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687 S.W.2d 384 (1985)
CAL GROWERS, INC., Appellant,
v.
PALMER WAREHOUSE AND TRANSFER COMPANY, INC., Appellee.
No. C14-84-488CV.
Court of Appeals of Texas, Houston (14th Dist.).
January 3, 1985.
*385 Timothy A. Beeton and Scott Kimball, Beeton & Eddings, Houston, for appellant.
Harvey F. Cohen, Henri-Ann Nortman, Houston, for appellee.
Before JUNELL, MURPHY and SEARS, JJ.
OPINION
SEARS, Justice.
This is an appeal from a summary judgment granted to the appellee. The trial court granted appellee's Motion for Summary Judgment which alleged that appellant's California judgment against appellee was not entitled to full faith and credit in Texas. We hold the trial court erred in granting the appellee's motion.
Appellant filed its Original Petition seeking to enforce a default judgment entered against the appellee in California in the amount of $20,460.50. The appellee answered by general denial and affirmatively alleged the judgment was not entitled to full faith and credit because it was not actually rendered, adopted or signed by a judge in California. Appellee subsequently filed a Motion for Summary Judgment based on this same contention. Appellant's response to the motion challenged the sufficiency of proof to support the appellee's contention and specifically requested the trial court to take judicial notice of § 585 of the California Code of Civil Procedure which authorizes the clerk to enter a default judgment. The trial court granted appellee's Motion for Summary Judgment.
In a single point of error the appellant contends the trial court erred in granting the appellee's Motion for Summary Judgment because 1) the motion was insufficient as a matter of law, 2) the trial court failed to take judicial notice of the laws of California as requested, and 3) the motion was directed to a defect in appellant's pleadings which the appellant was not given an opportunity to amend.
The movant in a summary judgment proceeding, against whom all doubts are resolved, has the burden of establishing the absence of genuine issues of material fact and the right to judgment under those undisputed material facts as a matter of law. Tex.R.Civ.P. 166-A(c); City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678 (Tex.1979). Where the movant relies on an affirmative defense, he must conclusively establish every factual element of the defense as expressly set forth in the motion. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex.1972). The appellee, therefore, must prove as a matter of law that the California judgment is not entitled to full faith and credit in the Texas courts.
The proof offered by the appellee in support of the motion was the California judgment itself, and Texas case law holding that a judgment which does not indicate on its face that it was rendered, adopted or signed by a judge is not entitled to full faith and credit. Mathis v. Wachovia Bank and Trust Co., 583 S.W.2d 800 (Tex. *386 Civ.App.Houston [1st Dist.] 1979, writ ref'd n.r.e.). The judgment was, however, signed by a clerk. In its response to appellee's Motion for Summary Judgment the appellant specifically requested the trial court to take judicial notice of § 585 of the California Code of Civil Procedure, which authorizes the clerk to enter a default judgment. Appellant's response alleged a copy of the quoted statute was attached as an exhibit, but the response filed with the court did not contain a copy of the statute. The trial judge refused to take judicial notice of the statute and granted appellee's motion.
Tex.R.Civ.P. 184a (Vernon 1976), the statute in effect at the time of this lawsuit, states the judge shall take judicial notice of the statutes of another state upon the motion of a party when the party furnishes the judge sufficient information to enable him to comply with the request. It is the appellee's contention that because the appellant never furnished the trial court with a copy of the statute, the information supplied to the judge was insufficient as a matter of law to enable the judge to take judicial notice of the California statute.
Texas case law does not hold that an actual copy of the foreign statute is required to give the judge sufficient information to take judicial notice of the laws of another state. See Shaps v. Union Commerce Bank, 476 S.W.2d 466 (Tex.Civ.App. Beaumont, writ ref'd n.r.e.), cert. denied, 409 U.S. 1060, 93 S. Ct. 559, 34 L. Ed. 2d 513 (1972) (court took judicial notice of Ohio laws when the defendant quoted from the statute); Utica Mutual Life Insurance Co. v. Bennett, 492 S.W.2d 659 (Tex.Civ.App. Houston [1st Dist.] 1973, no writ) (holding there is no absolute rule to determine the sufficiency of information required as long as the motion for judicial notice sets forth with some particularity the law to be relied upon).
The case law cited by the appellee in support of its Motion for Summary Judgment is distinguishable in that in that case the non-movant failed to request the trial court to take judicial notice of the laws of another state. See Mathis v. Wachovia Bank and Trust Co., 583 S.W.2d at 802. Here the appellant made a proper request that the trial court take judicial notice of the law of California and gave the judge sufficient information by citing the statute and the substance therein. The trial court erred in failing to take judicial notice of California law.
We hold the trial court erred in rendering summary judgment for appellee. Appellant's point of error is sustained.
The judgment is reversed and this cause is remanded to the trial court.
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952 A.2d 65 (2008)
109 Conn.App. 198
SUNSET MORTGAGE
v.
Alfonso AGOLIO.
No. 27915.
Appellate Court of Connecticut.
Argued March 20, 2008.
Decided July 22, 2008.
*66 T.J. Morelli-Wolfe, Colchester, for the appellant (defendant).
Peter A. Ventre, Hartford, for the appellee (substitute plaintiff).
McLACHLAN, HARPER and LAVERY, Js.
LAVERY, J.
The defendant, Alfonso Agolio, appeals from the trial court's judgment of strict foreclosure rendered after the court granted the motion for summary judgment as to liability only filed by the substitute plaintiff, the Bank of New York.[1] The defendant claims that equities should balance in his favor and that the court improperly determined that the notice of default was not defective, and, therefore, his motion for summary judgment, and not the plaintiff's, should have been granted. We affirm the judgment of the trial court.
The following facts and procedural history are relevant to our resolution of the defendant's appeal. On August 15, 2003, the defendant executed a $140,250 promissory note payable to Sunset Mortgage. The note was secured by a mortgage on property at 7 Chestnut Lane in Ledyard. The note and mortgage deed were assigned to the plaintiff on July 13, 2004. Since February, 2004, the defendant has either not paid his mortgage payment or paid an insufficient amount. The defendant claims that after the death of his live-in girlfriend in November, 2003, he contacted Sunset Mortgage and was granted a forbearance of his February, 2004 mortgage payment. There is no evidence of this agreement in writing. Sunset Mortgage sent the defendant a notice of default and acceleration on March 4, 2004. The defendant claims that under the promissory note, he could not be late on a payment until the fifteenth of the month, and, therefore, the notice of default was sent prematurely because he had not yet defaulted on his mortgage payments.
Sunset Mortgage initiated the foreclosure action by writ of summons and complaint on June 16, 2004. On December 23, *67 2004, the defendant filed an answer and a separate seven count counterclaim. In a June 14, 2005 memorandum of decision, the court granted the plaintiff's motion to strike as to six of the counts, leaving only a breach of contract claim. Specifically, the breach of contract counterclaim alleged that Sunset Mortgage did not (1) provide the defendant with a notice of default as required in the promissory note, (2) provide notice of acceleration as required in the promissory note, (3) honor its forbearance of the defendant's February, 2004 mortgage payment, (4) allow the defendant to reinstate the mortgage, (5) provide workout assistance to the defendant and (6) allow three months of missing mortgage payments before it initiated the action.
The plaintiff filed a motion for summary judgment as to liability only on December 1, 2005. On December 15, 2005, the defendant filed a motion for summary judgment as to his remaining counterclaim and an objection to the plaintiff's motion for summary judgment. In an April 7, 2006 memorandum of decision, the court denied the defendant's motion for summary judgment as to his remaining counterclaim and granted the plaintiff's motion for summary judgment as to liability only. The court found that after the defendant did not submit a mortgage payment for the month of February, the plaintiff sent a letter on March 4, 2004, informing the defendant that he was in default for nonpayment and additionally owed late charges for a total of $2514.17, but that he could cure the default by sending the total amount owed plus any regular monthly payments on or before April 3, 2004. The court further found that the defendant sent a check, dated April 1, 2004, in the amount of $1281.60. The court found that the statute of frauds and relevant case law disallowed the recognition of the defendant's claimed forbearance because it was not in writing. The court held that the affidavits and proof provided by the plaintiff established that the defendant defaulted and did not cure the default.
The court granted the plaintiff's motion for a judgment of strict foreclosure on July 17, 2006. The defendant filed his appeal on August 4, 2006.
"The standard for appellate review of a trial court's decision to grant a summary judgment motion is well established. Practice Book § 384 [now § 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. . . . Although the party seeking summary judgment has the burden of showing the nonexistence of any material fact . . . a party opposing summary judgment must substantiate its adverse claim by showing that there is a genuine issue of material fact, together with the evidence disclosing the existence of such an issue. . . . In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party. . . . The test is whether a party would be entitled to a directed verdict on the same facts. . . . Where the question whether proper notice was given depends upon the construction of a written instrument or the circumstances are such as lead to only one reasonable conclusion, it will be one of law, but where the conclusion involves the effect of various circumstances capable of diverse interpretation, it is necessarily one of fact for the trier. . . .
"Notices of default and acceleration are controlled by the mortgage documents. Construction of a mortgage deed is governed by the same rules of interpretation that apply to written instruments or *68 contracts generally, and to deeds particularly. The primary rule of construction is to ascertain the intention of the parties. This is done not only from the face of the instrument, but also from the situation of the parties and the nature and object of their transactions. . . . A promissory note and a mortgage deed are deemed parts of one transaction and must be construed together as such." (Citations omitted; internal quotation marks omitted.) Citicorp Mortgage, Inc. v. Porto, 41 Conn.App. 598, 601-602, 677 A.2d 10 (1996).
"A promissory note is nothing more than a written contract for the payment of money, and, as such, contract law applies. . . . In construing a contract, the controlling factor is normally the intent expressed in the contract, not the intent which the parties may have had or which the court believes they ought to have had. . . . Where . . . there is clear and definitive contract language, the scope and meaning of that language is not a question of fact but a question of law. . . . In such a situation our scope of review is plenary, and is not limited by the clearly erroneous standard. . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity." (Internal quotation marks omitted.) Fidelity Bank v. Krenisky, 72 Conn.App. 700, 707, 807 A.2d 968, cert. denied, 262 Conn. 915, 811 A.2d 1291 (2002).
Further, because the plaintiff sought summary judgment in a foreclosure action, which is an equitable proceeding, we note that "the trial court may examine all relevant factors to ensure that complete justice is done. . . . The determination of what equity requires in a particular case, the balancing of the equities, is a matter for the discretion of the trial court." (Internal quotation marks omitted.) Id., at 705, 807 A.2d 968.
On appeal, the defendant claims that his motion for summary judgment should have been granted because he was not yet in default when he received notice, so that the notice of default and acceleration was defective. We shall begin with the language of the promissory note. In this case, the language in the instrument is clear.
Section three of the note states: "Payments. (A) Time and Place of Payments. I will pay principal and interest by making a payment every month. I will make my monthly payments on the 1st of each month beginning on October 1, 2003."
Section seven provides: "Borrower's Failure to Pay as Required. (A) Late Charges for Overdue Payments. If the Note Holder has not received the full amount of any monthly payment by the end of 15 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5.000% of my overdue payment of principal and interest. I will pay this late charge promptly but only once each late payment.
"(B) Default. If I do not pay the full amount of each monthly payment on the date it is due, I will be in default."
We next look to the language of the mortgage deed to determine whether the defendant was notified properly of the acceleration. Section twenty-two states: "Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument. . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument *69 and foreclosure or sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in court the nonexistence of a default or any other defense of Borrower to acceleration and foreclosure or sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke any other remedies permitted by Applicable Law. Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this Section 22, including, but not limited to, reasonable attorneys' fees and costs of title evidence."
It is clear from the promissory note that when the defendant did not pay his mortgage by the first of the month, he was in default. The plaintiff could not impose a late charge, however, until the fifteenth. Further, there is no question whether there was a payment made in February, 2004; both parties agreed there was no payment. Because of the statute of frauds, there is no genuine issue of material fact as to whether the mortgage payment was due. See Saunders v. Stigers, 62 Conn.App. 138, 143, 773 A.2d 971 (2001). The written instrument we have is the promissory note, and it clearly states that the mortgage is due every month from October 1, 2003, until September 1, 2033. Therefore, the defendant was in default for his failure to pay the February and March, 2004 mortgage payments, and he owed late charges for the February payment. Notice of the default was not premature when it was sent on March 4, 2004, as the defendant claims. The notice of default also clearly and unambiguously set out the required elements for notice and acceleration as provided for explicitly in the mortgage deed. The court properly concluded that the notice of default and of acceleration was not defective. Further, the court did not abuse its discretion when balancing the equities of this case. We have reviewed all the other claims of the defendant and find that they are without merit.
The judgment is affirmed and the case is remanded for the purpose of setting a new law date.
In this opinion the other judges concurred.
NOTES
[1] The court granted the motion to substitute the Bank of New York as the plaintiff on September 27, 2004. We will refer to Bank of New York as the plaintiff in this matter.
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720 S.W.2d 158 (1986)
Duane Michael HYPKE, Appellant,
v.
The STATE of Texas, Appellee.
No. C14-85-00915-CR.
Court of Appeals of Texas, Houston (14th Dist.).
October 9, 1986.
*159 Sam Adamo, Stanley G. Schneider, Houston, for appellant.
John B. Holmes, Jr., William J. Delmore, III, Pamela Derbyshire, Houston, for appellee.
Before JUNELL, DRAUGHN and ELLIS, JJ.
OPINION
JUNELL, Justice.
Duane Michael Hypke appeals a judgment of conviction for involuntary manslaughter. After appellant pled guilty, the court assessed punishment at ten years imprisonment, probated for ten years, and a $1,000 fine. The appellant was ordered to serve 120 days in jail as a condition of probation in accordance with the requirements of Article 42.12, sec. 6b(c) Tex.Code Crim.Proc.Ann. (Vernon Supp.1986). In appellant's first two points of error he contends this Article is unconstitutionally vague and disproportionately harsh. His third point of error alleges the Article is unconstitutional because the caption to Senate Bill No. 1 fails to adequately call attention to changes in the involuntary manslaughter laws. We affirm.
Article 42.12 sec. 6b(c) provides:
A court granting probation to a defendant convicted of an offense under Subdivision (2), Subsection (a), Section 19.05, Penal Code, shall require as a condition of probation that the defendant submit to a period of detention in a penal institution to serve a term of confinement of not less than 120 days.
In his first point of error appellant contends the statute is unconstitutionally void for vagueness because it does not contain any upper limit on the length of time a defendant may be incarcerated as a condition of probation. Here, appellant has no standing to challenge the statute since he received the minimum period of confinement of 120 days. When challenging the constitutionality of a statute, the appellant must show it is unconstitutional as to him; it is not sufficient that the statute may be unconstitutional as to others. Parent v. State, 621 S.W.2d 796, 797 (Tex.Crim.App. 1981). See Eubanks v. State, 635 S.W.2d 568, 571 (Tex.App.Houston [1st Dist.] 1982, no pet.). It is well established that "the constitutionality of a statute will not be determined in any case unless such a determination is absolutely necessary to decide the case in which the issue is raised." Skinner v. State, 652 S.W.2d 773, 776 (Tex. *160 Crim.App.1983); Coberly v. State, 644 S.W.2d 734, 735 (Tex.Crim.App.1983).
Although it is unnecessary for this court to address appellant's issue of the statute's vagueness because of his lack of standing, we will note that under Article 42.12, sec. 3 and 3a(a), ten years is the maximum period of probation which may be imposed after an involuntary manslaughter conviction pursuant to Penal Code section 19.05(a)(2). It follows that the trial court is authorized to require as a condition of probation a period of detention of not more than ten years. Therefore, it cannot be said there is no maximum period of incarceration which can be assessed as a condition of probation.
The legislature has granted the trial court discretion in assessing more than the minimum 120 days detention time as a condition of probation. Only those conditions which are reasonable, i.e. those having "a reasonable relationship to the treatment of the accused and the protection of the public" may be imposed. Hernandez v. State, 556 S.W.2d 337, 343 (Tex.Crim.App.1977); Tamez v. State, 534 S.W.2d 686, 691 (Tex. Crim.App.1976). It follows that any period of detention over 120 days imposed as a condition of probation must meet the "reasonableness" standard and be subject to appellate review on an abuse of discretion basis. With these limitations the statute in question cannot be said to be vague or to authorize excessive discretion to the trial court. Appellant's first point of error is overruled.
Appellant asserts in his second point of error that section 6b(c) violates the Fifth, Eighth, and Fourteenth Amendments to the U.S. Constitution and Article I, Section 10 of the Texas Constitution by providing a more serious punishment for one convicted of violating section 19.05(a)(2) and granted probation than for other persons granted probation for more serious crimes. Appellant argues that since there is no mandatory term of incarceration as a condition of probation for first and second degree felonies while a minimum period of 120 days incarceration must be ordered for the third degree felony of involuntary manslaughter, the statute authorizes a punishment disproportionately harsh to the offense. Appellant relies upon Solem v. Helm, 463 U.S. 277, 103 S. Ct. 3001, 77 L. Ed. 2d 637 (1983) which held that a criminal sentence must be proportionate to the crime for which the defendant has been convicted. Solem, 463 U.S. at 290, 103 S.Ct. at 3009-10. The Supreme Court continues, however, stating that reviewing courts should grant substantial deference to the broad authority that legislatures necessarily possess in determining the types and limits of punishments for crimes, as well as to the discretion that trial courts possess in sentencing convicted criminals.[1]Solem, 463 U.S. at 290, 103 S.Ct. at 3009-10.
The range of punishment the legislature has established for a violation of section 19.05(a)(2) cannot be deemed disproportionate in light of the severity of the offense. A defendant could be sentenced to a penitentiary term of only two years, or a probationary term of two years with just 120 days incarceration as a condition of probation. Section 12.44 permits the trial court in a proper case to reduce the third degree felony to a Class A misdemeanor, thereby allowing the defendant to avoid any term of incarceration altogether. Tex.Penal Code Ann. sec. 12.21 (Vernon 1974).
The legislature did not overstep its broad authority in mandating confinement as a condition of probation. Considerations of public safety form a rational basis for the legislature to require mandatory confinement for 120 days as a condition of probation. Lopez v. State, 709 S.W.2d 744, 745 (Tex.App.San Antonio 1986, pet. pending). This requirement must be viewed in the context of current social campaigns and legislation to reduce the extreme *161 hazards of drunken driving. As a matter of public policy the state has a right to treat this crime with the gravity it warrants. Probation with a 120 day minimum incarceration term is not too much to ask for a life.
The statute in question is not unconstitutionally disproportionate, and appellant's second point of error is overruled.
In his third point of error appellant contends that the caption of Senate Bill 1 is unconstitutional because it fails to adquately notify a reader of the Bill's content as to changes in the law dealing with involuntary manslaughter involving the use of a motor vehicle. Article III, Section 35 of the Texas Constitution states:
No bill ... shall contain more than one subject, which shall be expressed in its title. But if any subject shall be embraced in an act, which shall not be expressed in the title, such act shall be void only as to so much thereof, as shall not be so expressed.
The caption of Senate Bill No. 1 reads in part:
An ACT relating to offenses of driving while intoxicated, involuntary manslaughter involving the use of a motor vehicle, criminally negligent homicide...; imposing and changing penalties,...; amending the Code of Criminal Procedure, 1965, as amended ...; and amending Sections 4, 6, 6b and 7; and Subsection (a), Section 10A Article 42.12.....
The caption expresses a broad purpose to amend the statutes relating to involuntary manslaughter and its penalties and specifically lists Section 6b as one provision amended by the legislation. In no way was Article III, Section 35, of the Constitution offended since the caption clearly amends the sections in question. Reference to the act or section to be amended is adequate, as long as the subject matter of the amendment is germane or reasonably related to the content of the original act. Smith v. Davis, 426 S.W.2d 827, 833 (Tex.1968). The Court of Criminal Appeals adopted the language of the Smith decision in Putnam v. State, 582 S.W.2d 146 (Tex.Crim.App. 1979). Reference by article number to the statute being amended has been held sufficient notice that the bill should be examined for any alterations of that article. Turnipseed v. State, 609 S.W.2d 798 (Tex. Crim.App.1980). Appellant's third point of error is overruled.
We affirm the judgment.
NOTES
[1] "In view of the substantial deference that must be accorded legislatures and sentencing courts, a reviewing court rarely will be required to engage in extended analysis to determine that a sentence is not constitutionally disproportionate." Solem, 463 U.S. at 290 n. 16, 103 S.Ct. at 3009-10 n. 16.
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290 B.R. 108 (2003)
LOOP CORP., Leon Greenblatt, Nola, LLC, Repurchase Corp., Leslie Jabine, Teletech Systems, Inc., Chiplease, Inc., and Banco Panamericano, Appellants,
v.
UNITED STATES TRUSTEE and Committee of Unsecured Creditors, Appellees.
No. Civ.02-793 ADM.
United States District Court, D. Minnesota.
February 5, 2003.
*109 *110 Michael F. McGrath, Ravich Meyer Kirkman McGrath & Nauman, P.C., Minneapolis, MN, and Robert M. Fishman, and Brian L. Shaw, Shaw Gussis Fishman Glantz & Wolfson, LLC, Chicago, IL, on behalf of Appellants.
Michael R. Fadlovich, U.S. Trustee's Office, Minneapolis, MN, on behalf of Appellant U.S. Trustee.
MEMORANDUM OPINION AND ORDER
MONTGOMERY, District Judge.
I. INTRODUCTION
This matter is before the undersigned United States District Judge on Appeal [Docket No. 1] from the March 13, 2002 Order of Bankruptcy Judge Robert J. Kressel [Docket No.1, Doc. No. 2]. Appellants challenge the court's conversion of the consolidated bankruptcy cases [Bky 01-43354] of Debtors Health Risk Management, Inc., HRM Claim Management, Inc., Institute for Healthcare Quality, Inc., and Health Benefit Reinsurance, Inc. f/k/a Health Benefit Reinsurance of Michigan, Inc. (collectively, "Debtors"), from Chapter 11 to Chapter 7. This matter was taken under advisement on November 15, 2002, upon the filing of Appellants' Reply Brief. For the reasons stated below, the Appeal is denied and the March 13, 2002 Order is affirmed.
II. BACKGROUND
Debtor Health Risk Management ("HRM") is a parent corporation with several subsidiaries. On May 18, 2001, Ernst & Young resigned as HRM's independent auditors after issuing a restatement of HRM's payables to reflect a $6 million increase. After revelation of Ernst & Young's mistake, Loop Corporation ("Loop"), owner of roughly 50% of HRM's stock, notified HRM that it would not fund the remaining $3.1 million of financing under an agreement in which Loop had committed to provide $6.1 million to HRM. Debtors' Disclosure Statement of Dec. 5, 2001, at 7 ("Disclosure Statement") [Docket No. 1, Doc. No. 9]. As a result of liquidity problems, on August 7, 2001, HRM and three of its subsidiaries filed four Chapter 11 cases [Bky 01-43354; Bky 01-43355; Bky 01-43356; Bky 01-43357], now consolidated and jointly administered under Bky 01-43354.
By December 5, 2001, HRM had liquidated most of its assets and filed its Disclosure Statement and Plan of Liquidation. Disclosure Statement at 1. HRM had no ongoing business concerns. Its assets consisted of: 1) approximately $3.25 million in cash; 2) potential causes of actions against Ernst & Young, Loop, and directors and accountants of HRM; and 3) net operating losses ("NOLs"). The Official Committee of Unsecured Creditors ("Committee"), HRM, and Loop then entered into roughly two months of negotiations on how to proceed. From September, 2001, through January, 2002, expenses and fees of attorneys, accountants, and consultants totaled over $1.3 million, and no final agreement was reached. See Bky 01-43354 Docket Nos. 71, 100, 103, 111, 160, 180, 206, 207, 209, 213, 224, 225, 236, 266, and 267 (applications for fees and expenses).
By motion heard on February 6, 2002, the U.S. Trustee ("UST") asked for the *111 Chapter 11 case to be dismissed or converted to Chapter 7 [Docket No. 1, Doc. Nos. 11, 12; Bky 01-43354 Docket No. 238]. The UST argued that the government trustee appointed to oversee the Chapter 7 action would have lower management expenses and expedite the process of securing payment for the creditors. Tr. of 2/6/02, at 6-11. Referencing the fruitless negotiations of the prior two months and the attendant expenses, it asserted that continued Chapter 11 proceedings would bring a certainty of more legal and consulting costs in exchange for the mere possibility of bringing in revenue for the NOLs. Id. at 7. In the UST's opinion, the plan developed by HRM seemed cumbersome and unlikely to work. Id. at 7, 9-11. The UST argued that the creditors would be better off avoiding certain expenses for the slim chance of greater return, and, based on his review of the December 5, 2001 Debtors' Plan of Liquidation ("Plan"), Judge Kressel agreed. However, all the parties involved, Debtors, Appellants, and the Committee, wanted to pursue the Plan and claimed that they were merely days away from an agreement. Judge Kressel expressed his inclination to convert, but continued the case until March 13, 2002, to give the parties a chance to finalize a reorganization plan. He warned the parties that if all had not agreed to a final plan by March 13, he would convert the case. See Tr. of 2/6/02, at 38, ll. 14-25.
On Monday, March 4, 2002, the Committee changed its position, filing a motion requesting that the case be converted to Chapter 7 immediately, or alternatively that HRM's assets be frozen pending the March 13 hearing. See Motion for Expedited Hearing and Immediate Convers on ¶¶ 17, 18 [Docket No. 1, Doc. No. 22]. As a basis for its motion and exigency, the Committee alleged sudden management changes, stating that on or about February 28, 2002, all of the members of HRM's board of directors resigned, with the exception of Andrew Jahelka ("Jahelka"). Id. ¶ 12. Jahelka thus simultaneously held positions as the sole member of HRM's board and as president of Loop, in addition to being a target of litigation in the Chapter 11 proceedings. Id. ¶ 14; but see Debtors' Response to Committees' Motion ¶ 3 [Docket No. 1, Doc. No. 24] (stating that the management shift was a minor change because there were only two directors prior to the resignation). Further, the Committee stated that Jahelka, as the sole director of HRM's board, then appointed Leon Greenblatt ("Greenblatt"), the majority owner of Loop and holder of ownership interests in other Appellants, as chief restructuring officer of HRM. Motion for Expedited Hearing and Immediate Conversion ¶¶ 14, 16. Stating that such changes placed Debtor HRM entirely under the control of just the Appellant creditors, the Committee argued that the requested relief was necessary to prevent insider control and usurpation of Debtors' assets. Id. ¶¶ 14, 16, 17. Judge Kressel heard the Committee's arguments in favor of conversion on March 7, but continued the motion without decision until the previously scheduled hearing on March 13. Tr. of 3/7/02, at 13, 1. 2.
At the March 13 hearing, Loop and HRM presented a plan on which the two had agreed. The Committee and the UST opposed this plan and requested that the case be converted to Chapter 7. Referencing his earlier findings and statement that unless all the parties had agreed to a final plan he would convert the case, Judge Kressel converted the case to Chapter 7. Appellant: now contest this ruling.
Appellants raise six issues on appeal. All center around the interpretation of 11 U.S.C. § 1112(b) and the sufficiency of the evidence. Initially, Appellants claim *112 Judge Kressel applied improper legal standards under § 1112(b)(1). Second, they argue he failed to hold Appellees, as movants, to their burden of proof. Relatedly, it is asserted that Appellees did not introduce sufficient evidence to support the conversion. Next, Appellants contend the bankruptcy court erred in failing to make adequate findings of fact. Fifth, they allege the bankruptcy court did not give proper weight to certain evidence, and lastly, that they were deprived of the opportunity to present their revised plan, resulting in a premature ruling.
III. DISCUSSION
A. Standard of Review
The District Court reviews the Bankruptcy Court's factual findings for clear error and conclusions of law de novo. In re Svoboda, 264 B.R. 190, 194 (8th Cir. BAP 2001). A finding is clearly erroneous if the reviewing court "is left with a definite and firm conviction that a mistake has been committed." Id. The bankruptcy court has broad discretion in evaluating whether or not there is cause to convert a Chapter 11 case and the court's factual basis for this determination will be reversed only for clear error. In re Hatcher, 218 B.R. 441, 448, 449 (8th Cir. BAP 1998); In re Lumber Exch. Build. Lmt. P'ship, 968 F.2d 647, 648 (8th Cir.1992).
B. 11 U.S.C. § 1112(b)
11 U.S.C. § 1112(b) provides that the court may convert a Chapter 11 case to a case under Chapter 7 if such action is in the best interests of the creditors and the estate, and cause for conversion exists. 11 U.S.C. § 1112(b); see also In re Fort Knox Mini Warehouse, Inc., 2002 WL 1842452, at *2 (Bankr.N.D.Iowa July 31, 2002). This section enumerates nine alternative factors that constitute cause. 11 U.S.C. § 1112(b). The list is not exhaustive and courts may find cause for other equitable reasons. See In re Economy Cab & Tool Co., 44 B.R. 721, 724 n. 1 (Bankr.D.Minn.1984). Among other circumstances, the statute states that cause includes "(1) continuing loss to or diminution of the estate and absence of a reasonable likelihood of rehabilitation; (2) inability to effectuate a plan; [or] (3) unreasonable delay by the debtor that is prejudicial to creditors. . . ." 11 U.S.C. § 1112(b). The movant bears the burden of proof and must demonstrate the presence of one of he statutory grounds or other cause. Economy Cab, 44 B.R. at 724.
Though some dispute exists as to the number of factors under which the court found cause to convert, the record shows Judge Kressel decided that cause had been established under the first statutory circumstance, continuing loss to or diminution of the estate coupled with no reasonable likelihood of rehabilitation. See 11 U.S.C. § 1112(b)(1); Tr. of 2/6/02, at 36-37, II. 18-15. Because one ground for cause is sufficient standing alone, the Court need not discuss the parties arguments as to additional factors listed in § 1112(b).
The first ground requires a showing of both a continuing loss to the estate and the absence of a reasonable likelihood of rehabilitation. 11 U.S.C. § 1112(b)(1). A finding that the debtor suffered continuing losses or maintained a negative cash flow "after the entry of the order for relief" suffices to demonstrate continuing loss to the estate. Fort Knox, 2002 WL 1842452, at *2. Absence of likelihood of rehabilitation is satisfied by a showing that the debtor is unable to get the business up and running again on a firm base. In re Minnesota Alpha Found., 122 B.R. 89, 93 (Bankr.D.Minn.1990); Economy Cab, 44 B.R. at 725 n. 2. *113 Under § 1112(b), "`rehabilitation' contemplates the successful maintenance or re-establishment of the debtor's business operations. . . ." Minnesota Alpha, 122 B.R. at 93.
a. Continuing Loss
Citing case law from other jurisdictions, Appellants complain that the court incorrectly considered the continuing administrative expenses to constitute diminution of the estate. In doing so, they assert, the court created a per se rule that there will be cause for conversion in every liquidating Chapter 11 case. However, within the Eighth Circuit, continuing loss can be demonstrated by a bare showing that the debtor suffered continuing losses or maintained a negative cash flow position after the entry of the order for relief. Fort Knox, 2002 WL 1842452, at *2; In re Schriock Const., 167 B.R. 569, 575 (Bankr.N.D.1994). The debtors do not dispute that losses were continuing, but base their argument on the court's interpretation of the law. The transcript of the proceeding reveals that Judge Kressel properly applied the standard used in this Circuit and Appellants' attempt to insert their preferred version of the law must be rejected. See Tr. of 2/6/02, at 12-13, ll. 20-13, 36-37, ll. 18-15; In re Schriock, 167 B.R. at 575. Although not a required finding under the law of the Eighth Circuit, Judge Kressel further noted that costs would likely be less under Chapter 7 than Chapter 11, due to the complexity of the Plan and the mounting legal and administrative costs. See Tr. of 2/6/02, at 33-34, ll. 20-7, 34-35, ll. 22-14, 36, ll. 14-17. In considering these litigious and discordant circumstances of the dispute the court properly made "a full evaluation of the present condition of the estate." Economy Cab, 44 B.R. at 724.
b. Likelihood of Rehabilitation
Similarly, Judge Kressel's conclusion that rehabilitation was not reasonably likely was not clearly erroneous. See Minnesota Alpha, 122 B.R. at 93; Economy Cab, 44 B.R. at 725 n. 2. The Debtor's Disclosure Statement reveals that HRM had no ongoing business concerns and Appellants do not contest that they had no intent to re-establish the business. See Disclosure Statement at 1. Instead, they again rely on the statutory interpretations of other jurisdictions, claiming that rehabilitation requires only the ability to confirm a plan of reorganization, not the ability to "emerge as an economically viable enterprise." In re Schriock, at 576.
The bankruptcy court's findings on this point, based on the record before it, properly applied the precedent of this Circuit and evidenced consideration of multiple factors. See Minnesota Alpha, 122 B.R. at 93 (reciting that "[r]ehabilitation means something more than reorganization," and noting that the prospect of long and complicated litigation militated against likelihood of rehabilitation) (internal quotation and alterations omitted); Tr. 2/6/02, at 12-13, ll. 20-13, 29, ll. 14-24, 36-37, ll. 25-6.
Even if the court's application of these legal standards to the facts of this case implied a per se rule of cause, the court has broad discretion in determining cause and is not limited to grounds specified in § 1112(b), such that the conversion may be supported on multiple bases. See Economy Cab, 44 B.R. at 724 n. 1. A bankruptcy judge may find cause for equitable reasons beyond those exemplified in § 1112(b), and Judge Kressel not only found continuing losses and lack of rehabilitation, but that the state of affairs between the parties warranted conversion. Id.; Tr. of 2/6/02, at 33-34, ll. 20-7, 34-36, ll. 18-17. The court's consideration of factors such as the potential for conflicts, the complicated and *114 costly nature of the Plan, and his view, based on review of the Plan, that it would not be confirmable, informed his decision to convert. Tr. of 2/6/02, at 33-34, ll. 20-7, 34-36, ll. 18-17. This was not an abuse of discretion.
c. The Best Interests of the Creditors
In addition to finding cause under any factor, the court must determine whether conversion or dismissal is in the best interests of the creditors. 11 U.S.C. § 1112(b); Han v. Linstrom, 2002 WL 31049846, at * 4 (N.D.Ill. Sept.12, 2002). The court does not need to consider whether or not proceeding under Chapter 11 would be better, but only whether conversion or dismissal is preferable. See id. (citing In re Woodbrook Assocs., 19 F.3d 312, 316 (7th Cir.1994)). Appellants contend that the bankruptcy court failed to make any findings regarding this necessary determination. However, the proceedings reveal that after Judge Kressel found cause, he also considered whether conversion or dismissal would be best, as required. See Tr. of 2/6/02, at 37, ll. 8-15; Tr. of 3/13/02, at 33, ll. 5-20.
C. Movant's Burden of Proof
As another ground of attack, Appellants argue Judge Kressel improperly shifted the burden of proof from the movant, the UST, to the Appellants. The February 6, 2002 Transcript, however, specifically states the court's recognition of the movant's burden and its conclusion that the movant had established cause. See Tr. of 2/6/02, at 37, ll. 8-15. Once cause has been shown, the judge may shift the burden of proof to the debtor to demonstrate that Chapter 11 would be better than Chapter 7. Minnesota Alpha, 122 B.R. at 94. This is precisely what occurred in this case. Judge Kressel gave Appellants the opportunity to present him with an agreed-upon, confirmable plan and the debtor failed to meet this burden. Tr. 2/6/02, at 37-39, ll. 16-4. Accordingly, at the subsequent hearing, Judge Kressel found cause pursuant to his earlier determinations. Tr. of 3/13/02, at 32-33, ll. 19-20. The allocation of the burden was proper under the law. Minnesota Alpha, 122 B.R. at 94.
D. The Court's Findings of Fact
Appellants next assert that the court did not make sufficient findings of fact. Particularly, Appellants challenge Judge Kressel's basis for his conclusion that conversion was in the best interests of the creditors.
An order of conversion does not require extensive findings of fact. Findings merely need to be sufficient to allow a reviewing court to determine the basis of decision. In re Fossum, 764 F.2d 520, 521-22 (8th Cir.1985); see also In re Sunflower Racing, Inc., 226 B.R. 665, 671 (D.Kan.1998). Judge Kressel specifically found, based on the Debtors' statements and disclosures, his personal review of the Plan and conclusion that it was excessively complex and costly, and the Committee's refusal of the proposed plan, as the representative body for the unsecured creditors, that conversion was proper. See Tr. of 2/6/02, at 33-39; Tr. of 3/13/02, at 33, ll. 13-20.
After reading the Plan, Judge Kressel determined that it was overly complicated and unlikely to be confirmed. Tr. of 2/6/02, at 34, ll. 8-10, 35, ll. 6-8, 35-36, ll. 25-11. Considering the contents of the Plan, the fact that several of the parties had already threatened, and the Committee had actually filed a motion to commence litigation against one another, along with the $1.3 million in legal, accounting and consulting expenses that had already accumulated, Judge Kressel found cause. *115 He inferred that given the complicated nature of the Plan, and the disputes between the parties, it might not be possible to effectuate a Chapter 11 plan at all and, even if it were possible, it would require much more negotiation and possibly even litigation. Id. at 33-38. From the amount of the fees already incurred, Judge Kressel considered that continuing on this course would be very expensive. Further, Judge Kressel concluded that conversion was in the best interests of the creditors, noting that the Committee favored conversion and that these creditors were in the best position to determine their own best interests. See Tr. of 3/13/02, at 33, ll. 14-18. These factual determinations are sufficient to support conversion under the law and were not clearly erroneous. See e.g., Allied Van Lines, Inc. v. Small Bus. Admin., 667 F.2d 751, 753 (8th Cir.1982) ("It is well established that the trial court does not need to make specific findings on all facts but only must formulate findings on the ultimate facts necessary to reach a decision.").
E. Movant's Evidence
Appellants cite no authority for the proposition that the UST may not rely on evidence of the debtor's circumstances already in the record to meet its burden of proof. In fact, in Fort Knox, the bankruptcy court stated that the trustee was relying on the debtor's financial statements and proceeded to find continuing losses based on this evidence. Fort Knox, 2002 WL 1842452, at *1-2, 3, 7 (discussing debtor's profit and loss statements; concluding with dismissal). Here, the UST acknowledged its evidentiary basis for its argument and the court explicitly articulated that the UST had shown cause with this proof. Tr. of 2/6/02, at 29, ll. 15-24, 37, ll. 8-12. Despite these allegations of insufficient evidence, Appellants do not dispute the court's factual findings regarding losses and rehabilitation, but instead challenge Judge Kressel's recitation and application of the legal standards of § 1112(b)(1), which, as addressed above, were proper. That much of the support for Appellees' motion and the court's decision came from Appellants' and Debtors' own submissions, which they do not dispute, does not detract from the sufficiency of the movant's factual basis.
F. Failure to Give Proper Weight to the Value of the NOLs
Without supporting citation, Appellants aver that the court abused its discretion by giving insufficient weight to the value of the NOLs. This exercise of judgment was not an abuse of judicial discretion. Indeed, under the standards of this Circuit, it is not clear that Judge Kressel even needed to consider this evidence. See e.g., Fort Knox, 2002 WL 1842452, at *2-3 (reciting tests for cause under § 1112(b)(1)). The NOLs would not have altered HRM's present negative cash flow, nor would they have gotten the company up and running again. Thus, cause would still exist. Similarly, the best interest of the creditors test requires consideration of conversion versus dismissal, not conversion versus benefits that might be realized under Chapter 11 or other alternatives. See Woodbrook, 19 F.3d at 316.
G. Premature Conversion/Failure to Hear Evidence
As another basis of appeal, it is asserted that the court erroneously denied Appellants the opportunity at the March 13, 2002 hearing to present evidence regarding the new proposed plan. Motions for conversion do not require full evidentiary hearings but only an adequate record on which to determine the relevant issues. Sunflower Racing, 226 B.R. at 671. Judge Kressel expressly informed Appellants *116 what they needed to do to withstand conversion, i.e., present an agreed-upon plan. Tr. of 2/6/02, at 33. Having been unable to fulfill this condition, Appellants were not entitled to enter in evidence the attributes of their revised plan. See Sunflower Racing, 226 B.R. at 671; Minnesota Alpha, 122 B.R. at 94 (stating that burden of proof shifts to opponent once movant has shown cause).
IV. CONCLUSION
Based on the foregoing, and all the files, records and proceedings herein, IT IS HEREBY ORDERED that:
1. Appellants' Appeal [Docket No. 1] is DENIED, and
2. The March 13, 2002 Order of Bankruptcy Judge Robert J. Kressel [Docket No. 1, Doc. 2; Bky 01-43354 Docket No. 296] is AFFIRMED.
LET JUDGMENT BE ENTERED ACCORDINGLY.
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952 A.2d 1156 (2008)
402 N.J. Super. 166
Sebastian FERNANDEZ, Plaintiff-Respondent,
v.
NATIONWIDE MUTUAL FIRE INSURANCE COMPANY, Defendant-Appellant, and
Proformance Insurance Company, Defendant.
No. A-4849-06T1
Superior Court of New Jersey, Appellate Division.
Argued April 28, 2008.
Decided August 12, 2008.
*1157 Christine M. Mercado, argued the cause for appellant (Richard D. Millet & Associates, LLC, attorneys, Somerville; Ms. Mercado and Richard D. Millet, of counsel and on the brief).
Anthony V. D'Elia, Secaucus, argued the cause for respondent (Chasan Leyner & Lamparello, attorneys; Mr. D'Elia, on the brief).
Before Judges PARRILLO, GILROY and BAXTER.
The opinion of the court was delivered by
GILROY, J.A.D.
This is a declaratory judgment action. Plaintiff Sebastian Fernandez filed a complaint seeking to resolve a dispute between himself and defendant Nationwide Mutual Fire Insurance Company, his personal injury protection (PIP) carrier, regarding the priority of their claims to the insurance proceeds of the third-party tortfeasors. Nationwide appeals from the April 13, 2007 order of the Law Division, which granted plaintiff's motion for summary judgment; denied its cross-motion for summary judgment; and directed the Clerk of the Court to pay plaintiff monies that had previously been deposited with the court by defendant Proformance Insurance Company, the tortfeasors' liability insurance carrier.
The issue presented on appeal is whether a PIP carrier's right to reimbursement for paid PIP benefits, pursuant to N.J.S.A. 39:6A-9.1, has priority over an insured's right to be made whole where the tortfeasor's insurance does not fully cover the insured's personal injury damages. The trial judge, believing a conflict exists between the appellate decisions in Knox v. Lincoln Gen. Ins. Co.,[1] and IFA Ins. Co. v. Waitt,[2] concerning whether a PIP carrier or its injured insured should have preference to the proceeds of a third-party tortfeasor's insurance policy, decided that IFA controlled and resolved the issue in favor of plaintiff. The judge concluded that a PIP carrier's statutory right to reimbursement "is triggered, only in the event that there are excess funds available."
We conclude that Knox and IFA are not in conflict, but rather address different issues under the PIP reimbursement statute, N.J.S.A. 39:6A-9.1. We determine that the issue presented is controlled by Knox and hold: that where a PIP carrier has paid benefits to its insured, it is entitled to reimbursement of those benefits from the insurance proceeds of a third-party tortfeasor, pursuant to N.J.S.A. 39:6A-9.1, even if the limits of the tortfeasor's insurance policy are insufficient to make the insured whole. Accordingly, we reverse.
*1158 On February 2, 2004, plaintiff was the owner and operator of an automobile insured by Nationwide when he was involved in an accident with a commercial vehicle owned by Go Pro Waste Services, Inc., and operated by Peter Garofalo (collectively, the tortfeasors). The tortfeasors' vehicle was insured by Proformance for personal injury liability coverage in the amount of $1,000,000. As a result of the accident, plaintiff suffered serious injuries and incurred medical expenses totaling $591,269.62. Nationwide paid plaintiff its PIP coverage limit of $250,000. On April 20, 2004, plaintiff filed a personal injury action against the tortfeasors. On July 14, 2004, Nationwide filed for inter-company arbitration against Proformance to recover the PIP benefits paid to plaintiff, together with interest, pursuant to N.J.S.A. 39:6A-9.1.
On September 20, 2005, Nationwide received an arbitration award against Proformance in the amount of $250,891.56. On November 3, 2005, plaintiff received a non-binding arbitration award against the tortfeasors in the amount of $1,841,269.62, which included excess medical expenses of $341,269.62. On February 23, 2006, plaintiff settled with the tortfeasors for $1,000,000, with Proformance paying plaintiff $749,108.44 and depositing the remaining $250,891.56, the amount awarded to Nationwide, into court, pending resolution of plaintiff's claim to those funds.
On May 30, 2006, plaintiff filed a declaratory judgment action against Nationwide and Proformance, seeking a declaration that "his claim to [the $250,891.56] takes priority over the Defendant Nationwide's arbitration award." On September 8, 2006, an order was entered granting leave to Proformance to deposit the amount of the arbitration award into court. Plaintiff and Nationwide cross-moved for summary judgment. Proformance did not assert a position on the motions. On April 13, 2007, the trial judge entered an order supported by an oral decision, granting plaintiff's motion and denying Nationwide's motion. In granting plaintiff summary judgment, the judge determined that plaintiff was entitled to be made whole for his injuries by receiving the full amount of Proformance's liability insurance proceeds before Nationwide was entitled to receive reimbursement.
On appeal, Nationwide argues that, as plaintiff's PIP carrier, it has a primary right of reimbursement over that of plaintiff, pursuant to N.J.S.A. 39:6A-9.1, even where the amount of the tortfeasors' insurance is insufficient to fully satisfy plaintiff's personal injury claims. Plaintiff counters that the PIP subrogation statute does not give Nationwide's claim priority over his claim; rather, it merely permits a PIP carrier to recoup the amount of paid PIP benefits directly from a tortfeasor's carrier when the tortfeasor did not maintain PIP coverage. Plaintiff contends that the facts of the present matter are more aligned with those in IFA, rather than Knox, and that we should affirm the decision of the trial court.
A trial court will grant summary judgment to the moving party "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 challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c); see also Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 523, 666 A.2d 146 (1995). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission *1159 of the issue to the trier of fact." R. 4:46-2(c).
On appeal, "the propriety of the trial court's order is a legal, not a factual, question." Pressler, Current N.J. Court Rules, comment 3.2.1 on R. 2:10-2 (2008). "We employ the same standard that governs trial courts in reviewing summary judgment orders." Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J.Super. 162, 167, 704 A.2d 597 (App.Div), certif. denied, 154 N.J. 608, 713 A.2d 499 (1998).
This appeal requires us to address an issue raised in Selective Ins. Co. v. Nat'l Cont'l Ins. Co., 385 N.J.Super. 62, 71, 895 A.2d 1218 (App.Div.), certif. denied, 188 N.J. 218, 902 A.2d 1235 (2006), where the court stated that "there is an inherent conflict between injured victims who are required to obtain PIP coverage and their first-part[y] insurer's right to subrogate against a tortfeasor's liability carrier." Although the court acknowledged that there is a "philosophical" dispute between an injured insured and his or her PIP carrier when the amount of the tortfeasor's insurance coverage is not sufficient to satisfy the claims of both, the court was not required to resolve the issue under the facts of the case. Ibid.
We begin our analysis by stating the PIP reimbursement statute:
An insurer, health maintenance organization or governmental agency paying benefits pursuant to subsection a., b. or d. of section 13 of P.L. 1983, c. 362 (C.39:6A-4.3), personal injury protection benefits in accordance with section 4 or section 10 of P.L. 1972, c. 70 (C. 39:6A-4 or 39:6A-100), medical expense benefits pursuant to section 4 of P.L. 1998, c. 21 (C.39:6A-3.1) or benefits pursuant to section 45 of P.L. 2003, c. 89 (C.39:6A-3.3), as a result of an accident occurring within this State, shall, within two years of the filing of the claim, have the right to recover the amount of payments from any tortfeasor who was not, at the time of the accident, required to maintain personal injury protection or medical expense benefits coverage, other than for pedestrians, under the laws of this State, including personal injury protection coverage required to be provided in accordance with section 18 of P.L. 1985, c. 520 (C.17:28-1.4), or although required did not maintain personal injury protection or medical expense benefits coverage at the time of the accident. In the case of an accident occurring in this State involving an insured tortfeasor, the determination as to whether an insurer, health maintenance organization or governmental agency is legally entitled to recover the amount of payments and the amount of recovery, including the costs of processing benefit claims and enforcing rights granted under this section, shall be made against the insurer of the tortfeasor, and shall be by agreement of the involved parties or, upon failing to agree, by arbitration.
[N.J.S.A. 39:6A-9.1.]
Plaintiff contends that because the tortfeasors' liability insurance policy will be exhausted before his and Nationwide's claims are fully satisfied, that pursuant to IFA, he is entitled to be made whole before Nationwide receives PIP reimbursement. We disagree.
In IFA, the insured was paid more than $30,000 in PIP benefits by his PIP carrier. IFA, supra, 270 N.J.Super. at 622, 637 A.2d 941. The tortfeasor operated a commercial motor vehicle insured with a $75,000 single-limit liability policy. After the insured filed a personal injury complaint, the tortfeasor's carrier deposited its entire amount of coverage into court in the underlying liability action. Ibid. After the money was deposited, the PIP carrier sought reimbursement against the *1160 tortfeasor's carrier pursuant to N.J.S.A. 39:6A-9.1. The tortfeasor's carrier did not reimburse the PIP carrier because its liability coverage had been exhausted in the underlying action between the injured insured and the tortfeasor. Id. at 623, 637 A.2d 941.
The trial court granted the tortfeasor's carrier summary judgment, determining that the PIP carrier was not entitled to reimbursement from the tortfeasor's carrier when the carrier's liability policy limits were exhausted. Ibid. On appeal, we framed the issue as "whether recovery of PIP payments is limited to the amount of the commercial tortfeasor's liability coverage." Id. at 625, 637 A.2d 941. In answering the question in the negative, we held that "the statute does not require the commercial tortfeasor's carrier to reimburse the PIP carrier after exhaustion of the liability policy limits where there is no excess policy available. Without a specific legislative directive, we should not abruptly increase the exposure of the tortfeasor's liability carrier." Id. at 626, 637 A.2d 941. Because IFA did not address the issue of priority between an injured insured's claim to be made whole and a PIP carrier's right to statutory reimbursement for paid PIP benefits, we determine plaintiff's reliance on that decision to be misplaced.
About seven years later, this court again addressed the PIP reimbursement statute in Knox, supra, 304 N.J.Super. at 431, 701 A.2d 445. In Knox, the plaintiffs' deceased mother suffered injuries in an automobile accident and later died as a result thereof. Prior to the decedent's death, she was paid $135,013.64 in PIP benefits by her PIP carrier. Id. at 434, 701 A.2d 445. The tortfeasor was insured for liability insurance in the amount of $1,000,000. The PIP carrier sought and obtained reimbursement from the tortfeasor's liability insurance carrier pursuant to the PIP reimbursement statute. Ibid. Plaintiffs had not learned that the tortfeasor's carrier had reimbursed the PIP carrier until plaintiffs had entered into settlement negotiations regarding their wrongful death claim. Id. at 434-35, 701 A.2d 445. Plaintiffs filed an action against the deceased's PIP carrier and the tortfeasor's carrier, claiming that the PIP carrier was wrongfully reimbursed for the PIP benefits paid to the insured. The trial court held that the PIP carrier did not have an obligation to ensure that sufficient funds remained available to provide a complete recovery to the insured before seeking PIP reimbursement. Id. at 433, 701 A.2d 445.
On appeal, the Appellate Division affirmed. Id. at 438, 701 A.2d 445. In reaching its decision, the court reviewed the prior decisions of Otto v. Prudential Prop. & Cas. Ins. Co., 278 N.J.Super. 176, 650 A.2d 832 (App.Div.1994), and Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590, 667 A.2d 670 (1995), to determine the Legislature's intent when it enacted the PIP reimbursement statute. The court stated:
From Otto, supra, and Frazier, supra, we glean a legislative intent in dealing with statutory reimbursement schemes. The carriers, whether paying PIP benefits or worker's compensation benefits, both have a right to be made whole even though reimbursement may reduce the pool of available insurance coverage to which the claimant or injured employee may look for recovery. The fact that a PIP carrier is given a degree of priority in being reimbursed for PIP payments made to its injured insured is understandable. The Act [the New Jersey Automobile Reformation Reform Act, N.J.S.A. 39:6A-1 to 6A-35] requires the injured motorist's medical expenses to be paid up-front by the PIP carrier without regard to the motorist's fault even before there has been a determination *1161 of ultimate liability for the accident, in order to afford the injured motorist a prompt measure of relief not available were he/she relegated to a conventional common-law negligence action. Thus, the possibility that PIP reimbursement may be charged against the tortfeasor's liability coverage is a fair trade-off.
All is not lost for the injured claimant. Recovery may be sought under the underinsured motorist coverage of the tortfeasor's policy or even against the tortfeasor's excess liability insurer, if such coverage exists.
Beyond insurance coverage, the injured claimant still has a full cause of action for recovery from the tortfeasor, although in the case of an underinsured or impecunious tortfeasor that course may not be fully satisfactory.
[Knox, supra, 304 N.J.Super. at 437, 701 A.2d 445 (internal citations omitted).]
After another seven years, this court was asked to reconsider the rationale underpinning Knox in David v. Gov't Employees Ins. Co., 360 N.J.Super. 127, 821 A.2d 564 (App.Div.), certif. denied, 178 N.J. 251, 837 A.2d 1094 (2003). In David, plaintiff was injured when the vehicle she was operating was involved in a two-car collision in New Jersey with a motor vehicle operated by a New York resident tortfeasor, who was not required to maintain PIP coverage. The tortfeasor's vehicle was insured with liability insurance in the amount of $300,000. Plaintiff's PIP carrier paid her PIP benefits. The PIP carrier obtained an arbitration award against the tortfeasor's liability carrier without notice to plaintiff in the amount of $57,208.48, representing paid PIP benefits and counsel fees in prosecuting the arbitration proceeding. Id. at 132, 821 A.2d 564. Plaintiff demanded the tortfeasor's policy limits in settlement. After plaintiff was advised by the tortfeasor's carrier of the amount awarded in arbitration to the PIP carrier, plaintiff settled her claim for $242,791.52. Ibid.
Plaintiff filed an action against her PIP carrier and the tortfeasor's liability carrier, contending in part that the PIP carrier was wrongfully reimbursed for paid PIP benefits and for reimbursement of counsel fees in prosecuting the arbitration proceeding. Ibid. The trial court granted summary judgment to the two insurance carriers following the reasoning of Knox. Id. at 131-32, 821 A.2d 564. On appeal, we were "urged" to depart from the decision in Knox. Id. at 130, 821 A.2d 564. We declined to do so, affirming that part of the trial court's decision determining that the PIP carrier was entitled to reimbursement of paid PIP benefits, pursuant to N.J.S.A. 39:6A-9.1; however, we did reverse on the issue of attorneys' fees, concluding that the PIP carrier was not entitled to recover such fees in arbitration against the liability insurer in prosecuting a PIP reimbursement claim. Id. at 144, 821 A.2d 564.
In re-affirming Knox, we addressed its reliance on Otto and Frazier, and concurred with plaintiff that those decisions were "not on all fours with Knox." Id. at 135, 821 A.2d 564. Otto concerned an insurance contract provision, not the legislative intent in enacting N.J.S.A. 39:6A-9.1. Frazier involved a worker's compensation statute, N.J.S.A. 34:15-40(c), "which explicitly provides that reimbursement of the insurance carrier is allowed even if the employee is not totally compensated. . . ." Id. at 137, 821 A.2d 564. Nevertheless, although Otto and Frazier were "perhaps slender reeds upon which to lean as support for Knox," we concluded that we would not depart from Knox for stare decisis purposes; the plaintiff not having shown Knox to be clearly wrong. Id. at 141-44, 821 A.2d 564. Our decision not to depart from Knox was informed by the *1162 then-recent decision of State Farm Mut. Auto. Ins. Co. v. Licensed Beverage Ins. Exch., 146 N.J. 1, 679 A.2d 620 (1996).
In State Farm, the Court held that a PIP carrier could recover paid PIP benefits, pursuant to N.J.S.A. 39:6A-9.1, from a tavern that served alcohol to an intoxicated person who injured the carrier's insured. Id. at 14-15, 679 A.2d 620. The Court determined that the purpose of the PIP reimbursement statute was to provide PIP carriers with "a new right of reimbursement that was primary and not linked to any purported subrogation right." Id. at 9, 679 A.2d 620. Further, the Court declared that the legislative intent of the statute was to alleviate imbalance by reducing the cost of automobile insurance for the public by allowing PIP insurers to recover paid PIP benefits from the tortfeasor's insurance carrier. Ibid. Stated simply, the Court reasoned that the legislative objective of the reimbursement statute was to remove PIP costs from the shoulders of the insured and pass them on to the responsible parties. Id. at 15, 679 A.2d 620.
In addition to determining that the rationale of State Farm lent support to Knox, we decided not to depart from Knox because it had been several years since the case had been decided and the Legislature had not amended the PIP reimbursement statute, despite having had ample time to do so. David, supra, 360 N.J.Super. at 143, 821 A.2d 564. We concluded that because the Legislature is assumed to know the law and judicial construction of statutes, the Legislature's acquiescence demonstrated that the judicial construction of Knox was consistent with its intended purpose. Ibid.
We conclude that this matter falls more under the umbrella of Knox, as affirmed by David, than of IFA. A PIP carrier who has paid PIP benefits to an insured is entitled to reimbursement of those benefits from the insurance proceeds of the third-party tortfeasor, pursuant to N.J.S.A. 39:6A-9.1, even when the amount of the tortfeasor's insurance is insufficient to make the insured whole. We reject plaintiff's argument that he is entitled to be made whole before Nationwide receives reimbursement of paid PIP benefits, distinguishing Nationwide's statutory right of reimbursement from the tortfeasors' liability carrier from those cases in which a claimant's reimbursement rights are based on subrogation. See Cirelli v. Ohio Cas. Ins. Co., 72 N.J. 380, 388, 371 A.2d 17 (1977) (holding under N.J.S.A. 39:6A-9, the predecessor statute to N.J.S.A. 39:6A-9.1, that where a PIP carrier was entitled to pursue statutory subrogation for reimbursement of paid PIP benefits against the tortfeasor's liability carrier, such right of recovery was subject to the insured's right to be made whole); see also McShane v. N.J. Mfrs. Ins. Co., 375 N.J.Super. 305, 313-15, 867 A.2d 1207 (App.Div.2005).
Accordingly, we reverse the grant of summary judgment to plaintiff; reverse the denial of summary judgment to Nationwide; and remand the matter to the trial court to enter an amended order of judgment consistent with this opinion.
Reversed and remanded to the trial court.
NOTES
[1] Knox v. Lincoln Gen. Ins. Co., 304 N.J.Super. 431, 701 A.2d 445 (App.Div.1997).
[2] IFA Ins. Co. v. Waitt, 270 N.J.Super. 621, 637 A.2d 941 (App.Div.), certif. denied, 136 N.J. 295, 642 A.2d 1004 (1994).
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952 A.2d 1112 (2008)
402 N.J. Super. 93
STATE of New Jersey, Plaintiff-Respondent,
v.
Oscar OSORIO, Defendant-Appellant.
Docket No. A-2067-05T4
Superior Court of New Jersey, Appellate Division.
Submitted October 30, 2007.
Decided August 4, 2008.
*1113 Yvonne Smith Segars, Public Defender, for appellant (Diane Toscano, Assistant Deputy Public Defender, of counsel and on the brief).
*1114 Paula T. Dow, Essex County Prosecutor, for respondent (Barbara A. Rosenkrans, Assistant Prosecutor, of counsel and on the brief).
Before Judges SKILLMAN, WINKELSTEIN and YANNOTTI.
The opinion of the court was delivered by
SKILLMAN, P.J.A.D.
This appeal requires us to consider the principles that govern a trial court's consideration of a claim of the discriminatory use of peremptory challenges in light of recent decisions of the Supreme Court of the United States that modify the principles set forth in State v. Gilmore, 103 N.J. 508, 511 A.2d 1150 (1986).
A jury found defendant guilty of conspiracy to violate the narcotics laws, in violation of N.J.S.A. 2C:5-2; possession of cocaine, in violation of N.J.S.A. 2C:35-10(a)(1); possession of cocaine with the intent to distribute, in violation of N.J.S.A. 2C:35-5(a)(1) and (b)(3); possession of cocaine within 1000 feet of school property with the intent to distribute, in violation of N.J.S.A. 2C:35-7; possession of cocaine within 500 feet of a public housing facility with the intent to distribute, in violation of N.J.S.A. 2C:35-7.1; and employing a juvenile in a drug distribution scheme, in violation of N.J.S.A. 2C:35-6. The trial court sentenced defendant to a seven-year term of imprisonment, with five years of parole ineligibility, for employing a juvenile in a drug distribution scheme and a concurrent seven-year term for possession of cocaine within 500 feet of a public housing facility with the intent to distribute. The court merged defendant's conviction for possession of cocaine within 1000 feet of school property with the intent to distribute into his conviction for possession of cocaine within 500 feet of a public housing facility with the intent to distribute, except that the court imposed the three-year parole ineligibility period mandated by N.J.S.A. 2C:35-7, which survived the merger but is to be served concurrently. The court merged defendant's other convictions.
We affirmed defendant's convictions in an unreported opinion. State v. Osorio, No. A-1664-02 (App. Div., June 7, 2005). However, we concluded that the trial court had erred in failing to require the assistant prosecutor who tried the case to show that her first six peremptory challenges, all of which were used to excuse minority jurors (four African-Americans and two Hispanics), which the trial court found established a prima facie case of the discriminatory use of peremptory challenges against defendant, a Hispanic male, were justified on the basis of concerns about situation-specific bias. Consequently, we remanded the case to the trial court to determine whether the prosecutor had made discriminatory use of her peremptory challenges and directed the court to vacate defendant's conviction and order a new trial if it made this determination.
At the hearing on remand, which occurred more than three years after the trial, the trial judge indicated that he did not have any notes or specific recollection of jury selection. Moreover, the judge did not obtain a copy of the transcript of jury selection before conducting the hearing. However, the assistant prosecutor who tried the case produced notes that she had taken during jury selection and explained her reasons for using her first six peremptory challenges to excuse minority jurors based on those notes. Those reasons are discussed in detail later in this opinion. The attorney who had represented defendant at trial did not appear at the hearing and, because of the deadline established by this court for completion of the remand, the trial judge declined a request by the *1115 substitute attorney appearing on defendant's behalf to adjourn the hearing to afford defendant's trial counsel the opportunity to appear. The trial judge accepted the assistant prosecutor's reasons for using her first six peremptory challenges to excuse minority jurors as legitimate and therefore again rejected defendant's claim that the prosecutor had made discriminatory use of her peremptory challenges.
Defendant filed a motion to supplement the record and for reconsideration. The transcripts of jury selection were produced for the hearing on this motion, and defendant's trial counsel appeared. The focus of this hearing was on the reasons given by the assistant prosecutor at the original hearing for using two of her first six peremptory challenges to excuse the only two Hispanic members of the jury. Those reasons were:
Juror number five that was kicked off actually was juror number nine. Her name, Judge, was Mrs.I think it's Aquirre, Judge. I'm not sure how to pronounce it. It's A-Q-U-I-R-R-E. She was a Hispanic female from Newark. She was a secretary for a doctor's office. She had one child and she was two years old. Judge, but just if I could place the next one on the record because the reason for her exclusion isis coupled with the next woman who was excluded and that was juror number ten. Her name is Miss Martinez, and she was from East Orange. She was a Hispanic female and she was a program analyst in East Orange.
The reason Judge, that I have written down, and Your Honor, as you can see they were seated in juror, in seat number nine and seat number ten, next to each other. And my notes indicate, Judge, making faces with Mrs. Martinez, giggling high fiving when a juror in the back row was excused. So based on, Judge, they were sitting together and I was observing, I obviously wrote that they were making faces, giggling and and excited when another juror got kicked off, Judge.
Defendant's trial counsel informed the trial judge that he had no recollection of the alleged inappropriate conduct of the two Hispanic jurors described by the assistant prosecutor:
Judge, initially I wanted to supplement the record with what I recall from three years ago, and this has to do with the exclusion of Sylvia [Aquirre] and Esther Martinez as jurors. Now, I believe the prosecutor told The Court on August the 3rd, which is in the transcript, that she excluded those two people because they high-fived each other when one of the other jurors was excluded, and that they were making faces. Judge, that's not my recollection. I remember those two people very well. And, in fact, I was very keenly aware of those two people because prior to that two other Hispanic people were excluded, and after those two women were excluded there were no Hispanics on the jury. Clearly my client is an Hispanic and, you know, during the jury selection I was acutely aware of the fact that he was not going to have anybody that was Hispanic that was going to sit on his jury.
When these two people were knocked off I was dumbfounded. I couldn't believe that these two people were taken off because they had an opportunity to answer all the questions that the Court had presented to them and they did not indicate anything that would otherwise show that they couldn't be fair and impartial. And when I heard that allegedly they high-fived each other, Judge, that would have been something that would have stood out in my mind forever *1116 as far as trying cases. And I've tried a few but I've never sat in a case where I saw two jurors high-five each other during a jury selection where another juror got knocked off.
As far as making faces unfortunately I couldn't find the case, but I know there is case law about that being used as a reason by a prosecutor in another case and the court said that's not a sufficient basis for knocking somebody off a jury. That's just notnot a good excuse. But I don't recall that either. I justI just remember these two people in particular. I thought they were excellent jurors. And, frankly, I didn't think they really favored one side or the other. They were both, you know, if I remember correctly, you know, ... working mothers who had children who seemed very respectful, very attentive, and they just happened to sit next to each other, they were friendly with each other, but to me they didn't seem to do anything disrespectful that would lead anybody to want to exclude them as jurors. In fact, they probably would have been the perfect jurors for this case. But I raised the issue because to me there was only one reason why they were knocked off and that's because they were both Hispanics. Probably the fear was that if Hispanics sat on a case with Mr. Osorio that somehow they would be sympathetic and they would exclude him. And I and I indicated three years ago I hate making this motion, I don't want to make this motion, but those were the facts that were before me at the time.
Now I can't, you know, put the genie back in the bottle or, as they say, put Humpty-Dumpty back together. They should have been discussed three years ago when it occurred. Your recollection would have been better of what was occurring in that jury panel, my recollection would have been better, and we could have hashed it out right there. We could have even interviewed the jurors and asked them if they high-fived each other, or if other jurors had made those observations. But unfortunately it's three years later, recollections aren't as good. I even looked through my notes. I don't have any notes about high-fiving or anything like that.
The assistant prosecutor then reiterated that she had seen the two Hispanic, female jurors making faces, giggling and high-fiving each other when another juror was excused.
At the conclusion of the hearing on motion for reconsideration, the trial judge again concluded that defendant had failed to show that the State had used its peremptory challenges in a discriminatory manner.
Nothing appears in the record with regard to making faces, or giggling, or high-fiving, or anything of that sort. And I don't have any specific recollection of it, nor does [defense counsel]. Now, the fact that we don't have any specific recollection of it doesn't mean that it didn't happen. [The prosecutor] says it did and she provided notes apparently that are a part of the record that indicate the basis for her exercising her preemptory [sic] challenges and I made them as part of the record.
....
Based on what I heard from [the defense counsel at the original remand hearing] supplemented by my review of the transcripts provided by [defense counsel] and argument from [defense counsel] here today, I find that the defendant has not carried his burden of proving by a preponderance of the evidence that the prosecution exercised its preemptory [sic] challenges on constitutionally-impermissible grounds[.]
*1117 Although our prior decision authorized defendant to apply for reinstatement of his original appeal if the trial court rejected his claim that the prosecutor had made discriminatory use of peremptory challenges, defendant filed a new notice of appeal from the court's decision on remand.
I
Under both the United States and New Jersey Constitutions, the determination whether the prosecutor has exercised peremptory challenges in a discriminatory manner involves a three-step inquiry:
First, the trial court must determine whether the defendant has made a prima facie showing that the prosecutor exercised a peremptory challenge on the basis of race. Second, if the showing is made, the burden shifts to the prosecutor to present a race-neutral explanation for striking the juror in question.... Third, the court must then determine whether the defendant has carried his burden of proving purposeful discrimination.
[Rice v. Collins, 546 U.S. 333, 338, 126 S.Ct. 969, 973-74, 163 L.Ed.2d 824, 831 (2006) (citations omitted).]
See also Gilmore, supra, 103 N.J. at 535-39, 511 A.2d 1150.
We concluded in our original opinion that the trial court "found that the prosecutor's use of her first six challenges to excuse minority jurors constituted `prima facie evidence' that the prosecutor had used those challenges in a discriminatory manner[,]" that "this finding [was] adequately supported by the record[,]" and "[t]herefore, the trial court should have called upon the prosecutor to provide `situation-specific' reasons for the exercise of her peremptory challenges." However, at the hearing on the remand, the trial judge seemed to retract his finding that defendant had made a prima facie showing that the assistant prosecutor made discriminatory use of her peremptory challenges. Moreover, the State's brief on this appeal questions the evidential foundation for this finding. Therefore, it is appropriate to return briefly to this issue.
After our original opinion, the Supreme Court of the United States made it easier for a party asserting a claim of the discriminatory use of peremptory challenges to establish a prima facie case. Under the prior test adopted by our Supreme Court, a defendant had to show that there was a "substantial likelihood" that the prosecutor had used peremptory challenges in a discriminatory manner to establish a prima facie case. Gilmore, supra, 103 N.J. at 536, 511 A.2d 1150. However, in Johnson v. California, 545 U.S. 162, 170, 125 S.Ct. 2410, 2417, 162 L.Ed.2d 129, 139 (2005), decided six days after our original opinion in this case, the Court rejected the argument that a defendant should be required to show that the prosecutor's use of peremptory challenges "was more likely than not the product of purposeful discrimination" to establish a prima facie case and held that a defendant is only required to "produc[e] evidence sufficient to permit the trial judge to draw an inference that discrimination has occurred." In reaching this conclusion, the Court stated that "[t]he [Batson v. Kentucky, 476 U.S. 79, 106 S.Ct. 1712, 90 L.Ed.2d 69 (1986)] framework is designed to produce actual answers to suspicions and inferences that discrimination may have infected the jury selection process[,]" and that "[t]he inherent uncertainty present in inquiries of discriminatory purpose counsels against engaging in needless and imperfect speculation when a direct answer can be obtained by asking [the prosecutor] a simple question." 545 U.S. at 172, 125 S.Ct. at 2418, 162 L.Ed.2d at 140-41. The *1118 requirement that a defendant show a "substantial likelihood" of the discriminatory use of peremptory challenge to establish a prima facie case, which our Supreme Court adopted in Gilmore, is quite similar to the "more likely than not" standard for establishing a prima facie case, which the Supreme Court of the United States rejected in Johnson. In fact, the Court in Johnson appeared to equate the "strong or substantial likelihood" and the "more likely than not" tests for establishing a prima facie case. See id. at 165, 168, 125 S.Ct. at 2414, 2416, 162 L.Ed.2d at 136, 138. Therefore, we conclude that the part of Gilmore dealing with the proof required to establish a prima facie case has been superseded by Johnson.
Although the standard for establishing a prima facie case has been relaxed by Johnson, the kind of factors that may support this findingand thereby shift the burden to the prosecutor to present non-discriminatory reasons for the exercise of peremptory challengesare similar. In State v. Watkins, 114 N.J. 259, 266, 553 A.2d 1344 (1989), our Supreme Court indicated that those factors include:
(1) that the prosecutor struck most or all of the members of the identified group from the venire; (2) that the prosecutor used a disproportionate number of his or her peremptories against the group; (3) that the prosecutor failed to ask or propose questions to the challenged jurors; (4) that other than their race, the challenged jurors are as heterogeneous as the community as a whole; and (5) that the challenged jurors, unlike the victims, are the same race as defendant.
Applying these factors under the Johnson test, it is even clearer now than at the time of our original opinion that defendant established a prima facie case of the discriminatory use of peremptory challenges. "[T]he prosecutor [had] struck ... all of [the minority jurors]" when defense counsel objected. Ibid. Moreover, "the prosecutor [had] used a disproportionate number of ... her peremptories" against minority jurors. Ibid. In fact, all six of the prosecutor's peremptory challenges up to the time defense counsel objected were used to excuse minority jurors. Furthermore, the prosecutor "failed to ... propose questions to the challenged jurors" before using her peremptories. Ibid. And two of the six challenged jurors were members of "the same [ethnic group (Hispanic)] as defendant." Ibid. Therefore, we reaffirm the conclusion reached in our original opinion that defendant established a prima facie case of discriminatory use of peremptory challenges.
II
Because defendant established a prima facie case, the burden shifted to the prosecutor "to come forward with evidence that the peremptory challenges under review are justifiable on the basis of concerns about situation-specific bias." Gilmore, supra, 103 N.J. at 537, 511 A.2d 1150. To satisfy this burden, the prosecutor was required to "articulate `clear and reasonably specific' explanations of [her] `legitimate reasons' for exercising each of [her] peremptory challenges." Ibid. (quoting Tex. Dep't of Cmty. Affairs v. Burdine, 450 U.S. 248, 258, 101 S.Ct. 1089, 1096, 67 L.Ed.2d 207, 218 (1981)). Those reasons were required to be "reasonably relevant to the particular case on trial or its parties or witnesses[.]" Id. at 538, 511 A.2d 1150 (quoting People v. Wheeler, 22 Cal.3d 258, 148 Cal.Rptr. 890, 583 P.2d 748, 765 (1978)). Such reasons are required to be both "genuine and reasonable." State v. McDougald, 120 N.J. 523, 555, 577 A.2d 419 (1990).
*1119 At the hearing on remand, the assistant prosecutor gave the following reasons for using her first six peremptory challenges to excuse minority jurors and, after defendant asserted that she was using her peremptory challenges in a discriminatory manner, for also using her seventh peremptory challenge to excuse a minority juror:
1. Hazel Purcel, an African-American female from East Orange with a relative involved in law enforcement, was excused because her father had been murdered and the responsible party "got-off."
2. Floyd Fair, an African-American male from East Orange, was excused because he was "sleeping" during jury selection.
3. Gloria Smith, an African-American female who resided in Newark and was friends with an East Orange police officer, was challenged because her brother had been convicted of a crime and served time in a State penal institution.
4. William Slade, an African-American male who had close friends and relatives in law enforcement (North Carolina, Irvington, Newark and East Orange), was challenged because his brother was arrested and placed on probation for a narcotics offense.
5 & 6. Sylvia Aquirre of Newark and Esther Martinez of East Orange, both Hispanic women and seated next to each other, were challenged for giggling, making faces at each other and high-fiving when another potential juror was excused.
7. Bernard Davis, an African-American male, was challenged for allegedly "sleeping for the majority of the selection."
We have no doubt that a conviction of a prospective juror's brother for a criminal offense, which was the reason given for the excusal of jurors Smith and Slade, constitutes a reasonable ground for exercise of a peremptory challenge in a criminal case. We also have no doubt that sleeping during jury selection, which was the reason given for excusing jurors Fair and Davis, constitutes a reasonable ground for exercise of a peremptory challenge. Moreover, if the conduct of jurors Aquirre and Martinez described by the assistant prosecutor actually occurred, that too could constitute a reasonable ground for exercise of a peremptory challenge. However, we question whether the reason given for excusing juror Purcelthat her father had been murdered and she believed his killer "got off"constituted a reasonable ground for the exercise by the State of a peremptory challenge. The assistant prosecutor did not explain why she believed this juror was likely to be biased against the State, and it is not self-evident to us. Nevertheless, we assume that the assistant prosecutor's proffered reason for excusal of juror Purcel was sufficient and proceed to the third step of the inquiry required where a claim is made that peremptory challenges have been exercised in a discriminatory manner.
III
At this stage, a trial court "must judge the defendant's prima facie case against the prosecution's rebuttal to determine whether the defendant has carried the ultimate burden of proving, by a preponderance of the evidence, that the prosecution exercised its peremptory challenges on constitutionally-impermissible grounds of presumed group bias." Gilmore, supra, 103 N.J. at 539, 511 A.2d 1150.
An appellate court ordinarily will extend substantial deference to a trial court's determination of whether the defendant has shown that the prosecutor had *1120 a discriminatory intent in the exercise of a peremptory challenge. See Snyder v. Louisiana, ___ U.S. ___, ___, 128 S.Ct. 1203, 1207-08, 170 L.Ed.2d 175, 181 (2008); Gilmore, supra, 103 N.J. at 541 n. 12, 545, 511 A.2d 1150; State v. Clark, 324 N.J.Super. 558, 571, 737 A.2d 172 (App.Div.1999), certif. denied, 163 N.J. 10, 746 A.2d 456 (2000). The primary reason for this deference is that only the trial judge is in a position to make "first-hand observations" of the demeanor of both the attorney who exercises the peremptory challenge and the juror who is excused. See Snyder, supra, ___ U.S. at ___, 128 S.Ct. at 1208, 170 L.Ed.2d at 181.
However, if a trial judge erroneously rules that a defendant has failed to establish a prima facie case of the discriminatory use of peremptory challenges and for that reason fails to call upon the prosecutor at the time of trial to give reasons for the exercise of those challenges, the trial judge's capacity to make such evaluations of demeanor is diminished and in some instances may be lost. This is particularly true where a substantial period of time elapses between the trial and the judge's determination of whether a prosecutor has exercised peremptory challenges in a discriminatory manner (in this case, more than three years), and the purported ground for the exercise of some of the prosecutor's peremptory challenges is not disclosed by the trial record.
If the trial judge had called upon the assistant prosecutor to give reasons for the use of her first six peremptory challenges to excuse minority jurors at trial, and she had alleged that jurors Aquirre and Martinez had been giggling, making faces at each other and high-fiving when another potential juror was excused, the judge could have made a reliable determination of whether such conduct had actually occurred based not only on defense counsel's observations but also on his own observations and those of other persons in the courtroom during jury selection. However, because the prosecutor was not called upon to state her reasons for exercising those peremptories until three years later, the only evidence placed before the judge regarding this alleged conduct by jurors Aquirre and Martinez was the assistant prosecutor's assertion that it had occurred and defense counsel's expression of incredulity that such conduct could have occurred without him observing it. Furthermore, confronted with this unsatisfactory record, the trial judge did not make an express finding that the conduct of jurors Aquirre and Martinez described by the assistant prosecutor had actually occurred. All the judge said was that the fact that neither he nor defense counsel had a "specific recollection" of such conduct "doesn't mean that it didn't happen."
In addition to his failure to make an express finding regarding the alleged incident involving jurors Aquirre and Martinez, the trial judge's decision on the remand was deficient in a number of other respects. In determining whether a prosecutor has exercised peremptory challenges in a discriminatory manner, a trial court should consider: (1) "whether the prosecution has applied the proffered reasons for the exercise of the disputed challenges even-handedly to all prospective jurors[,]" (2) "the overall pattern of the prosecution's use of its peremptory challenges[;]" and (3) "the composition of the jury ultimately selected to try the case." State v. Clark, 316 N.J.Super. 462, 474, 720 A.2d 632 (App.Div.1998) (citing Gilmore, supra, 103 N.J. at 541-43, 511 A.2d 1150). The trial judge failed to make any findings regarding these critical considerations.
We have previously expressed our reservations as to whether the reason given *1121 by the assistant prosecutor for excusing juror Purcelthat her father had been murdered and she believed his killer "got-off"constituted a reasonable ground for the State's exercise of a peremptory challenge. However, assuming that the fact that a juror or relative of a juror has been a victim of a crime may be a proper ground for the exercise of a peremptory challenge in some circumstances, the trial judge must consider whether this proffered reason has been applied even-handedly to all prospective jurors in determining whether the prosecutor has exercised a peremptory challenge in a discriminatory manner. The Supreme Court of the United States has reemphasized the importance of such "even-handedness" in the exercise of peremptory challenges in its recent decisions in Miller-El v. Dretke, 545 U.S. 231, 240-52, 125 S.Ct. 2317, 2325-32, 162 L.Ed.2d 196, 214-22 (2005) and Snyder, supra, ___ U.S. at ___, 128 S.Ct. at 1208-12, 170 L.Ed.2d at 181-86.
The trial judge failed to consider whether the assistant prosecutor extended even-handed consideration to the circumstance that a relative had been a crime-victim the purported reason for excusing Purcelto non-minority jurors. A total of twenty-one prospective jurors stated that either they, a relative or a friend had been a crime-victim and four of these jurors were selected for the jury that tried defendant. Although Purcel was the only prospective juror who stated that the perpetrator "got off," numerous prospective jurors stated that the perpetrator was "not apprehended." We have difficulty understanding how a prosecutor could come to the conclusion that a prospective juror who felt that the perpetrator of a crime against a family member "got off" would be biased against the State, but that prospective jurors who had been informed the perpetrator had not been apprehended would not have such bias. See Clark, supra, 324 N.J.Super. at 573-74, 737 A.2d 172. At a minimum, it was incumbent upon the trial judge to ask the assistant prosecutor to compare these circumstances and then to make findings regarding the even-handed application of her purported reason for Purcel's excusal, which the judge failed to do.
It was also incumbent upon the trial judge to consider the overall pattern of the assistant prosecutor's exercise of her peremptory challenges. Clark, supra, 316 N.J.Super. at 474, 720 A.2d 632. The record discloses that the prosecutor used the first seven of her ten peremptory challenges to excuse minority jurors. We indicated in Clark that "[e]ven if the reasons for each individual challenge appear sufficient when considered in isolation from the prosecution's other challenges, the use of a disproportionate number of peremptory challenges to remove members of a cognizable group may warrant a finding that those reasons are not genuine and reasonable." Ibid. In this case, even when considered in isolation, the assistant prosecutor's challenges of prospective jurors Purcel, Aquirre and Martinez were highly questionable. But considered in the context of the assistant prosecutor's use of a disproportionate number of peremptory challenges to excuse minority jurors, the inference that there was a discriminatory motive for the exercise of those challenges is even stronger.
Finally, the trial judge failed to consider the composition of the jury that was ultimately selected to try defendant. We have previously recognized that even though the presence of members of a cognizable group who allegedly have been discriminatorily excluded from a jury does not necessarily negate a finding that an individual prospective juror was discriminatorily challenged, "the ultimate composition of the jury[] is relevant to the determination *1122 of whether the prosecutor's intent was discriminatory." Clark, supra, 324 N.J.Super. at 570, 737 A.2d 172. Consequently, the presence on the jury of a substantial number of the group alleged to have been discriminatorily excluded may support a finding that a questionable proffered reason for challenging a member of that group was not reflective of a discriminatory intent. Id. at 575, 737 A.2d 172. However, the trial judge made no finding regarding the composition of the jury that found defendant guilty, nor is there any basis in the record for us to make this finding.
The deficiencies in the evidentiary record and the trial judge's findings on remand could support a second remand. However, more than six years have elapsed since defendant's trial, and there is no reason to believe that additional evidence material to the issue of the assistant prosecutor's exercise of her peremptory challenges could be presented on a further remand. Moreover, based on the assistant prosecutor's overall pattern of the use of her peremptory challenges, her questionable challenges of prospective jurors Aquirre, Martinez and Purcel, and her failure to apply the purported reason for the excusal of juror Purcel even-handedly, we conclude that defendant made a sufficient showing that the State used its peremptory challenges in a discriminatory manner.
Accordingly, defendant's convictions are reversed, and the case is remanded to the trial court for a new trial.
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290 B.R. 689 (2003)
In re PAYLESS CASHWAYS, INC.
Silverman Consulting, Inc., Chapter 11 Trustee, Plaintiff,
v.
Hitachi Power Tools, U.S.A., Ltd., the Valspar Corporation, the Scotts Company, Crane Plumbing Corporation, and Osram Sylvania, Defendants.
Bankruptcy No. 01-42643, Adversary Nos. 02-4055, 02-4078.
United States Bankruptcy Court, W.D. Missouri.
March 14, 2003.
*690 *691 Benjamin F. Mann, Terrance M. Summers, Heather B. Wolesky, Blackwell, Sanders, Peper, Martin, Kansas City, MO, for Plaintiff.
Paul D. Sinclair, Sinclair, Haynes & Cowing, P.C., Kansas City, MO, Peter S. Partee, Hunton & Williams, Richmond, VA, for Defendants.
MEMORANDUM OPINION
ARTHUR B. FEDERMAN, Chief Judge.
Silverman Consulting, Inc. (Silverman), the Chapter 11 trustee for debtor Payless Cashways, Inc. (Payless) filed adversary proceedings against Hitachi Power Tools, U.S.A. Ltd., The Valspar Corporation, The Scotts Company, Crane Plumbing Corporation, and Osram Sylvania (the Defendants), among others, to avoid alleged preferential transfers. This is a core proceeding under 28 U.S.C. § 157(b)(2)(F) over which the Court has jurisdiction pursuant to 28 U.S.C. § 1334(b), 157(a), and 157(b)(1). The following constitutes my Findings of Fact and Conclusions of Law in accordance with Rule 52 of the Federal Rules of Civil Procedure as made applicable to this proceeding by Rule 7052 of the Federal Rules of Bankruptcy Procedure.
ISSUE PRESENTED
The Bankruptcy Code (the Code) authorizes the trustee to avoid a transfer made *692 within 90 days of a bankruptcy filing if, on the date the transfer was made, the debtor was insolvent or became insolvent as a result thereof. Payless was solvent within 90 days prior to filing its bankruptcy petition if its assets are valued as a going concern, however, Payless was insolvent if its assets are valued at liquidation value. A business is a going concern if it is operating, unless it is on its deathbed. Payless began liquidating its assets within three months after filing a Chapter 11 bankruptcy petition. Was Payless on its deathbed at any time during the 90 days prior to filing its bankruptcy petition?
DECISION
Throughout the preference period, Payless operated in excess of 100 stores, received advances from its lenders, and maintained operations consistent with past practices, as modified upon the advice of its investment advisors. Its strongest selling season had in the past run from May through September. Payless had good sales in April, but its inventory lenders restricted credit such that it was not able to replace inventory at the beginning of the selling season. On May 13, 2001, one of Payless' inventory lenders suggested that it file a Chapter 11 bankruptcy petition, which was contrary to the advice of its investment advisors. Payless filed for bankruptcy protection on June 4, 2001. From May 13, 2001, until it obtained debtor-in-possession financing on July 19, 2001, Payless was unable to obtain goods on credit from a significant number of its trade vendors. That fact, and an increase in lumber prices in the spring, meant that Payless was not effectively able to offer product to its customers during what should have been its strongest selling season. The decision to file the bankruptcy case, and the inability thereafter to obtain goods on credit, doomed the company. I, therefore, find that Payless' assets should be valued at going concern value until May 13, 2001. Thereafter Payless' assets should be valued at liquidation value. Thus, Payless was solvent until on or before May 13, 2001, and insolvent thereafter.
FACTUAL BACKGROUND
This is the second Chapter 11 bankruptcy filing for this debtor. On July 21, 1997, Payless filed its first Chapter 11 case. It emerged pursuant to a Plan of Reorganization confirmed on November 19, 1997. One year after confirmation, Payless was operating 161 stores. By November 30, 2000, Payless was operating 150 stores.
When Payless emerged from its first bankruptcy it implemented new corporate goals. The corporate goal Payless considered most critical involved a decision to shift a greater percentage of its business from the do-it-yourself customer to the professional builder. In the fall of 2000 Payless retained Anderson Consulting to review its progress toward achieving its corporate goals. At the time of the consult, Payless' business was split almost equally between the two categories, and it hoped to increase the professional side to approximately 60 percent of the total. As part of its review, Anderson Consulting suggested the company retain Peter J. Solomon Company (Solomon), an investment banking firm. Solomon advised the company that its financial structure was sound, but that the company would be stronger if it closed approximately 24 stores and five distribution centers that were not performing well. By February 24, 2001, Payless was operating 133 stores.
Anders J. Maxwell, an investment advisor for Solomon stated in his deposition that during the fiscal year ending November 25, 1999, Payless showed Earnings Before Interest, Taxes, Depreciation, and *693 Amortization (EBITDA) of $62.8 million. For the fiscal year ending November 25, 2000, Payless showed EBITDA of $67.6 million. This represented the tenth consecutive quarter in which EBITDA increased. In 2000 Payless lost approximately $3.973 million before taxes, and $652,000 after taxes. In the prior year, however, the after-tax loss had been approximately $5.837 million. Moreover, net sales for fiscal year 2000 were the highest in four years. At that time Payless was the fourth largest seller of building materials in the nation. KPMG, as Payless' accountant, produced year-end financial statements for fiscal year 2000, in connection with Payless' 10-K filing with the Securities and Exchange Commission (The SEC). KPMG did not include a "going concern qualifier" in the financial statements. In order to prepare Payless' quarterly form 10-Q for the SEC for the quarter ending February 24, 2001, KPMG conducted a review(as opposed to a yearly audit) of the company's books, and again did not include a "going concern qualifier" in its report.
Based, however, upon both the reduction in the number of its stores and difficult conditions in the industry related to deflation in the price of lumber, at its February 21, 2001, Board meeting, Payless projected a decrease in EBITDA for fiscal year 2001 to approximately $52.4 million.
Despite these more conservative projections, during the first quarter of fiscal year 2001, which ended on February 24, 2001, Payless showed net income of $279,000, compared to a 2000 first quarter loss in the amount of $4,218,000. Millard Barron, the Chief Executive Officer of Payless, stated in his deposition that this was the company's best performance since 1994.
Mr. Barron also stated that by the end of fiscal year 2000, management believed it had made tremendous progress in re-engineering the company's business and profit models, as reflected in the significant improvement in the bottom line. Nevertheless, according to Mr. Barron, management continued to be aware that the company was highly leveraged, thus making it particularly susceptible to external factors.
At the end of the first quarter 2001, Payless issued a press release stating that it had reduced its overhead, and was making "significant progress toward (its) goal of profitability in 2001." Likewise, at the end of the first quarter, Payless showed total stockholders' equity in the amount of $134,693,000, based on fresh-start accounting.
In years past, Payless had received an overline advance from its lenders in January, during its slow season, to enable it to purchase inventory in anticipation of the increase in business during the spring selling season. In early January 2001, Payless' inventory lender, Congress Financial Corporation (Congress) notified Payless that, due to a disagreement among some of the participants in the inventory loan, the overline would not be made available. Congress advised Payless that one of the participants had suffered significant losses when another retailer filed for bankruptcy protection, and that it did not wish to continue to make retail overline loans. As a result, Payless had to find another overline lender. Hilco Capital, L.P., (Hilco) made an overline loan in the amount of $15 million to Payless on January 31, 2001. The overline loan was junior in priority to the existing Congress loan. While waiting for its overline loan, Payless was unable to purchase as much inventory as it planned, and in order to purchase critical inventory, it was forced to stretch payments to its vendors. Partially as a result, while Payless owned inventory on February 28, 2001, that it valued at cost in the amount of $291.4 million, by May 31, 2001, the cost *694 value of Payless' inventory had dropped to $218.81 million. The average per store inventory balance dropped from $2.49 million in May of 2000 to $1.89 million in May of 2001. And this decreased value assigned to inventory was even more damaging to Payless because the increase in lumber prices in late April and early May meant that Payless had even less inventory to offer customers with a cost value of $1.89 million than it would have had in February of 2001 at the same cost value.
When Payless emerged from its first bankruptcy filing, its trade vendors continued to do business with it, but demanded payment within 15 to 20 days of invoice. Payless adhered to that schedule through 2000. At least in part due to the delay in obtaining the overline loan, Payless began to stretch payments to its trade vendors by holding checks that its computers generated on the date each such payment was due to be paid. By the end of February, Payless had stretched its average payment to approximately 28.78 days, and was holding checks totaling $29.4 million. By the end of May, Payless had stretched average payment to 34.28 days, and was holding checks totaling $46.63 million.
According to Mr. Barron, the spring of 2001 was a difficult time for the entire industry. Lumber prices were deflated, and the country was emerging from a very severe winter. Nonetheless, by the end of the first quarter, on February 24, 2001, 90 percent of Payless' vendors continued to ship goods on credit despite the longer payment terms. By the end of the second quarter, on May 26, 2001, however, less than 5 percent of the vendors were shipping to Payless on credit.
On March 17, 2001, Payless still had available credit of $6,896,000 from Hilco. Nonetheless, Mr. Barron stated that in April and May of 2001, Hilco tightened its lending formula. Despite the tightened formula and the decreasing inventory reserves, however, Payless had $22 million in sales the last week of April 2001. Thereafter, Hilco continued to tighten its formula, so that Payless was unable to use the cash generated by such sales to purchase fresh inventory. As a result, the weekly sales dropped to $17 million for the first two weeks of May, and to $16 million for the last two weeks of May. Despite approximately $68 million in sales in May 2001, Payless spent just $31 million to replenish its inventory, with Congress and Hilco capturing much of the balance.
Michael J. Egan, an owner of Hilco, stated in his deposition that by April 23, 2001, Payless had overdrawn its overline in the amount of $2.451 million and was in violation of certain covenants in its loan agreement with both Hilco and Congress. Egan also stated that from April 23, 2001, until June 4, 2001, Payless was generally overdrawn on its line of credit with Hilco. Hilco continued to tighten its credit terms, but also continued to make advances. On February 9, 2001, Hilco had been advancing at 71.3 percent of the lower of cost of the inventory, or market value. Hilco dropped that rate to 69 percent sometime in March. On a tax basis, Payless lost $55.655 million through the quarter ending May 26, 2001,[1] of which approximately $40 million represented one-time costs related to the closing of stores.[2]
In his deposition Anders Maxwell stated that Solomon was not in favor of Payless filing another Chapter 11 bankruptcy petition because it believed Payless was worth much more outside of bankruptcy. Solomon also predicted that a bankruptcy filing would precipitate a sales drop in the range *695 of 20-30 percent. Solomon further projected that, if Payless did not file for bankruptcy relief, it would be able to reduce its accounts payable, which totaled $69 million in April of 2001, to $50 million by November. By the end of the second quarter, on May 26, 2001, Payless' accounts payable stood at approximately $57 million.
According to Mr. Barron, on May 13, 2001, at an emergency meeting, Hilco suggested that Payless file a Chapter 11 bankruptcy petition in order to use its cash to purchase new inventory rather than to pay vendors for merchandise that had already been shipped. Hilco pointed out that, while Payless had had a couple of good weeks in April, it was now out of stock in key commodity areas, just as the weather was starting to warm up and the main selling season was about to begin. Prior to that time, Mr. Barron stated that management believed that, with the cooperation of its secured lenders, Payless could maintain the support of its vendors, continue to operate, and protect its value for shareholders.
In late April and early May, the price of lumber, which had been at record low prices, increased dramatically, further exacerbating Payless' out-of-stock difficulties. Payless' overall in-stock level fell from 89 percent in February to 69 percent by the first week in June.
In the period immediately following the May 13, 2001, emergency meeting, Payless was unable to agree with Congress and Hilco on terms for restructuring its debt either in or out of bankruptcy. On June 4, 2001, Payless filed for Chapter 11 relief. Despite ongoing negotiations, Congress/Hilco would not agree, prepetition, to provide debtor-in-possession (DIP) financing for Payless unless it, among other conditions, was given a priming first lien on all of Payless' assets. Thus, Payless filed this Chapter 11 petition without a DIP facility. Mr. Barron stated that without DIP financing, after the filing, approximately 268 vendors refused to ship goods to the company. Congress/Hilco eventually agreed to become the DIP financier, but the financing was not put into place until on or after July 19,2001, more than six weeks after Payless had filed for relief.
As predicted by Solomon, the filing of the bankruptcy was devastating to the customer base, particularly the professional builders who needed assurance that goods they ordered from the company would be available when they needed them for their jobs. Mr. Witaszak estimated that the bankruptcy filing caused Payless to lose approximately 20-30 percent of its customer base.
As pointed out by one of the Defendants expert witnesses, Mr. Guy Davis, Payless had substantial equity in its real estate, an unusual circumstance for a retailer in Chapter 11. Schedule "A" filed July 13, 2001, 2001, in the bankruptcy case, lists the fair market value of Payless' real estate as follows: (1) Land and improvements to land: $69,562,700; (2) Buildings: $108,129,557; and (3) Real Estate held for sale: $53,761,490. The real estate was encumbered by liens held by LaSalle Bank National Association as Trustee for Fortress Commercial Mortgage Trust (Fortress), with a claim in the amount of $53,600,000 and Canadian Imperial Bank of Commerce (CIBC), with a claim in the amount of $106,050,000. The expert witnesses relied upon by both Silverman and the Defendants also valued Payless' real estate substantially in excess of the real estate liens throughout the preference period.
By late August, Congress/Hilco, as the DIP lender, concluded that Payless would have to be liquidated. And on September 10, 2001, the United States Trustee appointed *696 Silverman as the liquidating trustee.
Silverman filed a number of adversaries to avoid alleged preferential transfers. Several Defendants raised solvency as an affirmative defense. On October 22, 2002, this Court bifurcated the issue of solvency and consolidated the remaining Defendants in these two adversaries to make a solvency determination. As to the remaining five Defendants, Silverman alleges that transfers in the following amounts were made after March 6, 2001:(1) Hitachi Power Tools U.S.A., Ltd.: $1,258,377.89; (2) The Valspar Corporation: $842,088.40; (3) The Scotts Company: $624,731.16; (4) Crane Plumbing Corporation: $383,064.68; and (5) Osram Sylvania: $697,177.51. Commencing on February 24, 2003, this Court conducted a three day trial on the issue of solvency. Silverman called as an expert witness Louis G. Dudney, a principal with AlixPartners, L.L.C. Defendants called as expert witnesses (1) Guy A. Davis, a managing director of Navigant Consulting, Inc. and (2) Brooks Dean Myhran, a managing director and member of Goldsmith, Agio, Helms & Lynner, L.L.C. I will first deal with a motion to dismiss the Complaint, pursuant to section 550(a) of the Code, filed by the Defendants. I will then limit my analysis in these bifurcated adversaries to the issues of whether Payless was solvent on March 6, 2001, and, if so, at what point Payless became insolvent.
DISCUSSION
11 U.S.C. § 550(a)
In their pre-trial brief, Defendants ask this Court to find in their favor on the grounds that any recovery will only go to satisfy administrative claims, and not prepetition unsecured claims. Silverman and Defendants stipulate to the following facts: (1) Silverman has identified approximately 2000 potential preference claims with an aggregate gross recovery of $105,573,964; (2) approximately 1200 of these claims are for less than $10,000; (3) Silverman will proceed by demand letter for claims of less than $10,000; (4) administrative claims in the estate total approximately $17.5 million; (5) Silverman will incur an additional $2 million in legal fees and costs to pursue the remaining preference actions; (6) Congress has a lien on preference recoveries in the amount of $273,566.80; (7) Silverman cannot estimate the net recovery from preference litigation; and (8) without preference recoveries, the estate may be administratively insolvent.
Section 550(a) of the Code allows the trustee to bring an alleged preference action for the benefit of the estate:
(a) Except as otherwise provided in this section, to the extent that a transfer is avoided under section ... 547 ... of this title, the trustee may recover, for the benefit of the estate, the property transferred, or, if the court so orders, the value of such property ...[3]
Defendants argue that a trustee is not authorized to bring a preference cause of action to recover funds from some unsecured creditors unless the recovery will go to satisfy claims of all unsecured creditors. Here, the Defendants argue that any recovery will go to satisfy administrative claims, and that it is unlikely the recoveries will be sufficient to pay any dividend to unsecured creditors. Defendants rely upon Harstad v. First American Bank (In re Harstad).[4] In Harstad the court found that a trustee could not bring a preference action if the recovery would only benefit *697 the debtor, not any creditors of the estate.[5] That is not the case here. It is true that any recovery will first go to satisfy administrative expenses, but the payment of such expenses does benefit the estate, and not just the debtor. As such, based on the stipulation filed February 25, 2003, and my reading of Harstad, I find that section 550(a) of the Code does not bar Silverman from bringing these adversary proceedings. I will, therefore, enter an Order denying Defendants' request.
11 U.S.C. § 547(b)(3)
Silverman filed these adversary proceedings to avoid alleged preferential transfers Payless made to the above Defendants. Silverman contends that Payless transferred funds to the Defendants within 90 days of filing its bankruptcy petition, that it was insolvent at the time of the transfers, and that it made the transfers to pay antecedent debts. Section 547(b) of the Bankruptcy Code (the Code) authorizes the trustee to avoid such transfers:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition;
. . . . .
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.[6]
Moreover, there is a presumption that debtors are insolvent within 90 days of filing for bankruptcy relief:
(f) For the purposes of this section, the debtor is presumed to have been insolvent on and during the 90 days immediately preceding the date of the filing of the petition.[7]
Because of the presumption of insolvency, the burden of proof is on the defendant to rebut the presumption.[8] If the defendant, however, presents sufficient evidence of solvency, then the burden of persuasion shifts to the trustee to prove the debtor was insolvent on the relevant date.[9] Silverman moved for a judgment in its favor at the conclusion of the Defendants' case, claiming that the Defendants failed to rebut the presumption of insolvency. I denied that motion. I found that the Defendants had made a prima facie case that Payless was a going concern for all or part of the preference period. Defendants presented evidence that Payless was open and doing business at all times prior to the bankruptcy filing. Mr. Witaszak testified, *698 on behalf of management, that management believed its business plan was working and sales would improve. For most of the preference period Payless continued to obtain advances from its secured creditors. Payless was not in default with Congress or Hilco until April 23, 2001. In the Eighth Circuit a financial statement showing positive net worth at the beginning of the preference period is sufficient to rebut the presumption of insolvency.[10] Payless' Form 10-Q, which it filed with the Securities and Exchange Commission for the period ending on February 24, 2001, showed total stockholders equity in the amount of $134, 693,000.[11] For these reasons, I found that the Defendants had rebutted the presumption of insolvency, and I, therefore, denied Silverman's motion for judgment at the conclusion of defendant's evidence. As a consequence, the burden of proof shifted to the trustee to prove insolvency as of the date of each challenged transfer.
Payless filed its bankruptcy petition on June 4, 2001. The preference period, therefore began on March 6, 2001. Mr. Davis, Defendants' expert, testified that Payless was a going concern for all of the preference period, and that it was solvent for all of the preference period. Mr. Davis valued Payless' assets using both an individual asset valuation and a Comparable Company Approach. Since he found Payless to be a going concern throughout the preference period, Mr. Davis did not perform a valuation of Payless' assets using liquidation value. Mr. Dudney, Silverman's expert, testified that Payless was insolvent for all of the preference period using either going concern value or liquidation value. Mr. Dudney also used an individual asset valuation and a Comparable Company Approach. Both experts testified that Payless used "fresh-start" accounting beginning in 1997 when Payless emerged from bankruptcy the first time. Fresh-start accounting is the accounting method that a debtor adopts upon emergence from bankruptcy provided it can meet three criteria: (1) the debtor filed a Chapter 11 bankruptcy petition; (2) the debtor's reorganization value was less than allowed claims plus post-petition debt; and (3) preconfirmation shareholders received less than 50 percent of the voting shares of the reorganized company.[12] These criteria imply "that the company is a new entity with new owners and should be accounted for in a similar way to a purchase transaction."[13] Thus, the new entity's balance sheet is reconstituted from a historical-cost basis to a new fair-market-value basis.[14] The American Institute of Certified Public Accountants' Statement of Position 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, requires firms that meet the above criteria to restate their assets and liabilities at their going-concern values.[15] Under fresh-start accounting reorganization value in excess of amounts allocable to identifiable assets is captioned as goodwill on a debtor's balance sheet.[16] Both Mr. Davis and Mr. Dudney testified that they used fresh-start *699 accounting in making their individual asset valuations, and that they allocated no value for goodwill.
Both experts in this case defended their methodology and testified extensively regarding the Comparable Company Approach, which I will address later. I read section 101(32) of the Code, however, to mean that solvency or insolvency in preference litigation is to be determined primarily by use of the balance-sheet.[17] The Code defines insolvency as "a financial condition such that the sum of such entity's debts is greater than all of such entity's property at fair valuation."[18] As the Honorable Richard A. Posner stated, a "firm could be solvent in balance-sheet terms yet be in danger of imminent failure. Bankruptcy law ignores these subtleties in the interest of having a clear rule: balance-sheet solvency determines whether the payments to creditors ... are voidable preferences."[19] Thus, I will use a balance-sheet test, based on the assets at fair valuation, to determine if Payless was insolvent during the preference period.[20] Fair valuation is "generally defined as the going concern or fair market price `[u]nless a business is on its deathbed.'"[21] If, however, a company is "on its deathbed," assets should be valued on a liquidation basis.[22] In its Summary of Schedules filed on July 13, 2001, Payless listed total assets of $511,040,885 and total liabilities of $415,108,191.[23] Payless valued its assets at their going concern value in preparing its bankruptcy schedules. Mr. Dudney, Silverman's expert witness, conceded at the hearing that, as a going concern, Payless was solvent on March 6, 2001. Mr. Davis and Mr. Myhran offered testimony as to the value of Payless' assets as a going concern, but they offered no opinion of the value of the assets at liquidation value. Mr. Dudney, on the other hand, found that Payless was insolvent on March 6, 2001, and at all times thereafter, if the assets are valued at liquidation value. Therefore, whenever Payless ceased to be a going concern, I must use Mr. Dudney's liquidation values and find that Payless was insolvent on that date. Thus, I begin with a determination of whether Payless was a going concern on March 6, 2001, and if so, at what point it ceased to be a going concern.
In this case, the difference between whether Payless was solvent during the preference period depends entirely on whether Payless' inventory is valued at going concern or liquidation value. While both experts assign slightly different numbers to Payless' assets at the beginning of the preference period, those variances do not make a significant difference. And both experts agree that the inventory is the only asset significantly impacted by the valuation methodology utilized. As the chart below demonstrates, Payless was solvent on March 6, 2001, if its inventory is valued at cost, and it was insolvent on March 6, 2001, if its inventory is valued at *700 liquidation value, or 76.5 of cost. There is some discrepancy in the values assigned to assets other than inventory because Mr. Davis began his analysis on March 6, 2001, and Mr. Dudney began his analysis on February 24, 2001. For purposes of this determination, I will assume the value of the inventory on February 24, 2001, to approximate the value of the inventory ten days later. Below is a comparative chart of the values in thousands at the beginning of the preference period:
LIQUIDATION
FAIR VALUE VALUE[24]
March 6, 2001
Davis Dudney Davis Dudney
ASSETS:
Cash $ 843 843 843
Inventory & 104 stores 273,330 291,406 222,926[25]
Inventory & Closing locations 6,327[26]
Accounts Receivable 6,536 9,010 6,523
Prepaids 1,817 10,847 5,424[27]
Benefit plans 288
Deposits and Notes Receivables 226
Land and Buildings 250,038 221,948 237,821
Furniture and Fixtures 11,412 28,395 2,004
Equipment and computers 13,739 38,568 901
Automobiles 5,377 6,721 10,275
______ ______
Construction in Progress 1,946
Other 4
_______
TOTAL ASSETS $569,934 $609,118[28] $487,098
LIABILITIES:[29]
Total Liabilities: $504,425 504,425
Projected Net Loss 904 477
Reversal of bad debt reserve (2,244)
Closing costs for 29 stores 4,100
Other closing costs 25,200
*701
Selling expenses 5,699[30]
Closing costs for 137 stores 61,700[31]
______
Reversal of prior year store closing (1,300)
_______
TOTAL LIABILITIES $539,029 $563,058
Thus, according to both experts, using an individual asset analysis, Payless was solvent as a going concern on March 6, 2001. Having listened to the testimony of all three experts and studied their various reports, I will adopt the individual asset values in the report of Guy A. Davis as to Payless' going concern value. And, since Mr. Davis did not perform a liquidation analysis, I will adopt the individual asset values in Mr. Dudney's report as to Payless liquidation value.
Both experts relied upon the Comparable Company Approach (sometimes called the EBITDA Multiple Approach) as a widely accepted method of valuing the equity of a company. The Comparable Company Approach uses the market valuations and transactions of comparable companies in the same industry. According to Mr. Davis, the theory behind this approach "endorses the concept that the cash generated from assets employed by Company A in a particular industry is going to be valued on a consistent basis by potential investors as the cash flow generated from assets employed by Company B in the same industry."[32] In other words, Mr. Davis looked at Payless' EBITDA for the trailing twelve months. He then developed industry multiples using both market and transaction information from what he considered nine comparable companies. He averaged the multiples, adjusted upward for the premium purchasers will pay for a controlling interest, and downward for Payless' relative position versus the industry. He arrived at a multiple of 6.1. Mr. Davis testified that Payless' EBITDA from February 24, 2000, through February 24, 2001, multiplied by the market multiple of 6.1, after deducting interest-bearing debt demonstrated equity before adjustments of $80.7 million. This represents the going concern value of Payless' 104 profitable stores. Mr. Davis made further adjustments for liquidating the 29 unprofitable stores and determined that the going concern value of Payless was $71.377 on March 6, 2001.[33] Mr. Dudney challenged Mr. Davis' methodology and performed a similar calculation using different comparable companies and the harmonic mean instead of an average in order to determine the multiples. Not surprisingly, Mr. Dudney found that Payless' equity value was negative $15.9 million on March 6, 2001. For the following reasons, I will adopt Mr. Davis' report. Payless had had positive EBITDA for the previous ten quarters.[34] Both Mr. Davis and Mr. *702 Myhran testified that the harmonic mean is an inappropriate methodology for determining market multiples. I found their testimony credible. I find that Mr. Davis convincingly defended his choice of comparable companies. And finally, I find that Mr. Davis' conservative individual asset valuation on a going concern basis indicates positive equity. Both experts testified that fresh-start accounting removes goodwill from the equation when valuing a company emerging from bankruptcy. Both experts also testified that an EBITDA analysis is used to take advantage of the synergy created by a going concern. In other words, an EBITDA analysis, provided the correct multiples are used, should result in a higher valuation than an individual asset valuation. That was the case for Mr. Davis' Comparable Company Approach, but not for Mr. Dudney's.[35] For that reason, and based on my evaluation of the expert witnesses, their education and experience, and also because I found Mr. Davis' methodology more convincing, I will adopt Mr. Davis' report for the Comparable Company Approach.
The real issue, however, is whether Payless was a going concern or on its deathbed during the preference period. A commercial enterprise is a going concern if it is actively engaged in business with the expectation of indefinite continuance.[36] Mr. Davis found the following facts relevant in making his determination that Payless was a going concern: (1) Payless had 137 stores open and operating, 104 of which it believed could be made profitable; (2) Payless had an active workforce of approximately 7000 people; (3) Payless still had lenders willing to continue advancing money on a daily basis; (4) Payless had equity shares actively being traded on the open market; (5) Payless received a clean audit opinion from its auditors on February 24, 2001, with no going concern qualifier; (6) Payless had issued projections for both positive EBITDA and net income for 2001; (7) Payless' management was optimistic about its future; and (8) Payless had vendor loyalty and support.[37] In Jones Truck Lines, Inc. v. Full Service Leasing Corporation (In re Jones Truck Lines, Inc.),[38] the Eighth Circuit suggested the following factors as evidence of a going concern: (1) whether the company was operating; (2) whether the officers were optimistic; and (3) whether the managers and lenders continued to invest in the business.[39] Using these factors, the Eighth Circuit found that the debtor in that case, though financially troubled, was still a going concern at the beginning of the preference period.[40] In In re Taxman,[41] the Seventh Circuit began its analysis of solvency with a discussion of the purpose of section 547(b). The court suggested that the Code emphasized a company's solvency because "once a firm is in acute peril the temptation to try to keep afloat in the hope its luck will change may lead it to strike a deal with its key creditors to the prejudice of its other creditors."[42]*703 Thus, the knowledge that undue pressure may precipitate a bankruptcy filing and that any payments made may be subject to avoidance may cause other creditors to "be more forbearing, and by doing so makes it less likely that firms will be pushed into bankruptcy prematurely."[43] Judge Posner uses the term "point of peril" in lieu of "deathbed." He defines the "point of peril" as the time when a company's ability to continue as a going concern is in doubt because its expected revenues are less than the expected costs.[44] Thus, the Seventh Circuit in Taxman found that the debtor was not on its deathbed during the preference period because "the assets that it could realize on in the ordinary course of its business exceeded the expenses of realizing on them, plus its other liabilities."[45] Under his definition, as long as a company is operating, showing positive EBITDA, and its creditors and stockholders are continuing to invest in it, it is a going concern. Silverman argues, however, that solvency is not determined by either the debtor's conduct or the conduct of third parties.[46] It claims that a company is not solvent just because other parties believe it is solvent. Silverman relies on the facts that Payless' management missed projections for all of 2001 and that Payless was forced to liquidate within three months of its bankruptcy filing as proof that Payless was on its "deathbed" during the preference period. Those are relevant facts, but they are not sole determinants of solvency. It is undisputed that Payless continued to operate throughout the preference period. Moreover, both Edward Zimmerlin, Payless' former Senior Vice President of Marketing and Merchandising, and Richard Witaszak, testified that they believed the company would be successful, and that they both bought stock in the company. Mr. Witaszak testified that he continued to buy stock throughout the first quarter of 2001. Payless showed positive EBITDA for ten consecutive quarters, and had positive EBITDA at the beginning of the preference period.
In Lids Corporation v. Marathon Investment Partners, L.P. (In re Lids Corporation),[47] the court held that as long as liquidation in bankruptcy is not clearly imminent on the date of the transfer, a company should be valued as a going concern.[48] As a going concern a company's assets should be measured at market value rather than at distress value.[49] Or, as the court in Lids Corporation stated, "assets should be valued at the sale price a willing and prudent seller would accept from a willing and prudent buyer if the assets were offered in a fair market for a reasonable period of time."[50] The debtor in Miller & Rhoads, Inc. Secured Creditors Trust v. Robert Abbey, Inc. (In re Miller & Rhoads, Inc. Secured Creditors Trust),[51] was losing money in every store on a operating basis when it filed for bankruptcy protection. Inventory levels, sales levels, gross profit margins, operating expenses, sales per square foot and capital expenditures were all below industry average. On the date Miller & Rhoads filed for bankruptcy relief it had suffered net *704 losses of $14.7 million for fiscal year 1989, and there was negative shareholders' equity of $16.5 million.[52] Unlike Payless, Miller & Rhoads only showed positive EBITDA one month in the year prior to its bankruptcy filing.[53] In addition, on the date Miller & Rhoads filed its Chapter 11 bankruptcy petition the court found that by valuing its assets using a liquidation standard, its liabilities exceeded its assets by $20,792,592,90.[54] The court, thus, found that Miller & Rhoads was not solvent on the transfer dates.
I, however, find the facts in Taxman more on point to the facts of this case. In In re Taxman Clothing Company, Inc.,[55] the debtor closed its doors five days before filing for bankruptcy relief.[56] It later sold its inventory at an auction. In subsequent preference litigation, the bankruptcy court used the price the inventory brought at auction to value the inventory on the date of the alleged preferential transfer.[57] The district court affirmed, but the Seventh Circuit reversed. It found that, while the debtor closed its doors five days prior to filing for bankruptcy relief, 90 days before the filing it was open and doing business. It further found that debtor continued to sell clothing in its customary manner, even though it was being pressed for payment by its trade creditors.[58] The court stated that a company is not on its deathbed if "the assets that it could realize on in the ordinary course of its business exceeded the expenses of realizing on them, plus its (other) liabilities."[59] Using this objective definition I find that Payless was a going concern as long as it sold inventory at a rate to cover the costs of those sales. Payless had positive EBITDA for the quarter ending February 24, 2001. At some point during the quarter ending on May 26, 2001, however, Payless ceased to cover its costs. The Form 10-Q for the quarter ending May 26, 2001, indicates that Payless had negative EBITDA for that quarter.[60] Payless had gross profit of $43,589 million. After deducting selling, general, and administrative expenses of $64.940 million, and adding other income of $453,000, Payless had EBIDTA of negative $20.898 million.[61] But there is no evidence that Payless' EBITDA was negative throughout the quarter. Silverman offered no weekly or monthly financials to allow this Court to determine the exact time that Payless' EBITDA turned negative. I, thus, must look to other evidence that was presented. The last week of April Payless' sales were $22 million. Payless' total sales for the month of May were $68 million, but Congress/Hilco permitted Payless to use only $31 million to purchase inventory. In late April Payless defaulted on its loan from Congress. Nevertheless, the inventory lenders continued to make advances, albeit at reduced levels. On May 13, 2001, management and Congress/Hilco held an emergency meeting. At that meeting Congress/Hilco made further funding contingent upon Payless' filing for Chapter 11 bankruptcy relief. By that time Congress/Hilco had tightened credit terms such that less than one-half of the funds from net sales was going to *705 replace inventory. As a result, Payless could not stock its stores during the month of May, the beginning of Payless' optimum selling season. At the same time, lumber prices were increasing, so even if Payless had additional cash to make purchases, it was receiving less inventory in the exchange. In addition, the decision to file for bankruptcy, as predicted by Solomon, reduced Payless' customer base by 25-30 percent. Finally, as a result of the decision to file another bankruptcy petition, without a DIP facility, few of Payless' trade vendors were willing to extend credit to Payless on any terms. Thus, the coalescence of these four factors tightened credit; insufficient inventory; no DIP facility; and unavailable trade credit-put Payless to bed, and there was no realistic hope for recovery. And I find that those four factors coalesced on May 13, 2001. Until that date, Payless was a going concern.[62]
Silverman argues that Payless was on its deathbed for all of fiscal year 2001 because management's projections were inaccurate for all of that year, that the severe winter of 2000/2001 harmed sales, that lumber prices were deflated during the winter, and when they dropped Payless had little access to credit in order to replenish its supplies, that Payless was closing stores and had a declining sales base, that it reduced spending on advertising, thus further diminishing sales, that Payless was understocked, that Payless was holding checks and increasing payables, and that Payless decided to liquidate within three months of filing for bankruptcy relief. These factors must be balanced, however, against the facts that Payless continued to operate 104 stores, that it produced $22 million in sales for the last week of April of 2001[63] and $68 million in sales for the month of May; that projections for the year remained positive until late April, and that Payless continued to use its assets to cover the costs of its sales. As the court warned in Taxman,"caution should be taken not to consider property as `dead' merely because hindsight teaches that the debtor was traveling on the road to financial ruin."[64] On the other hand, liquidation value is appropriate if, at the time of the transfer, the company is "`so close to shutting its doors that a going concern standard is unrealistic.'"[65] Payless was a going concern on March 6, 2001. Only in hindsight can Silverman say that, in March, Payless was on the road to financial ruin and liquidation was inevitable. Nonetheless, on May 13, 2001, enough factors coalesced to create a situation where Payless either had to close its doors or file for bankruptcy relief. At that point, Payless ceased to be a going concern. I, therefore, find that Payless was a going concern, and solvent, until May 13, 2001. From then until June 4, 2001, Payless was insolvent.
An Order in accordance with this Memorandum Opinion will be entered this date.
NOTES
[1] Def. Ex. # 32.
[2] Id. at n. 5.
[3] 11 U.S.C. § 550(a) (emphasis added).
[4] 39 F.3d 898 (8th Cir.1994).
[5] Id. at 903.
[6] 11 U.S.C. § 547(b).
[7] 11 U.S.C. § 547(f).
[8] Jones Truck Lines, Inc. v. Full Service Leasing Corp. (In re Jones Truck Lines, Inc.), 83 F.3d 253, 258 (8th Cir.1996).
[9] Lids Corp. v. Marathon Investment Partners, L.P. (In re Lids Corp.), 281 B.R. 535, 540 (Bankr.D.Del.2002).
[10] Jones Truck Lines, 83 F.3d at 258..
[11] Def. Ex. # 2.
[12] James Horgan, Reporting the Post-Restructuring Balance Sheet, It's Not Always What You Would Expect, 21 Am. Bankr.J. 8, 8 (2002).
[13] Id.
[14] Id.
[15] Stuart C. Gilson, Edith Hotchkiss, and Richard S. Ruback, Valuation of Bankrupt Firms, 787 PLI/COMM 467, 482 (1999).
[16] James M. Lukenda, New Rules for Business Combinations, Intangibles and Goodwill Accounting, 20 Am. Bankr.J. 20, 20 (2002).
[17] In re Taxman Clothing Co., 905 F.2d 166, 169 (7th Cir.1990).
[18] 11 U.S.C. § 101(32)(A). See also Lids Corp. v. Marathon Investment Partners, L.P. (In re Lids Corp.), 281 B.R. 535, 540 (Bankr.D.Del.2002).
[19] 905 F.2d at 169.
[20] Miller & Rhoads, Inc. Secured Creditors' Trust v. Robert Abbey, Inc. (In re Miller & Rhoads, Inc. Secured Creditors' Trust), 146 B.R. 950, 955 (Bankr.E.D.Va.1992).
[21] Id. (quoting Utility Stationery Stores, Inc. v. Southworth Co. (In re Utility Stationery Stores, Inc.), 12 B.R. 170, 176 (Bankr.N.D.Ill.1981)).
[22] Id.
[23] Def. Ex. # 55.
[24] Def. Ex. 43A and 45.
[25] Mr. Dudney used 76.5 percent of realization for liquidation value as to the inventory in 137 stores.
[26] Mr. Davis figured on a 35 percent realization of inventory from the 29 stores slated for closure. I note that had Mr. Davis used a 76.5 realization for those stores, there would be no discrepancy in the value of the inventory. Mr. Dudney's cost value for the inventory is $291,406,000 and Mr. Davis' cost value for the inventory is $279,657,000.
[27] Mr. Dudney estimated a 50 percent realization.
[28] Mr. Dudney calculated total assets according to the balance sheet to be $639,118,000 as of February 24, 2001. The correct calculation is $609,118,000.
[29] Despite some debate as to how to value assets, liabilities are valued at their face value. Lids Corp. v. Marathon Investment, Partners, L.P. (In re Lids Corp.), 281 B.R. 535, 545 (Bankr.D.Del.2002). Therefore, when valuing individual assets, or conducting a balance sheet analysis of solvency, the fair market value of the assets is compared to the face value of the liabilities. Id.
[30] Mr. Davis estimates selling expenses of one percent of asset value.
[31] Mr. Dudney used liquidation values throughout and estimated the costs of closing 137 stores. Mr. Davis, on the other hand, estimated the cost of closing 29 stores. Mr. Dudney conceded at the hearing, however, that it would be inappropriate to factor in the cost of closing 137 stores if making a going concern valuation.
[32] Def. Ex. # 43 at pg. 6.
[33] Def. Ex. # 43F.
[34] According to Trustee's Ex. # 31 (Form 10-Q), Payless had net sales of $232,885,000 for the quarter ending February 24, 2001. The cost of merchandise sold was $166,952,000 leaving a gross profit of $65,933,000. After subtracting selling, general, and administrative expenses of $62.339 from gross profit, and adding other income of $342,000, I find that Payless' EBITDA for the first quarter of 2001 was $3,936,000.
[35] Using a Comparable Company Approach, Mr. Dudney found that Payless had a negative value of $16.232 million on March 6, 2001. However, during his testimony, he conceded that had he used the proper costs of closing 29 stores instead of 137 stores, under his individual asset analysis, Payless was solvent on March 6, 2001.
[36] Black's Law Dictionary 278 (Bryan A. Garner, ed.1996).
[37] Def. Ex. # 43 at pgs. 4-6.
[38] 83 F.3d 253 (8th Cir.1996).
[39] Id. at 258
[40] Id.
[41] 905 F.2d 166 (7th Cir.1990).
[42] Id. at 168.
[43] Id.
[44] Id.
[45] Id.
[46] Lids, 281 B.R. at 535.
[47] 281 B.R. 535 (Bankr.D.Del.2002).
[48] Id. at 541.
[49] Id.
[50] Id.
[51] 146 B.R. 950 (Bankr.E.D.Va.1992).
[52] Id. at 954.
[53] Id.
[54] Id.
[55] 905 F.2d 166 (7th Cir.1990).
[56] Id. at 167.
[57] Id. at 168.
[58] Id.
[59] Taxman, 905 F.2d at 169.
[60] Trustee's Ex. # 32.
[61] Id.
[62] This is not to say that either Congress or Hilco acted inappropriately. As shown, by May 13, 2001, Payless was in default on its obligation to both lenders. Although Congress and Hilco continued to advance for a short time after the default had occurred, they were under no obligation to do so.
[63] According to Millard Barron, this was one of the highest weekly sales recorded within the previous 12 months.
[64] Id.
[65] Gillman v. Scientific Research Products, Inc. of Delaware (In re Mama D'Angelo, Inc.), 55 F.3d 552, 555 (10th Cir.1995) (quotations omitted).
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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/1525737/
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952 A.2d 1274 (2008)
109 Conn.App. 749
Lester SELIGSON
v.
Charles F. BROWER.
No. 28913.
Appellate Court of Connecticut.
Argued May 30, 2008.
Decided August 19, 2008.
*1275 Charles F. Brower, pro se, the appellant (defendant).
John J. Kelly, Orange, for the appellee (plaintiff).
McLACHLAN, BEACH and MIHALAKOS, Js.
BEACH, J.
In this breach of contract action, the defendant, Charles F. Brower, appeals from the judgment of the trial court, rendered after a trial to the court, in favor of the plaintiff, Lester Seligson.[1] On appeal, the defendant claims that the court improperly determined (1) that the plaintiff had performed under the contract and was entitled to payment from the defendant in *1276 the amount of $1486.65 and (2) that the defendant could not prevail on his counterclaim alleging a violation of the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110b et seq. We affirm the judgment of the trial court.
The record reveals the following facts and procedural history. The plaintiff operated a court reporting service that utilized independent contractor court reporters. The defendant and David Weiss were opposing counsel at an arbitration hearing. Weiss requested the plaintiff's court reporting services in connection with the hearing. The plaintiff sent Charles Huneke, an independent contractor court reporter, to attend the matter and to record the proceedings. On January 19, 2006, at the conclusion of the proceedings, Weiss ordered from Huneke two copies of the transcript, one for himself and one for the arbitrator. The defendant ordered one copy of the transcript for himself. Huneke informed the defendant that the transcript would be postmarked no later than two weeks from January 21, 2006.
On January 25, 2006, Huneke completed the transcript, which consisted of 561 pages. Weiss, who originally requested the plaintiff's services, was charged $5 per page, plus an attendance fee of $300. The defendant's original bill was in the amount of $1486.65. Weiss expressed displeasure with his bill and informed the plaintiff that he had made an agreement with the defendant to split the cost of the transcript and demanded that his bill be revised downward. The plaintiff subsequently attempted to charge the defendant a higher fee of approximately $2200. The defendant refused to pay the additional amount.
On February 14, 2006, the plaintiff filed an action in the small claims session of the Superior Court. He claimed, inter alia, breach of contract and sought to recover $1486.65 in damages from the defendant. On February 24, 2006, the defendant filed a motion pursuant to Practice Book § 24-21 to transfer the matter to the regular docket, which motion was granted on that same date. Also on that same date, the defendant filed an answer and a counterclaim. In his counterclaim, the defendant alleged that the plaintiff's actions violated CUTPA.
On June 7, 2007, after a trial to the court, the court issued a memorandum of decision in which it found in favor of the plaintiff on his breach of contract claim. The court found that the parties entered into a contract for court reporting services. According to that contract, the plaintiff was to provide the defendant with a transcript of the arbitration proceeding, postmarked no later than two weeks from January 21, 2006, in exchange for $1486.65 from the defendant. The court found that the plaintiff performed his part of the contract by calling the defendant and attempting to give him the completed transcript on February 6, 2006. Accordingly, the court found the defendant in breach of contract and rendered judgment in favor of the plaintiff in the amount of $1486.65. The court also rendered judgment in favor of the plaintiff on the defendant's CUTPA counterclaim. This appeal followed.
I
The defendant first claims that the court improperly concluded that the plaintiff had performed under the contract and was entitled to payment from the defendant *1277 in the amount of $1486.65.[2] We disagree.
"The elements of a breach of contract action are the formation of an agreement, performance by one party, breach of the agreement by the other party and damages." (Internal quotation marks omitted.) Chiulli v. Zola, 97 Conn. App. 699, 706-707, 905 A.2d 1236 (2006). "Whether there was a breach of contract is ordinarily a question of fact. . . . We review the court's findings of fact under the clearly erroneous standard. . . . The trial court's findings are binding upon this court unless they are clearly erroneous in light of the evidence and the pleadings in the record as a whole. . . . We cannot retry the facts or pass on the credibility of the witnesses.. . . A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. . . ." (Citation omitted; internal quotation marks omitted.) Colliers, Dow & Condon, Inc. v. Schwartz, 77 Conn.App. 462, 471-72, 823 A.2d 438 (2003).
There is evidence in the record to support the court's findings of performance by the plaintiff, breach of the agreement by the defendant and damages in the amount of $1486.65.[3] Huneke testified that at the conclusion of the arbitration proceeding, the defendant ordered a copy of the transcript, for which the defendant expected to be charged, and Huneke agreed that it would be postmarked no later than two weeks from January 21, 2006. There was evidence that Huneke thereafter prepared the transcript, calculated the cost and faxed the invoice to the plaintiff, who subsequently faxed a bill in the amount of $1486.65 to the defendant on January 26, 2006. Although the plaintiff later faxed a revised bill of approximately $2200 to the defendant's office, the court found that this did not modify the original contract. The defendant does not challenge this finding. On January 27, 2006, the plaintiff spoke with a person from the defendant's office, who informed him that the defendant would not pay the revised bill but would pay the original bill of $1486.65. The defendant did not inform the plaintiff that he wanted to cancel the transcript order. The plaintiff did not indicate to the defendant that he would not be willing to accept $1486.65. On February 6, 2006, Huneke telephoned the defendant's office and informed *1278 a secretary that he had the transcripts of the arbitration hearing and was going to deliver them to the defendant's office on that day and collect the check. The court concluded that the plaintiff performed under the contract by attempting to deliver the transcript on that day.[4] We conclude that the court's finding that the defendant breached his contract with the plaintiff by failing to pay the sum of $1486.65 finds support in the record and, as such, is not clearly erroneous.
The defendant further argues, however, that the contract between the parties ceased to exist when the plaintiff attempted to charge a higher fee.[5] Implicit in the court's finding that the parties did not agree to modify the original agreement and its finding of a subsequent breach by the defendant is a finding that the contract continued to exist despite the attempted modification. We cannot say that the court's findings in this regard are clearly erroneous.
II
The defendant next claims that the court improperly determined that he could not prevail on his counterclaim alleging a violation of CUTPA. We disagree.
CUTPA provides in relevant part that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." General Statutes § 42-110b(a). "It is well settled that in determining whether a practice violates CUTPA we have adopted the criteria set out in the cigarette rule by the federal trade commission for determining when a practice is unfair: (1) [W]hether the practice, *1279 without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwisein other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers, [competitors or other businesspersons].. . . All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three." (Internal quotation marks omitted.) Willow Springs Condominium Assn., Inc. v. Seventh BRT Development Corp., 245 Conn. 1, 43, 717 A.2d 77 (1998).
"It is well settled that whether a defendant's acts constitute . . . deceptive or unfair trade practices under CUTPA, is a question of fact for the trier, to which, on appellate review, we accord our customary deference. . . . [W]here the factual basis of the court's decision is challenged we must determine whether the facts set out in the memorandum of decision are supported by the evidence or whether, in light of the evidence and the pleadings in the whole record, those facts are clearly erroneous." (Internal quotation marks omitted.) Chamlink Corp. v. Merritt Extruder Corp., 96 Conn.App. 183, 189, 899 A.2d 90 (2006).
On appeal, the defendant claims that the court improperly determined that the following conduct of the plaintiff did not amount to a CUTPA violation: (1) lying to the defendant concerning the reasons for changing the bill to reflect a higher price, (2) refusing, after January 26, 2006, to accept the originally billed amount of $1486.65, (3) berating and threatening the defendant's secretary in a February 6, 2006 telephone conversation and (4) falsely claiming in his complaint that he tendered the defendant the transcript on January 26, 2006, and that the defendant refused to pay $1486.65 for it.
The defendant cannot prevail on his argument. The court's memorandum of decision does not contain factual findings that the plaintiff lied concerning his reasons for increasing the bill, refused to accept payment of $1486.65 from the defendant, berated or threatened the defendant's secretary or filed a false complaint. "Weighing conflicting evidence is a matter solely committed to a fact finder." Verspyck v. Franco, 274 Conn. 105, 115, 874 A.2d 249 (2005). "It is well established that [t]he trier of fact may accept or reject the testimony of any witness. . . . The trier can, as well, decide whatall, none, or someof a witness' testimony to accept or reject." (Citation omitted; internal quotation marks omitted.) Wilson v. Hryniewicz, 51 Conn.App. 627, 633, 724 A.2d 531, cert. denied, 248 Conn. 904, 731 A.2d 310 (1999). We do not retry the facts or pass on the credibility of witnesses and thus cannot conclude that the court's finding that the defendant failed to prove a violation of *1280 CUTPA was clearly erroneous.[6]
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The complaint named "Lester Seligson, d/b/a Seligson Reporting," as the plaintiff. We note that "the use of a fictitious or assumed business name does not create a separate legal entity . . . [and that] [t]he designation [d/b/a] . . . is merely descriptive of the person or corporation who does business under some other name." (Internal quotation marks omitted.) Bauer v. Pounds, 61 Conn. App. 29, 36, 762 A.2d 499 (2000).
[2] In making his argument, the defendant also claims that the following factual findings made by the court are clearly erroneous: (1) the contract price was determined by the defendant's agreeing with Weiss to split the cost of the transcript, (2) the plaintiff sent the defendant a bill for a higher amount because the matter involved an arbitration proceedingthe defendant argues that the cause for the revision of the bills was Weiss' displeasure with his bill, (3) Huneke concluded that the proceedings were more complex than originally anticipated and therefore charged a higher amountthe defendant argues that the fact that the matter was an arbitration proceeding had nothing to do with the charges to either attorney and (4) despite evidence that a telephone call was made on January 26, 2006, and a delivery date given of January 30, 2006, the parties did not agree that time was of the essencethe defendant claims he never made a claim that time was of the essence.
There is evidence in the record to support the court's findings of performance by the plaintiff, breach of the agreement by the defendant and damages in the amount of $1486.65. The other factual findings, whether or not they are clearly erroneous, are not material to our legal conclusions with respect to the issues before us. See Colliers, Dow & Condon, Inc. v. Schwartz, 88 Conn.App. 445, 446 n. 2, 871 A.2d 373 (2005).
[3] The defendant does not dispute that there was an agreement between the parties.
[4] It was agreed that the transcript would be postmarked no later than two weeks from January 21, 2006, which would be, as noted by the court, February 4, 2006. The court found that although the transcript was not postmarked by February 4, 2006, hand delivery on February 6, 2006, would have put the transcript into the defendant's hands at the same time as if the plaintiff would have mailed the transcript on February 4, 2006. The defendant makes no claim on appeal that a February 6 hand delivery date, as opposed to a February 4 postmark date, constituted a breach of contract by the plaintiff.
[5] The defendant also maintains that on January 27, 2006, when the plaintiff called his office to inform him that the bill had been revised to a higher amount, the plaintiff committed an anticipatory breach of the original contract, which entitled the defendant to discharge his remaining duties of performance. The defendant did not assert this claim until this appeal, and, thus, we decline to address that claim. See In re Anna Lee M., 104 Conn. App. 121, 124 n. 2, 931 A.2d 949 ("[W]e will not decide an appeal on an issue that was not raised before the trial court. . . . To review claims articulated for the first time on appeal and not raised before the trial court would be nothing more than a trial by ambuscade of the trial judge." [Internal quotation marks omitted.]), cert. denied, 284 Conn. 939, 937 A.2d 696 (2007).
"An anticipatory breach of contract occurs when the breaching party repudiates his duty before the time for performance has arrived.. . . Its effect is to allow the nonbreaching party to discharge his remaining duties of performance, and to initiate an action without having to await the time for performance. . . . The manifestation of intent not to render the agreed upon performance may be either verbal or nonverbal . . . and is largely a factual determination in each instance." (Citations omitted; internal quotation marks omitted.) Pullman, Comley, Bradley & Reeves v. Tuck-It-Away, Bridgeport, Inc., 28 Conn.App. 460, 465, 611 A.2d 435, cert. denied, 223 Conn. 926, 614 A.2d 825 (1992). We further note that the facts found by the court do not necessarily compel the conclusion that an anticipatory breach had occurred. The court made no findings with respect to the plaintiff's intent when he revised the defendant's bill to reflect a higher amount.
[6] We express no opinion as to whether some or all of the facts claimed by the defendant would support recovery under CUTPA.
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720 S.W.2d 738 (1986)
STATE of Missouri, Respondent,
v.
Rudolph Herman CHRISTENSEN, Appellant.
No. WD 36803.
Missouri Court of Appeals, Western District.
September 30, 1986.
Motion for Rehearing and/or Transfer Denied November 25, 1986.
Application to Transfer Denied January 13, 1987.
Charles E. Atwell, Patrick Berrigan, Asst. Public Defender, Kansas City, for appellant.
William L. Webster, Atty. Gen., Carrie Francke, Asst. Atty. Gen., Jefferson City, for respondent.
Before TURNAGE, P.J., and SHANGLER and KENNEDY, JJ.
Motion for Rehearing and/or Transfer to Supreme Court Denied November 25, 1986.
TURNAGE, Presiding Judge.
Rudolph Christensen was found guilty by a jury of first degree robbery, § 569.020 RSMo 1978, and armed criminal action. Section 571.015 RSMo 1978. On finding Christensen to be a persistent offender, the *739 court imposed sentences of 25 years on each count with the sentences to run concurrently. Christensen contends the court erred in failing to quash the venire panel, in failing to grant a mistrial after a witness volunterred an inadmissible statement, in giving the burden of proof instruction, and in admitting identification testimony. Affirmed.
In July, 1984, two armed robbers entered the Silver Fox Hair Styling Salon, where the proprietor, Mona Angel, was cutting the hair of Donald Stephenson. Jackie Beshore was sitting in the waiting area, waiting to have his hair cut. One of the two robbers approached Angel and Stephenson, pointed a gun at Angel, and told her not to look at him. He took Angel and Stephenson back to a storage room in the salon and made them lie down on the floor. The second robber approached Beshore and made him go to the storage room and lie down on the floor beside Stephenson and Angel. The robber who had accosted Mona Angel commanded her to give him her jewelry. She was unable to remove her bracelets, and the robber bent down and removed her bracelets, while Mona Angel looked up into his face. He also put his hands on her body and said vulgar words to her. The robbers bound the victims with duct tape.
The robbers stayed long enough to take the cash register money, Mona Angel's purse and fur coat, and Jackie Beshore's money. After telling the victims not to get up, the robbers left.
The police officer investigating the crime showed each of the victims separately a photo array consisting of six pictures, including one of Christensen. The officer did not emphasize or point out the photo of Christensen in any way. Mona Angel identified the photograph of Christensen as that of the man who had pointed his gun at her and had taken her jewelry. Beshore picked out two pictures from the array, in an attempt to identify the other robber; the two pictures he picked out were of Christensen and Skidmore (who was later charged in the robbery). Beshore could not identify either picture positively. Stephenson also picked out Christensen's picture, although he expressed hesitancy due to what he described as a difference in hair color between the picture and the robber. All three victims identified Christensen in court as one of the robbers.
Christensen's first argument on appeal is that the trial court should have quashed the venire panel on the grounds that the prosecutor used her peremptory challenges to strike all of the blacks from the panel. Christensen relies on Batson v. Kentucky, ___ U.S. ___, 106 S. Ct. 1712, 90 L. Ed. 2d 69 (1986), in arguing that a showing that the prosecutor used peremptory challenges to eliminate blacks from the venire in the case at bar would be sufficient grounds for reversal. Christensen admits that, prior to Batson, the defendant seeking reversal because of improper use of peremptory challenges had to show that the prosecutor systematically used peremptory challenges for the purpose of removing blacks from juries in "case after case." Swain v. Alabama, 380 U.S. 202, 223, 85 S. Ct. 824, 837-38, 13 L. Ed. 2d 759 (1965). Christensen has made no showing for reversal under Swain, but instead relies exclusively on Batson.
Batson is inapplicable in this case. The Batson holding is clearly limited to cases in which "the prosecutor has exercised peremptory challenges to remove from the venire members of the defendant's race." 106 S.Ct. at 1723 (emphasis added). In this case the defendant is white; therefore, he can not avail himself of the Batson holding by his claim that the prosecutor removed blacks from the venire.
Christensen's second argument is that the trial court erred in failing to grant a mistrial after Mona Angel volunteered the statement that Christensen "just got quite violent" at his preliminary hearing. The trial court promptly admonished the jury to disregard Angel's statement, which was not responsive to the question posed and was concededly improper. When a witness volunteers an inadmissible statement, the trial court must exercise its discretion *740 to determine how best to cure the harm done. Anderson v. Burlington Northern Railroad, 700 S.W.2d 469, 475[6] (Mo.App. 1985), cert. denied, ___ U.S. ___, 106 S. Ct. 1974, 90 L. Ed. 2d 657 (1986). The trial court should endeavor to cure the harm by admonition to the jury or other remedy less drastic than mistrial. Id. In this case, the court's choice of admonition as a method of curing the harm wrought by the witness' utterance was well within the court's discretion.
Christensen next argues that the court erred in using MAI-CR2d 1.02 and 2.20 to instruct the jury on the burden of proof, because those instructions define proof beyond a reasonable doubt as proof that leaves the jury "firmly convinced" of a defendant's guilt. The instructions were in the format of MAI-CR2d 1.02 and 2.20. An instruction in the format of MAI-CR will not be deemed to be error. State v. Newlon, 627 S.W.2d 606, 614[8, 9] (Mo. banc), cert. denied, 459 U.S. 884, 103 S. Ct. 185, 74 L. Ed. 2d 149 (1982).
Finally, Christensen argues that the photo array shown to the victims was unduly suggestive and that therefore the victims' identifications of Christensen should have been suppressed. Christensen argues the photo array was unduly suggestive because the police had descriptions from the victims indicating that the robber had a few days' beard growth and was wearing sunglasses (although all the victims did not agree on these two aspects of the description), and of the six pictures in the array only Christensen's featured beard growth and a cut under the left eye (which Christensen argues suggested that the person in the picture would have worn sunglasses to disguise the cut). First of all, the photo array exhibits have not been submitted to the court for examination, so it is difficult to ascertain how pronounced the difference was between Christensen's picture and the others. In any case, the defendant must show both that the police used unduly suggestive tactics in arranging the photo array and that the identification procedure was unreliable in light of all the facts and circumstances. See State v. Green, 635 S.W.2d 42, 44-45[2] (Mo.App. 1982); State v. Patterson, 598 S.W.2d 483, 488[5, 6] (Mo.App.1980) (photo array case). Christensen has faltered at the first step, since the beard growth and the cut under the eye, as described to this court, do not indicate the police procedures were unduly suggestive. See Green, 635 S.W.2d at 45 (substantial differences may occur between persons in line-up). In State v. Davis, 645 S.W.2d 6 (Mo.App.1982), the court articulated the test as whether the identification procedure was so suggestive "as to give rise to a very substantial likelihood of irreparable misidentification." Id. (quoting State v. Patterson, 598 S.W.2d at 487). No such likelihood exists in this case. Mona Angel, who made the most positive identification, did not include the beard in her description to the police of the robber and never agreed that the robber wore sunglasses. Moreover, any connection between the cut under Christensen's eye and the sunglasses is very speculative. Mona Angel testified Christensen did not have the cut under his eye at the time of the robbery; therefore, if the cut in the photo had any effect, it was to make it more difficult to identify Christensen as the robber. Further, Mona Angel said she also identified Christensen by his voice, which she said was very distinctive. This was a permissible method of identification. Eichelberger v. State, 524 S.W.2d 890, 894 (Mo.App.1975). The court did not err in overruling Christensen's motion to suppress.
The judgment is affirmed.
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720 S.W.2d 702 (1986)
290 Ark. 421
Larry WHITE, Appellant,
v.
APOLLO-LAKEWOOD, INC., Appellee.
No. 86-102.
Supreme Court of Arkansas.
December 8, 1986.
Leon N. Jamison, Pine Bluff, for appellant.
Bridges, Young, Matthews, Holmes & Drake by R.T. Beard, III, Pine Bluff, for appellee.
PURTLE, Justice.
The lower court granted appellee's motion to dismiss appellant's complaint, stating that the court did not have jurisdiction because the rights and remedies pursuant to the workers' compensation act constitute the exclusive remedy between employer and employee for death or injury arising out of and in the course of employment. The trial court was correct.
The complaint alleged the appellee-employer deliberately and intentionally assigned the appellant-employee to duties which were known to almost certainly cause injury to the employee. The allegations included not only the failure to warn the employee of dangerous conditions, but also the concealment of the nature of those conditions from the employee. The complaint alleged fraud, deceit and wilful and wanton conduct by the employer. It was also alleged that the employer concealed the nature of the injuries from the employee even after such injuries caused the employee to be hospitalized.
The employer accepted the injury caused by the inhalation of toxic fumes as one covered by the workers' compensation act and benefits were paid to the employee pursuant to the act. After the appellant was injured the first time he was again required to do the same work with the same exposure. The facts of this case, as alleged, indicate the employer knew there was danger of injury to his employees simply by working in the plant. The plant produced agricultural chemicals.
Although the complaint, as amended, alleged wilful and intentional infliction of emotional distress, outrage, fraud, deceit and about everything else that could have been alleged, the genesis of all such allegations was the nature of the work in the chemical plant. We have dealt with this issue in the cases of Cain v. National Union Life Insurance Co., 290 Ark. 240, *703 718 S.W.2d 444 (1986), and Miller v. Ensco, Inc., 286 Ark. 458, 692 S.W.2d 615 (1985). In Cain the bad faith action was based upon the refusal of the insurance carrier to pay a claim on time. There we held that the remedies under the workers' compensation act were the exclusive remedies for failure to timely pay medical expenses incurred by an injured employee, and that the tort of bad faith was not separately actionable.
In Miller we considered a factual situation very close to the present appeal. There it was claimed the employer committed an intentional tort by requiring the employee to work in an unsafe place and by causing him to be directly exposed to the chemical PCB. In Miller, we again held that the workers' compensation act was the exclusive remedy for injuries arising out of and in the course of the employment. Regardless of the description, character, or style of the complaint in circuit court, the injuries in this case obviously arose out of and in the course of the employment and therefore the only remedy available to the appellant is pursuant to the act.
In our prior opinions we have uniformly held that the benefits pursuant to the workers' compensation act constitute an exclusive remedy for work-related injuries. However, in a case where the employer or his agent goes completely outside the employer-employee relationship and commits a wilful personal battery upon an employee, the act is no longer the exclusive remedy. See Heskett v. Fisher Laundry and Cleaners, 217 Ark. 350, 230 S.W.2d 28 (1950). In Heskett we stated:
The complaint in the instant case alleges that an officer and general manager of appellee committed a vicious, unprovoked, intentional and violent assault and battery upon appellant during the course of the employment under circumstances which, if substantiated, would entitle appellant to both actual and exemplary damages at common law. We conclude that the rule laid down in Boek v. Wong Hing, [citation omitted], is supported by sound reasoning and that appellant is entitled to elect to either claim compensation under the compensation act or treat the wilful assault as a severance of the employer-employee relationship and seek full damages in a common law action. Appellant having elected to pursue the latter remedy, it follows that the trial court erred in sustaining the demurrer to the complaint against appellee.
We hold that the actions complained of in the present appeal were not of such magnitude as to constitute an intentional tort and thereby remove the employer from the protection of the act. It cannot be reasonably argued that the injuries alleged in the case before us did not actually arise out of the work performed by the employee. Therefore, the only remedies available to the appellant are those pursuant to the workers' compensation act.
Affirmed.
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952 A.2d 942 (2008)
Melvin BROWN, Appellant,
v.
UNITED STATES, Appellees.
Nos. 03-CF-200, 04-CO-1458.
District of Columbia Court of Appeals.
Argued November 16, 2006.
Decided July 17, 2008.
*944 Corinne Beckwith, Public Defender Service, with whom James Klein, Public Defender Service, was on the brief for appellant.
Patricia A. Heffernan, Assistant United States Attorney, with whom Kenneth L. Wainstein, United States Attorney at the time the brief was filed, and Roy W. McLeese III, Thomas J. Tourish, Jr., and Rachel Carson Leiber, Assistant United States Attorneys, were on the brief for appellee.
Before GLICKMAN and KRAMER, Associate Judges, and FERREN, Senior Judge.
KRAMER, Associate Judge:
At the conclusion of a jury trial, appellant Melvin Brown was acquitted of first-degree murder and two counts of assault with intent to kill, but convicted of second-degree murder while armed and two counts of assault with a dangerous weapon, as well as carrying a pistol without a license, threats, and three counts of possession of a firearm during a crime of violence. He was subsequently sentenced to twenty-five years imprisonment. On appeal, he argues that the trial court committed *945 reversible error in curtailing the cross-examination of a key government witness with respect to threats made against her and the resulting bias against Mr. Brown that those threats may have engendered. We agree and remand for a new trial.
I.
Because this opinion deals primarily with the question of whether cross-examination on the issue of bias was unduly curtailed, only a brief recounting of the facts leading to Mr. Brown's indictment most of them undisputed is necessary. We also explain the government and defense theories at trial, and the events at trial underlying the charge of bias.
Mr. Brown had a romantic relationship with a young woman by the name of Falah Joe, with whom he had a child. On the night in question, the two had an argument outside of Ms. Joe's workplace. During the argument Greg Williams pulled up in a pickup truck with Perry Thompson in the passenger seat. Both knew Ms. Joe, and they stopped to offer her a ride. Mr. Brown had no relationship with the two men, and Ms. Joe had not expected to see them that night. Mr. Thompson got out of the truck, then slid the seat forward to let Ms. Joe in, and she entered. After Mr. Thompson got back in the truck, but before he closed the door, Mr. Brown pulled out a gun[1] and shot Mr. Williams and Mr. Thompson multiple times each. Mr. Thompson died on the scene, Mr. Williams survived, and Ms. Joe was not hit.
Mr. Williams testified at trial that Mr. Brown started shooting for no reason apparent to him, and that Mr. Brown checked to his left and his right, as if to look for witnesses, before he fired. Mr. Brown testified that Mr. Thompson had made a threatening statement and was reaching under the passenger seat, as though for a gun. Thus, Mr. Brown's defense theory was that he was acting in self defense. The government's theory was that Mr. Thompson reached under the passenger seat for the bar that triggers the seat to slide back after the seat had been moved forward to allow Ms. Joe to climb into the back seat of the pickup.[2] During their later search of the pickup truck, the police found a loaded, semi-automatic pistol that evidence at trial showed was owned by Mr. Thompson.
At some point during Ms. Joe's trial testimony, and perhaps earlier in the trial, a spectator, to whom we shall refer as Troy Hall,[3] was present in the courtroom. When later questioned by the court, Mr. Hall explained he was related to Mr. Thompson "by blood; [and to] Ms. Joe by marriage." During Ms. Joe's redirect examination, Mr. Brown's counsel stated in a bench conference that his co-counsel and Mr. Brown had observed Mr. Hall, at that time unidentified, making threatening gestures to Ms. Joe as she testified.[4] Counsel *946 represented that Ms. Joe concentrated on Mr. Hall as she continued her testimony, as though he were vetting it. He requested a recess after the redirect examination and permission to recross on the subject. Both requests were granted. Redirect concluded, and Mr. Brown's counsel began recross, but then renewed his request for a recess, which was also granted.
Once the jury was dismissed, Mr. Brown's counsel proffered that he had been told by Ms. Joe prior to trial that after the shooting but before Mr. Brown was taken into custody, Mr. Hall had threatened her on one occasion, and had told her on numerous occasions that he was frustrated because he was unable to find and kill Mr. Brown. The trial court ruled that Mr. Brown's counsel could ask Ms. Joe about any gestures Mr. Hall may have made to her in court, and whether she was afraid of him. Counsel could not ask her why she was afraid of him, because the court did not want a "side trial, [on] whether he engaged in certain conduct or intended to go after the defendant or have others go after the defendant." The court further stated that any questioning outside of what happened in the courtroom would be "too ancillary, especially [since Ms. Joe] has denied witness protection."
When questioned by the court about the alleged hand gestures, Mr. Hall stated that he left the courtroom to go to the restroom, and that at another point he turned his vibrating cell phone off. Other than that, he denied having made any gestures. On further questioning, he stated that he had also clasped his hands together to lean forward on the seat in front of him. The court requested that he not return after lunch, to which he replied, "No problem."[5]
After the luncheon recess, the jury was again excused so the court could question Ms. Joe about Mr. Hall. Ms. Joe stated that at one point in her testimony, "[H]e just looked at me like, you know, like a face, just a different face I saw from what I am used to seeing from him," and added that "[i]t looked like he was mad because he pulled a gun on me before with my son and I didn't do anything to him." She stated that she was scared "because he has done that, and he was here, and he has threatened me before about my son's father. He told me he wanted to kill him."[6]
Mr. Brown's counsel argued that Ms. Joe's history with Mr. Hall was needed to put her discomfort before the jury in the right context. As counsel argued, a "mad face" on its own may not mean much, but a "mad face" from someone who threatened her and actively tried to find Brown in order to kill him is an entirely different *947 matter. The prosecutor countered that there was no basis for cross-examining Ms. Joe before the jury on her history with Mr. Hall, because although Ms. Joe stated that she felt uncomfortable, there was no visible change in her demeanor. The court let the earlier ruling stand, stating that questioning would only be permitted with respect to how Ms. Joe felt in court, but not about her outside dealings with Mr. Hall. Thus, Ms. Joe testified before the jury that Mr. Hall looked at her with a "mad face ... he looked at me, you know, he is beefing with me, you know what I'm saying?" She again testified that this made her uncomfortable.
II.
During cross examination, in order to "satisfy the Sixth Amendment, the trial court should permit exploration of all matters that contradict, modify or explain testimony given by a witness during direct examination." Goldman v. United States, 473 A.2d 852, 857 (D.C.1984) (citing Morris v. United States, 398 A.2d 333, 339 (D.C. 1978)). The trial court, however, "`may always limit cross-examination to preclude repetitive and unduly harassing interrogations... or to prevent inquiry into matters having little relevance or probative value to the issues raised at trial.'" Adams v. United States, 883 A.2d 76, 81 (D.C.2005) (quoting Springer v. United States, 388 A.2d 846, 854-55 (D.C.1978)). Even if the trial court has permitted sufficient cross-examination to satisfy the Sixth Amendment, we will still consider whether the trial court abused its discretion by further limiting cross-examination. Riley v. United States, 923 A.2d 868, 890 (D.C. 2007). "In exercising that discretion, the court must balance the `importance of the subject matter' and the credibility of the witness against the `degree of cross-examination permitted.'" Id. (quoting Stack v. United States, 519 A.2d 147, 151 (D.C. 1986)).
Bias exists "when a witness has a general willingness or motivation to testify falsely on the stand," Rose v. United States, 879 A.2d 986, 995 (D.C.2005), and we have previously noted that an "important function" of the defendant's right to confront each government witness is "the exposure of the witness' biases." Brown v. United States, 683 A.2d 118, 124 (D.C. 1996) (quoting Elliott v. United States, 633 A.2d 27, 32 (D.C.1993)). Therefore, "[b]ias cross-examination of a main government witness is always a proper area of cross-examination and is relevant in assessing the witness' credibility and evaluating the weight of the evidence." Blunt v. United States, 863 A.2d 828, 833 (D.C.2004); see Davis v. Alaska, 415 U.S. 308, 316, 94 S. Ct. 1105, 39 L. Ed. 2d 347 (1974). Threat evidence in particular "`can be relevant to explain a witness' inconsistent statements, delay in testifying, or even courtroom demeanor indicating intimidation.'" Foreman v. United States, 792 A.2d 1043, 1049 (D.C.2002) (quoting United States v. Thomas, 86 F.3d 647, 653-54 (7th Cir. 1996)). The utility of cross-examination in "ferret[ing] out bias" lends it "enhanced significance where the credibility of the key government witness is in issue." Brown, supra, 683 A.2d at 124 (quoting Jenkins v. United States, 617 A.2d 529, 531 (D.C.1992)).
Nevertheless, examination on the question of bias cannot be baseless, for "[a]lthough `[b]ias or testimonial motivation is always a proper subject of cross-examination,' we have required that the examiner have a reasonable factual foundation or at least a `well-reasoned suspicion' that the circumstances indicating bias might be true." Fuller v. United States, 873 A.2d 1108, 1113 (D.C.2005) (quoting Clayborne v. United States, 751 A.2d 956, *948 962-63 (D.C.2000)) (citations omitted). If the government objects to a line of questioning aimed at exposing the bias of the witness, "the questioner must proffer some facts which support a genuine belief that the witness is biased in the manner asserted," and "must proffer facts sufficient to permit the trial judge to evaluate whether the proposed question is probative of bias." McGriff v. United States, 705 A.2d 282, 285 (D.C.1997) (internal quotation marks omitted).[7] When challenging an adverse ruling on that proffer, the defendant must show "that he was prohibited from engaging in otherwise appropriate cross-examination designed to show a prototypical form of bias on the part of the witness, and thereby `to expose to the jury the facts from which jurors ... could appropriately draw inferences relating to the reliability of the witness.'" Delaware v. Van Arsdall, 475 U.S. 673, 680, 106 S. Ct. 1431, 89 L. Ed. 2d 674 (1986) (quoting Davis, supra, 415 U.S. at 318, 94 S. Ct. 1105); Blunt, supra, 863 A.2d at 833.
In Hollingsworth v. United States, 531 A.2d 973 (D.C. 1987), the defendant was charged with robbing the complainant, but maintained that the allegation of robbery was in fact a fabrication that the complainant had contrived as the latest salvo in an ongoing dispute with the defendant. A witness for the defense recounted a previous altercation between the complainant and defendant. After the defense rested, defense counsel learned that the witness had allegedly been threatened by the complainant in the hallway following her testimony. The trial judge denied the defendant's request to reopen the case and recall the witness to testify about the threat, id. at 976, stating, "`I think you would take that up in another forum. That's not a part of this case.'" Id. at 979. On appeal this court noted that the threat that she "would `be taken care of too' implied that [the complainant] would seek revenge against [the witness], just as he had against" the defendant. Id. It was therefore "solid evidence of bias" on which examination should have been permitted, even if the jury ultimately "may have disbelieved that evidence." Id. The court concluded that the trial court's "refusal to permit such evidence ... improperly weakened the defense case and requires reversal." Id. at 980.
Similarly, in McGriff, the defendant alleged at trial that one of the officers who arrested him had threatened the defendant and his trial counsel. 705 A.2d at 284. According to trial counsel, at an earlier hearing the officer had told both of them that "`he was going to fuck us up.'" Id. at 285. The prosecutor reported that the officer denied making the comment, and the court granted the motion to prohibit questioning the officer on the subject during cross-examination, deeming the allegedly made statement "`totally collateral'" to the gun-related charges with which the defendant had been charged. Id. This court disagreed, but held the error to be harmless. Id. at 286.
Here, the trial court erred in ruling that any questions about why Mr. Hall's presence disturbed Ms. Joe were "too ancillary." Ms. Joe was one of two government eyewitnesses, and her truthful account of the events that took place was therefore essential. Testimony that a friend of the victim had brandished a pistol *949 at her and her son was far from ancillary, especially after that person appeared in the courtroom. Indeed, those alleged threats were much more indicative of potential bias than was the statement by the officer in McGriff, which, as the trial court there noted, "`could mean a number of different things.'" 705 A.2d at 285. Furthermore, here there was already a firm factual foundation in the record for the circumstances engendering the bias. Ms. Joe had stated during the court's questioning that Mr. Hall had threatened her. For this reason, the danger of a "side trial," as the court described it, was minimal, and no greater than in Hollingsworth. There would have been no need for Mr. Brown to introduce any further extrinsic evidence. Cf. In re C.B.N., 499 A.2d 1215, 1218-19 (D.C.1985) (noting that bias can be shown by extrinsic evidence). The matter was straightforward,[8] and the danger of jury confusion or distraction was de minimis.
The government's view, advanced in its brief and at oral argument, is that Mr. Brown sought to show only that Ms. Joe was made uncomfortable while Mr. Hall was in the courtroom, not that, as Mr. Brown argues, Mr. Hall's actions inside and outside the courtroom had tainted her testimony in its entirety. Thus, the government contends, Mr. Brown's present argument was not preserved. The government's characterization of the position adopted by Mr. Brown's counsel at trial is not supported by the record. Counsel made clear in urging that the court permit cross-examination on the matter that he felt the "need to cross-examine on what he says he has done to her and said to her in the past" because he believed "it has had a substantial [e]ffect on her." When asked directly by the court what his specific request was, he answered: "I want to be able to cross-examine her about the prior encounters with Mr. Hall as well as what happened here in the courtroom today." Counsel wanted to ask Ms. Joe not only whether she was afraid of Mr. Hall, but why, because, he contended, the jury needed "to understand contextually" why he was inquiring as to Ms. Joe's fears. It was only after the trial court declined to permit the scope of questioning initially sought that Mr. Brown's counsel proposed to limit his questioning to the effect of his presence that day "in the context of her prior experiences with him." Defense counsel's offer to limit the questioning, clearly made as a less desirable alternative to his original request, does not mean that the original request was not preserved for purposes of this appeal.
III.
The Sixth Amendment to the Constitution guarantees the criminal defendant the right to confront the witnesses against him. This right, "protected by the Confrontation Clause, is critical for ensuring the integrity of the fact-finding process. Cross-examination is `the principal means by which the believability of a witness and the truth of his testimony are tested.'" Kentucky v. Stincer, 482 U.S. 730, 736, 107 S. Ct. 2658, 96 L. Ed. 2d 631 (1987) (quoting Davis v. Alaska, 415 U.S. 308, 316, 94 S. Ct. 1105, 39 L. Ed. 2d 347 (1974)).[9] The *950 right is not without limit, of course, and "trial judges retain wide latitude insofar as the Confrontation Clause is concerned to impose reasonable limits on such cross-examination based on concerns about, among other things, harassment, prejudice, confusion of the issues, the witness' safety, or interrogation that is repetitive or only marginally relevant." Van Arsdall, supra, 475 U.S. at 679, 106 S. Ct. 1431.
When a criminal defendant claims that the trial court unduly restricted cross-examination, our reviewing standard "will depend upon the scope of cross-examination permitted by the trial court measured against our assessment of the appropriate degree of cross-examination necessitated by the subject matter thereof as well as the other circumstances that prevailed at trial." Springer v. United States, 388 A.2d 846, 856 (D.C.1978), overruled on other grounds, Bassil v. United States, 517 A.2d 714, 717 n. 5 (D.C.1986). Only by examining the facts can a court determine whether the alleged error was of constitutional magnitude, and it is only when the Sixth Amendment to the Constitution is satisfied that we will review more leniently for abuse of discretion. See id. Defense counsel's efforts in this case to have Ms. Joe testify about her history with Mr. Hall was aimed precisely at "explaining" her testimony, so that the jury could understand why she might be testifying in the manner that she was. We therefore conclude that the court "violated the defendant's Sixth Amendment right to confront the witnesses against him by precluding a `meaningful' degree of cross-examination." Flores v. United States, 698 A.2d 474, 479 (D.C.1997); see also McDonald v. United States, 904 A.2d 377, 382 (D.C.2006) (holding that where "the evidence without the defendant's excluded testimony has left a factual question central to his bias theory in dispute," the court could not "say that the defendant has been afforded a meaningful opportunity to present his defense").
When the improper restriction of cross-examination and alleged is of constitutional magnitude and rooted in a concern that the excluded testimony would have exposed the witness's bias, we follow the rule in Van Arsdall that "the constitutionally improper denial of a defendant's opportunity to impeach a witness for bias, like other Confrontation Clause errors, is subject to Chapman harmless-error analysis." 475 U.S. at 684, 106 S. Ct. 1431. Under that analysis, reversal is required unless, "assuming that the damaging potential of the cross-examination were fully realized," id., the constitutional error was harmless beyond a reasonable doubt. Chapman, supra, 386 U.S. at 24, 87 S. Ct. 824. Whether the error was harmless is determined by "a host of factors, all readily accessible to reviewing courts." Van Arsdall, supra, 475 U.S. at 684, 106 S. Ct. 1431. The Van Arsdall Court's non-exhaustive list included "the importance of the witness' testimony in the prosecution's case, whether the testimony was cumulative, the presence or absence of evidence corroborating or contradicting the testimony of the witness on material points, the extent of cross-examination otherwise permitted, and, of course, the overall strength of the prosecution's case." Id.[10]
*951 As an eyewitness to the shooting, Ms. Joe was a critical witness for the government. The threats she recounted being made to her by Mr. Hall were such that they could have easily caused her to fear that she (and possibly her child) would be at risk unless she implicated Mr. Brown. Her testimony about those threats would have been far from cumulative. Ms. Joe's testimony as to her relationship with Mr. Brown was a key element in the government's argument that "[w]hat drove this man to murder Perry Thompson and to almost kill Greg Williams" was "[i]n a word, jealousy" of the adulterous relationship that Mr. Brown suspected she was having with Mr. Thompson. Her testimony on the theory of Mr. Brown's jealousy was not corroborated, unlike that of the officer in McGriff, and while the government's case was strong, it was certainly not overwhelmingly so. We cannot say with assurance that the curtailment of cross-examination of Ms. Joe about the threats she had received and the effect of those threats on her testimony did not affect the outcome of this trial.
IV.
Mr. Brown also claims it was error for the trial court to deny him the opportunity to question Mr. Williams about his knowledge of where and when he had seen Mr. Thompson in possession of a gun. At trial his counsel argued that questioning on this matter could show that Mr. Williams' testimony at trial was inconsistent with his testimony before the grand jury, and would support Mr. Brown's theory that Perry Thompson constructively possessed the gun found in the truck. On appeal, Mr. Brown presents two additional arguments in support of his position: first, that the questioning would have been relevant to the location of the gun, and second, that any perjury exposed would have allowed counsel to flesh out the theory that Mr. Williams was biased against Mr. Brown. The government argues that these two new arguments should not be considered by this court in its review because they were not made below. But additional arguments in support of a position taken in the trial court are not automatically precluded on appeal. See, e.g., Randolph v. United States, 882 A.2d 210, 217-18 (D.C.2005). The claim that cross-examination should be permitted was clearly raised, and we may therefore consider it.
Questions regarding Mr. Williams's knowledge of where Mr. Thompson's gun was and whether and when he had seen Mr. Thompson with it were certainly relevant, as the government conceded at oral argument, and within the scope of the direct examination of Mr. Williams. Because we reverse for the reasons stated in Parts II and III of this opinion, we need not speculate as to the harmfulness, if any, of this error. It is sufficient to say that the trial court erred, and while we recognize that trial courts have great discretion in limiting cross-examination, upon any retrial of Mr. Brown some cross-examination of Mr. Williams on what he knew about the whereabouts of Mr. Thompson's gun, and when he had last seen Mr. Thompson with it, should be permitted if counsel chooses to pursue the issue.[11]
*952 V.
We are persuaded that the error in preventing counsel from asking Ms. Joe about threats Mr. Hall may have made against her, both before and during trial, was not "harmless beyond a reasonable doubt," Chapman, supra, 386 U.S. at 24, 87 S. Ct. 824. Accordingly, we reverse Mr. Brown's convictions and remand for a new trial.
So ordered.
NOTES
[1] The gun was licensed and registered to Mr. Brown, who resided in Maryland. He was not licensed, however, to carry the gun in the District of Columbia, where the shooting took place.
[2] Ms. Joe stated that she never saw a gun, but that the way Mr. Thompson was reaching would have been consistent with reaching for a gun. She said that she told this to detectives on the scene, but was impeached with her prior statement that she believed he was only adjusting the seat.
[3] At the beginning of re-cross, Ms. Joe was asked who the spectator was, and she identified him as Troy Hall. The trial court questioned Mr. Hall. He identified himself as Troy Robinson. For the sake of convenience, we follow the convention adopted by the parties and refer to him as "Mr. Hall" in the following discussion.
[4] Mr. Brown's counsel, while demonstrating the gesture, characterized the gesture as holding his hands as though holding a gun, to which the trial court responded, "That is not how one demonstrates a gun...."
[5] The following exchange then occurred between Mr. Brown's attorneys and the court:
[Defense Counsel:] The record should reflect [that] before this man turned around to walk out of the courtroom he stopped, stared into the eyes of [Counsel] and laughed out loud before he walked out of the courtroom.
[Defense Counsel:] I concur with that, Your Honor.
[Court:] Let me say he just turned and left from my observation. You seem to be hypersensitive. I didn't see anything threatening as he was turning to leave, [Co-Counsel].
[Defense Counsel:] The other thing I want to put on the record is the difference between what I saw and
[Court:] [Co-Counsel], I am accepting your representation. That's why I asked him to leave the courtroom.
[6] When asked if this affected the truthfulness of her testimony, she said, "No, it didn't affect the truthfulness, just mentally; that's all." She said that she was uncomfortable while he was there, and she felt better with him gone.
[7] At a minimum, this would seem to require "that the questioner [] support any proposal for cross-examination with a credible statement describing the suspected cause of bias in the witness, supported by plausible factual allegations or itself plausible within the framework of facts that neither party has contested." Scull v. United States, 564 A.2d 1161, 1164 n. 4 (D.C.1989).
[8] This case is, for example, devoid of a complication seen in many of our bias cases in which a balance must be struck between the right to confront a witness on questions of bias and that witness's invocation of the Fifth Amendment privilege against self-incrimination. See, e.g., McClellan v. United States, 706 A.2d 542, 548-49 (D.C. 1997).
[9] Cf. Thomas v. United States, 914 A.2d 1, 10-11 (D.C.2006) ("To be sure, the Clause's ultimate goal is to ensure reliability of evidence, but it is a procedural rather than a substantive guarantee. It commands, not that evidence be reliable, but that reliability be assessed in a particular manner: by testing in the crucible of cross-examination ...." (quoting Crawford v. Washington, 541 U.S. 36, 61-62, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004))).
[10] See also (Emmett) Jones v. United States, 853 A.2d 146, 153-54 (D.C.2004) (applying Van Arsdall factors to allegation that trial court improperly limited cross-examination of government witness for bias against the defendant); (Irving) Jones v. United States, 516 A.2d 513, 523 (D.C.1986) (Burgess, J., dissenting) (positing that "where the record does not disclose what evidence the cross-examination would have elicited, the government must show beyond a reasonable doubt that the defendant would have been convicted without the witness' testimony").
[11] Mr. Brown also claims that the trial court erred in allowing the government to introduce a prior consistent statement of Mr. Williams's. On direct examination, Mr. Williams testified that Mr. Brown moved his head to the left and right, as though to check for potential witnesses, before he opened fire. Defense counsel impeached Mr. Williams with his failure to mention this fact to police at the scene of the crime or at the hospital afterwards. The government then sought to rehabilitate Mr. Williams by introducing part of his grand jury testimony as a prior consistent statement that Mr. Brown had moved his head in that manner. Mr. Brown contends that was error, because the motive to fabricate existed at the time Mr. Williams gave his grand jury testimony. See Williams v. United States, 483 A.2d 292, 296 (D.C.1984). If the issue arises at a new trial, the admissibility of the prior consistent statement will turn on whether the record as developed at the new trial shows the absence of a motive to fabricate at the time it was made.
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720 S.W.2d 880 (1986)
Mattie Susan FOX, Appellant,
v.
George E. FOX, Appellee.
No. 09 86 044 CV.
Court of Appeals of Texas, Beaumont.
November 26, 1986.
Rehearing Denied December 18, 1986.
*881 W.C. Lindsey, Port Arthur, Richard G. Lewis, Boneau & Lewis, Port Arthur, for appellant.
Gary M. Angelle, Nederland, Frank M. Lamson, Provost, Umphrey, Swearingen & Eddins, Port Arthur, for appellee.
OPINION
BURGESS, Justice.
This case involves the construction of a divorce decree. Appellant, Mattie Susan Fox, Petitioner below, and George E. Fox were divorced on January 3, 1985.
Thereafter, a dispute arose as both parties applied to Texaco for the assets of a profit-sharing or stock plan. Mr. Fox applied for the assets of the plan under the following portion of the decree:
Respondent is awarded the following as Respondent's sole and separate property, and Petitioner is hereby divested of all right, title and interest in and to such property:
. . . . . .
9. Any and all sums, whether matured or unmatured, accrued or unaccrued, vested or otherwise, together with all increases thereof, the proceeds therefrom, and any other rights relating to the profit-sharing plan, pension plan, retirement plan, or like benefit program existing by reason of Respondent's past, present or future employment.
Ms. Fox applied for the assets under this portion of the decree:
Petitioner is awarded the following as Petitioner's sole and separate property, and Respondent is hereby divested of all right, title and interest in and to such property:
. . . . .
4. The Texaco stock.
Subsequently, Ms. Fox filed a lawsuit in which she sought enforcement and clarification of the January 3, 1985 decree and, in the alternative, a judgment nunc pro tunc and a declaratory judgment. Mr. Fox answered and filed a cross-motion for clarification. A hearing was held on both motions and the trial judge ruled that Mr. Fox was entitled to the assets of the plan.
Ms. Fox brings this appeal alleging the trial judge: (1) abused his discretion by not applying the rule of ejusdem generis to the facts of the case; (2) abused his discretion by not applying the rules of construction of instruments to the facts of the case; (3) erred because its order in Aid and Clarification of Decree of Divorce violates TEX. FAM.CODE ANN. sec. 3.71 (Vernon Supp. 1986); and, (4) the evidence was legally and factually insufficient to support the findings and conclusions that the decree's reference to "Texaco Stock" pertained to "Texaco Stock held outside of" Respondent's benefit plans.
From the outset, we note that the trial court found the decree to be a consent *882 decree. He apparently did so because of the manner the parties' signatures appeared on the document:
APPROVED AS TO FORM:
/s/Mattie Susan Fox
MATTIE SUSAN FOXPetitioner
_______________
LARRY THORNE
Attorney for Petitioner
/s/George E. Fox
GEORGE E. FOXRespondent
The decree, however, expressly states that the court is decreeing a disposition of the property. Nowhere does it state that the court is approving an agreement of the parties. We conclude the decree is not an agreed or consent judgment, and that contract law is, therefore, inapplicable to its construction.
A judgment is to be construed in the same manner as other written instruments and as written. Bankers Home Bldg. & Loan Assn. v. Wyatt, 139 Tex. 173, 162 S.W.2d 694 (1942). Further, if a judgment is unambiguous, it is the duty of the court to declare the effect thereof in light of the literal meaning of the language used. Lohse v. Cheatham, 705 S.W.2d 721 (Tex. App.San Antonio 1986, writ dism'd). We find no ambiguity requiring a need for construction. While a trial court may clarify a decree, he may not modify it. McGehee v. Epley, 661 S.W.2d 924 (Tex. 1983).
In this instance, the court divested Mr. Fox of "all right, title and interest in and to ... the Texaco stock." This is a clear, unequivocal disposition. This would apply to any and all Texaco Stock which the parties held in their name or which anyone, anywhere held in trust them. From the hearing on the motion to clarify, it is evident that the profit-sharing plan contained assets which consisted of Texaco Stock held in trust for Mr. Fox by Hanover Trust through the Employee Stock Ownership Plan and the Employee's Thrift Plan. While no stock had been issued to Mr. Fox in his name, the interest in each plan was always measured in shares of stock. Mr. Fox was allowed to vote, if he desired, those shares of stock held for his benefit.
We, therefore, hold that the only clarification the trial court could make, under the facts and the law, was to construe the phrase, "the Texaco stock", to include that stock held by Hanover Trust for the benefit of Mr. Fox as determined by his interest in the Employee Stock Ownership Plan and Employee Thrift Plan. Again, the clear effect of the award to appellant was to vest her with all Texaco stock held in either parties' name or for the benefit of either party. Thus, we grant points of error numbers two and four and do not reach points of error numbers one and three. Point of error number five complains of the trial court's failing to award attorney's fees in Petitioner's favor. In light of our disposition, we remand this issue to the trial court.
The judgment of the trial court is reversed and the cause remanded for the trial court to consider the issue of attorney's fees and then to enter a clarification order consistent with this opinion.
REVERSED AND REMANDED.
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290 B.R. 16 (2003)
In re David M. PTASINSKI and Maureen T. Ptasinski, Debtors.
Brian Sanderson and Marie A. Sanderson, Plaintiffs,
v.
David M. Ptasinski and Maureen T. Ptasinski, Defendants.
Bankruptcy No. 02-20524, Adversary No. 02-2172.
United States Bankruptcy Court, W.D. New York.
February 13, 2003.
*17 *18 Leonard Relin, Rochester, NY, for debtors.
DECISION & ORDER
JOHN C. NINFO, II, Chief Judge.
BACKGROUND
On February 20, 2002, David M. Ptasinski ("David Ptasinski") and Maureen T. Ptasinski ("Maureen Ptasinski") (collectively, the "Debtors") filed a petition initiating a Chapter 7 case. On March 7, 2002, the Debtors filed the Schedules and Statements required to be filed by Section 521 and Rule 1007 (the "Initial Schedules" and "Initial Statement of Affairs"), on which indicated that: (1) they owned a residence, as tenants by the entirety, located at 1474 Cherry Blossom Lane, Webster, New York (the "Residence"), which had a current market value of $202,000.00; (2) David Ptasinski had a retirement plan, administered by the Electricians Union, with a current balance of $76,001.48; (3) they had household goods and furnishings located at the Residence with a value of $2,000.00; (4) David Ptasinski owned a watch with a value of $35.00 and they each had wedding bands with a total value of $200.00 (Schedule B, Question 7 regarding Furs and Jewelry); (5) Canandaigua National Bank ("CNB") held a $50,000.00 collateral security mortgage on the Residence; (6) they leased a 2001 Volvo V70 wagon; (7) they were indebted to Marie A. and Brian Sanderson (the "Sandersons") on a personal loan for approximately $26,000.00; (8) they were potentially liable for $476,377.79 of unsecured debt, the majority of which was incurred in connection with a business that they operated with the Sandersons, known as East Bay Electric, Inc. ("East Bay"); (9) they were both unemployed, and David Ptasinski was drawing unemployment insurance of $1,741.50 per month; and (10) they had no losses from fire, theft, other casualty or gambling within one year immediately preceding the commencement of their case (Question 8 of the Statement of Financial Affairs).
At the Debtors' initial Section 341 Meeting of Creditors (the "Meeting of Creditors") the Sandersons and their attorney appeared.
On April 11, 2002, the Debtors filed an April 10, 2002 Amendment to their Schedule F (the "Schedule F Amendment"), *19 which added Doerrer Jewelers as an unsecured creditor, which indicated that it had a claim of $4,100.00 for December 2001 purchases.
On May 28, 2002, the Sandersons filed an Adversary Proceeding objecting to the discharge of the Debtors pursuant to Sections 727(a)(2), (a)(4) and (a)(5). The Complaint in the Adversary Proceeding alleged that: (1) on or around October 2000 the Debtors purchased a valuable diamond ring of at least one carat with a value of between $4,000.00 and $7,000.00 (the "Unscheduled Ring"); (2) Maureen Ptasinski continually wore the Unscheduled Ring through the closing of the East Bay business on September 21, 2001; (3) Maureen Ptasinski was not wearing the Unscheduled Ring at the Meeting of Creditors; (4) in response to questioning by the Sanderson's attorney at the Meeting of Creditors, Maureen Ptasinski testified that she did own a small diamond ring of approximately a quarter of a carat, not worth more than $200.00 (the "Engagement Ring"); (5) it was only after the attorney for the Sandersons questioned the Debtors regarding unscheduled jewelry that they amended their schedules to add Doerrer Jewelers as a creditor, however, as of the date of the filing of the Complaint, their schedules had still not been amended to reflect the jewelry purchased from Doerrer Jewelers; (6) the Debtors, with intent to hinder, delay and defraud their creditors and their Chapter 7 trustee (the "Trustee"), failed to properly schedule the Engagement Ring, the Unscheduled Ring or other items, if any, that may have been purchased from Doerrer Jewelers; (7) David Ptasinski had failed to schedule his interest in an Accubid computer software program (the "Accubid Software"), which he had utilized in connection with the operations of East Bay; (8) the Accubid Software had a value of approximately $6,500.00; (9) the Debtors had filed their 2002 income tax returns and scheduled an anticipated refund of $3,750.00, however, because East Bay, a Subchapter "S" corporation, had not filed its 2001 returns, the Debtors knowingly did not have the information regarding, and did not claim on their individual returns, any losses from the operations of East Bay, which may have resulted in significantly greater refunds; (10) the Debtors had failed to wait for and utilize losses from East Bay so that they could file their 2001 returns, obtain any refunds and spend the refunds before they filed their petition; (11) although the Debtors scheduled an indebtedness to John Deere Credit, they failed to schedule their John Deere tractor with snow blower attachment; (12) in connection with the operation of East Bay, David Ptasinski personally purchased a generator for in excess of $1,000.00, however, he did not schedule it as an asset; (13) the Debtors had made false oaths within the meaning and intent of Section 727(a)(4) in filing their Initial Schedules and Initial Statement of Affairs and in testifying at the Meeting of Creditors; and (14) the Debtors had intentionally concealed assets, failed to satisfactorily explain losses of assets and made false oaths so that their discharge should be denied.
On June 19, 2002, the Debtors interposed an Answer which admitted the purchase of a diamond ring weighing at least one carat in October 2000, and advised that the Accubid Software had been repossessed by CNB, as a secured creditor of East Bay.
At a July 18, 2002 pretrial conference, the attorney for the Debtors advised the Court and the attorney for the Sandersons that: (1) Maureen Ptasinski had lost the Unscheduled Ring that had been purchased from Doerrer Jewelers during her pregnancy in the fall of 2001; (2) the Unscheduled Ring had not been insured; (3) *20 the Debtors had provided the Trustee with a written statement regarding the loss of the Unscheduled Ring, which he was satisfied with; (4) the Debtors had now disclosed Maureen Ptasinski's ownership of the Engagement Ring, and had it appraised for the Trustee; (5) the Debtors had amended their schedules to add Doerrer Jewelers as a creditor in connection with their purchase of the Unscheduled Ring; (6) David Ptasinski had obtained the Accubid Software, in the form of a disk only, from a prior employer that went out of business, however, CNB had repossessed it when the East Bay business closed; (7) the Debtors were working with an accountant to ensure that the East Bay tax returns were filed, and they and their accountant would work with the Trustee to amend their individual returns if warranted; (8) they had not scheduled their John Deere tractor with snow blower attachment because it was secured to John Deere Credit and there was no equity in it; and (9) in September 2001, David Ptasinski sold the generator, which was then eighteen months old, to his father for $400.00.
On August 28, 2002, the Sandersons filed a petition initiating their own Chapter 7 case, and their trustee elected not to pursue the Adversary Proceeding on behalf of their estate.
On September 18, 2002, the Debtors filed a September 12, 2002 Second Amendment of their Schedules and Statements which listed: (1) a .3-carat solitaire with an appraised value of $120.00; (2) a lawn tractor financed through John Deere Credit in fair condition with a value of $2,000.00; and (3) a 1.23 carat diamond ring with an approximate value of $7,500.00, that was lost between September 2001 and February 2002 during Maureen Ptasinski's problem pregnancy.
On November 18, 2002, during a discovery dispute in the Adversary Proceeding, the attorney for the Debtors interposed an Affidavit, which attached a September 27, 2002 Affidavit of Maureen Ptasinski which asserted that: (1) Maureen Ptasinski became pregnant in early March 2001, and she wore the Unscheduled Ring only intermittently in the later part of her pregnancy due to excessive swelling and other pregnancy-related complications; (2) on February 8, 2002, her birthday, when she went to wear the Unscheduled Ring, she could not find it; (3) on Saturday, September 21, 2002, when the Debtors were preparing to relocate to North Carolina and were moving a couch in the basement to donate to The Volunteers of America, they found the Unscheduled Ring under the couch; and (4) on Monday, September 23, 2002, the Debtors notified their attorney that they found the Unscheduled Ring and gave it to him to turn over to the Trustee.
On December 23, 2002, when the Debtors were back in the Rochester area, the Court conducted a trial at which the Sandersons and the Debtors testified.
At trial, Brian Sanderson testified that: (1) he, his wife and the Debtors went into the East Bay business together in May 2000; (2) in April or November 2000, he observed that Maureen Ptasinski had acquired a new single solitaire diamond ring (the "Single Diamond Ring"), which she wore daily until September 2001 when the East Bay business operations were terminated; (3) in early 2001, the Sandersons discovered what they believed to be irregularities in the operation of the business, and they began to lose trust in the Debtors; (4) in March or April 2001, David Ptasinski, individually, purchased a commercial generator from Home Depot which was used by East Bay at a job it was doing at the LeRoy Town Hall; (5) after the LeRoy Town Hall job was completed, David Ptasinski took the generator, which he told Brian Sanderson had cost him between *21 $1,200.00 and $1,300.00, to the Residence; (6) Brian Sanderson did not see Maureen Ptasinski after the closing of the East Bay business until the Meeting of Creditors; (7) at the Meeting of Creditors Maureen Ptasinski was not wearing the Single Diamond Ring; (8) after the Unscheduled Ring had been turned over to the Trustee, he and Marie Sanderson went to the Trustee's office to see whether the Unscheduled Ring in his possession was the same as the Single Diamond Ring that he had observed Maureen Ptasinski wearing; and (9) the Unscheduled Ring in the possession of the Trustee was not the same as the Single Diamond Ring.
At trial, Marie Sanderson testified that: (1) one day in October or November 2000, Maureen Ptasinski came into the East Bay office, which was at the Residence, wearing the Single Diamond Ring, and was excited to show it off to everyone, explaining that it was just what she always wanted and now had; (2) Maureen Ptasinski was wearing the Single Diamond Ring in September 2001 when the East Bay business operations were terminated; (3) she did not see Maureen Ptasinski again until the Meeting of Creditors; (4) Maureen Ptasinski was not wearing the Single Diamond Ring at the Meeting of Creditors; and (5) the Unscheduled Ring in the possession of the Trustee was not the same ring as the Single Diamond Ring which Maureen Ptasinski had been wearing before the East Bay business was terminated.
At trial, David Ptasinski testified that: (1) the Engagement Ring had been purchased in the late 1980's; (2) the Engagement Ring was the only diamond ring in the Debtors' possession when they filed their petition; (3) Maureen Ptasinski had not acquired an additional ring in the year 2000; (4) the Unscheduled Ring was purchased from Doerrer Jewelers in April 2001, and the Debtors made monthly payments on the balance due to Doerrer Jewelers until October 2001; (5) the Debtors did not list the Unscheduled Ring on their Initial Schedules because at the time of the filing of the petition it was lost; (6) the loss of the Unscheduled Ring was not detailed in Item 8 of the Initial Statement of Affairs because he did not think that the loss needed to be disclosed because it did not result from a fire, theft, casualty or gambling; (7) he executed the Schedule F Amendment which, although it listed Doerrer Jewelers as a creditor, did not disclose that the alleged December 2001 purchase from Doerrer Jewelers, which was for the Unscheduled Ring; (8) he had no satisfactory explanation for why the Unscheduled Ring was not disclosed at the Meeting of Creditors in response to the questions of the Sandersons' attorney regarding the Debtors' jewelry; (9) when the Unscheduled Ring was purchased from Doerrer Jewelers it was mailed to his in-laws in Florida, so that Maureen Ptasinski would not know about it and he could surprise her with it when her parents next came up from Florida to Rochester and brought it with them; (10) the only diamond rings that Maureen Ptasinski ever owned were the Engagement Ring and the Unscheduled Ring; (11) the Debtors did not realize that the Unscheduled Ring was lost until February 8, 2002, when Maureen Ptasinski looked for it to wear it on her birthday; (12) when the Debtors realized that the Unscheduled Ring was lost, they looked all over for it, questioned their children, but did not find it until they moved the couch in September 2002; (13) the Unscheduled Ring was found under a couch in the basement when they were preparing for their move to North Carolina; (14) the Accubid Software was in a gang box that was turned over to CNB, as secured creditor of East Bay, after the Debtors filed their bankruptcy petition; *22 (15) his father had purchased the generator for $400.00 cash; (16) John Deere Credit had been listed as a creditor, and it was an oversight that the John Deere tractor with snow blower attachment was not scheduled as an asset, however, there was no equity in the tractor; (17) after the Unscheduled Ring was found, the Debtors came to believe that one of their two young daughters must have taken it off Maureen Ptasinski's dressing table where she kept it, and played with it in the basement; (18) he had no real explanation as to why Doerrer Jewelers had not been listed as a creditor; and (19) on February 20, 2002, when the Debtors' petition was filed, he may not have been completely sure that the Unscheduled Ring was permanently lost, and may simply have overlooked scheduling it.
At trial, Maureen Ptasinski testified that: (1) the Debtors had not listed Doerrer Jewelers because Doerrer was a friend of a friend and, although she admitted that they the Debtors never intended to pay him in full after the bankruptcy, they may have intended to make some payments to him and thereafter perhaps amend their schedules to include Doerrer; (2) the Debtors' admission in their Answer to the Complaint and their Response to the Plaintiff's Interrogatories that they had purchased a ring in October 2000, was either a typo, an oversight, the result of not reading the papers clearly, or just confusion on their part; (3) on February 20, 2002, when they filed their petition, she believed that the Unscheduled Ring had been lost forever, because the Debtors had searched everywhere for the Ring and ripped the house apart, although they did not move the couch in the basement, but they had not found it; (4) she kept the Unscheduled Ring on her dressing table during her pregnancy and thereafter, and even though her children had previously played with things on the dressing table which she did not want them to, she did not take any special steps to safeguard the Unscheduled Ring, but she did tell her children not to touch anything on the dressing table; (5) after she had acquired the Unscheduled Ring, she had put the Engagement Ring away for safekeeping for her daughter; (6) she never owned a diamond ring other than the Engagement Ring and the Unscheduled Ring purchased from Doerrer Jewelers; (7) before looking for the Unscheduled Ring on her birthday on February 8, 2002, the last time she remembers wearing the Ring was in August or September of 2001; (8) her baby was born November 25, 2001; (9) although she had a christening for her new baby at her home in January 2002, she never looked for the Unscheduled Ring to wear it at the christening because she was so busy with the christening and taking care of her three children she never even thought about the Unscheduled Ring; (10) David Ptasinski had acquired the Accubid Software when his prior employer went out of business, and he simply kept the disk that he had used as a bidder for that company; (11) David Ptasinski never paid a licensing fee so that he could legally use the Accubid Software, and the Software was ultimately turned over to CNB; and (12) she believed that the $400.00 received from David Ptasinski's father for the generator was a fair price.
DISCUSSION
I. Case Law
From the cases which have been decided under Section 727(a)(4)(A), including this Court's Decision & Order in In re Pierri, Ch. 7 Case No. 97-20461, A.P. Case No. 97-2125 (W.D.N.Y. April 21, 1998), we know that for the Court to deny a debtor's discharge because of a false oath or account: (1) the false oath or account must *23 have been knowingly and fraudulently made, see Farouki v. Emirates Bank Int'l, Ltd., 14 F.3d 244 (4th Cir.1994); (2) the required intent may be found by inference from all of the facts, see 6 L.King, Collier on Bankruptcy, ¶ 727.04[1][a] at 37 (15th ed. rev.1996); (3) a reckless disregard of both the serious nature of the information sought and the necessary attention to detail and accuracy in answering may rise to the level of the fraudulent intent necessary to bar a discharge, see Diorio v. Kreisler-Borg Constr. Co., 407 F.2d 1330 (2d Cir.1969); (4) a false statement resulting from ignorance or carelessness is not one that is knowing and fraudulent, see Bank of Miami v. Espino (In re Espino), 806 F.2d 1001 (11th Cir.1986); (5) the required false oath or account must be material; and (6) the required false oath or account may be a false statement or omission in the debtor's schedules or a false statement by the debtor at an examination at a creditors meeting, see In re Ball, 84 B.R. 410 (Bankr.D.Md.1988). Conversely, if items were omitted from the debtor's schedules because of an honest mistake or upon the honest advice of counsel, such a false declaration may not be sufficiently knowingly and fraudulently made so as to result in a denial of discharge.
II. The Diamond Rings
A. General
It is undisputed that: (1) when the Debtors filed their petition and Initial Schedules and Statements, they knew that Maureen Ptasinski owned and possessed the Engagement Ring; (2) the Debtors failed to disclose the Engagement Ring as an asset on their Initial Schedules and Statements; and (3) it was only after she was questioned by the Sandersons' attorney at the Meeting of Creditors that Maureen Ptasinski admitted her ownership and possession of the Engagement Ring.
It is undisputed that: (1) when the Debtors filed their petition and Initial Schedules and Statements, David Ptasinski was indebted to Doerrer Jewelers in the amount of $4,100.00 in connection with his purchase of the Unscheduled Ring; (2) David Ptasinski failed to list Doerrer Jewelers as a creditor on the Initial Schedules filed with the Court; and (3) it was only after the commencement of the Adversary Proceeding that the Debtors amended their schedules to include Doerrer Jewelers as a creditor.
It is undisputed that: (1) when the Debtors filed their petition and Initial Schedules, Maureen Ptasinski was the owner of the Unscheduled Ring, in that it had been given to her by David Ptasinski and she never conveyed ownership to a third party; (2) the Debtors failed to disclose the Unscheduled Ring as an asset on their Initial Schedules and Statements; and (3) the Debtors did not disclose that the Unscheduled Ring was allegedly lost on Question 8 of the Initial Statement of Affairs.
B. False Oath or Account
1. The Unscheduled Ring
From the evidence produced at trial and the pleadings and proceedings in the Debtors' bankruptcy case and in the Adversary Proceeding, I find that Maureen Ptasinski knowingly and fraudulently failed to schedule the Engagement Ring as an asset, and knowingly and fraudulently failed to schedule the Unscheduled Ring as an asset or to disclose, in the Initial Statement of Affairs or otherwise at the Meeting of Creditors, that the Unscheduled Ring was allegedly lost. Furthermore, I find that: (1) at a minimum, the actions of Maureen Ptasinski indicated such a reckless disregard for the serious nature of: (a) complying with her duties under Section *24 521 to pay the necessary attention to the detail and accuracy required to properly complete the Initial Schedules and Statements; and (b) responding correctly and completely to the questions of her Trustee, that fraudulent intent has been demonstrated by a preponderance of the evidence; and (2) the failure of Maureen Ptasinski to include her ownership interest in the Rings in the Initial Schedules and Statements, or to disclose the alleged loss of the Unscheduled Ring, simply could not have been an honest, careless or inadvertent mistake.
Except for the testimony that Maureen Ptasinski may not have worn the Unscheduled Ring at times during her pregnancy, which ended in November 2001, I find all of the other material testimony of the Debtors with respect to the Engagement Ring and the Unscheduled Ring to be so totally without credibility that it is laughable. No one, after observing how Maureen Ptasinski dressed and comported herself at trial could ever believe that such an individual would treat that $7,500.00 diamond Ring as cavalierly as she testified she did, knowing that she: (1) resided in a $200,000.00 suburban home in Webster, New York; (2) leased a 2001 Volvo wagon; (3) had recently run her own business; and (4) after years of wearing a .3-carat diamond ring, finally acquired and flaunted the Unscheduled Ring, the ring she always wanted.
Maureen Ptasinski's stories about: (1) the alleged loss of the Unscheduled Ring; and (2) the reasons for her failure to list, or insist that David Ptasinski list, Doerrer Jewelers as a creditor, or in any way to report the Ring as an asset or as being lost, considering that she allegedly only discovered that the Unscheduled Ring was lost twelve days before the filing of her petition, are more unbelievable than any other story ever told to this Court in a Section 727(a)(4) adversary proceeding.
I further find that David Ptasinski actively participated in this fraudulent failure to schedule or otherwise disclose the details of the alleged loss of the Unscheduled Ring.
The following observations and statements materially contribute to the Court's conclusions that: (1) the Debtors' testimony with respect to the Unscheduled Ring is not credible; (2) the Debtors knew or should have known that the Unscheduled Ring was not "lost" forever but was merely misplaced; and (3) the Debtors should have listed the Unscheduled Ring as a material non-exempt asset on the Initial Schedules, or, at a minimum, its loss should have been disclosed so that the Trustee could investigate and confirm a permanent loss: (a) the testimony of Maureen Ptasinski that when she acquired the Unscheduled Ring she put aside the Engagement Ring for safekeeping for her daughters, but when she could temporarily not wear the Unscheduled Ring during her difficult pregnancy, she did not put the Unscheduled Ring in a safe place, but left it out on her dressing table, and never regularly checked on it; (b) the testimony of Maureen Ptasinski that between the birth of her child in November 2001, after which she could now once again wear the Unscheduled Ring, and her birthday on February 8, 2002, she never checked on the Ring or had occasion to think about wearing it, even though that period covered the Christmas Holidays, New Year's, the christening of the new baby and a celebration of the christening at the Residence; (c) the lack of any plausible explanation by the Debtors as to how the Unscheduled Ring could have been permanently lost rather than merely misplaced, other than that the Debtors' children *25 may have played with it; (d) a lack of credible testimony as to how the Debtors could have questioned their children about the loss of the Ring but not get the kind of detailed answers from the children that could reasonably have resulted in their conclusion that the Unscheduled Ring was lost rather than merely misplaced; (e) the Debtors' alleged conclusion that the Unscheduled Ring was permanently lost when they testified that Maureen Ptasinski never wore the Ring in the later stages of her pregnancy, so that it could not have been permanently lost, as can be the case, while washing clothes, doing gardening, washing dishes, shopping at the store, traveling, going to the hospital or doctor's visits; and (f) in view of the foregoing testimony and the Debtors' failure to reasonably conclude when the petition was filed and the Initial Schedules and Statements were completed, that the Ring was simply misplaced somewhere in the house, and that it should be scheduled as an asset, or at least the alleged loss fully explained.
2. The Engagement Ring
Maureen Ptasinski's testimony that she never refocused on the Engagement Ring or understood that it needed to be scheduled as an asset, in part because she had put it in safekeeping for her daughters, is not credible since: (1) the Debtors specifically and separately scheduled their wedding rings, and presumably knew or had explained to them by their attorney, the difference between an exempt wedding ring and a non-exempt engagement ring, as determined by the Court in In re Tiberia, 227 B.R. 26 (Bankr.W.D.N.Y.1998); and (2) Maureen Ptasinski allegedly believed that the Unscheduled Ring was lost.
David Ptasinski's testimony that he did not disclose the loss of the Unscheduled Ring because the loss did not seem to be covered by the literal language of Question 8 of the Initial Statement of Affairs clearly demonstrates his lack of honesty and good faith as a debtor.
III. Doerrer Jewelers
I find that David Ptasinski knowingly and fraudulently failed to list Doerrer Jewelers as a creditor on the Initial Schedules, and that the failure was not an honest, careless or inadvertent mistake. The following observations regarding the testimony presented at trial materially contribute to this conclusion: (1) David Ptasinski was making monthly payments on the obligation up to October 2001; (2) with the alleged loss of the uninsured Unscheduled Ring twelve days before the filing of his petition, David Ptasinski would have been concerned that he would still have to pay the $4,100.00 balance due on the Ring that his wife no longer possessed unless the debt was discharged; (3) he was focused on the Unscheduled Ring in connection with his bankruptcy and the preparation of the Initial Schedules, because he specifically testified that he carefully read and considered Question 8 of the Statement of Affairs and concluded that the loss of the Unscheduled Ring did not have to be disclosed; (4) he had no credible explanation for not scheduling Doerrer Jewelers; and (5) the testimony of Maureen Ptasinski, which he did not contradict, that Doerrer Jewelers was not scheduled because Doerrer was a friend of a friend and, essentially, the Debtors were not sure what they were going to ultimately do with the debt was not credible and was internally inconsistent.
The only reasonable conclusion that the Court can reach, based upon the facts, circumstances and testimony presented, is that the Debtors purposely did not schedule Doerrer Jewelers so that they could *26 conceal the existence of the Unscheduled Ring from the Trustee and their creditors, knowing that if they scheduled Doerrer Jewelers with a balance of $4,100.00, the Trustee would inquire into what had been purchased at Doerrer Jewelers and fully investigate the alleged loss of the Ring.
Although Courts are generally more concerned with the failure of a debtor to disclose an asset than with the failure to disclose a liability, this is not true in cases such as this where the knowing failure to disclose a creditor is part of a fraudulent scheme to conceal an asset from the Trustee, or to prevent the Trustee from fully investigating the existence or value of an asset.
IV. Miscellaneous
A. Sanctions
The Sandersons have requested that sanctions be imposed against the Debtors for various reasons, including their failures to produce requested discovery information. Although the Court does not condone many of the actions and failures of the Debtors in connection with this Adversary Proceeding, undoubtedly in part because there is so much animosity between the Debtors and the Sandersons, it will not impose sanctions given the fact that the Court has determined to deny the Debtors their discharge.
B. Other Unscheduled Assets
The Debtors failed to disclose their John Deere tractor with snow blower attachment and the Accubid Software on their Initial Schedules. The John Deere Credit indebtedness was scheduled, which would and did lead the Trustee to inquire about the John Deere tractor, since to the best of this Court's knowledge, that is all that John Deere Credit finances. Therefore, the failure to schedule the John Deere tractor with snow blower attachment in itself is not sufficient to deny the Debtors' discharge. However, their reckless disregard for the accuracy of their Initial Schedules is further indicated by that failure.
In view of the fact that David Ptasinski was apparently illegally utilizing the Accubid Software in connection with the operations of East Bay, because he had not paid the required licensing or royalty fees to be legally entitled to use the disk which he inherited from his former employer, the Software, later turned over to CNB, was arguably not even an asset of the estate. It certainly was not an asset that the Trustee could realize upon, since David Ptasinski had not acquired it legally or taken the necessary steps to have legal possession and use of the Software. Therefore, the failure to schedule the Software in itself is not sufficient to deny David Ptasinski's discharge.
V. Overview
As this Court has often stated, the benefits received by an honest debtor in a bankruptcy case, including a discharge of all dischargeable debts, a "fresh start," are extraordinarily disproportionate to the few demands and expectations placed upon a debtor by the Bankruptcy Code and Rules. One of these few, but very important duties, which is seemingly easy for any debtor, even a consumer or typical individual debtor to perform, is to ensure that all of their assets are properly scheduled.
Further, as this Court has clearly stated on numerous occasions to debtors and their attorneys, notwithstanding all of the financial and perhaps personal difficulties that a debtor may be experiencing, the Bankruptcy Code expects that when debtors and their attorneys are finalizing and signing their schedules, they will devote their full attention to them in order *27 to ensure that they are complete and accurate to the best of the debtor's knowledge and information. Section 727 was enacted, in part, to prohibit a discharge and a fresh start for those who "play fast and loose with their assets or with the reality of their affairs." In re Tully, 818 F.2d 106, 110 (1st Cir.1987).
CONCLUSION
It has been proved by a preponderance of the evidence that the Debtors have made one or more material false oaths or accounts in completing the Initial Schedules and Initial Statement of Affairs and testifying at the Meeting of Creditors and at trial. These false oaths or accounts were knowingly and fraudulently made, or were made with such reckless disregard for both the serious nature of the information being sought and the necessary attention to detail and accuracy required in completing their Initial Schedules and Initial Statement of Affairs and answering questions asked at the Meeting of Creditors and the trial, that fraudulent intent is clearly indicated. Furthermore, there is no credible evidence that the false oaths or accounts were made by mistake, carelessness or inadvertence, or upon the honest advice of counsel. The discharges of both Maureen Ptasinski and David Ptasinski are hereby denied pursuant to Sections 727(a)(2)(B) and (4)(A).
IT IS SO ORDERED.
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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/1525819/
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952 A.2d 825 (2008)
109 Conn.App. 477
STATE of Connecticut
v.
John R. PELOSO III.
No. 27766.
Appellate Court of Connecticut.
Argued February 20, 2008.
Decided August 5, 2008.
*829 Hope C. Seeley, with whom were Benjamin B. Adams and, on the brief, Hubert J. Santos, Hartford, for the appellant (defendant).
Margaret Gaffney Radionovas, senior assistant state's attorney, with whom, on the brief, were James E. Thomas, former state's attorney, and David L. Zagaja, senior assistant state's attorney, for the appellee (state).
DiPENTIMA, McLACHLAN and GRUENDEL, Js.
DiPENTIMA, J.
The defendant, John R. Peloso III, appeals from the judgment of conviction, rendered after a trial to the court, of assault in the second degree in violation of General Statutes § 53a-60(a)(4),[1] delivery of a controlled substance in violation of General Statutes § 21a-277(b)[2] and sexual assault in the third degree in violation of General Statutes § 53a-72a(a)(1)(A).[3] On appeal, the defendant claims that the trial court (1) committed structural error by assuming the role of advocate on behalf of the state, (2) failed to maintain an appearance of impartiality during defense counsel's cross-examination of a witness, (3) improperly admitted certain evidence of prior misconduct and (4) violated his constitutional protection against double jeopardy by convicting and sentencing him *830 multiple times for the same offense. We affirm the judgment of the trial court.
The court reasonably could have found the following facts. On August 27, 2004, at approximately 6 or 7 p.m., the victim[4] met the defendant, with whom she had worked for more than six years and whom she regarded as a friend, for food and drinks at the Wood N' Tap restaurant in Hartford. After the victim and the defendant each had consumed a couple of alcoholic beverages and some food, they left the Wood N' Tap and drove to Tisane, a martini bar in West Hartford, where they each had another alcoholic drink and more food. Shortly after 10 p.m., the defendant and the victim left Tisane and drove in separate cars to Glastonbury, where they attended a party hosted by friends of the defendant. At the party, the victim consumed three or four more alcoholic beverages. Toward the end of their stay at the party, the defendant offered the victim a pill, which he stated would help her hangover for later that morning. The victim, who was scheduled to work later that morning, followed the defendant's advice and took the pill. At approximately 2 a.m., the defendant and the victim left the party together and drove in separate cars to the defendant's apartment in Glastonbury.
After arriving at the defendant's apartment, the victim and the defendant each consumed another alcoholic beverage. The victim then selected a movie, "Silence of the Lambs," from the defendant's DVD collection and lay on a sofa. She fell asleep shortly after the movie began.
At approximately 4 a.m., the defendant picked up the victim from the couch and started to carry her upstairs to the second floor of his apartment. As they reached the top of the stairs, the defendant set the victim down, and she woke up. The victim soon realized that she was not wearing any pants and quickly ran back down the stairs to find her missing clothes. She found her pants lying folded behind the sofa where she had been sleeping.[5]
After putting her clothes back on, the victim noticed a camera nearby. She began to recall the flashing of lights and the sound of a camera taking photographs while she had been lying on the sofa. Convinced that the defendant had taken photographs of her without her pants on, the victim demanded that the defendant give her the film inside the camera. After a brief discussion, the defendant opened the camera, exposing the film inside, and gave the victim the film from the camera and the film's casing. She left the apartment and called the police from her car.
Several Glastonbury police officers arrived a short time later. The officers detected a strong odor of alcohol on the victim's breath as she recounted her story, but she did not show any other signs of alcohol intoxication, such as difficulty moving or speaking. The victim gave the officers the film and casing that she had taken from the defendant.[6]
*831 The victim was transported to Saint Francis Hospital and Medical Center. At the hospital, she submitted to an examination for signs of sexual assault and, at 9:15 a.m., gave blood and urine samples. The physical examination revealed no signs of an assault. During the examination, however, she recounted certain events, which she recalled in greater detail at trial. After falling asleep on the defendant's sofa, she felt as though she was drifting in and out of consciousness and, when she was conscious, felt "completely different," as though things that happened to her were "happening to someone else."[7] She remembered that the defendant had removed some of her clothing and had taken photographs of her. She also remembered watching the defendant kissing her, fondling her breasts and penetrating her vagina with his fingers. The victim stated that it "felt good" in a "sick way" when the defendant was touching her with his hands, but not when he had kissed her.
Sometime before arriving at the hospital, the victim had taken two additional unidentified pills. The victim's urine sample revealed an alcohol level of 0.13 and the presence of methylene dioxy amphetamine (MDA), a controlled substance.[8] Her blood sample revealed an alcohol level of 0.07 by weight and the presence of acetaminophen. No MDA was detected in the victim's blood sample. A subsequent search of the defendant's apartment, pursuant to a warrant, produced pill bottles containing residual amounts of MDA, methylene dioxy methamphetamine (MDMA) and other controlled substances.[9]
By a long form information dated March 22, 2006, the state charged the defendant, in seven counts, with (1) kidnapping in the first degree, (2) assault in the second degree, (3) delivery of a controlled substance, (4) two counts of sexual assault in the first degree, (5) sexual assault in the second degree and (6) sexual assault in the third degree. The defendant elected a trial to the court on all seven charges. Following the state's case-in-chief, the court granted the defendant's motion for a judgment of acquittal as to the first count, kidnapping in the first degree. After the state's rebuttal case, the court found the defendant guilty on the charges of assault in the second degree, delivery of a controlled substance and sexual assault in the third degreecounts two, three and seven, respectively. The court found the defendant not guilty of the remaining charges, counts four through six. One June 8, 2006, the court sentenced the defendant to a total effective term of twelve years imprisonment, execution suspended after eight years, followed by ten years probation. The defendant filed this appeal.
*832 I
The defendant's first claim on appeal is that the court improperly interposed itself into the trial as an advocate on behalf of the state, thereby depriving him of his constitutional right to due process and a fair trial by an impartial finder of fact.[10] Specifically, the defendant claims that after the defense had rested and the state had indicated it would not offer rebuttal testimony, the court committed structural error by improperly suggesting to the state who to call as a rebuttal witness and what information to solicit from that witness. In support of his claim, the defendant argues that the additional testimony assisted the state in meeting its burden of proving a material fact, namely, that he had delivered a controlled substance to the victim. In response, the state argues that the court, sitting as the finder of fact, properly made the suggestion to the state and that even if the suggestion was improper, any error was harmless. We agree with the state that the court's intervention was harmless.
The following facts are necessary to our resolution of the defendant's first claim. During its case-in-chief, the state called Mark Anderson, a chemist with the toxicology and controlled substances laboratory for the department of public safety (laboratory). Anderson testified that when the laboratory receives a blood or urine sample to be analyzed for the presence of a particular substance, he conducts two tests. The first is a presumptive test to determine whether that substance might be present in the sample. The presumptive test is followed by a second confirmatory test to identify positively the substance. Both the presumptive test and the confirmatory test revealed that the sample of the victim's urine taken at 9:15 a.m. on August 28, 2004, contained MDA, but no MDA was detectable in the sample of her blood taken at the same time. Neither the state nor the defendant elicited testimony from Anderson as to the sensitivity of equipment he used to detect the substances in the victim's blood and urine samples.
The state next called Robert Powers, the director of the laboratory. Powers testified as to the general effects, including the lethal effects, of MDA abuse. Powers also testified that the limit of detection[11] of MDA in a urine sample, using the laboratory's equipment, is 100 nanograms per milliliter. Neither the state nor the defendant, however, elicited testimony from Powers as to the limit of detection of MDA in a sample of blood using the laboratory's equipment. Moreover, Powers could not opine, within a reasonable degree of scientific certainty, at what time the victim had ingested the MDA so that her urine sample would contain detectable levels of MDA but her blood sample would not.
*833 Finally, the state called James O'Brien, who testified, as an expert in the field of pharmacology,[12] as to the general effects of MDA. O'Brien opined, on the basis of the victim's description of her symptoms, that the victim was under the influence of MDA during the early morning hours of August 28, 2004. He could not give an opinion as to the time that the victim had ingested the MDA that was detected in her urine sample. He did opine, however, that absent an unusually high dose, she probably did not ingest the MDA more than one day prior to exhibiting its effects.
After the state had rested, the defendant called a number of witnesses to rebut the state's evidence. Through his witnesses, the defendant attempted to demonstrate that the victim must have consumed the MDA that was in her urine prior to the time she was with the defendant on the evening of August 27, 2004, because otherwise, her blood sample would have yielded a detectable level of MDA as well.
To challenge the testimony by the state's experts, the defendant called Francis Gengo, a clinical pharmacologist with an extensive research background in pharmacokinetics.[13] According to Gengo, the typical recreational dose of MDA, 100 milligrams, would have produced concentrations in the victim's blood sample between sixty and eighty nanograms of MDA per milliliter of blood. Gengo opined that the victim had not ingested a dose of MDA sufficient to be under the influence of that drug during the early morning hours of August 28, 2004, because such a dose would have yielded a measurable concentration of MDA in her blood sample.[14] Gengo formed his opinion on the basis of the fact that Powers had told him that the limit of detection of MDA in a sample of blood, using the laboratory's tests, is between twenty and fifty nanograms of MDA per milliliter of blood.
After Gengo testified, the defense rested. The court, in seeking to resolve an issue it had with Gengo's testimony, initiated the following colloquy:
"The Court: Further from the defense?
"[Defense Counsel]: Nothing further, Your Honor. We rest. . . .
"The Court: All right. Will there be rebuttal?
"[The Prosecutor]: No, sir.
"The Court: No one is going to tell me what Dr. Powers says is[the limit of detection] is?
"[The Prosecutor]: Well, I attempted to several times. I don't know if reoffering it is going to qualify.
"The Court: You never asked him about blood. I let in the urine.
"[The Prosecutor]: If I could tomorrow morning, the, Your Honor. . . .
"The Court: "I'll make myself available. I'd be interested in Dr. Powers' testimony. My notes and my memoryam I incorrect that no one ever asked about the [limit of detection] of blood? . . . I'd be interested, *834 if it's available. If not, not. . . . What I am interested in is what the [limit of detection] of the equipment they have over there is, if anybody wants to offer it."
The next day, April 5, 2006, the defendant filed a motion for a mistrial, claiming that the court's suggestion to the state to offer rebuttal testimony violated the court's duty to adjudicate the case impartially and assisted the state in prosecuting the defendant, thereby resulting in irreparable prejudice to his case in violation of the fifth, sixth and fourteenth amendments to the United States constitution and article first, §§ 8, 9 and 20, of the Connecticut constitution. The court denied the defendant's motion. In doing so, the court stated: "I have no clue as to what Dr. Powers is about to say, and it may help your case, and it may help the state's. I have two hearsaytwo basically unreliable ornot unreliable, but problematic statements about the limit of detection of MDA in blood, and I'm interested in the truth. . . . I'm interested in resolving a piece of evidence that is unclear to me."
The state then called Powers back to the witness stand. Powers testified that he did not know the limit of detection of MDA in blood using the laboratory's equipment. Powers testified, however, that he had, in fact, told Gengo that the limit of detection using the laboratory's test equipment was probably between twenty and fifty nanograms of MDA per milliliter of blood. The court admitted this testimony only as to the credibility of Gengo's testimony.
The defendant urges us to conclude that the court improperly intervened in the merits of the case, thus placing it in the role of advocate, by soliciting testimony that was essential to overcome the defendant's presumption of innocence. He asserts that the court's improper conduct rendered the trial fundamentally unfair and requires automatic reversal on the basis of structural error. We agree that the information requested by the court, had it been adduced, could have borne "the seeds of tilting the balance" in this case. (Internal quotation marks omitted.) State v. Fernandez, 198 Conn. 1, 12, 501 A.2d 1195 (1985). Because the evidence that the court had requested never was provided, however, we conclude that the court's intervention did not constitute structural error and was harmless beyond a reasonable doubt.[15]
Well established principles regarding the responsibilities of the court in conducting a criminal trial guide our resolution of the defendant's claim. "Due process requires that a criminal defendant be given a fair trial before an impartial judge and an unprejudiced [fact finder] in an atmosphere of judicial calm. . . . In a criminal trial, the judge is more than a mere moderator of the proceedings. It is [the court's] responsibility to have the trial conducted in a manner which approaches an atmosphere of perfect impartiality which is so much to be desired in a judicial proceeding." (Internal quotation marks omitted.) *835 State v. Iban C., 275 Conn. 624, 651, 881 A.2d 1005 (2005). In pursuit of this goal, "[t]he trial judge has the responsibility for safeguarding both the rights of the accused and the interests of the public in the administration of criminal justice." (Internal quotation marks omitted.) State v. Fernandez, supra, 198 Conn. at 11, 501 A.2d 1195.
This does not mean, however, that the trial court is merely a referee on the sidelines of the proceedings, there to ensure that the contestants observe the rules. As a matter of tradition, it is constitutionally acceptable under our system of jurisprudence for the trial judge, from time to time, to intervene in the conduct of a case. Id.
The discussion of United States Court of Appeals for the Second Circuit in United States v. Filani, 74 F.3d 378, 383-84 (2d Cir.1996), is instructive: "The trial judge's role in our jurisprudence came to us from the common law of England. . . . [T]he English trial judge is not a passive instrument of the parties, but has an independent duty to investigate the truth and, in so doing, may put questions in whatever form he pleases to the witness to elicit the truth more fully. . . . As a consequence, English judges traditionally exercised much control over juries in matters of fact as well as law. . . . This common law practice was one that, under the [c]onstitution, descended to and has been more or less maintained by [our] courts. . . . Thus, American judges, at least in theory, have some of the same powers in the conduct of a trial as their English counterparts. . . . [However, some] experienced trial judges have championed the view that our adversarial system gives little room for trial judges' questioning of witnesses. . . . One of the reasons for allowing an English judge greater latitude to interrogate witnesses is that a British trial, so it is said, is a search for the truth. In our jurisprudence a search for the truth is only one of the trial's goals; other important values individual freedom being a good example are served by an attorney insisting on preserving the accused's right to remain silent or by objecting to incriminating evidence seized in violation of an accused's [f]ourth [a]mendment rights. The successful assertion of these rights does not aid and may actually impedethe search for truth." (Citations omitted.) Id.
The issue in the present case is whether the court's exercise of its common-law power to ascertain the truth exceeded the limits of that power as established by the due process clause of the United States constitution. "Under the Anglo-American adversary trial system, the parties and their counsel have the primary responsibility for finding, selecting, and presenting the evidence. However, our system of party-investigation and party-presentation has some limitations. It is a means to the end of disclosing truth and administering justice; and for reaching this end the judge may exercise various powers." United States v. Karnes, 531 F.2d 214, 216 n. 1 (4th Cir.1976); see also Practice Book § 42-39 (judicial authority, sua sponte, may appoint expert witness). Among those powers, "[i]t is permissible, though it is seldom very desirable, for a judge to call and examine a witness whom the parties do not wish to call." United States v. Marzano, 149 F.2d 923, 925 (2d Cir.1945); see also United States v. Karnes, supra, at 216.
"Thus, when it clearly appears to the judge that for one reason or another the case is not being presented intelligibly to the [finder of fact], the judge is not required to remain silent. On the contrary, the judge may, by questions to a witness, elicit relevant and important facts." (Internal quotation marks omitted.) *836 State v. Tatum, 219 Conn. 721, 740, 595 A.2d 322 (1991). Such interventions may be necessary, for example, to resolve doubts as to the admissibility of certain evidence, to restrain a garrulous witness or to clarify questions that the witness may not understand. State v. Fernandez, supra, 198 Conn. at 13, 501 A.2d 1195. "Whe[n] the testimony is confusing or not altogether clear the alleged jeopardy to one side caused by the clarification of a [witness'] statement is certainly outweighed by the desirability of factual understanding." (Internal quotation marks omitted.) State v. Iban C., supra, 275 Conn. at 652, 881 A.2d 1005. "A trial judge's intervention in the conduct of a criminal trial would have to reach a significant extent and be adverse to the defendant to a substantial degree before the risk of either impaired functioning of the [finder of fact] or lack of the appearance of a neutral judge conducting a fair trial exceeded constitutional limits." (Internal quotation marks omitted.) Daye v. Attorney General of New York, 712 F.2d 1566, 1572 (2d Cir.1983), cert. denied, 464 U.S. 1048, 104 S. Ct. 723, 79 L. Ed. 2d 184 (1984).
"It is, however, important . . . that the [j]udge be aware that there may be greater risk of prejudice from overintervention than from underintervention. While the judge should not hesitate to exercise his or her authority when necessary, the judge should avoid trying the case for the lawyers." (Internal quotation marks omitted.) State v. Fernandez, supra, 198 Conn. at 11, 501 A.2d 1195. "[I]t should be kept in mind that the [i]nterrogation of witnesses tends to assimilate the court's role with the advocate's, and may tread over the line separating the provinces of judge and jury. . . . There is the risk that the questioning [of witnesses] may bear the seeds of tilting the balance against the accused and place the judge. . . on the side of the prosecution." (Internal quotation marks omitted.) Id., at 12, 501 A.2d 1195; United States v. Barbour, 420 F.2d 1319,1321 (D.C.Cir.1969). "Prosecution and judgment are two quite separate functions in the administration of justice; they must not merge." (Internal quotation marks omitted.) State v. Fernandez, supra, at 17, 501 A.2d 1195, quoting United States v. Marzano, supra, 149 F.2d at 926.
"The risk of constitutional judicial misconduct is greatest in cases where the trial court has interceded in the merits of the trial." (Emphasis added; internal quotation marks omitted.) State v. Lopes, 78 Conn.App. 264, 277, 826 A.2d 1238, cert. denied, 266 Conn. 902, 832 A.2d 66 (2003). In other words, the court may not solicit evidence that is "essential to overcome the defendant's presumption of innocence. . . ." (Emphasis in original.) United States v. Karnes, supra, 531 F.2d at 217. For example, it is improper for the court, through commentary or questioning of a witness, to discredit a witness' testimony in front of a jury when the credibility of that witness is a significant issue. See State v. Fernandez, supra, 198 Conn. at 11-12, 501 A.2d 1195; United States v. Filani, supra, 74 F.3d at 385; cf. State v. Tatum, supra, 219 Conn. at 740-41, 595 A.2d 322. As our Supreme Court noted in State v. Fernandez, supra, at 12, 501 A.2d 1195, the jury has a natural tendency to look to the trial judge for guidance. Thus, the court must take great caution not to intervene in such a manner that it implies to the jury the result the court supposedly desires. See id. In the case before us, however, the judge and fact finder were one and the same. Accordingly, any appearance of partiality in the court's conduct carried less danger of prejudicing the defendant than it would have in a jury *837 trial.[16] See Jackson v. United States, 329 F.2d 893, 894 (D.C.Cir.1964) ("[i]n a nonjury case, as in an appellate court, needless or active interrogation by judges, although not always helpful, is rarely prejudicial").
"Any claim that the trial judge crossed the line between impartiality and advocacy is subject to harmless error analysis." (Internal quotation marks omitted.) State v. Lopes, supra, 78 Conn.App. at 275, 826 A.2d 1238. The inquiry for identifying harmless constitutional error is whether the error was harmless beyond a reasonable doubt. State v. Fernando R., 103 Conn.App. 808, 822, 930 A.2d 78, cert. denied, 284 Conn. 936, 937 A.2d 695 (2007).
At the outset, we note that the defendant does not appear to claim that the court abused its discretion in allowing Powers to be recalled as a witness after both parties had rested, and we do not conclude otherwise. See State v. Montini, 52 Conn.App. 682, 687, 730 A.2d 76 (decision to open criminal case to add further testimony lies within sound discretion of trial court), cert. denied, 249 Conn. 909, 733 A.2d 227 (1999); see also State v. Iban C., supra, 275 Conn. at 652, 881 A.2d 1005 (whether trial judge shall question witness is within his sound discretion); United States v. Karnes, supra, 531 F.2d at 216 (court has authority, if not duty, to call witnesses who possess relevant information affecting outcome of issues when parties decline to call them so long as it is done impartially). The thrust of the defendant's claim is that the court exceeded its authority in inviting the state to elicit specific testimony from Powers, not to clarify previous testimony or to resolve a doubt as to the admissibility of certain evidence, but to set forth additional substantive evidence of the defendant's guilt. Thus, he argues, even if the court's proposed inquiry was framed in a neutral manner,[17] the substantive nature of the inquiry crossed the line between impartiality and advocacy in violation of the defendant's right to due process. We agree.
Prior to the court's intervention, the defendant had elicited testimony from Gengo in an attempt to show that the victim had ingested the MDA sometime before joining the defendant's company. In support of this defense, Gengo opined that if the victim had ingested the MDA during the period that the defendant was with her, she would have ingested a dose of MDA sufficient to yield a measurable concentration in her blood sample, i.e., between sixty and eighty nanograms of MDA per milliliter of blood. Gengo testified that his opinion was based on Powers' statement to him that the limit of detection of MDA in a sample of blood was between twenty and fifty nanograms of MDA per liter of blood. No substantive evidence had been offered, through Gengo or any prior witness, as to the actual sensitivity of the laboratory's testing equipment.[18] Accordingly, Gengo's *838 expert opinion was nothing more than hypothesis and speculation because an important fact on which his opinion rested, the limit of detection of MDA in blood, had not been established by the evidence. See DiNuzzo v. Dan Perkins Chevrolet Geo, Inc., 99 Conn.App. 336, 344-46, 913 A.2d 483 (expert opinion cannot be credited if based on subordinate facts not supported by evidence), cert. granted on other grounds, 281 Conn. 929, 918 A.2d 277 (2007); State v. Blades, 225 Conn. 609, 629, 626 A.2d 273 (1993) (court should reject entirety of expert testimony if based on subordinate facts that were not proven); Nash v. Hunt, 166 Conn. 418, 426, 352 A.2d 773 (1974) (same).
The additional evidence requested by the court, had it come before the court, could have had a significant impact on the outcome of this case. Had Powers been able to testify, for example, that the laboratory's equipment could detect a mere twenty nanograms of MDA in a milliliter of blood, that testimony would have gone a long way toward establishing the reliability of Gengo's opinion and earning the defendant an acquittal. More importantly, on the other hand, testimony by Powers that the laboratory's tests could detect no fewer than 100 nanograms of MDA in a milliliter of blood, would have been devastating to both Gengo's opinion and the defendant's defense.
We conclude, however, that the court's intervention in this case was harmless. First, we reject the defendant's claim that the court's intervention was essential to overcome the defendant's presumption of innocence because by the time the court had intervened, it already had sufficient evidence from which it properly could convict the defendant. Cf. United States v. Karnes, supra, 531 F.2d at 216-17 (government's case insufficient as matter of law without witnesses court called to testify). During the state's case-in-chief, the court heard testimony from the victim, who the court found to be credible, that the defendant had given her a single pill, that a short time later she experienced symptoms consistent with the recent ingestion of MDA and that while she was experiencing those symptoms, the defendant had compelled her to submit to sexual contact. The court also received evidence that the defendant had possessed MDA in pill containers in his apartment. The court took further evidence that a urine sample taken from the victim contained a detectable amount of MDA. Finally, the court heard testimony from the defendant's expert that the victim's clinical symptoms were consistent with the consumption of MDA.
Moreover, the actual level of sensitivity of the laboratory's equipment never was adduced. Powers testified that he did not know the limit of detection of MDA in blood using the laboratory's equipment. His testimony failed to provide the court with the evidentiary basis that it needed in order to find the facts on which Gengo had based his opinion.[19] Accordingly, the court could not rely on Gengo's opinion as to whether the victim had ingested a dose of MDA sufficient to yield a measurable concentration of MDA in her blood sample. See DiNuzzo v. Dan Perkins Chevrolet Geo, Inc., supra, 99 Conn.App. at 344-46, 913 A.2d 483. The additional testimony contributed nothing to the reliability of *839 Gengo's opinion or to the court's use of that opinion in its deliberation. See United States v. Carengella, 198 F.2d 3, 8 (7th Cir.) (court's instruction to prosecutor to "go back and pick up . . . about [witness'] previous conversation with" defendant harmless), cert. denied, 344 U.S. 881, 73 S. Ct. 179, 97 L. Ed. 682 (1952). The additional testimony, therefore, was harmless beyond a reasonable doubt.
II
The defendant next claims that the court improperly denied his motion for a mistrial after it had committed structural error by failing to maintain an appearance of impartiality during the cross-examination of a witness. Specifically, he claims that the court's conduct during the cross-examination gave comfort and support to the witness to the extent that it demonstrated bias in favor of the witness and animosity toward the defendant. In support of his claim, the defendant argues that the court's conduct was improper in the following ways: the court severely chastised defense counsel for asking the witness a question after an objection to that question had been sustained; the court interrupted the cross-examination to offer the witness a glass of water; and the court expressed in front of the witness skepticism about a particular line of defense counsel's questions.[20] We reject each of the defendant's arguments in turn and conclude that the court properly denied the defendant's motion for a mistrial.
"The standard for review of an action upon a motion for a mistrial is well established. While the remedy of a mistrial is permitted under the rules of practice, it is not favored. [A] mistrial should be granted only as a result of some occurrence upon the trial of such a character that it is apparent to the court that because of it a party cannot have a fair trial. . . and the whole proceedings are vitiated. . . . On appeal, we hesitate to disturb a decision not to declare a mistrial. The trial judge is the arbiter of the many circumstances which may arise during the trial in which his function is to assure a fair and just outcome. . . . In [our] review of the denial of a motion for mistrial, [we recognize] the broad discretion that is vested in the trial court to decide whether an occurrence at trial has so prejudiced a party that he or she can no longer receive a fair trial. The decision of the trial court is therefore reversible on appeal only if there has been an abuse of discretion. . . . In general, abuse of discretion exists when a court could have chosen different alternatives but has decided the matter so arbitrarily as to vitiate logic, or has decided it based on improper or irrelevant factors. . . . Therefore, [i]n those cases in which an abuse of discretion is manifest or where injustice appears to have been done, reversal is required." (Citations omitted; internal quotation marks omitted.) State v. Hamlett, 105 Conn.App. 862, 872-73, 939 A.2d 1256, cert. denied, 287 Conn. 901, 947 A.2d 343 (2008).
The defendant first argues that the court's rebuke of defense counsel during his cross-examination of a witness "represents the very antithesis of the `judicial calm'" required by the fifth amendment *840 to the United States constitution. See State v. Iban C., supra, 275 Conn. at 651, 881 A.2d 1005. In support of his argument, he characterizes the court's response as an "explosive verbal tirade," an "outburst," an "attack" and "rage," and suggests that the court was "out of control" and "explode[d] in anger." We disagree with the defendant's descriptions of the court's conduct and, accordingly, reject the defendant's argument that the court's action deprived him of a fair trial.
We begin our analysis of the defendant's argument by noting that defense counsel's conduct invited the court's reprimand.[21] "The Superior Court has inherent and statutory authority to regulate the conduct of attorneys who are officers of the court." (Internal quotation marks omitted.) State v. Drakeford, 63 Conn. App. 419, 424-25, 777 A.2d 202 (2001), aff'd, 261 Conn. 420, 802 A.2d 844 (2002). In its execution of this duty, the court has broad discretionary power, and we will accord every reasonable presumption in favor of its actions. See State v. Jones, 180 Conn. 443, 448, 429 A.2d 936 (1980), overruled in part on other grounds, State v. Powell, 186 Conn. 547, 555, 442 A.2d 939, cert. denied sub nom. Moeller v. Connecticut, 459 U.S. 838, 103 S. Ct. 85, 74 L. Ed. 2d 80 (1982). "Reversal is required only where an abuse of discretion is manifest or where injustice appears to have been done." (Internal quotation marks omitted.) Id.
The defendant refers to Cameron v. Cameron, 187 Conn. 163, 444 A.2d 915 (1982), in support of his argument that the court so abused its discretion that it prejudiced him. In Cameron, an issue developed at trial about $4000 that the defendant allegedly had failed to include in his financial affidavit. Id., at 164, 444 A.2d 915. In the course of resolving this discrepancy, the trial court accused the defendant and his attorney of tampering with evidence and "perpetrating or attempting to perpetrate a fraud upon [the] [c]ourt"; (internal quotation marks omitted) id., at 165, 444 A.2d 915; made derogatory comments about the defendant's attorney and some of his prior clients, stated several times that the defendant had lied under oath and, subsequently, held both the defendant and counsel in contempt of court. Id., at 164-68, 444 A.2d 915. Our Supreme Court stated that the trial court had expressed by its conduct "a preconceived view of the credibility of a witness who had not yet testified before the trier and an attitude of skepticism concerning any person represented by his counsel [that] must have been devastating to the defendant and astounding to any observer schooled in *841 the simple faith that the court is an instrument of justice." Id., at 170, 444 A.2d 915. Concluding that the situation "inevitably raise[d] in the minds of litigants ... a suspicion as to the fairness of the court's administration of justice"; (internal quotation marks omitted) id., at 171, 444 A.2d 915; the Supreme Court held that the trial court's conduct toward the defendant and his counsel created the appearance of partiality and that the trial judge sua sponte should have ordered a mistrial. Id.
We find State v. Gordon, 197 Conn. 413, 426, 504 A.2d 1020 (1985), to be more applicable to the facts of this case. In Gordon, our Supreme Court concluded that the trial court's actions, while questionable, did not deny the defendant a fair trial. In reaching its conclusion, the court noted that the record was replete with instances of argumentative conduct toward defense counsel. Id., at 425, 504 A.2d 1020. The court reasoned, however, that the trial court's allegedly improper treatment of defense counsel did not thwart defense counsel's ability to defend his client, as counsel zealously argued numerous motions, fully cross-examined all witnesses and was not constrained in his attempts to have evidence admitted or in his ability to object to actions of the state's attorney. Id., at 426, 504 A.2d 1020; see also United States v. Pisani, 773 F.2d 397, 403 (2d Cir.1985) (although some of trial judge's comments and behavior toward defense counsel were regrettable, they did not convey impression of partiality toward government to such extent that it became factor in jury deliberations).
In this case, the court's response to defense counsel's questioning arguably was more emphatic than the situation required, but not to the extent that we can conclude that the court exceeded its authority.[22] Our review of the transcript and the audiotape[23] of that portion of the trial reveals that the court had raised its voice at defense counsel. The court's language and tone, however, demonstrate that it neither "lost control" nor verbally "attacked" defense counsel. Moreover, the defendant does not claim, and the record does not show, that the court's reproach, in fact, had limited defense counsel's ability to cross-examine the witness fully or otherwise to maintain a vigorous and thorough defense of his client.[24] We conclude, *842 therefore, that the court's actions did not rise to the level of judicial misconduct such that they prejudiced the defendant and denied him a fair trial.
We find even less persuasive the defendant's argument that the court demonstrated bias toward the witness by offering her a cup of water. We address this claim only to note that the record reflects that the witness had been coughing at the time the court interrupted defense counsel's cross-examination.
The defendant's final argument merits little discussion. The record reveals that the court's "skepticism" about a particular line of defense counsel's questions was, in fact, its ruling sustaining the state's objection, on the basis of relevance, to that line of questioning. The defendant essentially complains that the court's evidentiary ruling demonstrated its partiality on the sole ground that the ruling was unfavorable to the defendant.[25] We disagree. Accordingly, we conclude that the court's conduct during the defendant's cross-examination of the witness resulted in no injustice to the defendant.
III
The defendant next claims that the court improperly admitted certain evidence of prior uncharged misconduct. Specifically, the defendant claims that the court improperly admitted the testimony of two witnesses, L and M, as evidence of the defendant's intent to deliver a controlled substance to the victim and to kidnap and assault her.[26] The defendant argues that the testimony was inadmissible because (1) it did not prove sufficiently that the prior misconduct, in fact, had occurred and (2) even if the testimony was sufficient to prove the prior misconduct, that prior misconduct was not probative of his intent.[27] We are not persuaded.
The following additional facts are relevant to the defendant's claim. During its case-in-chief, the state offered testimony from L, another former coworker of the defendant. L testified that one evening in early August, 2001, she accompanied the defendant after work to a bar. At the bar, the defendant offered to buy her an alcoholic beverage. She declined and, instead, requested ginger ale, which the defendant *843 brought her. After playing pool for awhile and drinking the ginger ale, L started to feel hot. She interrupted their game to get a glass of water and sat down at the bar.
At the insistence of the defendant, L, who was taking medication at the time, joined him in a couple shots of tequila. The warm feeling that L had experienced continued, and she started to feel disoriented. She excused herself to go to the bathroom but had difficulty walking there. After spending an extended period of time in the bathroom, she began to feel nauseated and asked the defendant to take her home.
At approximately 7:30 p.m., L and the defendant left the bar in the defendant's car. As they drove, L vomited and passed out in the car. Instead of taking her home, the defendant took L to his apartment where she spent the night on his floor. Sometime during the night, she awoke briefly but could not move her arms or legs. The defendant eventually took L home at approximately 8:30 a.m. the next day. Prior to this incident, L never had experienced such an adverse reaction to ginger ale or tequila.
The state next called M, who testified that she began working with the defendant in September, 2001, and, shortly thereafter, started dating him. On their first date, the defendant picked up M at her house and took her to a restaurant. At the restaurant, the defendant ordered M a drink, a cosmopolitan, which she only partially consumed. After they ate dinner, they walked to another place nearby, where the defendant purchased a shot of tequila for M. She drank some, but not all, of the tequila.
At approximately 11 p.m., M called her baby-sitter to inform the baby-sitter that she would be home within twenty or thirty minutes because the date was ending. As she was on the telephone, the defendant brought her a bottle of beer. M drank some of the beer and began to feel hot and dizzy. The next thing she remembers is waking up the following morning alone in the defendant's bed with her shirt partially unbuttoned and her underpants and nylons removed.[28] The defendant took M home later that morning.
About one week later, the defendant admitted to M that he had had sex with her but stated that it was consensual. The defendant opined during this conversation that she must have blacked out from her medication's interaction with the alcohol. M continued for several months to have a sexual relationship with the defendant until December, 2001, and again, briefly, in the spring of 2004.
"As a general rule, evidence of a defendant's prior crimes or misconduct is not admissible.... We have, however, recognized exceptions to the general rule if the purpose for which the evidence is offered is to prove intent, identity, malice, motive, a system of criminal activity or the elements of a crime.... [Prior misconduct] evidence may also be used to corroborate crucial prosecution testimony.... Moreover, we have held that such evidence may be used to complete the story of the crime on trial by placing it in the context of nearby and nearly contemporaneous happenings....
*844 "To determine whether evidence of prior misconduct falls within an exception to the general rule prohibiting its admission, we have adopted a two-pronged analysis.... First, the evidence must be relevant and material to at least one of the circumstances encompassed by the exceptions. Second, the probative value of such evidence must outweigh the prejudicial effect of the other crime evidence." (Internal quotation marks omitted.) State v. Colon, 272 Conn. 106, 332, 864 A.2d 666 (2004), cert. denied, 546 U.S. 848, 126 S. Ct. 102, 163 L. Ed. 2d 116 (2005); State v. Epps, 105 Conn.App. 84, 92-93, 936 A.2d 701 (2007), cert. denied, 286 Conn. 903, 943 A.2d 1102 (2008).
With respect to the first prong, "[r]elevant evidence is evidence that has a logical tendency to aid the trier in the determination of an issue.... One fact is relevant to another if in the common course of events the existence of one, alone or with other facts, renders the existence of the other either more certain or more probable.... Evidence is irrelevant or too remote if there is such a want of open and visible connection between the evidentiary and principal facts that, all things considered, the former is not worthy or safe to be admitted in the proof of the latter.... Evidence is not rendered inadmissible because it is not conclusive. All that is required is that the evidence tend to support a relevant fact even to a slight degree, so long as it is not prejudicial or merely cumulative." (Internal quotation marks omitted.) State v. Nunes, 260 Conn. 649, 685-86, 800 A.2d 1160 (2002) "[B]efore such evidence can have any probative value, [however] there must be a preliminary showing sufficient to support a jury finding that the defendant, in fact, caused the prior injury. The evidence of causation may be circumstantial or direct." (Emphasis in original.) State v. Wilson, 199 Conn. 417, 449, 513 A.2d 620 (1986).
Our standard of review on such matters is well established. "The admission of evidence of prior uncharged misconduct is a decision properly within the discretion of the trial court.... [E]very reasonable presumption should be given in favor of the trial court's ruling.... [T]he trial court's decision will be reversed only where abuse of discretion is manifest or where an injustice appears to have been done." (Internal quotation marks omitted.) State v. Colon, supra, 272 Conn. at 333, 864 A.2d 666; State v. Epps, supra, 105 Conn.App. at 93, 936 A.2d 701.
We begin our analysis by noting that the testimony by L and M was sufficient direct and circumstantial evidence to support a finding that the defendant had, in fact, committed the prior acts. The testimony of L and M reasonably permitted the inferences that (1) the defendant intentionally had administered alcoholic beverages to them that contained a controlled substance, (2) the controlled substance, as opposed to the alcohol or their prescription medications, rendered them unconscious and (3) the defendant had restrained their movement by carrying them to his apartment, rather than to their respective residences. Compare State v. Nunes, supra, 260 Conn. at 688-89, 800 A.2d 1160 (prior misconduct testimony reasonably permitted inference that beverage, administered to witness by defendant, contained substance that rendered her physically helpless, despite lack of additional evidence as to identity of substance), with State v. Wilson, supra, 199 Conn. at 449, 513 A.2d 620 (prior misconduct testimony not admissible where record completely lacking in evidence as to how or by whom injuries were caused).
The defendant argues that even if the testimony is sufficient proof of the prior *845 misconduct, the prior misconduct demonstrates only his propensity to have criminal intent. He asserts, therefore, that such propensity evidence is not relevant to the issue of his state of mind during his interactions with the victim because it violates the general rule prohibiting evidence of prior misconduct. We disagree.
On the basis of the prior misconduct testimony, the court reasonably could have concluded that the defendant was familiar with, and had access to, controlled substances, specifically, controlled substances that cause physical impairment. From there, the court logically could have inferred, not on the basis of his propensities but on the basis of his familiarity with controlled substances, that the defendant had delivered MDA to the victim intentionally, rather than by accident or mistake.[29] Accordingly, the court did not abuse its discretion by allowing L and M to testify as to the defendant's prior misconduct.
IV
The defendant's final claim is that his conviction of delivery of a controlled substance, assault in the second degree and sexual assault in the third degree violated the double jeopardy clause of the United States constitution. Specifically, he argues that the court should have merged the conviction of those three crimes because under the facts of this case, he could not have committed assault in the second degree in the manner alleged by the state without first committing delivery of a controlled substance, and he could not have committed sexual assault in the third degree without first committing assault in the second degree in the manner alleged by the state. In other words, he claims that the counts two and three were lesser offenses included in count seven. In support of his claim, the defendant invites this court to reject our Supreme Court's long-standing approval of the rule set forth in Blockburger v. United States, 284 U.S. 299, 52 S. Ct. 180, 76 L. Ed. 306 (1932). We decline the defendant's invitation and, applying a Blockburger analysis, hold that the court properly convicted the defendant of three separate offenses.[30]
We note at the outset that the defendant's claim raises a question of law over which we exercise plenary review. See State v. Culver, 97 Conn.App. 332, 336, 904 A.2d 283, cert. denied, 280 Conn. 935, 909 A.2d 961 (2006). "The fifth amendment to the United States constitution provides in relevant part: No person shall ... be subject for the same offense to be twice put in jeopardy of life or limb.... The double jeopardy clause of the fifth amendment is made applicable to the states *846 through the due process clause of the fourteenth amendment. Benton v. Maryland, 395 U.S. 784, 794, 89 S. Ct. 2056, 23 L. Ed. 2d 707 (1969). Although the Connecticut constitution has no specific double jeopardy provision, we have held that the due process guarantees of [the Connecticut constitution] include protection against double jeopardy....
"[Our Supreme Court has] recognized that the Double Jeopardy Clause consists of several protections: It protects against a second prosecution for the same offense after acquittal. It protects against a second prosecution for the same offense after conviction. And it protects against multiple punishments for the same offense." (Internal quotation marks omitted.) State v. Bletsch, 281 Conn. 5, 27, 912 A.2d 992 (2007). "Double jeopardy analysis in the context of a single trial is a two-step process. First, the charges must arise out of the same act or transaction. Second, it must be determined whether the charged crimes are the same offense. Multiple punishments are forbidden only if both conditions are met." (Internal quotation marks omitted.) State v. Moore, 100 Conn.App. 122, 140, 917 A.2d 564 (2007). "One may, however, when the legislature authorizes, be convicted of multiple offenses even though the offenses arise from the same conduct. Missouri v. Hunter, 459 U.S. 359, 367-68, 103 S. Ct. 673, 74 L. Ed. 2d 535 (1983)." State v. Quint, 97 Conn.App. 72, 78, 904 A.2d 216, cert. denied, 280 Conn. 924, 908 A.2d 1089 (2006). "[T]he issue, though essentially constitutional, becomes one of statutory construction." (Internal quotation marks omitted.) State v. Culver, supra, 97 Conn. App. at 337, 904 A.2d 283.
The defendant claims that the court's sentence violated his protection against multiple punishments for the same offense. "[Our Supreme Court has] applied the Blockburger test to determine whether two statutes criminalize the same offense, thus placing a defendant prosecuted under both statutes in double jeopardy: [W]here the same act or transaction constitutes a violation of two distinct statutory provisions, the test to be applied to determine whether there are two offenses or only one, is whether each provision requires proof of a fact which the other does not.... This test is a technical one and examines only the statutes, charging instruments, and bill of particulars as opposed to the evidence presented at trial." (Citation omitted; internal quotation marks omitted.) State v. Bletsch, supra, 281 Conn. at 27-28, 912 A.2d 992. "[I]f two offenses stand in the relationship of greater and lesser included offense, [however] then [t]he greater offense is ... by definition the same for purposes of double jeopardy as any lesser offense included in it." (Internal quotation marks omitted.) State v. Moore, supra, 100 Conn.App. at 139, 917 A.2d 564.
"Our analysis of double jeopardy claims does not end, however, with a comparison of the offenses. The Blockburger test is a rule of statutory construction, and because it serves as a means of discerning [legislative] purpose the rule should not be controlling where, for example, there is a clear indication of contrary legislative intent." (Internal quotation marks omitted.) State v. Kirsch, 263 Conn. 390, 421-22, 820 A.2d 236 (2003).
The defendant claims that as alleged in the information, the charge of delivery of a controlled substance was a lesser offense included within the greater offense of assault in the second degree. He argues that proof of assault in the second degree, as charged by the state, first required proof of all the facts necessary to convict him of delivery of a controlled substance.
*847 In order to convict the defendant of assault in the second degree under § 53a-60(a)(4), the state was required to prove, as it had alleged in its long form information, that he (1) intentionally (2) had caused stupor, unconsciousness or other physical impairment or injury to another person (3) by administering to such person (4) a drug, substance or preparation capable of producing the same (5) without her consent (6) for a purpose other than lawful medical or therapeutic treatment. In order to convict the defendant of delivery of a controlled substance under § 21a-277(b), the state was required to prove, as it had alleged in its long form information, that he (1) administered to another person (2) any controlled substance, except a narcotic substance, or a hallucinogenic substance other than marijuana.
The defendant's argument overlooks the possibility that the state could have proven assault in the second degree with evidence that he had administered a narcotic substance capable of producing stupor, unconsciousness or other physical impairment or injury to the victim. The administration of a narcotic substance would not have supported a conviction under § 21a-277(b).[31]
Likewise, the defendant claims that as alleged in the information, the charge of assault in the second degree was a lesser offense included within the greater offense of sexual assault in the third degree. The defendant argues that proof of sexual assault in the third degree, as charged by the state, first required proof that he had applied force by way of a "substance which, under the circumstances in which it is used or attempted or threatened to be used, is capable of causing death or serious physical injury...." General Statutes § 53a-3(7); see General Statutes § 53a-65(7).
In order to convict the defendant of sexual assault in the third degree under § 53a-72a(a)(1)(A), the state was required to prove, as it had alleged in its long form information, that he (1) had compelled another person to submit to sexual contact (2) by the use of force against such other person or a third person. The defendant's argument ignores the possibility that the state could have proven sexual assault in the third degree with evidence that the defendant had used "actual physical force or violence or superior physical strength against the victim;" General Statutes § 53a-65(7); without proof that he administered a drug. Such evidence would not have supported a conviction under § 53a-60(a)(4). Accordingly, we conclude that the defendant's conviction does not violate the constitutional prohibition against double jeopardy. Our review of the relevant statutes has indicated no clear legislative intent to the contrary. See State v. Kirsch, supra, 263 Conn. at 421-22, 820 A.2d 236.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] General Statutes § 53a-60(a) provides in relevant part: "A person is guilty of assault in the second degree when . . . (4) for a purpose other than lawful medical or therapeutic treatment, he intentionally causes stupor, unconsciousness or other physical impairment or injury to another person by administering to such person, without his consent, a drug, substance or preparation capable of producing the same. . . ."
[2] General Statutes § 21a-277(b) provides: "Any person who manufactures, distributes, sells, prescribes, dispenses, compounds, transports with intent to sell or dispense, possesses with intent to sell or dispense, offers, gives or administers to another person any controlled substance, except a narcotic substance, or a hallucinogenic substance other than marijuana, except as authorized in this chapter, may, for the first offense, be fined not more than twenty-five thousand dollars or be imprisoned not more than seven years or be both fined and imprisoned; and, for each subsequent offense, may be fined not more than one hundred thousand dollars or be imprisoned not more than fifteen years, or be both fined and imprisoned."
[3] General Statutes § 53a-72a(a) provides in relevant part: "A person is guilty of sexual assault in the third degree when such person (1) compels another person to submit to sexual contact (A) by the use of force against such other person or a third person. . . ."
[4] In accordance with our policy of protecting the privacy interests of the victims of sexual abuse, we decline to identify the victim or others through whom the victim's identity may be ascertained. See General Statutes § 54-86e.
[5] The victim testified that she had consumed large amounts of alcohol and passed out at the defendant's apartment on five to seven previous occasions. On at least two of those occasions, she woke up in the defendant's bed with some or all of her clothing missing.
[6] Pursuant to a search warrant, the police retrieved additional film from the defendant's apartment. None of the five rolls of film collected by the police depicted any photographs of nude women. On the morning of the incident, Officer Jeffrey Hodder and another officer interviewed the defendant, who invited them into his apartment and showed them a scene from "Silence of the Lambs," in which a flash camera was used to take several photographs.
[7] The victim testified that this experience was different from other occasions when she had consumed large amounts of alcohol. On those occasions, she would typically pass out completely, rather than drift in and out of sleep.
[8] Methylene dioxy amphetamine is an analog of methylene dioxy methamphetamine, collectively known as "ecstasy." These drugs are central nervous system stimulants that produce heightened sensitivity to sensory stimulation, hallucinations and altered perceptual sense, in addition to increased energy, euphoria and empathy.
[9] Among the controlled substances found were tramadol and oxycodone, which are pain relievers, cocaine, MDE, which is another analog of MDMA and causes similar effects, and ketamine, which is a pain killer used primarily for animals but also known to be used to facilitate "date rape" by causing mental and physical impairment and memory loss.
[10] The defendant does not provide an analysis of his claim under the constitution of Connecticut independent of his claim under the analogous provisions of the United States constitution. "[W]e will not entertain a state constitutional claim unless the defendant has provided an independent analysis under the particular provisions of the state constitution at issue. . . . Without a separately briefed and analyzed state constitutional claim, we deem abandoned the defendant's claim. . . ." (Internal quotation marks omitted.) State v. Fauntleroy, 101 Conn.App. 144, 159 n. 5, 921 A.2d 622 (2007). Accordingly, we confine our analysis to the defendant's federal constitutional claim. See State v. Eady, 249 Conn. 431, 435 n. 6, 733 A.2d 112, cert. denied, 528 U.S. 1030, 120 S. Ct. 551, 145 L. Ed. 2d 428 (1999).
[11] The limit of detection refers to the minimum amount of a drug that must be present in a sample in order for that drug to be detected in the sample.
[12] Pharmacology is the study of the effects of drugs and chemicals on animals and humans.
[13] Pharmacokinetics is the quantitative study of how the human body absorbs, distributes and eliminates drugs.
[14] Gengo also explained that when MDMA is ingested, it is metabolized partially by the liver into a variety of substances, including MDA. Both MDMA and MDA then are distributed through the blood to the brain, where they produce their clinical effects. Gengo opined that the victim had not ingested a dose of MDMA sufficient to be under the influence of either MDMA or MDA during the early morning hours of August 28, 2004, because although MDA may not have been detected, such a dose would have yielded a measurable concentration of MDMA in her blood sample.
[15] "[T]he [United States] Supreme Court has noted that there is a very limited class of cases involving error that is structural, that is to say, error that transcends the criminal process.. . . Structural [error] cases defy analysis by harmless error standards because the entire conduct of the trial, from beginning to end, is obviously affected. . . . These cases contain a defect affecting the framework within which the trial proceeds, rather than simply an error in the trial process itself. . . . Such errors infect the entire trial process . . . and necessarily render a trial fundamentally unfair. . . . Put another way, these errors deprive defendants of basic protections without which a criminal trial cannot reliably serve its function as a vehicle for determination of guilt or innocence . . . and no criminal punishment may be regarded as fundamentally fair." (Citations omitted; internal quotation marks omitted.) State v. Lopez, 271 Conn. 724, 733-34, 859 A.2d 898 (2004).
[16] We note that nearly all of the cases cited by the defendant in support of his claim of error are immediately distinguishable from the present case in that they involved either jury trials or noncriminal proceedings in which there was no presumption of innocence to overcome.
[17] We disagree with the defendant's assertion that the court had aligned itself with the state in requesting additional testimony from Powers. The court invited both parties to call a witness who could testify as to the limit of detection of MDA in blood. Although the state accepted the court's invitation, we cannot conclude, on the basis of the record in this case, that the court was attempting to assist the state in meeting its burden of proof. As the court properly noted, it had "no clue as to what . . . Powers [was] about to say, and it may help [the defendant's] case, and it may help the state's."
[18] See State v. Henry, 27 Conn.App. 520, 529-30, 608 A.2d 696 (1992); Conn.Code Evid. § 7-4(b); C. Tait, Connecticut Evidence (3d. Ed.2001) § 7.9.3, p. 534.
[19] Contrary to the defendant's statement in his brief, Powers' testimony regarding the limit of detection of MDA in blood was not admitted for its truth and, therefore, was not "crucial in the [c]ourt's determination that the [d]efendant was guilty. . . ."
[20] The defendant also argues that the court demonstrated an appearance of partiality by interrupting the cross-examination to rebuke defense counsel for making an inappropriate facial expression. We note that the record is inadequate to review this claim because we are unable to identify from the record whether defense counsel, in fact, had made such a facial expression. See United States v. Filani, supra, 74 F.3d at 385. Accordingly, we decline to review this part of the defendant's claim. See Practice Book § 61-10; Lucas v. Lucas, 88 Conn.App. 246, 251-52, 869 A.2d 239 (2005).
[21] The statements by the court to which the defendant objects were part of the following colloquy:
"[Defense Counsel]: You have a temperament problem?
"[The Prosecutor]: Objection.
"[The Witness]: No.
"The Court: Sustained.
"[The Witness]: No.
"[Defense Counsel]: You don't have a temperament problem?
"[The Witness]: No.
"[The Prosecutor]: Objection.
"The Court: I have sustained the objection, [defense counsel]. What are you thinking of asking that question again?
"[Defense Counsel]: I apologize, Your Honor. I didn'tI don't
"The Court: I think you should apologize. Do not do that again.
"[Defense Counsel]: I apologize.
"The Court: You are distressing the witness. You are visibly upsetting her. And it is
"[Defense Counsel]: May I make a
"The Court: You may comment when I'm finished and not until.
"[Defense Counsel]: Yes, Your Honor.
"The Court: It is unseemly in the extreme, having upset the witness, visibly, to then repeat a question that I have sustained an objection to. Do not ever do it again. . . ."
[22] The defendant urges us to reach a different conclusion by juxtaposing the court's reprimand of defense counsel with its subsequent admonishment of the prosecutor. We are not persuaded. Moments after the court's reprimand of defense counsel, the witness was excused from the courtroom, and the following colloquy occurred:
"The Court: Now what did you want to put on the record?
"[Defense Counsel]: Yes, Your Honor. We have reason to believe that the defendant is an unstable personality.
"[The Prosecutor]: I knew that.
"The Court: I'm sorry? What did you say?
"[Defense Counsel]: The victim. The victim is an unI misspoke. I misspoke.
"[The Prosecutor]: He said, `the defendant.'
"The Court: Oh, and then you said, `I knew that.'
"[The Prosecutor]: Yes.
"The Court: All right. Well, if you want to join [defense counsel] in the penalty box
"[The Prosecutor]: I apologize, Your Honor.
"The Court:you're welcome to try."
[23] Upon the motion of defense counsel, an audiotape of the relevant portion of the trial was admitted as an exhibit.
[24] Accordingly, the defendant's reliance on State v. Gionfriddo, 154 Conn. 90, 221 A.2d 851 (1966), is inapposite. In Gionfriddo, our Supreme Court held that the trial court's repeated interruptions and rebukes of counsel in the presence of the complainants had the effect of repressing counsel's attack on the credibility of the witnesses and, therefore, denied the defendant the right to cross-examine them. Id., at 96-97, 221 A.2d 851.
[25] Even if we assume that the court's "skepticism" was evident, we reiterate that there was no jury in this case to be influenced by the court's manner in ruling on the state's objection. See Fernandez, supra, 198 Conn. at 11-12, 501 A.2d 1195; see also Jackson v. United States, supra, 329 F.2d 893.
[26] Following argument on the defendant's motion in limine, the court admitted the challenged evidence as to counts one, two and three only. As previously noted, the court subsequently acquitted the defendant on count one, kidnapping in the first degree.
[27] The defendant, in a footnote in his appellate brief, also states that the prior misconduct testimony was more prejudicial than probative but does not provide any further analysis of this claim. "[W]e are not required to review issues that have been improperly presented to this court through an inadequate brief.... Analysis, rather than mere abstract assertion, is required in order to avoid abandoning an issue by failure to brief the issue properly.... We will not review claims absent law and analysis." (Internal quotation marks omitted.) State v. Perez, 78 Conn.App. 610, 646, 828 A.2d 626 (2003), cert. denied, 271 Conn. 901, 859 A.2d 565 (2004). Accordingly, we deem the defendant's claim abandoned and decline to afford it review.
The defendant further argues that the court admitted improperly the testimony of the two witnesses as evidence of a common plan or scheme. Because we conclude that the evidence was properly admitted on the issue of the defendant's intent, we need not decide whether the evidence also was probative of a common plan or scheme. See State v. John G., 100 Conn.App. 354, 364 n. 9, 918 A.2d 986, cert. denied, 283 Conn. 902, 926 A.2d 670 (2007).
[28] M testified that she had been prescribed medication at the time she began dating the defendant but that she had not taken her medication on the day of this incident. One side effect of her medication was dizziness, which may be intensified by alcohol. According to M, however, she has consumed similar amounts of alcohol with her medication, but never has experienced a loss of memory from doing so.
[29] Although the defendant did not contend that he accidentally or mistakenly had given the victim a controlled substance, the state nonetheless was required to prove his intent to the court. See State v. Bryant, 106 Conn. App. 97, 105 n. 5, 940 A.2d 858, cert. granted on other grounds, 287 Conn. 905, 950 A.2d 1282, A.2d (2008).
[30] Even if we were inclined to accept the defendant's invitation, he has offered no argument that the Connecticut constitution requires a more protective test than the Blockburger test. See footnote 10. Further, we note that "[t]he constitution of Connecticut does not contain an express prohibition against double jeopardy. Instead, [our Supreme Court] repeatedly ha[s] held that the due process guarantees, presently encompassed in article first, § 8, of the Connecticut constitution, include protection against double jeopardy .... [and] that the absence of an explicit constitutional double jeopardy provision strongly suggests that the incorporated common-law double jeopardy protection mirrors, rather than exceeds, the federal constitutional protection." (Citations omitted; internal quotation marks omitted.) State v. Bletsch, 281 Conn. 5, 9 n. 4, 912 A.2d 992 (2007).
[31] We note that the defendant, on March 14, 2006, filed a motion for a bill of particulars in which he requested that the court order the state to declare, inter alia, "the exact `drug, substance or preparation'" that provided the basis for the charge of assault in the second degree and "the exact `controlled substance'" that provided the basis for the charge of delivery of a controlled substance. The court denied the defendant's motion for a bill of particulars, and the defendant has not challenged that ruling on appeal.
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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/1525814/
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952 A.2d 859 (2008)
Thomas J. FIELDS, Appellant,
v.
UNITED STATES of America, Appellee.[1]
No. 06-CF-894.
District of Columbia Court of Appeals.
Argued September 28, 2007.
Decided April 10, 2008.
Andrea Roth, with whom James Klein, Samia Fam, and Richard Greenlee, Public Defenders, were on the brief, for appellant.
Lisa H. Schertler, Assistant United States Attorney, with whom Jeffrey A. Taylor, United States Attorney, Roy W. McLeese III, Elizabeth Trosman, and Sharad S. Khandelwal, Assistant United States Attorneys, were on the brief, for appellee.
Before FARRELL, RUIZ, and BLACKBURNE-RIGSBY, Associate Judges.
RUIZ, Associate Judge:
Appellant appeals from a jury conviction *860 of possession of marijuana.[2]See D.C.Code § 48-904.01(d) (2001). The parties agree that the "DEA-7," a report prepared by the Drug Enforcement Administration, which determined that the green weed substance found on and near appellant was marijuana, was erroneously admitted into evidence in violation of appellant's constitutional right to confrontation. See Howard v. United States, 929 A.2d 839, 847 (D.C.2007); Thomas, 914 A.2d at 5.
The parties disagree as to the appropriate remedy. The government argues that the case should be remanded with instructions to the trial court to vacate the conviction of possession and enter a conviction for the lesser-included offense of attempted possession of marijuana. See Mitchell v. United States, 595 A.2d 1010, 1012 n. 3 (D.C.1991) ("[A]ttempted possession is ... a lesser-included offense of simple possession."). Appellant counters that he is entitled to reversal and a new trial because the admission of the DEA-7 is not harmless error even as to the lesser-included offense of attempted possession. We agree with appellant and reverse and remand the case for a new trial.
I.
Officer John Bolden of the Metropolitan Police Department testified that in the evening of February 11, 2005, he was on patrol in an unmarked police cruiser as part of the Third District Focus Mission Unit,[3] along with Officers Bret Brown and Christopher Petz. Around 7:35 p.m., the officers received over the radio a complaint of drug activity near Georgia Avenue and Hobart Street, in Northwest Washington. As the officers pulled into the area, Officer Bolden saw appellant leaning over a burgundy car and talking to the people inside the car. Appellant appeared to look in the direction of the officers, stood straight up, and walked away from the car toward the officers. As Officers Bolden and Brown alighted from the cruiser, appellant started to run. The officers gave chase.
As they were running, Officer Bolden saw appellant clenching something in his right hand. He then heard a "metal sound" as appellant threw a "dark item" over a privacy fence. A short while later, Officer Bolden discovered a gun in the yard behind the fence.
Officer Petz followed in the cruiser and arrested appellant. The officer testified that he saw appellant being searched within a few minutes of the arrest, before he was placed in a car. The police did not discover anything despite appellant being "searched thoroughly from head to toe."
Officer Bolden processed appellant at the police station house. Appellant told Officer Bolden that his name was Gregory Jackson. As the officer was removing loose property from appellant-which the officer described as "his belt, shoelace[s], the contents of his pockets, [and] things of that nature.... "a "green weed substance" fell out from the "crotch area of [appellant's] pants."[4] Officer Bolden also *861 saw "a clear plastic bag with a green weed substance underneath the bench" in the holding cell where appellant had been placed. Appellant was the only person in the cell at the time.
At Officer Bolden's request, Officer Ralph Daviswho had been processing another persontook photographs of the green weed substance located "maybe a foot" from appellant,[5] and of the plastic bag containing a green weed substance, three to four feet away. Separate photographs of appellant standing inside the cell block, of the green weed on the ground, and of the plastic bag underneath the bench in the holding cell were admitted into evidence.
Officer Davis testified that "[he] conducted a field test on the green weed substance [found in the cell block], and it tested positive for THC, which is the active chemical ingredient found in marijuana." As the officer began to explain the field test to the jury, the trial court cut short his testimony saying, "Okay. I think we can dispense with this part of the testimony since we have the DEA-7, so we don't need to talk about the preliminary field test."
The green weed substance, which had been placed in a heat-sealed envelope, was admitted into evidence. The DEA-7 report, which showed that the green weed substance contained a measurable amount of marijuana, was admitted into evidence over appellant's objection that it violated his Sixth Amendment right to Confrontation.
II.
Following the Supreme Court's holding in Crawford v. Washington, 541 U.S. 36, 124 S. Ct. 1354, 158 L. Ed. 2d 177 (2004), we held in Thomas and reaffirmed in Howard that a drug analysis reportthe DEA-7 is "testimonial" evidence, and that admission of the report into evidence without the presence of the chemist who prepared it violates the defendant's constitutional right to confrontation unless the defendant validly waives the chemist's presence at trial. See Howard, 929 A.2d at 841; Thomas, 914 A.2d at 5, 19.[6]
Because the erroneous admission of the lab report implicates constitutional rights, reversal will be required unless the court is "able to declare a belief that [the constitutional error] was harmless beyond a reasonable doubt." Chapman v. California, 386 U.S. 18, 24, 87 S. Ct. 824, 17 L. Ed. 2d 705 (1967); see Delaware v. Van Arsdall, 475 U.S. 673, 680, 106 S. Ct. 1431, 89 L. Ed. 2d 674 (1986) (noting cases applying harmless error review to violations of Confrontation Clause and applying same review where trial court significantly curtailed *862 defendant's cross-examination of a witness for bias in violation of his right to confrontation); cf. Thomas, 914 A.2d at 8 (applying plain error standard to erroneous admission of DEA-7 report because appellant's trial counsel objected at trial solely on the basis that the government had not "laid proper foundation.").
The harmless-error doctrine recognizes the principle that the central purpose of a criminal trial is to decide the factual question of the defendant's guilt or innocence, ... and promotes public respect for the criminal process by focusing on the underlying fairness of the trial rather than on the virtually inevitable presence of immaterial error.
Van Arsdall, 475 U.S. at 681, 106 S. Ct. 1431 (citation omitted). The framework for analyzing the evidence where there has been constitutional error has been formulated in different ways. Chapman instructed courts to "requir[e] the beneficiary of a constitutional error [the government] to prove beyond a reasonable doubt that the error complained of did not contribute to the verdict obtained." 386 U.S. at 24, 87 S. Ct. 824 (emphasis added). Although the decision under review in Chapman had "found from `other substantial evidence[,]' ... overwhelming[]" evidence of one of the petitioners' guilt, id. at 24 n. 7, 87 S. Ct. 824 the Court, however, found that the lower courts' tendency to find overwhelming evidence was "perhaps overemphas[ized]," id. at 23, 87 S. Ct. 824, and reversed the conviction, concluding that the error had "contribute[d] to the verdict," id. at 24, 26, 87 S. Ct. 824. The Court noted that "[al]though the case in which this occurred presented a reasonably strong circumstantial web of evidence against petitioners, it was also a case in which, absent the constitutionally forbidden comments, honest, fair-minded jurors might very well have brought in not-guilty verdicts." Id. at 25-26, 87 S. Ct. 824. (citation omitted);[7]see Brooks v. United States, 367 A.2d 1297, 1309-10 (D.C.1976) ("Even where it may be fairly said that the government's proof assuredly would have led to conviction without the disputed items, we also must consider the likely effect of the [improper] material on the trier itself....").[8]
Two years later, the Courtaffirming Chapmananalyzed the impact of constitutional error by considering whether the government had presented "overwhelming evidence" of guilt. Harrington v. California, 395 U.S. 250, 254, 89 S. Ct. 1726, 23 L. Ed. 2d 284 (1969) ("We do not depart from Chapman; nor do we dilute it by inference. We reaffirm it."). There, Harrington was tried together with three co-defendantsover his objectionfor attempted robbery and first-degree murder. Id. at 252, 89 S. Ct. 1726. Confessions from his three co-defendants were admitted at trial, but only one co-defendant took the stand. Id. The Court affirmed the conviction notwithstanding the constitutional errorthe admission of the non-testifying co-defendants' confessions implicating Harrington, see Bruton v. United States, 391 U.S. 123, 88 S. Ct. 1620, 20 L. Ed. 2d 476 (1968)because the "case against Harrington was so overwhelming." Harrington, 395 U.S. at 254, 89 S. Ct. 1726. *863 The Court found significant that the government's case was "not woven from circumstantial evidence," id.as was the case in Chapmanbut proved by direct evidence, including the properly admitted statements of the testifying co-defendant who said that Harrington had a gun and participated in the crime. Id. at 253, 89 S. Ct. 1726. The improperly admitted confessions of the non testifying co-defendantswhich had placed Harrington at the scene but did not say he had a gun were "cumulative" because Harrington himself had made a statement, "which fell short of a confession but which placed him at the scene of the crime," and "[s]everal eyewitnesses placed [Harrington] at the scene of the crime." Id. at 252-53, 89 S. Ct. 1726.[9] In addition, Harrington had admitted that "he fled with the other three [co-defendants]; and that after the murder he dyed his hair black and shaved off his moustache." Id. at 253, 89 S. Ct. 1726.
In Sullivan v. Louisiana, 508 U.S. 275, 113 S. Ct. 2078, 124 L. Ed. 2d 182 (1993), the Court emphasized Chapman's initial formulation, explaining that the harmless test "is not whether, in a trial that occurred without the error, a guilty verdict would surely have been rendered, but whether the guilty verdict actually rendered in this trial was surely unattributable to the error." Id. at 279, 113 S. Ct. 2078 (emphasis added). "Consistent with the jury-trial guarantee, the question ... the reviewing court [is] to consider ... is not what effect the constitutional error might generally be expected to have upon a reasonable jury, but rather what effect it had upon the guilty verdict in the case at hand." Id. (emphasis added).[10] "That must be so," the Court reasoned, "because to hypothesize a guilty verdict that was never in fact renderedno matter how inescapable the findings to support that verdict might be would violate the jury-trial guarantee." Id. at 279, 113 S. Ct. 2078 (citing Rose v. Clark, 478 U.S. 570, 578, 106 S. Ct. 3101, 92 L. Ed. 2d 460 (1986) (Blackmun, J., dissenting); Pope v. Illinois, 481 U.S. 497, 509-10, 107 S. Ct. 1918, 95 L. Ed. 2d 439 (1987) (Stevens J., dissenting)).
More recently, in Neder v. United States, 527 U.S. 1, 119 S. Ct. 1827, 144 L. Ed. 2d 35 (1999), the Court applied the "overwhelming evidence test" in affirming a conviction, where the trial court had improperly omitted an element of an offense from the jury instruction. Id. at 9, 119 S. Ct. 1827.[11] The Court distinguished Sullivan, explaining that the constitutional error in that case (an erroneous reasonable doubt instruction) "precludes the jury from rendering a verdict of guilty-beyond-a-reasonable-doubt" and, therefore, "the entire premise of Chapman review is simply absent." Id. at 11, 119 S. Ct. 1827 (quoting Sullivan, 508 U.S. at 280, 113 S. Ct. 2078). Where the error does not vitiate all of the jury's findings, however, the case is subject to harmless-error review, and the reviewing court must ask, "Is it clear beyond a reasonable doubt that a rational jury would have found the defendant guilty absent *864 the error?" Id. at 18, 119 S. Ct. 1827. The Court explained that while the reviewing court does not "become in effect a second jury," it can "in typical appellate-court fashion, ask[] whether the record contains evidence that could rationally lead to a contrary finding with respect to the omitted element." Id. at 19, 119 S. Ct. 1827 (emphasis added). "If the answer to that question is `no,' holding the error harmless does not `reflect a denigration of the constitutional rights involved.'" Id. (quoting Rose v. Clark, 478 U.S. 570, 577, 106 S. Ct. 3101, 92 L. Ed. 2d 460 (1986)). The Court concluded that even though the jury had not been instructed that, to be convicted, the government had to prove the "materiality" of a false statement, Neder's "failure to report such substantial income [over $5 million] incontrovertibly establishes that Neder's false statements were material to a determination of his income-tax liability." Id. at 16, 119 S. Ct. 1827. Indeed, "[t]he evidence supporting materiality was so overwhelming ... that Neder did not argue to the jury ... that his false statements of income could be found immaterial." Id.
With these precedents in mind, we turn to the merits of the question before us, whether the government has shouldered its burden of showing that the erroneous admission of the DEA-7 report was harmless beyond a reasonable doubt in the context of the case against appellant.
III.
As a preliminary matter, the government agrees with appellant that the admission of the DEA-7 report without having the chemist at trial was not harmless error with respect to the possession charge, because in order to prove the completed crime of possession of a controlled substance, the government must prove "that the substance possessed was, in fact, the controlled substance in question." Seeney v. United States, 563 A.2d 1081, 1083 (D.C.1989); see D.C.Code § 48-904.01(d) ("It is unlawful for any person knowingly or intentionally to possess a controlled substance...." (emphasis added)). Here, only the DEA-7 was conclusive evidence that the green weed substance found on appellant was in fact marijuana. Although there was other evidence tending to suggest that the green weed substance was marijuana, nothing was as persuasive as the official forensic report confirming its chemical identity. Officer Davis began to testify that the preliminary field test indicated that the substance was marijuana, but the trial court cut short his testimony explaining the field test, in anticipation of the better evidence, the DEA-7 report. Thus, as the government concedes, the admission of the DEA-7 was not harmless with respect to the conviction of possession of marijuana because it is "beyond a reasonable doubt that the error ... did ... contribute to the verdict obtained." Chapman, 386 U.S. at 24, 87 S. Ct. 824.
The government contends, however, that the error was harmless with respect to the lesser-included offense of attempted possession, see D.C.Code § 48-904.09, because to prove that offense it need not "establish that the substance a defendant attempted to possess was the proscribed substance." Seeney, 563 A.2d at 1083 (noting that "Congress intended that the common law defense of impossibility should not be available to one charged with the federal crime upon which our prohibition is patterned."); Thompson v. United States, 678 A.2d 24, 27 (D.C.1996) ("[T]he government was not required to prove that the substance actually was cocaine in order to establish appellant's guilt of attempted distribution."). Even though the evidentiary value of the DEA-7 report in the possession *865 case that was tried to the jury was to prove that the substance was indeed marijuana, and the offense of attempted possession that the government would now substitute does not require such proof, on the facts of this case we see no difference of the report's impact in proving either the completed or the attempted crime of possession. That is because, as the case was tried, the proof of either actual or (implicitly) attempted possession by appellant consisted chiefly of the same thing: his possession of what the government contended was marijuana.[12]
For attempted possession, "[t]he government must establish conduct by the defendant that is reasonably adapted to the accomplishment of the crime of possession of the proscribed substance, and the requisite criminal intent." Seeney, 563 A.2d at 1083 (emphasis added). The mens rea element requires proof that appellant had the "intent to commit the crime[]" of attempted possession of a controlled substance (in this case, marijuana). Blackledge v. United States, 447 A.2d 46, 48 (D.C.1982). Here, the fact of actual possession was sought to be proven by the officer's testimony that the green weed substance fell on the floor from appellant's clothes, and that a plastic bag with a similar substance was found close to appellant in the holding cell. The same evidence would serve to prove attempted possession. The DEA-7 report was offered as proof that what appellant possessed was marijuana. See Thomas, 914 A.2d at 22 ("The DEA chemist's report was the main, if indeed not the only, proof offered by the prosecution that the ziplocks distributed by appellant contained a measurable amount of a mixture containing cocaine,...."). If the case had been charged and tried for attempted possession, the DEA-7 report similarly would prove that what appellant intended to possess was a controlled substance, marijuana.
Although the identity of a controlled substance, or the defendant's belief that he was dealing in controlled substances, may be proved by circumstantial evidence, see Thompson, 678 A.2d at 28 n. 7, other than the DEA-7 report, there was scant evidence to suggest that appellant intended to possess a controlled substance. This is not a case, for example, where the government sought to prove attempted possession of an illegal substance with circumstantial evidence of the defendant's intent, because the substance was not recovered or tested and evidence suggested that the substance was not the contraband the defendant believed, but was, instead, a "burn bag" (the street name for a bag containing no drugs or bogus drugs). See id. at 27; cf. Carter v. United States, 591 A.2d 233 (D.C.1991) (affirming conviction for distribution of heroin even though defendant thought he was selling cocaine). Nor was this a case where the illegal nature of the substance could be inferred from a transaction during which the defendant had manifested his intent to buy or sell a particular drug. See Thompson, 678 A.2d at 27-28 (evidence that defendant had a bundle of packets, handed one of the packets to someone, and got into a fight with that *866 person when he complained that it was "not real," and later counted the packets "plainly manifested her intent to distribute a controlled substance."); Seeney, 563 A.2d at 1083 (defendant testified that he was selling PCP); cf. Otts v. United States, 936 A.2d 782, 786 (D.C.2007) (no plain error where DEA-7 report admitted without chemist because there was other evidence that the substance in question was heroin: police saw defendant conduct drug transactions in an "open air drug market," and when police approached, appellant put something in his mouth, chewed it, and spat out what an officer recognized as heroin residue)[13]; Carter, 591 A.2d at 233-34 (sustaining conviction for distribution where defendant approached undercover officer to ask whether he wanted to buy some "blow," which is a street name for cocaine). Rather, the government here sought to prove its case in the most direct manner, by establishing that the DEA-7 report established that the substance was marijuana. As a result, there understandably was little need for circumstantial evidence.
Given that, on the facts of this case, the government would similarly have to prove that the substance was marijuana in order to prove appellant's attempted possession, and in view of the conclusive finding of the DEA-7 report that the substance was marijuana, it is impossible to say that admission of the report did not "contribute" to the jury's verdict, Chapman, 386 U.S. at 24, 87 S. Ct. 824, or that the verdict was "surely unattributable," Sullivan, 508 U.S. at 279, 113 S. Ct. 2078, to the erroneously-admitted DEA-7 report.
Nor can we say, applying Harrington, that this was a case where there was "overwhelming evidence" of appellant's intent to possess marijuana. 395 U.S. at 254, 89 S. Ct. 1726; see Hill v. United States, 858 A.2d 435, 447 (D.C.2004) (explaining that Chapman considers errors to be harmless if "there remains overwhelming evidence to support the jury's verdict.") (citation omitted). There remains doubta reasonable doubt"that a rational jury would have found the defendant guilty absent the error," Neder, 527 U.S. at 18, 119 S. Ct. 1827, because "[a] reasonable jury might have received a significantly different impression" of the government's case had the DEA-7 report not been admitted. Van Arsdall, 475 U.S. at 680, 106 S. Ct. 1431.
[T]here lies the need for evidence in all its particularity to satisfy the jurors' expectations about what proper proof should be. Some such demands they bring with them to the courthouse, assuming, for example, that a charge of using a firearm to commit an offense will be proven by introducing a gun in evidence. A prosecutor who fails to produce one, or some good reason for his failure, has something to be concerned about. "If [jurors'] expectations are not satisfied, triers of fact may penalize the party who disappoints them by drawing a negative inference against that party."
Old Chief v. United States, 519 U.S. 172, 188, 117 S. Ct. 644, 136 L. Ed. 2d 574 (1997) (alteration in original) (quoting Stephen A. Saltzburg, A Special Aspect of Relevance: Countering Negative Inferences Associated with the Absence of Evidence, 66 CAL. L.REV. 1011, 1019 (1978)); cf. Greer v. United States, 697 A.2d 1207, 1208, 1212 (D.C.1997) (not harmless error where trial court instructed the jury that it could not *867 base its verdict "on evidence that has not been presented," because the defense could properly argue that there was "no scientific or physical evidence, such as fingerprints, photographs, or videotape, ... to corroborate [police officer's] account of what happened"). Here, the jury could well have had a doubt about the government's case if the prosecution did not proffer the type of scientific evidence establishing the identity of the substance that is commonly expected.
Following Neder, the government frames the issue as "whether it is clear beyond a reasonable doubt that a rational jury would have found appellant guilty of attempted possession of a controlled substance in the absence of the improperly-admitted DEA-7 report." Or put another way, does the record contain evidence that "could rationally lead to a contrary finding," i.e., that the green weed substance was not marijuana? Neder, 527 U.S. at 19, 119 S. Ct. 1827. In answering that question in the negative, the government points to the following evidence the jury had to consider: the officer's testimony that appellant kept the "green weed substance" in his crotch, an inference that appellant attempted to rid himself of the plastic bag that was found in the holding cell, the officer's partial explanation of the positive field-test result, and appellant's giving an alias when he was arrested. But even if such circumstantial evidence were sufficient to convict, it does not suffice to overcome the presumption of harm flowing from constitutional error. See Fahy v. Connecticut, 375 U.S. 85, 86, 84 S. Ct. 229, 11 L. Ed. 2d 171 (1963) (noting that evaluation for harmless error is not concerned with "whether there was sufficient evidence on which the petitioner could have been convicted without the evidence complained of."). This was not a case, like Harrington, in which the defendant himself made incriminating admissions and there was direct evidence of his participation in the crime. Cf. Harrington, 395 U.S. at 254, 89 S. Ct. 1726. Unlike Harrington, the case against appellant was "woven from circumstantial evidence." Id. Here the circumstantial evidence of appellant's intente.g., Officer Bolden's testimony that the substance came from appellant's crotch areacould have been subject to question in light of Officer Petz's testimony that no contraband was found on appellant when he was "searched thoroughly from head to toe" at the time of arrest and the fact that Officer Bolden was the only witness to have seen the green weed substance fall from appellant's pants.
Nor is this a case like Neder, where by the very nature of the defendant's admitted conduct, the jury would have been compelled to find a necessary element of the crime. In Neder, the Court found it "uncontroverted" that the defendant's false tax statement was "material" (materiality being the element erroneously omitted from jury instructions) and that the defendant "did not, and apparently could not, bring forth facts contesting" it. 527 U.S. at 16, 18-19, 119 S. Ct. 1827. In this case, the necessary element is intent to possess marijuana. There can be no doubt that if the jury credited Officer Bolden's testimony that the green weed substance fell from appellant's crotch area, it could infer that appellant not only possessed itor intended to posses itbut also wished to conceal it. But to convict, the jury would also have to infer that what appellant intended to conceal was marijuana. Hiding a green weed substance in a private area of the body is not commonplace and surely permits an inference that it might bemaybe more likely than notcontraband, see Jefferson v. United States, 906 A.2d 885, 888 (D.C.2006) (per curiam) (noting that the crotch area is "a uniquely private part of *868 the body not normally used for carrying lawfully-held personal effects"), but here the evidence was not "uncontroverted" or "overwhelming" that it came from appellant and that he believed it was marijuana. Significantly, unlike in Neder, appellant did not concede the fact from which the jury could have inferred that he attempted to possess the green weed substance and that he attempted to dispose some of it underneath the bench. To the contrary, he contested Officer Bolden's testimony that the green weed substance came from appellant, as defense counsel argued in closing:
Ladies and gentlemen, we know that they had a camera in that cell, and they could have taken a picture of this marijuana on [appellant], and they didn't.[14] That's because there was no marijuana. And Officer Davis took the stand, and he told you that he's the one who recovered the alleged marijuana off the ground. But that's not what his report says.... He told you I wrote down what Bolden told me, and that was it.
Defense counsel cast further doubt on Officer Bolden's credibility: "You saw how Officer Bolden was. You saw his demeanor. You should evaluate that." During cross-examination, Officer Davis, who took the photographs in the holding cell, testified that he did so at Officer Bolden's request and admitted that he only saw the green weed substance on the ground and never on appellant, even though on the report that he filled out he wrote that it had been found "on [appellant's] person... [based on] information that I received from Officer Bolden." See note 5, supra. Any doubt that the jury could have had, however, was completely dispelled by the erroneously admitted DEA-7 report, which provided objective evidence establishing that the substance was marijuana, and thus "filled in" what otherwise might have been understood either as an (admittedly eccentric) act of concealment of an innocuous substance, or of a different illegal substance. See note 12, supra.
The additional green weed in a plastic bag found under the bench in the cell where appellant was held could corroborate that appellant possessed it,[15] but does not add much to the jury's ability to conclude that the substance was marijuana, and suffers from the same evidentiary weakness, that Officer Bolden, whose credibility was challenged, was the only witness. Officer Davis's testimony about the field test is not as probative as the DEA-7 report and, in any event, the officer's explanation was cut short because the trial court anticipated admitting the DEA-7 report. Thus, evidence about the field test was not developed enough to persuade the jury of its reliability and to establish the chain of custody. Finally, we think that appellant's giving of an alias to the police adds little to the evaluation of harmless error with respect to appellant's intent. See Van Ness v. United States, 568 A.2d 1079, 1083 (D.C.1990) ("This court has held that a defendant's use of a name different from his own can support an inference that he was conscious of his guilt." (emphasis added)). Although appellant's giving of an alias would support an inference that he was conscious of guilt for something, it was not necessarily to distance himself from the green weed substance, which did *869 not come to light until after he gave the alias. In this case, for example, appellant was arrested because he was suspected of gun (not drug) offenses, and he was on supervised release;[16] thus, it is equally possible that he would have given an alias in order to avoid having his release revoked.[17]
We conclude that, on this record, the erroneous admission of the DEA-7 report without an opportunity to cross-examine the chemist who prepared it was not harmless beyond a reasonable doubt as to the offense of attempted possession of marijuana because we cannot say that the error did not contribute to the verdict, and the government did not otherwise present overwhelming evidence that appellant intended to possess marijuana.
Reversed and remanded for new trial.
NOTES
[1] This appeal was initially consolidated with Lathan v. United States, No. 05-CM-1398. Both appeals were stayed by the court sua sponte pending decision of Thomas v. United States, 914 A.2d 1 (D.C.2006). Lathan was later dismissed pursuant to the government's unopposed motion to vacate Lathan's conviction.
[2] Appellant was indicted on four counts: (1) Carrying a Pistol Without License, D.C.Code § 22-4504(a) (2001); (2) Possession of Unregistered Firearm, D.C.Code § 7-2502.01; (3) Unlawful Possession of Ammunition, D.C.Code § 7-2506.01; and (4) Unlawful Possession of a Controlled Substance (Marijuana), D.C.Code § 48-904.01(d). The jury acquitted appellant of all but the drug charge. Appellant was sentenced to 180 days in prison with credit for time served.
[3] Officer Bolden testified that the "specialized unit" primarily focused on "drug enforcement."
[4] The prosecutor argued in closing that there was "testimony [that the police] were unzipping his crotch.... [a]nd that's when the weed-like substance [fell] out...." But there was no testimony of such account:
Prosecutor: Okay. Specifically, in terms of the search, exactly how did you uncover the green weed substance that fell from [appellant's] pants?
Officer Bolden: During the removal of his belt and the continuous search of his person, that was the first time I physically had a chance to search.
[5] After the green weed substance was found in appellant's holding cell, Officer Davis filled out a report (PD-95) in which he indicated that the substance was found on appellant's "person." Officer Davis testified, however, that he did not see the substance on appellant, but filled out the report based on information provided by Officer Bolden.
[6] On March 17, 2008 the Supreme Court granted certiorari to decide "[w]hether a state forensic analyst's laboratory report prepared for use in a criminal prosecution is `testimonial' evidence subject to the demands of the Confrontation Clause as set forth in Crawford v. Washington...." Petition for Writ of Certiorari Melendez-Diaz v. Massachusetts, ___ U.S. ___, 128 S. Ct. 1647, 170 L. Ed. 2d 352 (2008).
[7] In Chapman, the Court applied harmless error review to the prosecutor's improper comments urging the jury to infer guilt from defendant's decision not to take the stand, a right protected by the Fifth Amendment. 386 U.S. at 24-26, 87 S. Ct. 824.
[8] In Brooks, the erroneously admitted evidence was clothing and blood and semen-stained bedding obtained in violation of the Fourth Amendment in a case where the defendant was charged with rape, sodomy, assault, and threats. 367 A.2d at 1300, 1304, 1309.
[9] The Court cautioned, however, that "[w]e do not suggest that, if evidence bearing on all the ingredients of the crime is tendered, the use of cumulative evidence, though tainted, is harmless." Harrington, 395 U.S. at 254, 89 S. Ct. 1726.
[10] The error in Sullivan was a jury instruction defining "reasonable doubt" that the Court held unconstitutional in Cage v. Louisiana, 498 U.S. 39, 111 S. Ct. 328, 112 L. Ed. 2d 339 (1990) (per curiam). See Sullivan, 508 U.S. at 277, 113 S. Ct. 2078.
[11] "[T]he District Court instructed the jury that, to convict on ... tax [fraud] offenses, it `need not consider' the materiality of any false statement `even though that language is used in the indictment,'" and was required by the federal statutes under which the charges were brought. Neder, 527 U.S. at 4, 6, 119 S. Ct. 1827.
[12] The government has not suggested that the information or evidence presented in this case would have supported a conviction of attempted possession of a controlled substance other than marijuana. In his brief, appellant suggests that PCP-laced parsley could also be described as a "green weedy substance." See Satterfield v. State, 325 Md. 148, 599 A.2d 1165, 1167 (1992) (referring to "PCP-laced parsley"); Davis v. State, 319 Md. 56, 570 A.2d 855, 856 (1990) (describing process by which parsley flakes are saturated with PCP). There was no evidence, for example, of the strong odor characteristic of PCP. See Satterfield, 599 A.2d at 1166.
[13] After the issuance of this opinion but before its publication in the Atlantic and Maryland Reporters, Otts was vacated on other grounds, see 2007 D.C.App. LEXIS 221 (D.C.April 24, 2008), and reissued, see 2007 WL 5123819, 2007 D.C.App. LEXIS 843 (D.C.April 24, 2008).
[14] Officer Bolden admitted that there was no photograph of the green weed substance on appellant's person:
Defense Counsel:.... Officer Bolden, you never took pictures back at [the police station] that shows any marijuana on [appellant], isn't that true?
Officer Bolden: That is true.
[15] There was no evidence, however, that the cell had been cleaned before appellant was placed there.
[16] The jury, however, was not aware of appellant's release status; the matter was discussed between the judge and the parties during a pre-trial hearing.
[17] The fact that appellant was initially seen in the area where the police were responding to a drug complaint did not permit the jury to infer, much less beyond a reasonable doubt, that appellant intended to possess drugs when there was no testimony linking up appellant's presence to the complaint about drug activity. See Smith v. United States, 558 A.2d 312, 316 (D.C.1989) (en banc) ("[W]e have been careful to emphasize that `this familiar talismanic litany [high drug trafficking area], without a great deal more, cannot support an inference that appellant was engaged in criminal conduct.'" (quoting In re D.J., 532 A.2d 138, 143 (D.C.1987))).
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720 S.W.2d 827 (1986)
William Thomas WAGNER, Appellant,
v.
The STATE of Texas, Appellee.
No. 6-86-030-CR.
Court of Appeals of Texas, Texarkana.
October 7, 1986.
Rehearing Denied November 12, 1986.
*828 Bruce Condit, Harkness, Friedman, Kusin and Condit, Texarkana, for appellant.
*829 Neal Birmingham, Crim. Dist. Atty., Cass County Courthouse, Linden, for appellee.
CORNELIUS, Chief Justice.
William Thomas Wagner was convicted of driving while intoxicated and assessed punishment at one year in jail and a $1,000.00 fine. On appeal he contends that certain evidence was improperly admitted, that his motion for directed verdict should have been granted, and that the trial court should have submitted a requested charge on reckless driving as a lesser included offense. We overrule these contentions and affirm the judgment.
On October 7, 1984, Department of Public Safety patrolman Larry Aycock noticed Wagner's car weaving back and forth on the highway. Aycock stopped the car and approached Wagner to determine the cause of the erratic driving. Aycock observed that Wagner's eyes were glazed and that his breath smelled of alcohol. When Wagner stepped from the car, Aycock noted that his balance was unsteady. Aycock took Wagner to the Criminal Justice Center in Linden and videotaped his compliance with several sobriety tests, including an intoxilyzer analysis. The intoxilyzer results found Wagner's alcohol concentration to be 0.12.
At trial the State introduced the videotape which Aycock had made of Wagner shortly after the arrest. Wagner asserts that the tape should have been excluded from evidence because the State failed to prove the manner of its preservation and that it had not been altered.
Officer Aycock testified that he took Wagner to a room where the videotape was taken, and that the tape as shown faithfully depicted the scene it purported to represent, i.e. "what went on in that room." Some of the tape had been excised pursuant to Wagner's objections before it was shown to the jury. The testimony of the officer was sufficient to show that the portion introduced and shown to the jury had not been damaged or altered.
Although the accuracy and authenticity of such a tape should be established before admitting it in evidence, the specific requirements of Tex.Code Crim. Proc.Ann. art. 38.22 (Vernon 1979 & Supp. 1986) do not apply to a videotape taken in connection with a driving while intoxicated charge pursuant to Tex.Rev.Civ.Stat.Ann. art. 6701l-1 (Vernon Supp.1986). Article 38.22 is based on the privilege against self-incrimination, and it applies only to recordings of testimonial confessions made as a result of custodial interrogation. Section 24 of the Act of June 16, 1983, ch. 303, Tex.Sess.Law Serv. 1605 (Vernon 1983), provides for visually recording the appearance of persons charged with driving while intoxicated. Representations of a person's appearance are not prohibited by the Fifth Amendment protection against self-incrimination. Schmerber v. California, 384 U.S. 757, 86 S. Ct. 1826, 16 L. Ed. 2d 908 (1966); Delgado v. State, 691 S.W.2d 722 (Tex.App. San Antonio 1985, no pet.); see also, Annot., 62 A.L.R. 2d 686, 701 (1958). Moreover, Wagner's objection to the introduction of the tape was not adequate. Defense counsel made a general objection stating, "I don't believe a proper predicate has been laid for admission of the tape...." He renewed his objection moments later, adding, "Your Honor, there is a statute that governs how to admit these things into evidence, ...."
An objection to the admission of evidence on the ground that no proper predicate has been laid is too general to merit consideration except where the specific ground is apparent from the context or, it has been held, the evidence is inadmissible for any purpose. 35 Tex.Jur.3d Evidence § 32 (1984). Any omissions in the predicate must be specifically complained of. Bird v. State, 692 S.W.2d 65 (Tex.Crim.App.1985); Harris v. State, 565 S.W.2d 66 (Tex.Crim.App.1978); Boss v. State, 489 S.W.2d 582 (Tex.Crim.App.1972); Bennett v. State, 394 S.W.2d 804 (Tex. Crim.App.1965); see also, Zillender v. State, 557 S.W.2d 515 (Tex.Crim.App.1977).
*830 In addition, the evidence is sufficient to sustain the conviction regardless of the presence or absence of the videotape. The evidence includes Aycock's testimony concerning Wagner's abnormal driving and physical condition. The intoxilyzer result in itself proves that Wagner was legally intoxicated. Tex.Rev.Civ.Stat.Ann. art. 6701l-1 (Vernon Supp.1986). The jury could have convicted Wagner on the basis of that evidence alone. Forte v. State, 707 S.W.2d 89 (Tex.Crim.App.1986).
Wagner urges that his motion for directed verdict should have been granted because the State failed to prove that 210 liters of breath were used in the intoxilyzer test to determine the alcohol concentration in his blood. He contends that such proof is an essential element of the offense. Article 6701l-1 defines intoxicated as follows:
(A) not having the normal use of mental or physical faculties by reason of the introduction of alcohol, a controlled substance, a drug, or a combination of two or more of those substances into the body; or
(B) having an alcohol concentration of 0.10 or more.
Tex.Rev.Civ.Stat.Ann. art. 6701l-1(a)(2) (Vernon Supp.1986). Alcohol concentration is defined as, among other things, the number of grams of alcohol per 210 liters of breath.
As there was additional evidence of Wagner's intoxication apart from the intoxilyzer result, the trial court did not err when it denied the motion for directed verdict. Additionally, the intoxilyzer test result was not incompetent evidence. An expert witness testified that the intoxilyzer machine was in proper working order, and that when it registered a level of .12 (as in Wagner's case) it meant there were twelve grams of alcohol in 210 liters of the person's breath. There was no objection to this testimony. It was not necessary to show that 210 liters of breath were actually measured.
Wagner additionally contends that the trial court erred in refusing his submitted charge on the lesser included offense of reckless driving. A two-step analysis is used to determine whether a charge on a lesser included offense is required. Royster v. State, 622 S.W.2d 442 (Tex.Crim.App.1981). 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. Applying these principles to the present facts requires an analysis of each alleged offense.
Wagner was charged with violation of Article 6701l-1. To violate this article a person must be intoxicated while driving or operating a motor vehicle in a public place. To constitute reckless driving, on the other hand, a person must drive a vehicle in willful or wanton disregard for the safety of persons or property. Tex.Rev.Civ.Stat. Ann. art. 6701d, § 51(a) (Vernon 1977). It is obvious that proof of the elements of reckless driving are not necessary to establish the offense of driving while intoxicated under Article 6701l-1. The first prong of the Royster test is therefore unmet. Thus, it was not error for the trial court to refuse a charge on reckless driving.
The judgment of the trial court is affirmed.
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552 F. Supp. 311 (1982)
D.N. STAFFORD and Flora C. Stafford, Plaintiffs,
v.
UNITED STATES of America, Defendant.
Civ. A. No. 76-1-VAL.
United States District Court, M.D. Georgia, Valdosta Division.
November 19, 1982.
Carlton King, Jr., Atlanta, Ga., for plaintiffs.
Gerald B. Leedom, Tax Div., Dept. of Justice, Washington, D.C., for defendant.
ORDER
OWENS, Chief Judge.
This income tax refund suit brought by plaintiffs with respect to their 1969 tax year is before the court on remand by the Fifth Circuit Court of Appeals. Stafford v. United States, 611 F.2d 990 (5th Cir.1980).
The record has been supplemented by evidentiary hearing held on June 24, 1981, following which the parties filed cross-motions for summary judgment. Having considered the record, including the deposition transcripts, the memoranda and argument of counsel, the Fifth Circuit's opinion, and the additional showing made by plaintiffs at the June 24, 1981, hearing, the court now finds and concludes the following:
Findings of Undisputed Material Fact
In the 1960's plaintiff Denean Stafford began negotiating with officers of the Life Insurance Company of Georgia (hereinafter referred to as Life of Georgia) for the development of a hotel which Life of Georgia wished to have built on property adjacent to its corporate headquarters in Atlanta. Plaintiff had been in the business of developing motels in the Southeastern United States for many years and his reputation and development efforts were known to and respected by Life of Georgia officers.
On February 7, 1967, Life of Georgia's Finance Committee authorized negotiations with plaintiff and approved in principle the negotiations that had already taken place.
On July 2, 1968, H. Talmage Dobbs, who was then the Executive Vice President of Life of Georgia, sent plaintiff a "letter of intent" (Exhibit A) which stated that "[w]hile there are many details to be worked out, we would like to continue our negotiations along the following general lines." The letter of intent then summarized the status of the negotiations at that *312 point in time, specifically that: (1) Life of Georgia would grant to plaintiff or his designee (limited partnership if he desired) a 30-year net ground lease; (2) the lease would obligate plaintiff to construct a hotel complex according to plans meeting Life of Georgia's approval; and (3) Life of Georgia would make a first mortgage loan on the improvements equal to seventy-five percent of the total cost of construction at 6¾ percent interest per annum for a term to run concurrent with the lease. The letter of intent concluded with the statement that "[w]e will be happy to meet with you at any time for the purpose of continuing our negotiations."
On July 3, 1968, Mr. Dobbs sent plaintiff a follow-up letter (Exhibit B) advising him that the proposal in the letter of intent of July 2nd was "open only for prompt consideration" and should be considered open for acceptance for a period of only sixty (60) days.
On August 30, 1968, plaintiff responded to Mr. Dobbs' letters of July 2nd and 3rd by letter (Exhibit C) which he said was "evidence of our intent to proceed toward a finalization" of all plans along the lines set out in the letter of July 2nd. Plaintiff's letter closes with the statement that when certain items are resolved and plan specifications are available, "we will be in a position to enter into the necessary lease and contract arrangements." The letter was signed by plaintiff as "General Partner of Partnership to be formed."
On or about October 3, 1968, plaintiff's attorneys revised a proposed draft of a limited partnership agreement for Center Investments, Ltd., a proposed limited partnership with plaintiff as general partner. On page four of the revised proposed draft of the limited partnership agreement is a provision to the effect that plaintiff "has contributed property worth $100,000 for $100,000 of his contribution" to the capital of the partnership.
On October 30, 1968, a letter was sent out to prospective investors who might be interested in participating in a limited partnership to develop the hotel. The letter, which was sent by Alton F. Irby, Jr., noted that there would be 19 limited partners and one general partner (plaintiff). The letter further pointed out that plaintiff was delivering the July 2, 1968, letter of intent for what amounted to $100,000 of additional participation.
On January 21, 1969, the limited partnership of Center Investments, Ltd. was formally established by execution without change of the proposed articles of limited partnership authored by plaintiff's attorneys. Plaintiff was the sole general partner to build the Life of Georgia hotel. Twenty-one limited partnership interests were created. Twenty of these interests were acquired by investors for $100,000 per interest. Plaintiff acquired two such interests for cash. The remaining twenty-first limited partnership interest was issued to plaintiff purportedly in "exchange" for the assignment by plaintiff of the letter of intent of July 2nd to the partnership.
At no time did the investors who became limited partners on January 21, 1969, ever meet together and discuss whether or not to give plaintiff the twenty-first limited partnership interest in exchange for the assignment of the letter of intent. The limited partnership agreement that was prepared by plaintiff's attorneys and offered to the prospective investors for their signatures was in final form and stated that plaintiff "has contributed property worth $100,000 for $100,000 of his contribution."
On June 29, 1970, and July 1, 1970, Life of Georgia and Center Investments, Ltd. executed the lease and loan documents on terms differing somewhat from those outlined in the July 2, 1968, letter. The amount of the loan required had increased to $7,127,500 and interest rates had escalated. The first five million dollars of the loan was to bear interest at the rate of 6¾ percent per annum as set forth in the letter, but the amount above five million dollars was to bear interest at the rate of 9¾ percent per annum. In addition the desired size of the hotel had changed from 350 or 400 rooms to 500 rooms.
*313 Plaintiff on his 1969 joint federal income tax return did not report the value of the twenty-first partnership interest received by him in 1969 as income. Upon audit of his return the Commissioner of Internal Revenue assessed a deficiency based upon a determination that the twenty-first partnership interest should be treated as compensation received for plaintiff's services in negotiating and developing the investment for the partnership rather than as a contribution of property in exchange for the twenty-first partnership interest. On that basis plaintiff was considered not to be entitled to the benefit of non-recognition afforded by 26 U.S.C. § 721(a) which provides: "No gain or loss shall be recognized to a partnership or to any of its partners in the case of a contribution of property to the partnership in exchange for an interest in the partnership."
Plaintiff paid the resulting additional income taxes, filed a claim for refund and, following disallowance of the claim, instituted the instant suit for refund.
Conclusions of Law
I. Was there the requisite "exchange" contemplated by 26 U.S.C. § 721(a) so as to entitle plaintiff to the benefit of non-recognition?
The controlling statute in this suit is 26 U.S.C. § 721(a) (hereinafter I.R.C. § 721(a)) which was set out previously. The key to the benefit of non-recognition afforded by this code section is that property must be exchanged for an interest in the partnership.
Assuming for the sake of argument only that the letter of intent of July 2, 1968, constituted property, plaintiff would not be entitled to the benefit of nonrecognition under I.R.C. § 721(a) unless he received the twenty-first limited partnership interest in "exchange" for the letter of intent. It is therefore necessary for the court to determine whether the transaction between plaintiff and the other investors (limited partners) concerning the letter of intent and the twenty-first limited partnership interest constituted an "exchange."
Although Congress has not defined the word "exchange" for purposes of the Internal Revenue Code, the Supreme Court has held that it should be given its ordinary meaning. C.I.R. v. Brown, 380 U.S. 563, 571, 85 S. Ct. 1162, 1166, 14 L. Ed. 2d 75, 82 (1965). In this court's judgment, the ordinary meaning of "exchange" is "a mutual or reciprocal transfer of one thing for another." See, Webster's Third New International Dictionary 792 (1971); Black's Law Dictionary 505 (5th ed. 1979). "Exchange" thus suggests that each side to the transaction has a choice as to whether to transfer the respective items of property.
In the instant case the investors who became limited partners never had any choice as to whether they would give plaintiff the additional limited partnership interest in return for his assignment of the letter of intent to the partnership. The limited partnership agreement that was prepared by plaintiff's attorneys and offered in final form to the prospective investors stated flatly that plaintiff "has contributed property worth $100,000 for $100,000 of his contribution." The investors could thus take the agreement in the form that it was offered or leave it. They had no choice.
Applying the ordinary meaning of the word "exchange," the court cannot conclude that the transaction in which plaintiff transferred the letter of intent to the partnership in return for the twenty-first limited partnership interest was an exchange. Had the investors who became limited partners met together and arrived at the idea of giving plaintiff the additional limited partnership interest in return for his assignment of the letter of intent to the partnership, discussed and agreed upon its value, and then requested that such a provision be made a part of the limited partnership agreement, the court's conclusion would be different.
Under those circumstances there would have been an actual exchange in which there was a mutual transfer or giving and in which each side had a true choice as to *314 whether to transfer or to give and the value of the transferred item. That however was not the case. Accordingly, it is the opinion of the court that the requisite exchange contemplated by I.R.C. § 721(a) did not take place.
II. Was the letter of intent of July 2, 1968, "property" for purposes of 26 U.S.C. § 721(a) so as to entitle plaintiff to the benefit of nonrecognition.
As was stated previously, the key to the benefit of nonrecognition afforded by I.R.C. § 721(a) is that property must be exchanged for an interest in the partnership. Assuming that contrary to this court's views the transaction between plaintiff and the other investors (limited partners) concerning the letter of intent and the twenty-first limited partnership constituted an exchange, plaintiff would still not be entitled to the benefit of nonrecognition under I.R.C. § 721(a) unless the letter of intent constituted "property" for purposes of § 721(a). In the interest of finality upon appeal it is therefore necessary for the court to determine whether the letter of intent constituted "property."
In making this determination the court is guided in particular by two points made by the Court of Appeals in its opinion: (1) that merely because the letter of intent may have been of value does not mean that it assumed the status of "property;" and (2) that the enforceability of any agreement evidenced by the letter of intent is "important and material to the question of whether [plaintiff] transferred property to the partnership under § 721." Stafford, supra, 611 F.2d at 996, n. 6.
After having carefully considered the arguments of counsel in conjunction with the opinion of the Court of Appeals, it is the opinion of the court that both value and enforceability are necessary to a conclusion that a document is "property" for purposes of § 721. Applying these requirements to plaintiff's letter of intent, it is apparent that at the most only one is satisfied.
The court can appreciate how the letter of intent may have been of value to a businessman, but the court fails to perceive how the letter of intent was legally enforceable. Clearly from the record the letter of intent did not evidence an agreement as to all necessary terms and conditions. Both plaintiff and Life of Georgia understood that there were further negotiations of major importance to be carried out.
Under the circumstances this court cannot conclude that the letter of intent attained the status of an enforceable obligation. At the most it was simply "an agreement to agree." See, Malone Construction Co., Inc. v. Westbrook, 127 Ga. App. 709, 194 S.E.2d 619 (1972) and Dumas v. First Federal Savings and Loan Ass'n, 654 F.2d 359 (5th Cir.1981). Accordingly, it is the opinion of the court that the letter of intent of July 2, 1968, did not constitute "property" for the purposes of I.R.C. § 721(a).
Conclusion
The court is aware that under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate only when it appears from the pleadings and supporting documentation that: (1) no genuine issue exists as to any material facts; and (2) such facts entitle the moving party to judgment as a matter of law. Expressed somewhat differently, summary judgment should be granted only when it is clear what the truth is and that no genuine issue remains for trial. United States v. Burket, 402 F.2d 426, 430 (5th Cir.1968). With this in mind, it is the court's considered judgment that defendant's motion for summary judgment should be granted.
SO ORDERED.
EXHIBIT A
LIFE INSURANCE COMPANY OF GEORGIA
HOME OFFICEATLANTA
July 2, 1968
Mr. Denean Stafford
Holiday Inn of Tifton
Tifton, Georgia
*315 Dear Denean:
This will serve as a letter of intent with reference to the construction of a hotel complex on a part of the block in which our new home office building is located. While there are many details to be worked out, we would like to continue our negotiations along the following general lines:
1. We will lease to you, or your designee, (limited partnership if you desire), the air rights sufficient for said complex over that part of the block abutting the north side of Linden Avenue and the south part of the east side of Spring Street approximately 40,000 square feet.
2. The lease will run for a term of 30 years an annual net rental equal to the sum of the following:
(a) The number of square feet over which the hotel complex is constructed times $12.00 times 7%.
(b) Cost of the foundations devoted exclusively to the hotel complex times 7%.
(c) One-half the rental value of any underground loading or service areas to be constructed to serve the Life of Georgia Center.
3. The annual net rental will be payable in twelve equal installments and will increase each year at the rate of 1.7% compounded.
4. The lease will provide for an absolute net rental to us obligating you to pay all ad valorem taxes and assessments, keep and maintain the improvements in good repair during the entire term of the lease, and provide and maintain fire and extended coverage insurance at least equal to the current insurable value of the improvements. The lease will also obligate you to maintain such other insurance for the benefit of Lessor and Lessee as may be deemed necessary in connection with the operation of a hotel.
5. The lease will obligate you to construct a hotel complex, according to such plans, specifications and cost as may be approved by us. As you know, our original discussions contemplated approximately 350 guest rooms at a cost of around $12,000.00 per room. Our current thinking indicates from 400 to 450 rooms and at a somewhat higher per room cost. This is a matter which will require further consideration.
6. The lease will give us the right of prior approval of any retail shops to be located in the hotel in order that there will be no unsatisfactory competition between such shops and those in the Tower.
7. We will make a first mortgage loan on the improvements equal to 75% of the total cost at an interest rate of 6¾% per annum for a term to run concurrent with the lease. The loan will be amortized in equal monthly installments of interest plus principal.
8. Prior to commencement of construction, your 25% share of the cost of improvements will be deposited in an escrow account and applied to their cost before any of the loan funds are used. The usual performance and payment bonds will be required.
9. All furniture, fixtures and other equipment used in the operation of the hotel complex will be installed at your cost, and we will be given a first lien thereon, or on any replacement or substitutions, which lien may be renewed, as required, during the term of the loan.
10. Adequate parking facilities will be made available, either in the underground parking garage located in the home office block or in a parking garage to be constructed on the northwest corner of the intersection of Linden Avenue and Spring Street. Rates for parking will be one of the matters for future determination.
We will be happy to meet with you at any time for the purpose of continuing our negotiations.
Yours very truly,
HTD:ec
cc: Mr. Jason B. Gilliland
EXHIBIT B
July 3, 1968
Mr. Denean Stafford
Holiday Inn of Tifton
Tifton, Georgia
*316 Dear Denean:
With further reference to our letter of intent dated July 2, 1968, this is to add that the proposal is open only for prompt consideration. As we discussed recently, factors such as land value and interest rates have increased materially since our original discussions; therefore, the proposal should be considered as open for acceptance for a period of say 60 days to August 31, 1968.
Trusting this will be more than adequate time for you to consummate all necessary arrangements and with highest personal regards,
Yours very truly,
HTD:ec
EXHIBIT C
August 30, 1968
Mr. H.T. Dobbs, Jr.
Executive Vice President Finance
Life Insurance Company of Georgia
Life of Georgia Tower
Atlanta, Georgia
Dear Mr. Dobbs:
This will acknowledge receipt of your letters of July 2 and 3, 1968, concerning the construction of a hotel complex on a portion of the Life of Georgia Center.
You may consider this as evidence of our intent to proceed toward a finalization of plans and specifications and the required financing, along the lines set out in your letters subject to further negotiations on the following specific items.
1. Rent value of the underground loading or service area. (Item 2c)
2. Parking. (Item 10)
3. Commencement date of rent payments on ground lease.
4. Rental options and/or lease term(s).
As soon as these items can be resolved and plan specifications sufficient to identify the land and air rights to be utilized are available, we will be in a position to enter into the necessary lease and contract agreements.
Yours very truly,
/s/ Denean Stafford
Denean Stafford
General Partner of Partnership to
be formed
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720 S.W.2d 201 (1986)
Leonard LOPEZ, Appellant,
v.
The STATE of Texas, Appellee.
No. 04-85-00444-CR.
Court of Appeals of Texas, San Antonio.
October 31, 1986.
Rehearing Extension Denied December 3, 1986.
*202 Douglas S. Daniel, San Antonio, for appellant.
Sam Millsap, Jr., Kate Feiner, Edward F. Shaughnessy, III, Criminal Dist. Attys., San Antonio, for appellee.
Before ESQUIVEL, CANTU and DIAL, JJ.
OPINION
DIAL, Justice.
This is an appeal from a conviction for cruelty to an animal. TEX.PENAL CODE ANN. § 42.11(a)(4) (Vernon Supp.1986). Defendant was found guilty in a non-jury trial, and the court assessed punishment at five days' confinement and a $50.00 fine, probated for six months. The defendant attacks the sufficiency of the evidence and the constitutionality of the statute. We affirm.
The evidence established that the defendant and his wife went to a movie theatre in San Antonio on the afternoon of July 21, 1985. While attending the movie, the defendant left his dog in his automobile which was parked in the direct sun in the theatre parking lot. The windows of the automobile were left open approximately an inch and one-half on each side. The automobile had a tinted glass "T-Top" which allowed the sun to shine directly through the roof into the interior of the vehicle. The testimony was that it was a very hot, sunny, dry day. The defendant returned to check on the dog once during its period of confinement. An officer testified that when the doors to the car were opened, "it was hot, very hot inside the car." And it was definitely hotter inside the car than it was outside the car.
The information alleged that the defendant on the date in question "did then and there intentionally and knowingly confine an animal, to-wit: a dog in a cruel manner, by confining said dog in an automobile without adequate venilation."
The first ground of error alleges that the trial court erred in rendering a verdict of guilty because the evidence was insufficient to support a conviction for the offense of cruelty to animals. We agree.
The defendant contends that since there was no direct evidence indicating what would constitute adequate ventilation for the dog under the circumstances, that this would be a case based on circumstantial evidence. Further, in circumstantial evidence cases the evidence is insufficient if the circumstances do not exclude every reasonable hypothesis except that of the guilt of the accused. Wilson v. State, 654 S.W.2d 465, 467 (Tex.Crim.App.1983).
*203 The standard for review for sufficiency of the evidence is the same in both direct and circumstantial cases. The standard is whether, after viewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 319, 99 S. Ct. 2781, 2789, 61 L. Ed. 2d 560, 563 (1979); Chambers v. State, 711 S.W.2d 240, 245 (Tex.Crim.App. 1986). The exclusion of outstanding reasonable hypothesis analysis is part of the same mental process that a rational trier of fact would employ in logically analyzing any circumstantial evidence case. Id. Applying the above standard to the evidence set out we conclude that the trier of fact could have found the essential elements of the crime beyond a reasonable doubt. The first ground of error is overruled.
The defendant's second ground of error is that the trial court erred in not granting the motion for acquittal because the evidence was insufficient to support a conviction. After the trial court overruled the defendant's motion for instructed verdict, the defendant testified in his own behalf. By presenting defensive evidence before the court the defendant waived any review of the trial court's action on the motion for an acquittal. Kuykendall v. State, 609 S.W.2d 791, 794 (Tex.Crim.App. 1980).
Under his final ground of error the defendant contends that the statute on which the information was based is unconstitutionally vague and overbroad in violation of the Fifth and Fourteenth Amendments of the U.S. Constitution.
Section 42.11 of the Texas Penal Code reads in pertinent part:
(a) A person commits an offense if he intentionally or knowingly:
* * * * * *
(4) transports or confines an animal in a cruel manner.
TEX.PENAL CODE ANN. § 42.11(a) (Vernon Supp.1986).
Penal statutes must be drafted so that ordinary people can understand what conduct is prohibited, and in a manner that does not encourage arbitrary and discriminatory enforcement. Clark v. State, 665 S.W.2d 476 (Tex.Crim.App.1984). To pass constitutional muster, a statute must give persons of ordinary intelligence fair notice that their contemplated conduct is forbidden. United States v. Greene, 697 F.2d 1229 (5th Cir.1983), cert. denied, 463 U.S. 1210, 103 S. Ct. 3542, 77 L. Ed. 2d 1391 (1983).
In McCall v. State, 540 S.W.2d 717, 719 (Tex.Crim.App.1976) the Court of Criminal Appeals held that subsection (a)(2) of section 42.11 sufficiently informed an accused of the nature and cause of the accusation against him that it would not be unconstitutionally indefinite. Mejia v. State, 681 S.W.2d 88 (Tex.App.Houston [14th Dist.] 1984, pet. ref'd) involved an alleged violation of subsection (6), causing one animal to fight with another. However, the appellant process under TEX. CONST. art. I, § 19 and U.S. CONST. amend. V & XIV. The court said, "We find the wording of TEX. PENAL CODE ANN. § 42.11 (Vernon 1982) to be quite clear." Mejia, 681 S.W.2d at 90. The court then quoted the entire statute including subsection (a)(4). The court overruled the challenge that the statute was unconstitutionally vague.
We likewise conclude that the terms of section 42.11(a)(4) have a meaning which may be understood by a person of ordinary intelligence and give fair notice of conduct which may be subject to prosecution under this statute. The third ground of error is overruled.
The judgment of conviction is affirmed.
ESQUIVEL, Justice, dissenting.
I respectfully dissent.
This is an appeal from a conviction for cruelty to an animal. TEX.PENAL CODE § 42.11(a)(4) (Vernon Supp.1986). The defendant attacks the sufficiency of the evidence and the constitutionality of the statute. *204 I would reverse because the evidence is insufficient to support the conviction.
The undisputed facts show that the appellant and his wife went to a movie theatre and left the dog in their automobile which was parked in the theatre parking lot. Admittedly, there was evidence that it was a very hot day. However, the State's burden under the "information" was to prove beyond a reasonable doubt that the dog was confined in an automobile without adequate ventilation.
The information charged appellant under Section 42.11 of the Texas Penal Code with intentionally and knowingly confining an animal in a cruel manner. The information also contained excess language: "by confining said dog in an automobile without adequate ventilation." In Upchurch v. State, 703 S.W.2d 638, 640 (Tex.Crim.App. 1985) the Court of Criminal Appeals in an en banc decision stated:
The distinction between unnecessary matter that must be proven, and that which is surplusage requiring no proof, is thus: When the unnecessary matter in the charging instrument describes an essential element of the offense, the unnecessary matter must be proven at trial. Where it does not describe an esential element, it need not be proven.
Since the excess language clearly describes the "essential element" of confining an animal in a cruel manner, it was incumbent upon the State to prove that the ventilation was inadequate. Furthermore, the State, whether relying upon circumstantial evidence or direct evidence, was required to prove each element of its case beyond a reasonable doubt. Crocker v. State, 573 S.W.2d 190, 207 (Tex.Crim.App.1978).
The standard of review, in both direct and circumstantial evidence cases, is whether, after reviewing the evidence in the light most favorable to the prosecution, any rational trier of fact could have found the essential elements of the crime beyond a reasonable doubt. Jackson v. Virginia, 443 U.S. 307, 316-17, 99 S. Ct. 2781, 2787-88, 61 L. Ed. 2d 560, 572 (1979); Chambers v. State, 711 S.W.2d 240, 245 (Tex.Crim. App.1986). The only evidence presented with respect to the ventilation was that the windows of the automobile were left open approximately an inch and one-half on each side and that it was hot inside the car. This evidence is clearly insufficient, as the circumstances do not exclude every reasonably hypothesis except the guilt of appellant. Chambers, 711 S.W.2d at 245; Moore v. State, 640 S.W.2d 300, 302 (Tex. Crim.App.1982). I would sustain appellant's first point of error.
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552 F. Supp. 605 (1982)
COLONIAL LEASING COMPANY OF NEW ENGLAND, INC., a Massachusetts corporation, dba Colonial-Pacific Leasing Company, Plaintiff,
v.
Harold BEST, individual, and H.B. Best, Inc., dba Harold's Service Center, Defendant.
Civ. No. 82-549.
United States District Court, D. Oregon.
October 28, 1982.
James D. Huegli, Charles R. Markley, Schwabe, Williamson, Wyatt, Moore & Roberts, Portland, Or., for plaintiff.
Charles P. Starkey, Weiss, Derr & DesCamp, Portland, Or., for defendant.
OPINION
REDDEN, Judge:
The plaintiff is the lessor of certain equipment to an automobile mechanic in St. *606 Louis, Missouri and sues in Oregon for the deficiency allegedly owing on the lease. The lease contains a clause by which the defendant lessee purportedly consents to Oregon jurisdiction in any suit on the lease. That clause reads as follows:
22. CHOICE OF LAW. Choice of Laws. This Lease shall be considered to have been made in the State of Oregon, and shall be interpreted, and the rights and liabilities of the parties hereto determined, in accordance with the constitution, statutes, judicial decisions, and administrative regulations of the State of Oregon. Lessees waive all right to a trial by jury in any litigation relating to any transaction under this agreement.
Lessee hereby designates ______ as its agent for the purpose of accepting service of process within the State of Oregon and further agrees to arrange for any transmission of notice of such service of process from said agent to Lessee as Lessee deems necessary or desirable. Lessee consents to Oregon jurisdiction in any action, suit or proceeding arising out of the Lease, and concedes that it, and each of them, transacted business in the State of Oregon in entry into this lease. In the event of suit enforcing this Lease, Lessee agrees that venue may be laid in the county of Lessor's address below.
The line to be used for the designation of an agent for service is not filled in on the lease. The clause is at the bottom of the second page of the lease and is in fine print.
This is not a true forum selection clause, but a clause by which the defendant consented to Oregon jurisdiction. The clause does not prevent suit in Missouri where the cause of action may have arisen. Keaty v. Freeport Indonesia, Inc., 503 F.2d 955, 957 (5th Cir.1974). The clause by its terms does not prevent transfer of venue of this case to Missouri; it merely provides that venue "may" lie in Oregon.
Defendant asserts that this clause is unconscionable, in that it was inserted into a contract of adhesion, was not negotiated, was in fine print, and was not understood by the unsophisticated defendant when he signed the lease. Defendant asserts that this case should be dismissed for want of jurisdiction over the person of defendant.
Defendant submitted an affidavit with his motion. The defendant's affidavit states in essence that he is an auto mechanic in Missouri, that he thought he was dealing with a company from New York, not Oregon, that he signed certain documents which he believed were financing agreements and did not realize that he could be sued in Oregon as a result of signing the agreements. Since the plaintiff has not controverted any of these facts by affidavit or otherwise, there are no material issues of fact in dispute.
If the choice of laws clause did not appear in the contract, Missouri law would apply because the contract was made in Missouri and was intended to be performed in Missouri. If Missouri law were applied the clause would be invalidated without further inquiry, since such clauses are void under Missouri law. State of Missouri ex rel. Gooseneck v. Barker, 619 S.W.2d 928, 929 (Mo.Ct.App., 1981) (Such a clause is void as against public policy; contrary interpretation of Missouri law as applied by federal courts in Missouri disapproved).
However, in this case the clause would be invalidated under Oregon law as well, and therefore I am not called upon to decide a "true" conflict of laws question, because the laws of the two states will lead to the same result. In Oregon, a clause such as the one at issue is not void per se, but will be given effect if not "unfair or unreasonable," Reeves v. Chem. Ind. Co., 262 Or. 95, 101, 495 P.2d 729 (1972). The standard of "unfair or unreasonable," which has been enunciated by the Oregon Supreme Court in Reeves, is designed to invalidate clauses such as the one in question here, which is an adhesion contract in which the clause is not negotiated by the parties or is the result of unequal bargaining power:
As previously stated, a contractual clause agreeing on an exclusive forum will not be enforced if it is determined to be unfair or unreasonable. Clauses in *607 contracts which are now termed contracts of adhesion, "i.e., a `take it or leave it' contract and was the product of unequal bargaining power between the parties," are in this category.
Reeves, supra, at 101, 495 P.2d 729, quoting Professor W. Reese, 13 American Journal of Comparative Law 187, 188 (1964). Significantly, the Oregon Supreme Court pointed to the precedent of State ex rel. Kahn v. Tazwell, 125 Or. 528, 266 P. 238 (1928), as one containing a clause which would probably be invalidated under this standard. Reeves, supra, at 101, 495 P.2d 729. The clause in Kahn was contained in an insurance contract entered into in Germany. The insurance company in question was located in Karlsruhe, Germany, and inserted this clause into the insurance contract:
For the fulfillment of this contract only the courts of Karslruhe are competent; as the legal domicile of the company is agreed upon [as] its office at Karlsruhe and for the insured or his legal successor the place mentioned in the application for insurance...
125 Or. 532, 266 P. 238.
The Oregon Supreme Court in Kahn (1928) held that this clause was void; the Oregon Supreme Court in Reeves (1972) pointed to this clause as one which it would probably invalidate under the "unfair or unreasonable" standard. This is in accord with the analysis of Judge Leflar in his treatise on conflicts of law, which the Oregon Supreme Court in Reeves quotes as authoritative, Reeves, supra at 98, 495 P.2d 729:
Choice-of-forum contract provisions are today generally regarded as neither absolutely binding nor absolutely void, but rather as factors which help a court to exercise its discretion on a reasonable basis as to whether its legally existent jurisdiction ought to be exercised. The modern cases say that contracts limiting judicial jurisdiction will be respected if there is nothing unfair or unreasonable about them, but will be disregarded if they are unfair or unreasonable. They are more likely to be sustained if they relate to disputes already arisen or contemplated, but that is not a rigid limitation. They are less likely to be sustained if they appear in adhesion contracts prepared in advance by one of the parties, and will generally be disregarded if genuine inconvenience or inadequacy of remedy would ensue from them.
Leflar, American Conflicts Law 3rd Ed. 1977, pp. 100-101 (Footnotes omitted; emphasis added to reflect parts of passage actually quoted by the Oregon Supreme Court in Reeves.) Thus, the analysis under Oregon law is essentially similar to the analysis of the United States Supreme Court in construing such clauses in admiralty cases, see The BREMEN v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972). Applying these precedents, it is clear that the clause in question in this case is "unfair or unreasonable," and will be disregarded.
As is evidenced by the defendant's affidavit, which is not challenged by plaintiff, there was in fact no bargaining on the clause in question. It was contained in a form contract, in fine print, at the bottom of a page. The defendant had no knowledge of the meaning of the clause. The parties left blank the line on the contract for the appointment of an agent for service of process in Oregon. Since the form contract will be interpreted most strongly against the plaintiff, see Meskimen v. Larry Angell, 286 Or. 87, 93, 592 P.2d 1014 (1979) (Ambiguities in contract interpreted against preparer of contract) accord, Rizal Comm. Banking Corp. v. Putnam, 429 F.2d 1112, 1117-8 (9th Cir.1970), it may be that the parties' failure to appoint such an agent should be interpreted as an intent to void the entire clause. I need not so hold, however, because the clause was manifestly not bargained for by the parties, unequally or otherwise. This was exactly the sort of "take-it-or-leave-it" clause in a contract of adhesion which the Oregon Supreme Court in Reeves has indicated would be disregarded, Reeves, supra, at 101, 495 P.2d 729, under the "unfair or unreasonable" test for forum selection clauses. I will emphasize, *608 however, that the test for the validity of a forum clause, "unfair or unreasonable," is easier to satisfy than the defenses of duress or unconscionability as to the substantive terms of a contract of adhesion. Kolendo v. Jerell, 489 F. Supp. 983, 985 (S.D.W.Va. 1980). I have no evidence before me as to whether the substantive terms of the contract could be invalidated on that ground. See § 2-302, Uniform Commercial Code; Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C.Cir.1965); Bowl-Opp v. Bayer, 255 Or. 318, 322-3, 458 P.2d 435 (1970); Leff, Unconscionability and The Code The Emperor's New Clause, 115 U.Pa.L.Rev. 485 (1967). In light of my disposition of this case, I will not reach that issue. Since the forum selection clause is invalid and the plaintiff has not urged any other basis for a finding of personal jurisdiction over the defendant, this case will be dismissed. Data Disc v. Systems Technology, 557 F.2d 1280, 1286-7 (9th Cir.1977).
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NUMBER 13-14-00473-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
IN RE STATE FARM LLOYDS, RICHARD FREYMANN,
AND AARON AQUILES GALVAN
On Petition for Writ of Mandamus.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Perkes and Longoria
Memorandum Opinion1 Per Curiam
Relators, State Farm Lloyds, Richard Freymann, and Aaron Aquiles Galvan, have
filed a petition for writ of mandamus requesting that this Court direct respondent, the
Honorable Rose Guerra Reyna, Presiding Judge of the 206th District Court of Hidalgo
County, Texas, to withdraw her order denying relators’ verified plea in abatement and to
enter an order abating the suit for damages brought against relators by the real parties in
interest, Yulisa D. Chapa and Reynol Ramos, until sixty days after they provide relators
1 See TEX. R. APP. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not
required to do so.”); TEX. R. APP. P. 47.4 (distinguishing opinions and memorandum opinions).
with a notice letter for their claim stating the specific, separate amounts for the claimed
damages and attorney’s fees. See TEX. INS. CODE ANN. § 541.154 (West, Westlaw
through 2013 3d C.S.) (“Prior Notice of Action”); id. § 541.155 (West, Westlaw through
2013 3d C.S.) (“Abatement”); TEX. R. APP. P. 52.1 (“Commencement” of Original
Proceedings). In addition, relators request that this Court issue immediate temporary
relief staying respondent’s order denying the plea in abatement. See TEX. R. APP. P.
52.10 (“Temporary Relief”).
The Court, having examined and fully considered the petition for writ of mandamus
and the applicable law, is of the opinion that the petition for writ of mandamus should be
denied for the reasons expressed in our opinion in In re State Farm Lloyds, Richard
Freymann, and Nathan Burris, No. 13-14-00347-CV, 2014 WL _____ (Tex. App.—Corpus
Christi Aug. 27, 2014, orig. proceeding) (mem. op.), available at
http://www.search.txcourts.gov/case.aspx?cn=13-14-00348-CV. Accordingly, the Court
DENIES the petition for writ of mandamus and request for immediate temporary relief.
See TEX. R. APP. P. 52.8(d).
PER CURIAM
Delivered and filed the
2nd day of September, 2014.
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952 A.2d 473 (2008)
401 N.J. Super. 563
BLOCK 268, LLC, Plaintiff-Respondent,
v.
CITY OF HOBOKEN RENT LEVELING AND STABILIZATION BOARD, City of Hoboken, Carole McLaughlin, Division Chief City of Hoboken, Department of Human Services, Rent Leveling and Stabilization, Defendants, and
Raul G. Perez, Jr. and Elizabeth L. Perez, Defendants-Appellants.
Docket No. A-2228-06T2.
Superior Court of New Jersey, Appellate Division.
Submitted December 12, 2007.
Decided June 12, 2008.
*474 Raul G. Perez, Jr. and Elizabeth L. Perez, appellants pro se.
Riker, Danzig, Scherer, Hyland & Perretti LLP, Morristown, attorneys for respondent (Michael K. Furey, of counsel and on the brief; Stephanie D. Edelson, on the brief).
Before Judges PARKER, R.B. COLEMAN and LYONS.
The opinion of the court was delivered by
R.B. COLEMAN, J.A.D.
Defendants Raul and Elizabeth Perez (collectively "the Perezes") appeal from a November 8, 2006 order granting plaintiff Block 268, LLC (Block 268) summary judgment against defendants City of Hoboken Rent Leveling and Stabilization Board (the Board), the City of Hoboken (the City), Carole McLaughlin (McLaughlin), the division chief of the Board, and the Perezes (collectively "defendants").[1] Only the Perezes have appealed. After reviewing the record in light of the arguments advanced on appeal, we affirm.
The Perezes are tenants in one of two buildings owned by Block 268, located at 1500 Hudson Street, Hoboken, that are commonly known as the Hudson Tea Buildings. BDLJ Associates, LLC (BDLJ) owned both buildings from 1998 to 2004. In 1998, BDLJ renovated and converted the buildings from industrial and commercial use to residential buildings containing 525 units. In March 2000, Barry Light (Light), wrote to the construction official of Hoboken to give notice of his claim, pursuant to N.J.S.A. 2A:42-84.1, for exemption from the rent control ordinance that would have otherwise applied to the two buildings.
In February 2004, the Perezes entered into an eighteen-month lease with BDLJ *475 for an apartment in the 1500 Hudson Street building. The lease contained a provision indicating that the unit was exempt from the rent control pursuant to the Act. Specifically, paragraph 31 of the Perezes' Lease, entitled "EXEMPTION FROM RENT CONTROL," provides as follows:
The Unit is exempt from the provisions of Hoboken's Rent Control Ordinance and will be exempt from any future rent control, rent stabilization or rent leveling ordinance of the City of Hoboken pursuant to N.J.S.A. 2A:42-84.1 et seq. for a period of thirty years from completion of construction of the building.
Furthermore, immediately prior to the Perezes' execution of the Lease, they executed and acknowledged a "Notice to Prospective Tenants," which also advised them that the Property was exempt from the provisions of the Ordinance. Specifically, the "Notice To Prospective Tenants," signed by Raul Perez on February 3, 2004, provides as follows:
BDLJ Associates, LLC is exempt from the provisions of Hoboken's Rent Control Ordinance and will be exempt from any future rent control, rent stabilization or rent leveling ordinance of the City of Hoboken pursuant to N.J.S.A. 2A:42-84.1 et seq. for a period of thirty years from completion of construction of the building. The undersigned is considering executing a Lease for Unit 1L in the project known as "The Hudson Tea Building" . . . and has been furnished a copy of this notice by the Landlord prior to executing the Lease to the Unit.
In May 2004, BDLJ sold the buildings to Toll Brothers, Inc. Approximately two months later, Toll Brothers sold the buildings to Block 268. In September 2005, Block 268 filed a "Master Deed" converting the apartments to condominiums. Block 268 used a "non-eviction plan" to effectuate the conversion, allowing existing renters to remain in occupancy after the conversion was completed.
The Perezes' lease expired in August 2005, and they signed an option to renew form, indicating that they agreed to continue leasing the unit at an increased rate of $3,050 per month. BDLJ subsequently agreed to change that rate and offered the Perezes a monthly rent of $2,970, an amount not calculated in accordance with the rent control ordinance. Despite executing the option to renew, the Perezes believed their unit was subject to rent control and refused to sign the new lease. On January 15, 2006, the Perezes filed a request with McLaughlin, seeking to have their rent calculated in accordance with the Hoboken Rent Control Ordinance (the Ordinance). In response, McLaughlin informed the Perezes that State law precluded her from imposing a rent control regulation on their dwelling. The Perezes appealed McLaughlin's determination to the Board and requested that the Board determine that their unit "falls under the rent control laws" and that the Board make a rent calculation.
At a hearing on May 10, 2006, the Board entertained arguments from Block 268 and the Perezes. The Board voted in favor of the Perezes, finding that their unit was subject to rent control. That determination was memorialized in a resolution dated June 14, 2006.
On June 22, 2006, Block 268 filed a complaint in lieu of prerogative writs against defendants, seeking a declaratory judgment that its buildings are exempt from rent control pursuant to N.J.S.A. 2A:42-84.5. Thereafter, Block 268 moved for summary judgment seeking an order: (1) declaring its buildings are exempt from rent control until 2030; (2) enjoining the municipal defendants from taking any action *476 that would impair its exemption from rent control; and (3) vacating the Board's resolution. Defendants opposed Block 268's motion.
On August, 28, 2006, the motion judge heard oral argument, issued an oral decision, and entered a written order granting Block 268's motion. On November 8, 2006, the judge issued a detailed written opinion, holding that the buildings were exempt from rent control pursuant to the Rent Control Act (the Act), N.J.S.A. 2A:42-84.1 to -84.6, and that the Legislature had preempted the Board from taking any action that would impair the exemption. The Perezes filed a timely notice of appeal.
On appeal, the Perezes present the following issues:
POINT I: BLOCK 268 HAS FAILED TO SHOW THAT THE PEREZES' APARTMENT IS EXEMPT FROM RENT CONTROL.
POINT II: BLOCK 268 IS INELIGIBLE FOR THE RELIEF GRANTED BY THE ACT.
POINT III: THE PEREZES' MARKET RENT.
For substantially the reasons articulated by Judge Curran in her comprehensive written opinion of November 8, 2006, and for the reasons stated below, we affirm.
Rule 4:46-2 provides that a motion for summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." Appellate courts employ the same standard when reviewing summary judgment orders. Prudential Property & Cas. Ins. v. Boylan, 307 N.J.Super. 162, 167, 704 A.2d 597 (App.Div.1998). Thus, a reviewing court must decide whether there was a genuine issue of material fact. Ibid. If there is no genuine issue of fact, the court will decide whether the trial court's ruling of law was correct. Ibid. In the present case, we are asked to interpret a statute. This is purely a question of law; therefore, our review is de novo. Toll Bros., Inc. v. Twp. of W. Windsor, 173 N.J. 502, 549, 803 A.2d 53 (2002).
N.J.S.A. 2A:42-84.2 exempts newly constructed multiple dwellings from rent control or rent leveling ordinances. That statute provides:
In any municipality which has enacted or which hereafter enacts a rent control or rent leveling ordinance, other than under the authority of P.L.1966, c. 168 (C.2A:42-74 et seq.), those provisions of the ordinance which limit the periodic or regular increases in base rentals of dwelling units shall not apply to multiple dwellings constructed after the effective date of this act, for a period of time not to exceed the period of amortization of any initial mortgage loan obtained for the multiple dwelling, or for 30 years following completion of construction, whichever is less.
The term "multiple dwelling" refers to "any building . . . containing four or more dwelling units, other than dwelling units constructed for occupation by senior citizens, rented or offered for rent to four or more tenants or family units." N.J.S.A. 2A:42-84.1. "`Constructed' means constructed, erected or converted but excludes rehabilitation of premises rented previously for residential purposes without an intervening use for other purposes for a period of at least two years prior to conversion." N.J.S.A. 2A:42-84.1b. The effective date of the Act is June 25, 1987. In the present case, Block 268's buildings qualify as "multiple dwellings" and were constructed after the statute's effective date. Therefore, the buildings qualify for exemption from rent control.
The Perezes argue that Block 268 is not entitled to a rent control exemption because *477 it failed to comply with the Act's filing requirements, which are as follows:
The owner of any multiple dwelling claiming an exemption from a rent control or rent leveling ordinance pursuant to this act shall file with the municipal construction official, at least 30 days prior to the issuance of a certificate of occupancy for the newly constructed multiple dwelling, a written statement of the owner's claim of exemption from an ordinance under this act, including therein a statement of the date upon which the exemption period so claimed shall commence, such information as may be necessary to effectively locate and identify the multiple dwelling for which the exemption is claimed, and a statement of the number of rental dwelling units in the multiple dwelling for which the exemption is claimed.
[N.J.S.A. 2A:42-84.4.]
The Perezes assert that Light's letter to the Hoboken municipal construction official did not satisfy the aforementioned requirement because it was filed individually by Light, and not on behalf of BDLJ. This argument was not raised below; therefore, we need not consider the merits of this claim. Nieder v. Royal Indem. Ins. Co., 62 N.J. 229, 234, 300 A.2d 142 (1973). Nevertheless, we comment briefly on this issue.
First, Light's letter claiming the exemption was addressed to "BDLJ Associates, LLC," and to the municipal construction official. Although the record does not disclose precisely what connection Light has to BDLJ, the referenced statutory provision concerns an exemption from rent control that is only available to "the owner of any multiple dwelling claiming exemption from a rent control or rent leveling ordinance" and it is reasonably clear that Light is the owner or is claiming the exemption on the owner's behalf. If there is only one unavoidable resolution of an alleged disputed issue of fact, then a genuine issue of material fact does not exist. Liberty Surplus Ins. Corp., Inc. v. Nowell Amoroso, P.A., 189 N.J. 436, 446, 916 A.2d 440 (2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540, 666 A.2d 146 (1995).
It is undisputed that BDLJ was the owner, that it converted the premise from industrial and commercial uses to residential, and that it was sent a copy of Light's notice claiming the exemption. There is no evidence that BDLJ or any person on its behalf ever challenged or objected to Light's authority to file with the municipal construction official the written statement of the owner's claim of exemption. We agree with plaintiffs that Light should have disclosed the nature of his interest in the property or in BDLJ, however, his failure to have done so appears to have been a hypertechnical omission or oversight that does not nullify the effect of his act. Any technical non-conformity is excusable under the equitable doctrine of substantial compliance.[2]Bernstein v. Bd. of Trs. of Teachers' Pension & Annuity Fund, 151 N.J.Super. 71, 76-77, 376 A.2d 563 (App.Div.1977).
In their appeal to the Board and at times in their papers on this appeal, the Perezes appear to acknowledge or presume that BDLJ obtained the exemption in 2000, but they contend it lost that exemption or it lapsed either because the filing was defective, because the exemption was not transferable or because the conversion to condominiums constituted a forfeiture. The argument that the filing was defective, that is, that BDLJ failed to gain *478 the exemption because it did not include information pertaining to the building's mortgage financing, is flawed. The Act does not require an owner to include this information when claiming an exemption. See N.J.S.A. 2A:42-84.4. On the other hand, it is clear that the duration of the exemption may be affected by the term of the mortgage. The duration of the exemption is the lesser of two periods: (1) the period of amortization, or (2) thirty years from completion of construction. N.J.S.A. 2A:42-84.2a and b. That does not mean that the buildings are not exempt from rent control if information is not provided concerning the period of amortization. It means if the period of amortization is less than thirty years, the exemption is limited to that lesser period.
Next, the Perezes argue that if Block 268 or its predecessors succeeded in perfecting the rent control exemption, it was lost when title was transferred or the exemption lapsed in 2005 when Block 268 converted the units from apartments to condominiums. We agree with the trial court's rejection of that proposition. The exemption runs with the real estate. As stated above, N.J.S.A. 2A:42-84.2 provides that municipal rent control ordinances "shall not apply to multiple dwellings constructed after [June 25, 1987]." Clearly expressing the intent of the Legislature, N.J.S.A. 2A:42-84.5, states:
It is the intent of P.L.1987, c. 153 (C.2A:42-84.1 et seq.), that the exemption from rent control or rent leveling ordinances afforded under P.L.1987, c. 153 (C.2A:42-84.1 et seq.) shall apply to any form of rent control, rent leveling or rent stabilization, whether adopted now or in the future, and by whatever name or title adopted, which would limit in any manner the periodic or regular increases in base rentals of dwelling units of multiple dwellings constructed after the effective date of P.L.1987, c. 153 (C.2A:42-84.1 et seq.). No municipality, county or other political subdivision of the State, or agency or instrumentality thereof, shall adopt any ordinance, resolution, or rule or regulation, or take any other action, to limit, diminish, alter or impair any exemption. . . .
Likewise, N.J.S.A. 2A:42-84.6 provides that "[t]he Legislature . . . declares it to be public policy of this State that, within the limitations imposed by this act, the exemptions granted under this act shall not be limited, diminished, altered, or impaired during the period of exemption afforded."
Therefore, the trial court properly concluded that the language of the Act is clear and unambiguous. The statute is to be interpreted consistent with its plain meaning. Lozano v. Frank DeLuca Constr., 178 N.J. 513, 522, 842 A.2d 156 (2004).
Notably, there is no provision in the Act indicating that a multiple dwelling is no longer exempt from a rent control ordinance upon a transfer of title or a conversion from a rental premises to a condominium. By contrast, the language of the Act makes it clear that the Board may not limit or impair the exemption of multiple dwellings constructed after the effective date of the Act. Thus, the Act preempted municipalities from enacting or enforcing rent control ordinances such as the ordinance the Board found applicable to the Perezes' unit. Because State law preempted this field, the City and the Board cannot exercise a power that contradicts the policy established by the Legislature. State v. Crawley, 90 N.J. 241, 248, 447 A.2d 565 (1982); Auto-Rite Supply Co. v. Mayor & Committeemen of Woodbridge, 25 N.J. 188, 194, 135 A.2d 515 (1957).
Despite the clear language of the Act, the Perezes suggest that the conversion of apartments within the Hoboken Tea Building to condominiums diminished the rental *479 housing supply and thereby frustrated the legislative purpose of the Act. They rely on N.J.S.A. 2A:42-84.5b and -84.6 to support their position. N.J.S.A. 2A:42-84.5b provides that "[t]he Legislature deems it necessary for the public welfare to increase the supply of newly constructed rental housing to meet the need for such housing in New Jersey." N.J.S.A. 2A:42-84.6 states that "the intent of this Act is to establish an experimental program whereby the construction of multiple dwellings in this State shall be encouraged and the marketability of those multiple dwellings shall be maintained[.]"
Although Block 268 converted a number of units to condominiums, it continues to rent or offer for rent over 100 units, not including units that are being rented by other owners of condominiums in their buildings. Thus, the building retains its status as a "multiple dwelling," and it remains exempt from the rent control ordinance. Moreover, the renovation did increase the supply of newly constructed rental housing. By continuing to rent and offer for rent several of its units, the conversion to condominiums has not frustrated the Legislative intent outlined in N.J.S.A. 2A:42-84.5b and -84.6. Nor did the conversion decrease the marketability of the units. To the contrary, maintaining the exemption of the building upon transfer of title to subsequent owners makes it more marketable. A prospective buyer is more likely to purchase a building knowing that its units will not be subject to rent control. Indeed, the exemption enhances a building's marketability. As the trial court observed, the Legislature chose to effectuate its policies through the grant of an exemption from rent control. If collateral consequences resulting from that choice are unacceptable, it is for the Legislature to rectify by statutory amendment.
Because we find that Block 268 remains exempt from the Ordinance, there is no need to consider the Perezes' third point on appeal regarding the calculation of the base rent. In sum, although the record does not reveal Barry Light's relationship to BDLJ at the time he claimed the exemption, that does not raise a genuine dispute as to a material fact. We also note that the record before us does not reveal the terms of the mortgage, if any, and that the August 28, 2006 order states the exemption is thirty years. The statute provides, however, that the exemption is thirty years or the initial period of amortization if that period is less than thirty years.
In the event it is established that the initial period of amortization is less than thirty years, the order may be amended accordingly. With that qualification, the order granting summary judgment is affirmed, and we do not retain jurisdiction.
NOTES
[1] On August 28, 2006, Judge Barbara A. Curran entertained oral argument on the motion. On that date, the judge issued an oral decision and entered a written order granting Block 268's motion, and expressly stating the court's intention to supplement the order with a written opinion. Thereafter, Judge Curran entered the November 8, 2006 Order and Opinion from which the Perezes appeal.
[2] In its brief, Block 268 contends that "BDLJ precisely complied with the requirements of N.J.S.A. 2A:42-54.4 in two claim letters it filed for the two Hudson Tea Buildings[.]" It asserts "the letters were sent on behalf of BDLJ, the owner[.]"
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720 S.W.2d 886 (1986)
Michael WERNEKE, et ux., Appellant,
v.
Robert SEABURY, Seabury Homes, Inc., Robert Seabury Co. and McKenney-Seabury Co., Appellees.
No. 2-86-102-CV.
Court of Appeals of Texas, Fort Worth.
December 3, 1986.
Clayton Kramer, Wichita Falls, for appellants.
Nutt, Brooks & Campbell, and C. Dan Campbell, Wichita Falls, for appellees.
Before HOPKINS, FARRIS and KELTNER, JJ.
OPINION
KELTNER, Justice.
The Wernekes appeal from a summary judgment granted in favor of one of the defendants in the trial court below. The summary judgment cancelled the notice of lis pendens filed by Werneke, as notice of their pending suit against appellees involving an allegedly fraudulent conveyance. The Wernekes' point of error is not decided, as this court is without jurisdiction to hear this interlocutory appeal.
As a result, the appeal is dismissed for lack of jurisdiction.
Werneke is a judgment creditor of Seabury Homes, Inc. Specifically, Mr. and Mrs. Werneke filed a previous lawsuit against Seabury Homes, Inc., alleging a deceptive trade practice act violation. That suit resulted in a judgment in favor of the Wernekes in the approximate amount of $69,000.00. After the jury verdict was entered but before the judgment was entered, a foreclosure sale was conducted, which resulted in the sale of one of Seabury Homes' tracts of land. McKenney-Seabury Co. was the purchaser at the foreclosure sale and also held the deed of trust on the property.
*887 Thereafter, the Wernekes brought suit against Seabury Homes, Inc., McKenney-Seabury, and others, alleging that the foreclosure sale constituted a fraudulent conveyance. The Wernekes claim that Seabury Homes and McKenney-Seabury are related companies with the controlling shareholder being Robert Seabury. Additionally, the Wernekes claim that the tract of land which was the subject of the sale is the primary asset of Seabury Homes, which is otherwise insolvent.
After this lawsuit was filed, the Wernekes also filed a notice of lis pendens on the property pursuant to TEX.PROP. CODE ANN. sec. 12.007 (Vernon 1984). McKenney-Seabury filed a motion for summary judgment, asserting that the notice of lis pendens was not proper as this fraudulent conveyance suit only collaterally affected title to the tract.
The trial court granted McKenney-Seabury's motion for partial summary judgment and entered an order cancelling the notice of lis pendens. The underlying action on the fraudulent conveyance remains undecided. Additionally, other parties plaintiff and defendant remain in the underlying lawsuit.
The Wernekes candidly admit that the granting of motion for summary judgment is neither a final order nor falls within the statutory exceptions for interlocutory appeals. Instead, they assert that the granting of the summary judgment operates as the functional equivalent of the overruling of a temporary injunction. They further argue that this court must look past the form of the order to its actual substance in determining whether the order is appealable.
We hold that the granting of a partial summary judgment is not an appealable order and as a result, this court does not have jurisdiction to review the trial court's action. However, we recognize that an order cancelling lis pendens can be appealed given the correct circumstances. Hughes v. Houston Northwest Medical Center, 647 S.W.2d 5, 7 (Tex.App.Houston [1st Dist.] 1982, no writ); Lane v. Fritz, 404 S.W.2d 110, 112 (Tex.Civ.App.Corpus Christi 1966, no writ). However, the facts in this case are distinguishable from those cases. For example, the Hughes case dealt with an appeal from a trial court order granting what amounted to a temporary injunction. Temporary injunctions are expressly appealable by statute. TEX.CIV.PRAC. & REM.CODE ANN. sec. 51.014(4) (Vernon 1986). The Lane case did involve an appeal of a summary judgment. However, the summary judgment in that case was a final judgment and not a partial summary judgment as in the instant case.
The Wernekes further argue that the effect of the partial summary judgment in this case, is the same effect as an order denying or dissolving a temporary injunction. Specifically, Wernekes contend that a notice of lis pendens functions in the same manner as a temporary injunction, "forbidding the sale of the property." In support of this argument, the Wernekes cite Whatley v. King, 151 Tex. 220, 249 S.W.2d 57 (1952) and Pilot Engineering Co. v. Robinson, 470 S.W.2d 311 (Tex.Civ.App.Waco 1971, no writ). We do not believe that the court's order granting a partial summary judgment can be construed as an order overruling a temporary injunction. At the outset, a notice of lis pendens cannot be construed as a temporary injunction. Temporary injunctions are issued by court orders which contain mandatory safeguards. TEX.CIV.PRAC. & REM.CODE ANN. sec. 65.021 (Vernon 1986). In marked contrast to the procedural complexities of the injunction statute, lis pendens is a fairly simple device enacted as part of the property code. Specifically, lis pendens is a signed statement by an attorney stating the particulars of the underlying cause of action. The court is not involved in either the filing or the issuance of the notice of lis pendens. In fact, the county clerk with whom the notice is filed, must file the notice of lis pendens without further inquiry. TEX. PROP.CODE ANN. sec. 12.007 (Vernon 1984).
*888 The Whatley and Pilot Engineering cases are clearly distinguishable. In Whatley, the Supreme Court found that a court order, directing appellant to turn over property to appellees was a mandatory injunction and appealable. However, the Supreme Court went on to say that the court's order contained "all the elements of finality so far as the petitioner is concerned." The instant case is clearly distinguishable. First, the trial court issued no order requiring action or prohibiting action on behalf of the Wernekes. Second, the order is clearly not final. The Pilot Engineering case is also distinguishable. In that case, the appellant was ordered to pay a sum of money into the registry of the court pending final litigation of the lawsuit. As a result, the Eastland Court of Appeals had no problem in finding that the order was a temporary mandatory injunction. The facts in the instant situation are not comparable. An order granting or cancelling a notice of lis pendens is not in the form of an injunction. We recognize that the injunction and lis pendens statutes are co-equal, designed by the legislature to accomplish differing purposes. Lis pendens is designed merely to protect innocent buyers from purchasing land subject to litigation. Kropp v. Prather, 526 S.W.2d 283, 287 (Tex.Civ.App.Tyler 1975, writ ref'd n.r.e.). In essence, lis pendens promotes the alienability of land because it promotes certainty of title.
On the other hand, an injunction, with all of its procedural safeguards, would be an absolute prohibition to the alienability of land. Because it is such a harsh provisional remedy, the legislature has provided very specific safeguards for its use. In the instant case, the Wernekes could have applied for an injunction regarding the transfer of the subject tract of property. Wernekes' attorney frankly admitted in oral argument that this course of action was considered, but abandoned, due to the Wernekes' inability to post required bond.
As a result, this appeal is dismissed for lack of jurisdiction.
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952 A.2d 764 (2008)
288 Conn. 326
William FARADAY
v.
COMMISSIONER OF CORRECTION.
No. 17694.
Supreme Court of Connecticut.
Argued February 13, 2007.
Decided August 12, 2008.
*767 Neil Parille, assistant attorney general, with whom, on the brief, were Richard Blumenthal, attorney general, and Henri Alexandre, assistant attorney general, for the appellant (respondent).
Kim Coleman, with whom, on the brief, was Erin M. Kallaugher, for the appellee (petitioner).
BORDEN, KATZ, PALMER, VERTEFEUILLE and ZARELLA, Js.[*]
PALMER, J.
Under Estelle v. Gamble, 429 U.S. 97, 97 S. Ct. 285, 50 L. Ed. 2d 251 (1976), prison officials will be found to have violated the eighth amendment to the United States constitution[1] if, by virtue of their deliberate indifference to an inmate's serious medical needs, they refuse to provide care or treatment to that inmate. The petitioner, William Faraday, filed a petition for a writ of habeas corpus, claiming that the respondent, the commissioner of correction, had violated his eighth amendment rights by refusing to provide him with certain medical care for a chronic back condition. The habeas court rendered judgment granting the petition, and the Appellate Court, with one judge dissenting, affirmed the judgment of the habeas court. Faraday v. Commissioner of Correction, 95 Conn.App. 1, 19, 894 A.2d 1048 (2006). On appeal following our grant of certification,[2] the respondent claims that the Appellate Court improperly affirmed the judgment of the habeas court because the evidence was insufficient to support that court's finding that the respondent had been deliberately indifferent to the petitioner's medical needs. We agree with the respondent and, accordingly, reverse the judgment of the Appellate Court.
The following relevant facts and procedural history are set forth in the opinion of the Appellate Court. "The petitioner pleaded guilty ... to sexual assault in the third degree and risk of injury to a child. Following the trial court's imposition of a sentence in accordance with the plea,[3] the petitioner was charged with violating two conditions of his probation. The [trial] court concluded that the petitioner had violated both conditions, revoked the petitioner's probation and ordered the petitioner to serve the twelve year sentence originally imposed. [See footnote 3 of this opinion. This court] upheld the [trial] court's judgment. State v. Faraday, 268 Conn. 174, [207] 842 A.2d 567 (2004).
"In December, 2002, the petitioner filed a petition for a writ of habeas corpus.[4] The petitioner alleged that the conditions of his confinement were inhumane or dangerous to him because the respondent denied him necessary medical care for a back condition. The petitioner alleged, inter alia, that a magnetic resonance [image] (MRI) ... of his back and an operation to repair herniated discs in his back were medically necessary, and that the respondent *768 had denied his requests for the same." Faraday v. Commissioner of Correction, supra, 95 Conn.App. at 3, 894 A.2d 1048.
In April, 2003, the habeas court conducted an evidentiary hearing on the petition. At the hearing, the petitioner testified that, approximately ten years earlier, he had undergone an MRI of his lower back, which indicated that he suffered from a herniated disc. The petitioner further testified that, although he had been unsuccessful in obtaining a copy of the results of the MRI, he did recall that the MRI had been ordered by a physician by the name of Geiter, who had done so as a favor to another physician who had been treating the petitioner for an unrelated medical condition. The petitioner did not present any other witnesses or medical evidence.
The respondent presented the testimony of Edward Blanchette, the clinical director of medicine of the department of correction. Blanchette, a physician with approximately thirty years experience and who is board certified in internal medicine and infectious disease, testified that an MRI of the lower back is medically required only when neurological findings indicate that the patient is a candidate for surgery. Blanchette further testified that, on the basis of his evaluation of the petitioner's medical records, the petitioner met none of the criteria for back surgery, and, therefore, he was not a candidate for an MRI. Blanchette also testified that the petitioner had been evaluated by a number of physicians, including several with expertise in orthopedics, and all of them agreed that the petitioner "is not someone [who] requires an MRI of his back or surgery...." Blanchette explained that, by the petitioner's own admission, his back pain "comes and goes," that the petitioner would be suffering from persistent pain and discomfort if he had a herniated disc requiring surgery, and that the medically appropriate treatment for the petitioner's intermittent discomfort is muscle relaxants, pain medication and bed rest to alleviate the symptoms.[5] Blanchette further stated that the petitioner suffered from no muscle atrophy or reflex asymmetry, that there was nothing to indicate that the petitioner required surgical intervention, and that the petitioner had responded favorably to conservative treatment. Finally, Blanchette testified that he would authorize an MRI or a neurological consultation if such action became medically necessary due to a change in the petitioner's condition.[6]
Following up on the petitioner's testimony that he had been unable to obtain a copy of the results of the MRI that had been performed on him approximately ten years earlier, the habeas court asked Blanchette whether he had consulted with the physician who purportedly had ordered the MRI. Blanchette testified that he personally had contacted the physician whom the petitioner originally identified as having ordered the MRI, but that physician had *769 no record of treating the petitioner. Blanchette further testified that he also had requested the petitioner's medical records from the two hospitals at which the petitioner had claimed to have received treatment for his back, namely, Manchester Memorial Hospital and Saint Francis Hospital and Medical Center. Neither hospital, however, had any record of an MRI having been performed on the petitioner. Blanchette also stated that, prior to the hearing on the habeas petition, the petitioner never had mentioned a physician named Geiter.
When the habeas court asked Blanchette whether it would be worthwhile to attempt to locate Geiter, Blanchette responded that, although it might be interesting to know the results of the MRI that purportedly had been performed on the petitioner ten years earlier, those results would have no bearing on Blanchette's opinion with respect to the petitioner's care and treatment. Blanchette explained that, even if the MRI indicated that the petitioner had a herniated disc, in light of his present symptoms, the petitioner still would not be a candidate for another MRI or for surgery, and, consequently, there would be no reason to order a neurosurgical consultation. Finally, Blanchette testified that the treatment that the petitioner was receiving for his back pain comported fully with accepted medical standards.
At the conclusion of the hearing, the habeas court issued an oral decision rejecting the petitioner's claim that the respondent had been deliberately indifferent to the petitioner's medical needs. Expressly crediting Blanchette's expert testimony, the court concluded that neither an MRI nor disc surgery was necessary. Accordingly, the court dismissed the petition.
Thereafter, the petitioner filed a motion for reconsideration. In support of his motion, the petitioner alleged that, subsequent to the dismissal of his habeas petition, he had obtained a report detailing the results of a 1992 computed tomographic (CT) scan which, according to the petitioner, substantiated his claim that he suffered from a herniated disc. In May, 2003, the habeas court granted the petitioner's motion, and, in February, 2005, the court conducted a second evidentiary hearing on the petition.[7] The petitioner did not testify at the hearing but introduced into evidence a transcript of his testimony at the earlier proceeding. The petitioner also introduced into evidence the results of the 1992 CT scan and, in addition, the results of an MRI that had been performed on October 15, 2003, following the first hearing.[8] The 1992 report detailing the results of the CT scan indicated that the petitioner suffered from "a central and right sided herniated migrated disc" at the L5-S1 (fifth lumbar and first sacral) vertebrae, which are located in the lower back. The diagnostic report detailing the findings of the 2003 MRI indicated that the petitioner suffered from "[d]egenerative disc disease with mild diffuse disc bulge at L4-5 [fourth and fifth lumbar vertebrae]" and "[s]mall central disc protrusion with degenerative disc disease at L5-S1," and *770 that there was "[n]o evidence of any disc extrusion...."[9]
Blanchette did not testify at the second hearing, but the respondent introduced Blanchette's affidavit into evidence. In the affidavit, Blanchette stated that the 2003 MRI confirmed his original determination that the petitioner was not a candidate for surgery. Blanchette specifically stated in the affidavit: "With respect to an MRI, it was my opinion [at the April, 2003 hearing] that this was unnecessary for pre-surgical evaluation given that [the petitioner] was not a surgical candidate in view of [the] clinical findings. Since multiple past X-rays had documented only mild to moderate degenerative joint disease with no clinically significant disc herniation, an MRI was not needed for diagnostic considerations. A subsequent MRI that was done on October 15, 2003, confirmed my clinical impression."
Following the close of evidence, the respondent asserted that the evidence supported only one conclusion, that is, that the respondent had been treating the petitioner's back condition in a medically appropriate manner. The respondent further noted that, several months earlier, the petitioner had been provided with a copy of the 2003 MRI for the purpose of having it evaluated by a medical expert, but the petitioner had failed to obtain such an evaluation. According to the respondent, the record was devoid of evidence that the care and treatment that the petitioner received was inadequate or inappropriate, let alone that the respondent had demonstrated deliberate indifference to the petitioner's medical needs.
In an oral decision following the parties' arguments, the habeas court granted the petition. The habeas court expressed "great respect" for Blanchette, but noted that Blanchette was not an expert in neurology or neurosurgery and that he never had performed a "hands-on physical examination of the petitioner." The habeas court also observed that, although the petitioner had failed to adduce the testimony or affidavit of a medical expert, "common sense" led the court to conclude that the petitioner needed a further evaluation of his back. Specifically, the habeas court stated: "I have the [1992 CT scan results] which [talk] about a disc herniation at the [fifth lumbar and first sacral vertebrae], and the 2003[MRI] report talks about the disc protrusion with degenerative disc disease at [that same location]. So the two track each other.... And based [on] that, there is sufficient evidence, in [the] court's view, to have a neurological evaluation by a neurologist or a neurosurgeon ... of the petitioner." In reaching its conclusion, the habeas court also observed that "it is not a major thing to have [the petitioner] examined and evaluated by a neurologist or a neurosurgeon, who, in addition to reviewing [the relevant] documents, will be able to conduct a ... physical examination [of the petitioner]." The habeas court further noted that the respondent's "failure to do so or the refusal to do so seems to [represent] rigidity by the [respondent] that is unnecessary," a rigidity that, according *771 to the court, the respondent had demonstrated in another, unrelated habeas case.[10] Finally, the court concluded that, because of the "substantial probability that the petitioner has a herniated disc," the respondent's refusal to grant the petitioner's request for an examination by a specialist reflected her "deliberate indifference to the [petitioner's] medical needs...." The court thereupon directed the respondent "to have the petitioner evaluated for his disc or back problem by a neurosurgeon or a neurologist to determine what course of action should be taken, if any." The court subsequently granted the respondent's petition for certification to appeal.
On appeal to the Appellate Court, the respondent claimed that the habeas court improperly had ordered her to provide the petitioner with an evaluation by a neurologist or a neurosurgeon because (1) the habeas court did not make a finding that the petitioner suffered from a serious medical condition, (2) even if the habeas court had made such a finding, it was not supported by the evidence, and (3) the evidence was inadequate to establish that the respondent had demonstrated deliberate indifference to the medical needs of the petitioner. Faraday v. Commissioner of Correction, supra, 95 Conn.App. at 8, 13, 894 A.2d 1048. The Appellate Court, with one judge dissenting, rejected the respondent's claims and affirmed the judgment of the habeas court. Id., at 19, 894 A.2d 1048.
With respect to the respondent's contention that the evidence was inadequate to support the habeas court's finding of deliberate indifference, the Appellate Court majority determined that the evidence of the petitioner's condition, coupled with the respondent's refusal to provide him with an evaluation by a neurologist or a neurosurgeon, was sufficient to warrant the habeas court's conclusion.[11] In reaching its determination, the Appellate Court majority stated that the habeas court had acted within its discretion in "look[ing] unfavorably" on Blanchette's evaluation of the petitioner's condition because Blanchette was not an expert in neurology or neurosurgery. Id., at 15, 894 A.2d 1048. The Appellate Court majority further explained that the issues presented by the petitioner's claim were not so complex as to require expert testimony concerning the nature of the care and treatment that the petitioner needed, and, therefore, the habeas court reasonably had relied on its *772 "commonsense view of the evidence" in concluding that the respondent's handling of the petitioner's back condition satisfied the deliberate indifference standard. (Internal quotation marks omitted.) Id., at 16, 894 A.2d 1048. Specifically, the Appellate Court majority stated: "The [habeas] court made ample findings concerning (1) the fact that the treatment afforded to the petitioner had not alleviated his physical condition or the pain occasioned by it, (2) the extent and nature of the petitioner's disc condition and (3) the respondent's repeated refusal to provide the petitioner with the evaluative services of a neurologist or a neurosurgeon. On the basis of these findings, we conclude that the petitioner demonstrated that the respondent possessed a culpable state of mind. The [habeas] court reasonably could have concluded that prison officials were aware of the pain being experienced by the petitioner and disregarded a substantial risk that the petitioner's painful condition would either continue or worsen under the admittedly `conservative' course of treatment being provided to him. The [habeas] court reasonably could have inferred that the respondent's denials of the petitioner's repeated request for further medical evaluation or treatment reflected a reckless disregard for the petitioner's suffering and not, as the respondent asserts, merely the respondent's `good faith' medical decisions." Id., at 18-19, 894 A.2d 1048.
Judge Schaller dissented, concluding, inter alia, that there was "no evidence whatsoever supporting [the habeas court's] determination of deliberate indifference on the part of the respondent...." Id., at 23, 894 A.2d 1048 (Schaller, J., dissenting). Judge Schaller explained: "The [habeas] court cited no evidence of deliberate indifference, nor could it because none was offered, in reaching its conclusion. The sole evidence of the way the respondent had managed this situation was Blanchette's earlier testimony that neither surgery nor further evaluations were medically appropriate. Nonetheless, the [habeas] court volunteered its personal opinion that the respondent was displaying rigidity by refusing to authorize a consultation. Reaching even further outside the record in this case, the court bolstered its speculation by stating that it had seen this rigidity before in ... an[other] unrelated case concerning sex offender classification." (Internal quotation marks omitted.) Id. We agree with Judge Schaller that the record does not support the habeas court's conclusion that the respondent acted with deliberate indifference to the petitioner's medical needs by refusing to have him examined by a neurologist or neurosurgeon.
We begin our analysis with the standard of review. "The habeas court is afforded broad discretion in making its factual findings, and those findings will not be disturbed unless they are clearly erroneous.... The application of the habeas court's factual findings to the pertinent legal standard, however, presents a mixed question of law and fact, which is subject to plenary review." (Citation omitted.) Duperry v. Solnit, 261 Conn. 309, 335, 803 A.2d 287 (2002).
"The [e]ighth [a]mendment prohibits the infliction of cruel and unusual punishments. U.S. Const. amend VIII. This includes punishments that involve the unnecessary and wanton infliction of pain. Gregg v. Georgia, 428 U.S. 153, 173 [96 S. Ct. 2909], 49 L. Ed. 2d 859 (1976). In order to establish an [e]ighth [a]mendment claim arising out of inadequate medical care, a prisoner must prove deliberate indifference to [his] serious medical needs. Estelle v. Gamble, [supra, 429 U.S. at 104, 97 S. Ct. 285]. The standard of deliberate *773 indifference includes both subjective and objective components. First, the alleged deprivation must be, in objective terms, sufficiently serious. Hathaway v. Coughlin, 37 F.3d 63, 66 (2d Cir.1994) [cert. denied sub nom. Foote v. Hathaway, 513 U.S. 1154, 115 S. Ct. 1108, 130 L. Ed. 2d 1074 (1995)].... Second, the [government official] must act with a sufficiently culpable state of mind. Id. An official acts with the requisite deliberate indifference when that official knows of and disregards an excessive risk to inmate health or safety; the official must both be aware of facts from which the inference could be drawn that a substantial risk of serious harm exists, and he must also draw the inference. Farmer v. Brennan, 511 U.S. 825, 837 [114 S. Ct. 1970], 128 L. Ed. 2d 811 (1994)."[12] (Internal quotation marks omitted.) Chance v. Armstrong, 143 F.3d 698, 702 (2d Cir.1998). Thus, "an official's failure to alleviate a significant risk that he should have perceived but did not [does not violate the eighth amendment]." Farmer v. Brennan, supra, at 838, 114 S. Ct. 1970.
Accordingly, to establish a claim of deliberate indifference in violation of the eighth amendment, a prisoner must prove that the officials' actions constituted "more than ordinary lack of due care for the prisoner's interests or safety." Whitley v. Albers, 475 U.S. 312, 319, 106 S. Ct. 1078, 89 L. Ed. 2d 251 (1986). "`[D]eliberate indifference' is a stringent standard of fault"; Board of the County Commissioners v. Brown, 520 U.S. 397, 410, 117 S. Ct. 1382, 137 L. Ed. 2d 626 (1997); requiring proof of "a state of mind that is the equivalent of criminal recklessness." (Internal quotation marks omitted.) Hernandez v. Keane, 341 F.3d 137, 144 (2d Cir.2003), cert. denied, 543 U.S. 1093, 125 S. Ct. 971, 160 L. Ed. 2d 905 (2005); see Farmer v. Brennan, supra, 511 U.S. at 839-40, 114 S. Ct. 1970 ("subjective recklessness as used in the criminal law is a familiar and workable standard that is consistent with the [c]ruel and [u]nusual [p]unishments [c]lause ... and we adopt it as the test for `deliberate indifference' under the [e]ighth [a]mendment"). Consequently, "a complaint that a physician has been negligent in diagnosing or treating a medical condition does not state a valid claim of medical mistreatment under the [e]ighth [a]mendment. Medical malpractice does not become a constitutional violation merely because the victim is a prisoner." Estelle v. Gamble, supra, 429 U.S. at 106, 97 S. Ct. 285. In other words, "negligence, even if it constitutes medical malpractice, does not, without more, engender a constitutional claim." Chance v. Armstrong, supra, 143 F.3d at 703. "At the same time, however, while mere medical malpractice is not tantamount to deliberate indifference, certain instances of medical malpractice may rise to the level of deliberate indifference; namely, when the malpractice involves culpable recklessness, i.e., an act or a failure to act by the prison doctor that evinces a conscious disregard of a substantial risk of serious harm." (Internal quotation marks omitted.) Id.
Finally, in defending against a claim of deliberate indifference, "[p]rison officials may ... introduce proof that they were not ... aware [that a substantial risk of harm existed], such as testimony that *774 `they knew the underlying facts but believed (albeit unsoundly) that the risk to which the facts gave rise was insubstantial or nonexistent.' [Farmer v. Brennan, supra, 511 U.S. at 844, 114 S. Ct. 1970]. Thus, in Johnson v. Wright, 412 F.3d 398, 404 (2d Cir.2005), [the Second Circuit Court of Appeals] held that a jury could infer the absence of a sufficiently culpable state of mind if the jury believed that the defendant denied the plaintiff medical treatment `because the defendant ... sincerely and honestly believed ... that applying [a prison policy mandating the denial of treatment] was, in [the] plaintiff's case, medically justifiable.' ... The defendant's belief that his conduct poses no risk of serious harm (or an insubstantial risk of serious harm) need not be sound [as] long as it is sincere. Thus, even if objectively unreasonable, a defendant's mental state may be nonculpable." (Citation omitted.) Salahuddin v. Goord, 467 F.3d 263, 281 (2d Cir.2006).
Applying these principles to the present case, we conclude that the habeas court reasonably could not have found that the respondent was deliberately indifferent to the petitioner's serious medical needs. First, the record does not support the conclusion that the care and treatment that Blanchette recommended did not meet applicable medical standards. We acknowledge that an inmate seeking to establish an eighth amendment violation is not always required to present evidence that his treatment fell below the requisite standard of care because, even without such testimony, the facts may be sufficiently compelling to permit a finding of deliberate indifference by prison officials. See, e.g., Hathaway v. Coughlin, supra, 37 F.3d at 68. Contrary to the determination of the Appellate Court majority, however, we conclude that this is not such a case. We therefore disagree with the Appellate Court majority that the habeas court, after comparing the results of the 1992 CT scan and the 2003 MRI, reasonably relied on its own "common sense" in concluding that the petitioner's back condition was so severe that an evaluation by a neurologist or a neurosurgeon was necessary to determine whether surgery was required. We simply do not accept the petitioner's claim that that evidence so clearly and unequivocally indicated the need for such an evaluation that the habeas court reasonably could have found that Blanchette's refusal to order it was improper. In other words, we are not persuaded that the habeas court was qualified, on the basis of the evidence presented, to render its own opinion that such an evaluation was medically necessary.
The petitioner, moreover, had ample opportunity to seek to demonstrate the need for an evaluation by a neurologist or neurosurgeon. For example, several months before the hearing on the petitioner's motion for reconsideration, counsel for the petitioner had been provided a copy of the results of the petitioner's 2003 MRI so that the petitioner could have it evaluated by an expert. For whatever reason, the petitioner never presented any testimony, by way of affidavit or otherwise, from such an expert. Having failed to produce evidence tending to establish that the care he received was medically inappropriate, the petitioner cannot prevail on his claim that the respondent's conduct was constitutionally inadequate.
Furthermore, although the habeas court was not required to credit the testimony of Blanchette, the court could not have concluded that Blanchette had failed to adhere to accepted medical standards merely because the court was unpersuaded by Blanchette's testimony. See, e.g., Paige v. St. Andrew's Roman Catholic Church Corp., 250 Conn. 14, 18, 734 *775 A.2d 85 (1999) ("it is well established that, although the [fact finder] is entitled to disbelieve any evidence, it may not draw a contrary inference on the basis of that disbelief"). The petitioner bore the burden of proving his claim that the care and treatment he received lay "somewhere between the poles of negligence at one end and purpose[ful] or know[ing] [conduct] at the other"; Farmer v. Brennan, supra, 511 U.S. at 836, 114 S. Ct. 1970; and, as we have explained, in the absence of any explanatory expert testimony, the various diagnostic tests that had been performed on the petitioner over the years were not sufficiently clear or definitive with respect to the extent and severity of his back ailment to permit a finding by the habeas court that an examination by a neurologist or neurosurgeon was required.
This determination leads inexorably to the conclusion that the evidence did not warrant the habeas court's finding that Blanchette had consciously disregarded an excessive risk to the petitioner's health. In the absence of evidence sufficient to support a finding that Blanchette had failed to care for and to treat the petitioner's back condition adequately, there can be no basis to conclude that Blanchette was "aware of facts from which the inference could be drawn that a substantial risk of serious harm [to the petitioner] exist[ed]" and that Blanchette actually "dr[ew] the inference." Id., at 837, 114 S. Ct. 1970.
Indeed, the record is devoid of evidence to suggest that Blanchette did not "sincerely and honestly [believe] ... that [the conservative treatment being afforded the petitioner] was, in [the petitioner's] case, medically justifiable." (Internal quotation marks omitted.) Salahuddin v. Goord, supra, 467 F.3d at 281. In fact, as we have noted, the habeas court expressed "great respect" for Blanchette, who, the habeas court observed, had testified before that court "many times...." Thus, even if the evidence was sufficient to establish that Blanchette's care and treatment of the petitioner had been inadequate, there was no evidence indicating that Blanchette knew that his refusal to have the petitioner examined by a specialist created an undue risk of serious harm to the petitioner. For this reason, as well, the habeas court's finding of deliberate indifference cannot stand.
Finally, to the extent that the evidence suggested that an examination by a neurologist or neurosurgeon might be useful or beneficial, that fact alone is insufficient to demonstrate an eighth amendment violation. As the United States Supreme Court explained in Estelle, "the question whether an X-rayor additional diagnostic techniques or forms of treatmentis indicated is a classic example of a matter for medical judgment. A medical decision not to order an X-ray, or like measures, does not represent cruel and unusual punishment. At most it is medical malpractice, and as such the proper forum is the state [civil] court...." Estelle v. Gamble, supra, 429 U.S. at 107, 97 S. Ct. 285. "[T]o the extent that [a prisoner] alleges that he was not properly treated, or that he disagreed with the treatment given him ... that conduct does not rise to the level of a constitutional violation. Courts have repeatedly held that an omission of this nature does not amount to a constitutional violation ... and disagreements between a prisoner and prison officials over treatment decisions fall short of cruel and unusual punishment. Thus, disagreements over medications, diagnostic techniques (e.g., the need for X-rays), forms of treatment, or the need for specialists or the timing of their intervention, are not adequate grounds for [an eighth amendment] claim. These issues implicate *776 medical judgments and, at worst, negligence amounting to medical malpractice, but not the [e]ighth [a]mendment." (Citation omitted.) Sonds v. St. Barnabas Hospital Correctional Health Services, 151 F. Sup.2d 303, 312 (S.D.N.Y.2001).
It is apparent that the habeas court was frustrated by what it believed was the respondent's stubborn and unreasonable refusal to agree to have the petitioner examined by a neurologist or a neurosurgeon. This frustration is reflected in the habeas court's reference to a wholly unrelated case in which, according to the habeas court, the respondent had taken a similarly rigid position in connection with the request of an inmate.[13] See footnote 10 of this opinion. The habeas court's belief that the respondent should have acceded to what that court viewed as the petitioner's reasonable request for an examination by a neurologist or neurosurgeon, however, is insufficient to support the court's finding of an eighth amendment violation. "The [c]onstitution does not command that inmates be given the kind of medical attention that judges would wish to have for themselves...." (Internal quotation marks omitted.) Dean v. Coughlin, 804 F.2d 207, 215 (2d Cir.1986). It is well established, moreover, "that mere disagreement over the proper treatment does not create a constitutional claim. [As] long as the treatment given is adequate, the fact that a prisoner might prefer a different treatment does not give rise to an [e]ighth [a]mendment violation." Chance v. Armstrong, supra, 143 F.3d at 703.
For the foregoing reasons, we conclude that the evidence does not support the finding of the habeas court that the respondent's refusal to provide the petitioner with an examination by a neurologist or a neurosurgeon constituted a violation of the eighth amendment's proscription against cruel and unusual punishment. The Appellate Court, therefore, improperly affirmed the habeas court's judgment.
The judgment of the Appellate Court is reversed and the case is remanded to that court with direction to reverse the judgment of the habeas court and to remand the case to that court with direction to render judgment dismissing the petition for a writ of habeas corpus.
In this opinion the other justices concurred.
NOTES
[*] The listing of justices reflects their seniority status as of the date of oral argument.
[1] The eighth amendment to the United States constitution provides: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted."
[2] We granted the respondent's petition for certification to appeal, limited to the following issue: "Did the Appellate Court properly affirm the trial court's grant of the writ of habeas corpus?" Faraday v. Commissioner of Correction, 279 Conn. 907, 908, 901 A.2d 1225 (2006).
[3] The trial court sentenced the defendant to a term of twelve years imprisonment, execution suspended, and five years probation.
[4] The petitioner filed the petition pro se.
[5] We note that the petitioner never has disputed Blanchette's description of the petitioner's pain or symptoms.
[6] Blanchette also explained that disc-related problems frequently are associated with the aging process, and X rays had revealed that the petitioner's chronic back condition could be associated with degenerative joint disease. Blanchette further testified that surgery does not always relieve the pain and discomfort caused by such back problems, and, in fact, sometimes those symptoms are more severe following surgery. Blanchette stated that, for this reason, disc surgery generally is performed only "under certain conditions," none of which was present in the petitioner's case. In addition, Blanchette observed that, according to the petitioner's medical records, he had not complained of back pain for some time even though he had been admitted to the prison infirmary for other reasons.
[7] The petitioner was represented by counsel at the hearing on his motion for reconsideration.
[8] In his brief filed with this court, the petitioner asserts that the 2003 MRI had been performed at the direction of the department of correction in response to an action that he had filed in the United States District Court for the District of Connecticut in September, 2003, alleging a violation of 42 U.S.C. § 1983. According to the petitioner, his federal action and the present action are based on the same essential allegation, that is, the respondent's purportedly deliberate indifference to the petitioner's medical needs.
[9] The petitioner also introduced into evidence two other documents, namely, a "Diagnostic Radiologic Report" dated March 27, 2000, from the department of radiology at the University of Connecticut Health Center, and a "Utilization Review Report" dated May 22, 2002, from the correctional managed health care utilization review committee of the University of Connecticut Health Center. The radiologic report stated that "there is no fracture or dislocation seen" but recommended that the petitioner undergo a bone scan and, possibly, a CT scan, "to rule out [any] underlying destructive process involving the left pedicle of the L-5 [(fifth lumbar) vertebra]." The utilization review report recommended that the petitioner begin a back exercise program.
[10] After characterizing the respondent's refusal to provide the petitioner with an evaluation by a neurologist or neurosurgeon as unnecessarily rigid, the habeas court made the following observations with respect to that other, unrelated habeas case: "I have seen this rigidity before in [another] case ... in which the petitioner [in that case] has been labeled as a sex offender, yet he was acquitted in a jury trial of being a sex offender or sexual assault one, and the [respondent's] own classification manual states that any charge for which a prisoner or an inmate ... has been acquitted or the [charge has] been dismissed shall not be considered in classification of the prisoner. And yet the [respondent] insists on categorizing this [other] individual ... as a sex offender or having sex offender [treatment] needs, which, as far as I'm concerned, is the same thing. And even though this court had denied a motion to dismiss, finding that there is a liberty interest on behalf of [this other individual] by [his] ... not being labeled as a sex offender, the [respondent] insists that it is correct and, regardless of its own regulations, insists on its position. And that, to me, is rigidity which is unnecessary and improper."
[11] For purposes of this appeal, and in light of our conclusion that the Appellate Court majority improperly determined that the evidence supported the habeas court's finding of deliberate indifference, we assume without deciding that the habeas court correctly concluded that the petitioner's back ailment constitutes a serious medical condition.
[12] With respect to the objective component of the deliberate indifference standard, the term "sufficiently serious" has been described as "a condition of urgency, one that may produce death, degeneration, or extreme pain." (Internal quotation marks omitted.) Hathaway v. Coughlin, 99 F.3d 550, 553 (2d Cir. 1996). As we have indicated; see footnote 11 of this opinion; we assume that the petitioner's chronic back condition satisfies this component of the test.
[13] As the Appellate Court majority acknowledged; Faraday v. Commissioner of Correction, supra, 95 Conn.App. at 18 n. 10, 894 A.2d 1048; the habeas court's reference to this other, unrelated case was improper because that case bore no relevance to the present case.
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552 F. Supp. 820 (1982)
HANDGARDS, INC., a corporation, Plaintiff,
v.
ETHICON, INC., a corporation, Defendant.
No. C-49451 SAW.
United States District Court, N.D. California.
December 13, 1982.
Blecher & Collins, Maxwell M. Blecher, Consuelo S. Woodhead, Los Angeles, Cal., for plaintiff.
David F. Dobbins, Dunne, Phelps, Mills & Jackson, San Francisco, Cal., Thomas C. Morrison, Patterson, Belknap, Webb & Tyler, New York City, for defendant.
ORDER DENYING MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT, FIXING THE APPLICABLE RATES AND PERIODS OF INTEREST ON THE JUDGMENT, AND AWARDING ATTORNEY'S FEES
WEIGEL, District Judge.
The first trial of this antitrust action resulted in a jury award on March 1, 1976, *821 of $6,219,000 after trebling. On appeal, the Court of Appeals for the Ninth Circuit reversed the judgment on the grounds of error in the trial court's instructions to the jury and remanded for a new trial. See Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986 (9th Cir.1979), cert. denied, 444 U.S. 1025, 100 S. Ct. 688, 62 L. Ed. 2d 659 (1980). On August 6, 1982, following a new trial, a jury awarded plaintiff damages after trebling of $10,761,993. Defendant moves for judgment notwithstanding the verdict or, in the alternative, for a new trial. Plaintiff moves the Court to fix the applicable rates and periods of interest on the judgment and to award attorney's fees.
Defendant's Motion for Judgment Notwithstanding the Verdict or, in the Alternative, for a New Trial
A motion for judgment notwithstanding the verdict is properly granted only "if, without accounting for the credibility of the witnesses, * * * the evidence and its inferences, considered as a whole and viewed in the light most favorable to the nonmoving party, can support only one reasonable conclusion that the moving party is entitled to judgment notwithstanding the adverse verdict." William Inglis & Sons Baking Co. v. ITT Cont. Baking Co., 668 F.2d 1014, 1026 (9th Cir.1982). A new trial is appropriate if "the jury's verdict was clearly contrary to the weight of the evidence." Id. at 1027. The record in this case reasonably supports the jury's verdict. Consequently, defendant is entitled to neither judgment notwithstanding the verdict nor a new trial.
Plaintiff's Motion to Fix the Applicable Rates and Periods of Interest on the Judgment
The parties agree that plaintiff is entitled to post-judgment interest at the lawful rate from the date of the present judgment, August 6, 1982. 28 U.S.C. § 1961 provides that "interest should be allowed on any money judgment in a civil case recovered in a district court." For periods prior to October 1, 1982, interest is to be determined "at the rate allowed by state law." Id. (1982). 28 U.S.C. § 1961 was recently amended to provide, effective October 1, 1982, that "[s]uch interest shall be calculated from the date of the entry of the judgment, at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the judgment. * * *" Section 302 of the Federal Court Improvements Act of 1982, P.L. 97-164, 96 Stat. 55.
The parties differ, however, over whether plaintiff should receive interest on the amount of the first judgment from the date of its entry on March 1, 1976. It is well settled that interest on that part of a judgment affirmed on appeal should be computed from the date of the judgment's initial entry. See Kneeland v. American Loan & Trust Co., 138 U.S. 509, 511, 11 S. Ct. 426, 427, 34 L. Ed. 1052 (1891); Lew Wenzel & Co. v. London Litho Supply Co., 563 F.2d 1367, 1369 (9th Cir.1977); Perkins v. Standard Oil, 487 F.2d 672, 676 (9th Cir.1973); United States v. Hougham, 301 F.2d 133, 134-35 (9th Cir.1962).
The Court of Appeals for the Ninth Circuit has recently expanded this rule in Mt. Hood Stages, Inc. v. Greyhound Corp., 616 F.2d 394 (9th Cir.1980), and Twin City Sportservice v. Charles O. Finley & Co., 676 F.2d 1291 (9th Cir.1982). In Mt. Hood, the Supreme Court reversed in part the district court's award of damages on the ground that the relevant statute of limitations had expired, and remanded for determination of whether tolling of the statute was justified on equitable principles. See Greyhound Corp. v. Mt. Hood Stages, Inc., 437 U.S. 322, 98 S. Ct. 2370, 57 L. Ed. 2d 239 (1978). The district court on remand found that equitable tolling was justified, and awarded the same amount of damages it had originally granted. On appeal, the Court of Appeals for the Ninth Circuit upheld the district court's award of interest on the entire judgment from the date of its original entry. 616 F.2d at 407. The Court of Appeals *822 expressly declined to follow those cases holding that interest does not accrue on a vacated judgment. See id.
In Twin City, the district court found the defendant had committed four antitrust violations and awarded damages. The Court of Appeals reversed the district court's legal conclusions with respect to all four violations. On remand, and after receiving new evidence, the district court found the defendant had committed two of the violations, and awarded the same amount of damages as after the first trial, but granted interest only from the date of the second judgment. On appeal, the Court of Appeals reversed in part and awarded interest from the date of the first judgment, despite the fact that "the issue of antitrust liability was not firmly settled until the post-remand judgment[] * * * *" 676 F.2d at 1311.
In this case the first judgment was reversed by the Court of Appeals on the grounds of error in the Court's instructions to the jury and insufficient evidence to support a jury charge on one of plaintiff's two theories of liability. See Handgards, Inc. v. Ethicon, Inc., 601 F.2d 986, 995 n. 15 (9th Cir.1979), cert. denied, 444 U.S. 1025, 100 S. Ct. 688, 62 L. Ed. 2d 659 (1980). After a new trial, a jury awarded damages in an amount larger than the first judgment.
Although here, unlike Mt. Hood and Twin City, the second judgment is larger than the first, that fact should not preclude an award of interest on the first judgment from the date of its entry. In this case, as in Twin City, antitrust liability was not established until the second judgment. In addition, in both cases the second judgment was entered only after a new trial was held or new evidence received. Similarly, in both cases the second judgment was based upon only some of the theories of liability that supported the first judgment.
A plaintiff's right to post-judgment interest should not hinge on the fortuity that on remand the finder of fact will award the exact amount of damages awarded at the first trial. Furthermore, if interest is not allowed on the first judgment from the date of its entry simply because the first and second judgments are not for the same amount, then a successful plaintiff could be penalized for receiving a second judgment larger than the first judgment. A second judgment that is larger than the first could result in a lower total recovery of principal plus interest by a successful plaintiff than were the two judgments for the same amount. Defendant's contention that calculating interest on different parts of the judgment from different dates would "plunge[] the Court into an unprecedented exercise in splitting the current judgment" is meritless. Such calculations are a familiar task for courts. See e.g., Lew Wenzel & Co., supra; Perkins, supra. Hence, plaintiff is entitled to interest on the first judgment from March 1, 1976.
Plaintiff's Motion to Award Attorney's Fees
A prevailing plaintiff in an antitrust action is entitled to "a reasonable attorney's fee" pursuant to Section 4 of the Clayton Act, 15 U.S.C. § 15. The appropriate method for determining a reasonable fee is to multiply the number of hours worked by the customary hourly rate of compensation for like services. The resulting "lodestar" figure is then adjusted based on the novelty and difficulty of the questions raised, the results of the litigation, the experience and ability of the attorneys, attorney's fees awards in similar cases, and like factors. See, e.g., Kerr v. Screen Extras Guild, 526 F.2d 67, 70 (9th Cir.1975), cert. denied, 425 U.S. 951, 96 S. Ct. 1726, 48 L. Ed. 2d 195 (1976).
Plaintiff requests an attorney's fee of $2.5 million. By contrast, defendant urges that no more than $618,633 be awarded as a reasonable fee. The Court finds that reasonable attorney's fees for the first trial, the subsequent appeal, and the second trial are $1,064,943.10.
On July 13, 1976, Judge Orrick awarded plaintiffs $498,955 following the first trial as a reasonable attorney's fee in the action. Judge Orrick reached this figure by multiplying *823 the number of hours he found to be compensable, 4,223, by an average hourly rate of $85, and then increasing the resulting lodestar figure by $140,000, equivalent to a multiplier of approximately 1.39.
Defendant urges that the Court not increase the award made by Judge Orrick for work performed prior to the first judgment. Plaintiff argues that Judge Orrick's award should be increased in two respects. First, plaintiff asserts that the 1350 hours that Judge Orrick subtracted as spent in pursuit of unsuccessful claims should be compensated based upon the recent decision of the Court of Appeals for the Ninth Circuit in Twin City Sportservice v. Charles O. Finley & Co., 676 F.2d 1291 (9th Cir.1982). Plaintiff misconstrues the rule enunciated in Twin City, and thus is not entitled to compensation for those hours. See id. at 1316 (work on claims unrelated to the successful recovery of antitrust damages may be excluded from award). Second, plaintiff claims that the appropriate hourly rate at which it should be compensated is that of the time of the petition and not the historical rate in force at the time the services were rendered, and that the current average rate for plaintiff's counsel is $150 per hour. In protracted antitrust litigation, a successful plaintiff's attorney should be compensated for delay in the payment for services rendered. A court may do so either by adopting a current hourly rate or by increasing the multiplier used to adjust the lodestar figure. See Virginia Academy of Clinical Psychologists v. Blue Shield, 543 F. Supp. 126, 144 (E.D.Va.1982); Chrapliwy v. Uniroyal, 509 F. Supp. 442, 457-58 (N.D. Ind.1981); Weiss v. Drew Nat'l Corp., 465 F. Supp. 548, 552-53 (S.D.N.Y.1979). Thus, in this case the Court may either use a current hourly rate to compensate work done prior to the first judgment or increase Judge Orrick's multiplier of 1.39 to adjust for the additional delay endured by plaintiff's counsel since the first judgment on March 1, 1976.
Rather than simply adding delay in receipt of payment to the already long list of factors to be considered in determining an appropriate multiplier, see, e.g., Virginia Academy, supra, at 131 & n. 5, a current hourly rate will be used to compute plaintiff's attorney's fees. This method more directly adjusts the award for the combined effects of delay in payment and inflation. See Virginia Academy, supra, at 144; Chrapliwy, supra, at 458.
Plaintiff urges that a current hourly rate of $150 per hour be used to determine the award. Taking into account the skill and experience of plaintiff's counsel, the Court finds that a rate of $115 per hour is justified. In addition, although plaintiff's counsel submit that their current billing rates are $190 per hour for Mr. Blecher, $150 per hour for Mr. Bennett, and $125 per hour for Ms. Bennett, considerable work over the course of the litigation has been performed by associates for whom plaintiff provides no hourly rate. Hence a lower hourly rate of $115 per hour is warranted.
Applying the $115 per hour rate to the 4,223 hours Judge Orrick found properly compensable yields a lodestar figure of $485,645. Multiplying the lodestar by Judge Orrick's multiplier of 1.39 results in an attorney's fee for work done prior to Judge Orrick's award of $675,046.55.
Plaintiff asserts that a total of 3,005 lawyer hours, plus 265 paralegal hours, have been spent in prosecuting the case since the first judgment. Defendant urges that various deductions be made from this figure for hours spent on unsuccessful claims, for hours spent prior to Judge Orrick's award, for unproductive work, and for excessive trial preparation. First, 300 hours must be deducted for work spent unproductively and on unsuccessful claims. Because the Blecher firm has failed adequately to support the fees requested with contemporaneously maintained time records, "the Court must * * * make [these] reductions in the fee requested." In Re Equity Funding Corp. of America Securities, 438 F. Supp. 1303, 1328 (C.D.Cal.1977). Second, based on the time records submitted by plaintiff's counsel, 328.75 hours must be subtracted for time spent prior to Judge Orrick's award and already compensated in that award. *824 Finally, 20 hours must be deducted for time spent on plaintiff's attorney's fees request, which is not compensable. See, e.g., Locklin v. Day-Glo Color Corp., 378 F. Supp. 423 (N.D.Ill.1974). These deductions result in a total number of compensable lawyer hours of 2,356.25.
Multiplying the number of compensable hours by the current average hourly rate of $115 per hour results in a lodestar award of $270,968.75. When increased by the multiplier of 1.39, which the Court finds appropriate for work done after the first judgment as well as for services provided prior to that date, this figure rises to $376,646.56. Adding $13,250 to this figure for 265 paralegal hours compensated at $50 per hour results in a total award for work done after Judge Orrick's award of $389,896.56. Hence the total attorney's fee for work done in this action, both before and after the first judgment, is $1,064,943.10.
Accordingly,
IT IS HEREBY ORDERED that defendant's motion for judgment notwithstanding the verdict or, in the alternative, for a new trial is denied.
IT IS FURTHER HEREBY ORDERED that the Judgment entered herein on August 6, 1982, be supplemented to provide as follows:
1. As to Six Million Two Hundred Nineteen Thousand Dollars ($6,219,000) of the present judgment, interest shall accrue at the legal rate in California of seven (7) percent from March 1, 1976, through August 6, 1982.
2. As to the whole of the present judgment plus attorney's fees awarded herein, a total of Eleven Million Eight Hundred Twenty-Six Thousand Nine Hundred Thirty-Six Dollars and Ten Cents ($11,826,936.10), interest shall accrue at the legal rate in California of seven (7) percent from August 6, 1982, through September 30, 1982, and from October 1, 1982, forward until paid at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the judgment.
IT IS FURTHER HEREBY ORDERED that plaintiff is awarded attorney's fees in this action in the sum of One Million Sixty-Four Thousand Nine Hundred Forty-Three Dollars and Ten Cents ($1,064,943.10).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/1525896/
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952 A.2d 346 (2008)
180 Md. App. 606
Eui KIM, et al.
v.
COUNCIL OF UNIT OWNERS FOR COLLINGTON CENTER III CONDOMINIUM.
No. 723, Sept. Term, 2007.
Court of Special Appeals of Maryland.
July 2, 2008.
*347 Alyssa W. Chang, Germantown, for appellant.
Frank J. Emig, Greenbelt, for appellee.
Panel: HOLLANDER, WOODWARD, JAMES A. KENNEY, III (retired, specially assigned), JJ.
KENNEY, J.
Appellee, the Council of Unit Owners for Collington Center III ("the Council"), as landlord of a commercial condominium complex located in Prince George's County, instituted repossession proceedings in the District Court for Prince George's County against Angela Trading Company, Inc. ("Angela Trading"), tenant of Condominium Unit 104 ("the Unit"). A default judgment of possession of the Unit was entered for the Council.
While Angela Trading's motion for a new trial was pending in the District Court, appellants, Eui Kim and Sook Ja Kim ("the Kims"), as the purchasers of the Unit from Angela Trading, sought a declaratory *348 judgment in the Circuit Court for Prince George's County that they owned the Unit. The circuit court granted summary judgment in favor of the Council.
The Kims present four questions for our review, which we have consolidated and reworded as follows:
I. Are the Kims barred from pursuing their claim to the Unit by the doctrine of res judicata?
II. Did the circuit court err in granting summary judgment in favor of the Council?
III. Did the Council have standing to challenge the validity of the deed purporting to give an interest in the condominium unit to the Kims?
For the following reasons, we shall dismiss this appeal as moot.
FACTUAL AND PROCEDURAL HISTORY
I. Facts
On October 15, 1985, Prince George's County, as landlord, entered into a 61-year lease agreement ("the Prime Lease") with Foreign Trade Zone Three Associates Limited Partnership ("FTZT Associates"), as tenant, for approximately 11.8 acres of land in the subdivision known as Prince George's International Commerce Center ("the Property"). That same day, pursuant to a sublease agreement ("the Sublease"), FTZT Associates leased all of its rights and interests in the Property to Harkins Associates, Inc. ("Harkins Associates") for a term to "expire, unless sooner terminated, upon the expiration of the term of the Prime Lease[.]" Section 14 of the Sublease permitted Harkins Associates to develop the Property into commercial condominiums for sale to third parties, "subject to the terms of [the Prime Lease]." The Memorandum of the Prime Lease and the Sublease, signed by representatives for Prince George's County, FTZT Associates, and Harkins Associates, Inc., was recorded among the land records on November 5, 1985.
Harkins Associates established a condominium regime of twenty-six commercial units known as Collington Center III Condominium on August 3, 1987. Also on August 3, the Prime Lease and the Sublease were amended to extend the respective term of each to sixty-six years. The First Amendment to the Memorandum of the Prime Lease and the Sublease reflecting the new term was recorded.
On November 25, 1987, by a Deed and Assignment of Subleasehold Interest ("the Unit 104 Assignment Deed"), Harkins Associates assigned its interest in the Unit[1] to Angela Trading for "the term of years set forth in [the Prime Lease]." The Unit 104 Assignment Deed expressly stated that it was subject to the Prime Lease and the Sublease, and that the Unit "is a portion of the property" of which Prince George's County was the fee simple owner. It was recorded on November 27, 1987.
On July 6, 1989, Prince George's County assigned its interest in the Prime Lease to Collington Center Associates Limited Partnership ("Collington Center Associates"), and, by a deed recorded on July 10, 1989, it granted its fee simple ownership of the Property to Collington Center Associates.
Collington Center Associates conveyed its fee simple ownership of the Property to the Council on May 28, 1996. By a separate agreement, Collington Center's interest in the Prime Lease and FTZT *349 Associates' interest in the Sublease were assigned to the Council. Relevant to this case, Section 12.13 of the Prime Lease and Section 3 of the Sublease amendment provided that interests under those leases would not merge unless a written instrument effecting such a merger was executed. The Council became sublessor under the Sublease.
On August 31, 2005, Angela Trading executed a deed ("the Deed") purporting to grant to the Kims, "in FEE SIMPLE, [its] sub-leasehold estate, title and interests in and to the land and all of their interests in and to the improments [sic] [,]" for "consideration of the sum of Ten and No/100 (10.00) Dollars[.]" The Deed was recorded on October 5, 2005.
II. Legal Proceedings
A. District Court Proceedings
On April 14, 2006, the Council filed a complaint for breach of lease against Angela Trading in the District Court for Prince George's County, asserting that Angela Trading was in substantial violation of the Sublease for "[u]nauthorized lease to subtenant, excessive noise and disturbance[,] and creating a nuisance."[2] The complaint stated that, on October 13, 2005 and January 25, 2006, the Council notified Angela Trading that it was in violation of the Sublease and that the Council desired to repossess the premises.
Angela Trading did not appear at the June 13, 2006 hearing, and a default judgment of possession of the Unit was entered in favor of the Council. Angela Trading did not appeal the default judgment within the required ten day period. In a letter dated June 23, 2006, the Council's attorney notified counsel for Angela Trading that it had filed a petition for a warrant to remove Angela Trading from the Unit.
Angela Trading filed a motion for a new trial on June 26, 2006, in which it claimed that it was the tenant of the Unit and that it had not been served with the Counsel's complaint for breach of lease. Attached to it's motion, Angela Trading provided an "affidavit of non-service" signed by Eui Kim, "as principal for Angela Trading[.]" In the affidavit, Eui Kim asserted:
3. I was never served with any complaint in the above captioned case.
4. I am not in breach of the lease with [the Council] and if I was previously in breach of lease with [the Council], any such breach has been cured at this time.
(Emphasis added.)
On August 24, 2006, Angela Trading filed an amended motion for a new trial. In its supporting memorandum, filed seven days later, it explained that, "previous to the filing of [the breach of lease action], [it had] conveyed its ownership interest in [the Unit] to [the Kims.]" In the memorandum, Angela Trading argued:
Neither Angela Trading [ ], nor [the Kims] had any knowledge of the pending action for breach of lease, nor did either Angela Trading [] or [the Kims] know about the entry of judgment by default until June 26, 2006[,] when the attorney for Angela Trading [ ] and [the Kims] received a letter from [the Council's] attorney, just after the appeal period *350 had run, advising [their] counsel that a judgment had been entered by default in favor of [the Council.]
That judgment names only Angela Trading [] as a defendant[,] and does not name [the Kims], the actual tenants pursuant to the [D]eed and assignee of the subleasehold interest.
In its conclusion, it asserted that "[the Kims], the true lessor, [have] a valid and credible defense to the alleged breaches of lease filed against Angela Trading [,]" and that "[the Council] has put [the Kims'] property interest in jeopardy and has caused [the Kims] to incur substantial legal fees[.]"
The initial hearing on the original motion for a new trial, conducted on August 30, 2006,[3] was limited to whether Angela Trading had been actually served and had notice of the June 13, 2006 hearing. Another hearing on whether the proper defendant was named, the issue raised in the amended motion for a new trial, was held on December 11, 2006.
At the August 30, 2006 hearing, Bonnie Windsor, supervisor of the landlord clerks and civil clerks in the Prince George's County Sheriff's Office, testified that she mailed the complaint and summons to the Unit on April 26, 2006. Kristina Coleman, a Prince George's County deputy sheriff, testified that she served the complaint by affixing it to the front door of the Unit on April 28, 2005. Frank Carlyle, president of In The Beginning School of Arts, testified that the school subleased the Unit from Angela Trading. He stated that any mail that he received at the Unit that was addressed to Angela Trading was "store[d] [ ] in the inbox for [Eui] Kim [,]" who typically retrieved the mail once a week. Eui Kim testified that he had been Angela Trading's president for thirty-five years, and that he was the owner of the Unit. He stated that he had visited the Unit in late April of 2006, but he did not see the complaint posted on the door and he did not receive the District Court's mailed notice of the June 13, 2006 hearing. At the conclusion of the hearing, the District Court stated that it did not believe Eui Kim's testimony and found that the complaint was properly served.
Angela Trading's amended motion for a new trial, in which it argued that the Kims were the proper party to the breach of lease proceedings, was heard on December 11, 2006. At that hearing, it was asserted that the Kims were the owners of the Unit, and, because they were not named as defendants in the complaint, they could not have received notice of the June 13, 2006 hearing. The Council argued that Angela Trading had acquired only a leasehold interest in the Unit and, therefore, it could not transfer fee simple title. According to the Council, the Deed was invalid because it did not comply with the Prime Lease's restriction on assignability, did not mention the Prime Lease, and purported to convey a fee simple interest, which Angela Trading did not possess. Because the Kims did not acquire an interest in the Unit, the Council asserted, Angela Trading was the proper defendant in the breach of lease proceeding.
At the conclusion of the hearing, the District Court denied the motion for a new trial. It determined that Angela Trading had a leasehold interest in the Unit, and that the Deed to the Kims was invalid. Therefore, Angela Trading was the proper party. Angela Trading noted an appeal on *351 the record, which was subsequently dismissed.[4]
B. Circuit Court Proceedings
The Kims filed a Verified Complaint to Quiet Title and Declaratory Judgment on August 29, 2006. In their Complaint, they asked the court to declare that the Deed conveyed ownership of the Unit to them. The Kims simultaneously filed a motion seeking summary judgment.
In its cross-motion for summary judgment, the Council asserted that the Deed failed to transfer any interest in the property to the Kims. Attached to its cross-motion, the Council included a Statement of Undisputed Material Facts that traced the chain of title of the Property and the Unit. The Kims did not file a contravening affidavit.
Following the April 4, 2007 hearing, the circuit court issued a written opinion granting summary judgment in favor of the Council. After the denial of their motion to reconsider, the Kims filed this appeal.
DISCUSSION
I. Effect of District Court Proceeding
A. Res Judicata
Included in the Council's brief is a motion to dismiss the Kims' appeal as moot, arguing that "[t]he sole issue raised in [the Kims'] declaratory judgment action and in this appeal was already asserted and finally decided in the District Court landlord-tenant proceedings."
Res judicata bars a lawsuit involving claims that have been litigated or should have been litigated in a prior proceeding between the same parties, or their privies. United Book Press, Inc. v. Maryland Composition Co., Inc., 141 Md.App. 460, 476, 786 A.2d 1 (2001). A determination that res judicata applies may render a case moot. Maryland Rule 8-602(a)(10) permits this Court, on motion or on its own initiative, to dismiss an appeal because the case has become moot. A case is moot "`if, at the time it is before the court, there is no longer an existing controversy between the parties so that there is no longer any effective remedy which the court can provide.'" Baltimore Sun Co. v. State, 340 Md. 437, 454, 667 A.2d 166 (1995) (quoting Attorney General v. A.A. School Bus, 286 Md. 324, 327, 407 A.2d 749 (1979)). See Arundel Corp. v. Board of Zoning Appeals of Howard County, 255 Md. 78, 79, 257 A.2d 142 (1969) (Dismissing the appeal of a denial of an injunction as moot based on res judicata.); Roebuck v. Steuart, 76 Md.App. 298, 307 fn. 2, 544 A.2d 808 (1988) ("Steuart correctly observes in his brief that this issue would become moot by a holding in his favor that this judgment is barred because [ ] of the doctrine of res judicata[.]").
In Simpkins v. Ford Motor Credit Company, 389 Md. 426, 441 fn. 23, 886 A.2d 126 (2005), the Court of Appeals summarized the doctrine of res judicata in Maryland:
Maryland law requires the following elements for the application of res judicata: "1) that the parties in the present *352 litigation are the same or in privity with the parties to the earlier dispute; 2) that the claim presented in the current action is identical to the one determined in the prior adjudication; and 3) that there was a final judgment on the merits." Accordingly, a judgment between the same parties and their privies acts as a final prohibition to any other proceeding upon the same cause of action and is final, "not only as to all matters decided in the original suit, but also as to matters that could have been litigated in the original suit." Res judicata is applied notwithstanding the type of court which rendered the earlier final judgment, provided that the earlier final judgment was rendered by a court of "competent jurisdiction." The judgment of a court, acting within the limits of its jurisdiction, that has not been reversed must be accepted as conclusive by all other courts.
(Citations omitted.)
Whether the parties are the same or in privity with a party in the prior proceeding is a question of law. Boyd v. Bowen, 145 Md.App. 635, 658, 806 A.2d 314 (2002) (citing Douglas v. First Security Federal Savings Bank, Inc., 101 Md.App. 170, 180, 643 A.2d 920 (1994)). Because the Kims were not named parties in the District Court case, the question is whether they are in privity with Angela Trading, the named party in that proceeding.
In Douglas, 101 Md.App. at 183, 643 A.2d 920, we examined privity in the context of res judicata:
Generally, the parties to a suit are those persons who are entered as parties of record. But for the purpose of the application of the rule of res judicata, the term "parties" includes all persons who have a direct interest in the subject matter of the suit, and have a right to control the proceedings, make defense, examine witnesses, and appeal if an appeal lies. So, where persons, although not formal parties of record, have a direct interest in the suit, and in the advancement of their interest take open and substantial control of its prosecution, or they are so far represented by another that their interests receive actual and efficient protection, any judgment rendered therein is conclusive upon them to the same extent as if they had been formal parties.
(Emphasis in original.)
As Angela Trading asserted during the December 11, 2006 hearing,[5] the Kims clearly had a direct interest in the District Court proceedings. Counsel for Angela Trading, who also served as counsel for the Kims,[6] repeatedly contended that the Kims had a fee simple interest in the Unit. Eui Kim, when he testified at the August 30, 2006 hearing, stated that he was the owner of the Unit.
Eui Kim actively participated in the District Court proceedings. In his affidavit of "non-service" to accompany Angela Trading's motion for a new trial, he stated that he was not served with the complaint and that he was not in breach of the lease with the Council. At the August 30, 2006 hearing on the service of process, he testified that he had not been served with the complaint.
Angela Trading, acting through Eui Kim, represented, and attempted to protect, the Kims' asserted interest in the Unit throughout the District Court proceedings. *353 Attached to its first motion for a new trial, it included Eui Kim's affidavit described above. The amended motion for a new trial explained that Angela Trading had conveyed its interest in the Unit to the Kims, and that "[n]either Angela Trading [ ], nor [the Kims] had any knowledge of the pending action for breach of lease, nor did either Angela Trading [ ] or [the Kims] know about the entry of judgment by default until June 26, 2006[,] when the attorney representing Angela Trading [ ] and [the Kims] received a letter from [the Council's] attorney[.]" (Emphasis added.) Moreover, the conclusion of the motion focused solely on the Kims' interests:
Upon information and belief, [the Kims], the true lessor[s], [have] a valid and credible defense to the alleged breaches of lease filed against Angela Trading Company. By failing to thoroughly investigate its claim and filing suit prematurely against the wrong party, [the Council] has put [the Kims'] property interest in jeopardy and has caused [the Kims] to incur substantial legal fees as a result of this improper action. This Court should strike its judgment and dismiss this action filed against the wrong party.
Counsel clearly represented the Kims' interest in the Unit during the hearings. At the August 30, 2006 hearing, when the District Court rejected its argument that it did not receive notice of the breach of lease proceeding, Angela Trading asserted that it had conveyed its fee simple interest in the Unit to the Kims, and, therefore, it was not the correct party defendant and the default judgment of possession should be vacated. The success of that contention depended on establishing the Kims' interest in the Unit. That argument was asserted again during the December 11, 2006 hearing.
Eui Kim served as president of Angela Trading for thirty-five years and took an active role in the litigation. In Bodnar v. Brinsfield, 60 Md.App. 524, 483 A.2d 1290 (1984), this Court stated that "[w]hen the owners of a closely-held corporation participate at trial `it may be presumed that their interest coincide with the corporation's interests and that one opportunity to litigate interests that concern them in common should sufficiently protect both.'" Under these circumstances, the Kims' failure to formally intervene and become parties of record does not permit them to circumvent the judgment of the District Court by a separate proceeding in the circuit court. See Douglas, 101 Md.App. at 186-187, 643 A.2d 920 ("[I]t is a `well established principle of law that a person who has full knowledge of pending litigation and that it affects, or will determine, his rights, and, who is entitled to appear, but who makes no effort to intervene as a party, and permits such a conclusion thereof without objection, such person is concluded by the proceedings as effectually as if he were named on the record.'") (quoting Reddick v. State, 213 Md. 18, 30, 130 A.2d 762, cert. denied, 355 U.S. 832, 78 S. Ct. 50, 2 L. Ed. 2d 44 (1957)).
The doctrine of res judicata bars the relitigation of a claim when "`the subject matter and causes of action are identical or substantially identical as to the issues actually litigated and as to those which could have been or should have been raised in the previous litigation.'" R & D 2001, LLC v. Rice, 402 Md. 648, 663, 938 A.2d 839 (2008) (quoting Board of Ed. v. Norville, 390 Md. 93, 106, 887 A.2d 1029 (2005)). Res judicata "restrains a party from litigating the same claim repeatedly and ensures that courts do not waste time adjudicating matters which have been decided or could have been decided fully and fairly." Anne Arundel County Board of *354 Education v. Norville, 390 Md. 93, 107, 887 A.2d 1029 (2005) (Emphasis in original.)
At the conclusion of the December 11, 2006 hearing, the District Court concluded that "[the Council] is the owner [of the Unit] in this case; that Angela Trading is [its] tenant; [and] that there was a leasehold established between the two parties." It further concluded that, because Angela Trading's "attempt to transfer some interest to the Kims . . . wasn't done properly[,]" the Kims did not have a property interest in the Unit.[7] In their complaint in the circuit court, the Kims request that the court "determine, adjudicate and declare the rights of the parties with respect to [the Deed] and whether [the Council] [was] entitled to possession and/or ownership of [the Unit]." The District Court, in its finding, effectively determined both the ownership and the right to possession in the Unit.
The Kims' argument that the District Court lacked jurisdiction to determine the parties' respective property rights fails because the District Court made its decision regarding the property rights and the status of the parties in the exercise of its exclusive jurisdiction in landlord and tenant actions. Maryland Code Annotated (1974, 2006 Repl.Vol.) § 4-402(b) of the Courts and Judicial Proceedings Article ("CJ") states that, "[e]xcept as provided in § 4-401 of this subtitle, the District Court does not have jurisdiction to decide the ownership of real property or of an interest in real property." (Emphasis added.) CJ § 4-401(4) provides the District Court with exclusive jurisdiction in "[a]n action involving a landlord and tenant, . . . regardless of the amount involved." Although an "action involving landlord and tenant" in CJ § 4-401(4) "was intended to be limited to `those possessory in rem or quasi in rem actions that provided a means by which a landlord might rapidly and inexpensively obtain repossession of his premises situated in this State or seek security for rent due from personalty located on the leasehold,'" this was such a case. Williams v. Housing Authority of Baltimore City, 361 Md. 143, 157, 760 A.2d 697 (2000) (quoting Greenbelt Consumer Services, Inc. v. Acme Markets, Inc., 272 Md. 222, 229, 322 A.2d 521 (1974)).
Statutory construction is an issue of law. Singley v. County Commissioners of Frederick County, 178 Md.App. 658, 675, 943 A.2d 636 (2008). In Rush v. State, 403 Md. 68, 97-98, 939 A.2d 689 (2008), the Court of Appeals recently summarized:
It is well established that "[t]he cardinal rule of statutory construction is to ascertain and effectuate the intent of the Legislature." We begin our analysis by first looking to the normal, plain meaning of the language of the statute so that "no word, clause, sentence or phrase is rendered superfluous or nugatory." Further, whenever possible, an interpretation should be given to the statutory provisions which does not lead to unreasonable or illogical consequences. If the language of the statute is clear and unambiguous, we need not look beyond the statute's provisions and our analysis ends. If, however, the language is subject to more than one interpretation, it is ambiguous, and we resolve that ambiguity by looking to the statute's legislative history, case law, and statutory purpose.
(Citations omitted.)
A plain-language reading of the phrase, "[e]xcept as provided in § 4-401 of this subtitle," indicates that CJ § 4-402(b)'s *355 general limitation on the District Court's jurisdiction is not applicable in instances arising under CJ § 4-401, including an action involving a landlord and tenant as provided in CJ § 4-401(4).[8]
The legislative history of CJ § 4-402(b) confirms this interpretation. See Mayor of City Council of Baltimore v. Chase, 360 Md. 121, 131, 756 A.2d 987 (2000) ("[E]ven when the language of a statute of free from ambiguity, `in the interest of completeness' we may, and sometimes do, explore the legislative history of the statute under review. We do so, however, to look at the purpose of the statute and compare the result obtained by use of its plain language with that which results when the purpose of the statute is taken into account. In other words, the resort to legislative history is a confirmatory process; it is not undertaken to contradict the plain meaning of the statute.") Before it was amended in 1993, CJ § 4-402(b) read, "The District Court does not have jurisdiction to decide the ownership of real property or of an interest in real property." The present introductory phrase was proposed in House Bill 1174. See H. 1174, 1993 Leg., 407th Sess. (Md.1993). Its accompanying Floor Report stated that, at that time, CJ § 4-401(8)[9] "grant[ed] the District Court jurisdiction over petitions filed by a county or municipality for the listed purposes if the relief sought [was] an injunction[;] [h]owever, under § 4-402(b) . . ., the District Court [did] not have jurisdiction to decide the ownership of real property or of an interest in property." House Bill 1174, the Floor Report explained, "alter[ed] this provision to grant the District Court jurisdiction in all cases where equitable relief is provided."
In a statement dated March 4, 1993, Mary E. Gardner, the Baltimore City Mayor's legislative liaison to the Department of Housing and Community Development, explained that the amendment "[would] state, in effect, that except as ancillary to its existing jurisdiction, the District Court cannot decide the ownership of real property." According to Gardner, "[i]t is only common sense that the District Court has to have ancillary jurisdiction to decide questions of property ownership without which it would be largely out of businessunable to exercise properly the jurisdiction explicitly granted in [CJ §] 4-401." See also Webb v. Oxley, 226 Md. 339, 343-344, 173 A.2d 358 (1961) ("The so-called `ancillary jurisdiction' rule is a concept enunciated by the federal courts by which it is held that a district court acquires jurisdiction of a case or controversy as an entirety, and hence may, as an incident to disposition of a matter properly before it, possess jurisdiction to decide other matters raised by the case of which it could not take cognizance were they independently presented.")
On September 29, 2000, former Maryland Attorney General J. Joseph Curran, Jr. issued an opinion related to a cooperative housing project that is relevant to this case:
You have requested our opinion [as to] whether the District Court has jurisdiction over eviction actions brought by *356 Armistead Homes Corporation, a cooperative housing corporation, against its member tenants, who occupy housing units under renewable 99-year leases.
For the reasons detailed below, it is our opinion that the District Court has jurisdiction to handle such a matter as a landlord-tenant proceeding. Of course, a defendant would have the right to remove the action to circuit court for a jury trial if the defendant's property interest in the unit exceeds $10,000.
* * *
A. Jurisdiction of the District Court
The District Court is a court of limited jurisdiction. Maryland Constitution, Article IV § 41A ("[t]he District Court shall have the original jurisdiction prescribed by law.") Except for juvenile cases, the Constitution requires that the District Court's jurisdiction be uniform throughout the State. Id.
Subject to limited exceptions, the District Court does not have equity jurisdiction or jurisdiction to decide the ownership of an interest in real property. However, the District Court does have exclusive original jurisdiction in "[a]n action involving landlord and tenant . . . regardless of the amount involved. Of course, this provision must be construed in conjunction with the constitutional right to a jury trial should the property interest exceed $10,000.
Thus, whether the District Court has jurisdiction of an action by the Corporation to evict a member from Armistead Gardens based on a violation of the lease depends on whether the relationship between the Corporation and its members is a landlord-tenant relationship.
* * *
C. Summary
Because the relationship between Armistead Homes Corporation and its members is properly characterized as a landlord-tenant relationship, the covenants set forth in, or incorporated into the lease, are enforceable in the District Court as a landlord-tenant matter.
85 Op. Att'y Gen. 265 (2000).
After the District Court rejected Angela Trading's lack of notice defense, it argued that it was not a proper party because it had conveyed its interest in the Unit to the Kims. To reject that argument, as it did, the District Court had to determine what interest, if any, the Kims held in the Unit, which it was permitted to do under CJ §§ 4-401(4) and 4-402(b).
That the underlying judgment of possession was a default judgment that the District Court did not vacate does not erode its res judicata effect in the case. See Morris v. Jones, 329 U.S. 545, 550-551, 67 S. Ct. 451, 91 L. Ed. 488 (1947)("`A judgment of a court having jurisdiction of the parties and of the subject matter operates as res judicata, in the absence of fraud or collusion, even if obtained upon a default.'") (quoting Riehle v. Margolies, 279 U.S. 218, 225, 49 S. Ct. 310, 73 L. Ed. 669 (1929)); Millison v. Ades of Lexington, Inc., 262 Md. 319, 328, 277 A.2d 579 (1971) ("A judgment by default, while it may require extension by way of proof of damages . . . is still final in respect of the question of the liability of the party against whom it is obtained. `Like every other judgment, it is conclusive of every fact necessary to uphold it.'"); Wagner v. Cholley, 181 Md. 411, 414, 31 A.2d 852 (1943) (stating that a default judgment in an Ohio action was conclusive in the Maryland action on the judgment as to all defenses which were available in the Ohio action); Sheahy v. Primus Automotive Financial Services, Inc., 284 F.Supp.2d, 278, *357 281 (D.Md.2003) ("[A]lthough the earlier suit filed by Primus against Sheahy in the Maryland District Court resulted in a default judgment, for res judicata purposes a default judgment is given the same [preclusive] effect as a judgment entered after a trial on the merits.").
The District Court's denial of the motion for a new trial constituted a final judgment, which could be, and was, appealed. See Gravely v. State, 164 Md.App. 76, 90, 882 A.2d 889 (2005) ("The trial court's decision on [the motion for a new trial] was a final judgment that appellant could have appealed."); see also CJ § 12-101(f) (defining "final judgment" as "a judgment, decree, sentence, order, determination, decision, or other action by a court, including an orphans' court, from which an appeal, application for leave to appeal, or petition for certiorari may be taken.").
B. In-Rem Proceeding
The District Court's judgment awarding possession of the Unit to the Council was a judgment in rem. See Jones v. Albert, 50 Md.App. 685, 689, 440 A.2d 416 (1982) (stating that an action is an in rem action "in so far as it involves a clarification of title and recovery of possession of land"). A judgment in rem is "an adjudication pronounced on the status of a some particular subject matter[.]" Syester v. Brewer, 27 Md. 288, ___ (1867).
A judgment in rem is binding and conclusive with respect to the res, and it binds all persons who may have or claim any right or interest in the subject matter of the litigation, as to the particular point or matter decided. See Brown v. Smart, 69 Md. 320, ___, 17 A. 1101, 1101 (1888); Restatement (First) of Judgments § 74(1) ("In a proceeding in rem with respect to a status[,] the judgment is conclusive upon all persons as to the existence of the status.")
Additionally, where, as here, title to or a right or interest with respect to real property is put directly in issue, and such issue is tried and determined, the judgment is conclusive in all further litigation between the same parties or their privies, regardless of the purpose of the action in which the judgment was rendered. See Bugg v. State Roads Commission, 250 Md. 459, 462, 243 A.2d 511 (1968) (finding that the appellant was not entitled to relief because the description under his deed was identical to the description of a tract that was the subject of an ejectment suit which was brought by third persons against plaintiff and in which title was found to be vested in third persons); Hartford Accident & Indemnity Co., Inc. v. State, to use of Ritter, 201 Md. 433, 438-439, 94 A.2d 639 (1953) ("If, however, title to the property was in issue in the replevin suit, judgment there is conclusive as to title in the suit on the bond."). The District Court's decision as to ownership and the right to possession of the Unit, therefore, is conclusive.
APPEAL DISMISSED AS MOOT; COSTS TO BE PAID BY APPELLANTS.
NOTES
[1] The Unit 104 Assignment Deed stated that Harkins Associates assigned its "sub-leasehold estate, title and interests in and to [the Property] and all of [its] interests in and to the improvements" to Angela Trading.
[2] In a letter to Angela Trading dated October 13, 2005, the Council stated:
You should be aware that possession of your unit is pursuant to various lease agreements. [The Council] is the landlord under these leases. By permitting your tenant to conduct its operations in a loud and offensive manner, you are in violation under the terms of your lease with [The Council].
On January 25, 2006, the Council sent another notice to Angela Trading, informing it that it had "thirty [] days to remove [its] subtenant from [the Unit,]" or its "lease of [the Unit would] expire and terminate."
[3] A prior hearing, set for August 22, 2006, was reassigned so that it could be heard by the judge who ordered the default judgment.
[4] The Council filed a motion to dismiss Angela Trading's appeal, asserting that it "disregarded the appeal rules and [it] ha[d] not taken any steps to prosecute [its] appeal" because it did not order the transcript of the District Court proceeding, as required by Maryland Rule 7-113(b), and it did not submit a memorandum, as required by Rule 7-113(d).
The docket entry reads: "[The Council's] motion to dismiss [Angela Trading's] appeal from district court argued. motion granted. district court decision final. judgment by district court stands. case closed statistically."
[5] At the hearing, counsel for Angela Trading stated that the Kims had a property interest that goes towards the merits of the breach of lease action.
[6] At the August 30, 2006 hearing, counsel for Angela Trading stated that he also represented the Kims.
[7] The District Court initially stated that it found the deed "entered on November 25, 1987" invalid, but it subsequently clarified that it was the "deed entered on August 31, 2005" that was invalid, not the Unit 104 Assignment Deed.
[8] The District Court's jurisdiction under CJ § 4-401(4) is not without limitation. Maryland Code Annotated (1974, 2003 Repl.Vol.), § 8-404 of the Real Property Article ("RP") provides that certain title disputes in a landlord tenant action must be heard in the circuit court.
[9] CJ § 4-408 provides:
(8) A petition filed by a county or municipality, including Baltimore City, for enforcement of local health, housing, fire, building, electric, licenses and permits, plumbing, animal control, consumer protection, and zoning codes for which equitable relief is provided.
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https://www.courtlistener.com/api/rest/v3/opinions/1525963/
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720 S.W.2d 183 (1986)
Nancy L. MOORE, et vir., Thomas Moore, Appellants,
v.
POLISH POWER, INC., Ernest Romanowski and Harold Romanowski d/b/a Polish Power Enterprises and L.D. Brinkman & Co. (Texas, Inc.), Appellees.
No. 05-85-01287-CV.
Court of Appeals of Texas, Dallas.
October 28, 1986.
Rehearing Denied December 3, 1986.
*184 Bertran T. Bader, III, Dallas, for appellants.
Mark C. Enoch, Kevin J. Keith, C. Edward Fowler, Jr., Dallas, for appellees.
Before VANCE, WHITHAM AND HUGHES[1], JJ.
WHITHAM, Justice.
In this personal injury case tried before the court, appellants, Nancy L. Moore and Thomas Moore, appeal a take-nothing judgment in favor of appellees Polish Power, Inc., Ernest Romanowski and Harold Romanowski, individually and doing business as Polish Power Enterprises (Polish Power), and L.D. Brinkman & Co. (Texas Inc.) (Brinkman). The principal issue involves an evidentiary ruling made by the trial court in an aborted jury trial immediately before the bench trial. The trial court's evidentiary ruling precipitated the bench trial. The parties treat Brinkman's objection to the evidence and the trial court's ruling on that objection as part of the nonjury trial. We treat the objection and trial court ruling in the same manner. We conclude that the trial court erred in excluding the evidence. We conclude further that the trial court's error was reasonably calculated to cause and probably did cause rendition of an improper judgment. TEX.R. APP.P. 81(b)(1). Accordingly, we reverse and remand.
We begin by reference to our Supreme Court's decision in Morgan v. Compugraphic Corp., 675 S.W.2d 729 (Tex.1984). In a personal injury case, the plaintiff typically alleges that the defendant's conduct caused an eventan automobile accident, a fall, or in this case, the release of chemical fumesand that this event caused the plaintiff to suffer injuries for which compensation in damages should be paid. Morgan, 675 S.W.2d at 731. Thus, at trial the plaintiff must establish two causal nexuses in order to be entitled to recovery: (a) a causal nexus between the defendant's conduct and the event sued upon; and (b) a causal nexus between the event sued upon and the plaintiff's injuries. Morgan, 675 S.W.2d at 731. In Morgan, the court held that a default judgment admits that the defendant's conduct caused the event upon which the plaintiff's suit is based. Morgan, 675 S.W.2d at 732. There was no default judgment in the present case. Therefore, Brinkman insists that Moore must show that Brinkman's conduct caused the event in issuethe release of formaldehyde *185 fumes in Moore's home. Absent that showing, Brinkman asserts that directed verdict was proper. Moore argues that she did show that Brinkman's conduct caused the event in issuethe release of formaldehyde fumes in her homeand, therefore, directed verdict was improper. We agree with Moore.
At this point, we describe the procedural aspects of the present case. Moore alleged that she purchased carpet and carpet pad from Polish Power which was installed in the Moore residence by Polish Power. Polish Power purchased the carpet and carpet pad from Brinkman. Moore alleged further that the carpet and carpet pad emitted or "off-gassed" formaldehyde, causing her neurological and muscular problems. Moore asserted three causes of action; first, strict tort liability; second, negligence; and third, breach of implied warranties of merchantability under TEX.BUS. & COM.CODE ANN. § 2.314 (Vernon 1968). Jury trial commenced October 7, 1985. Before that date, on September 9, 1985, Brinkman filed a motion to exclude certain deposition testimony of Moore's witness, Dr. Donald Sprague. In its motion, Brinkman objected to Sprague's testimony:
[R]elating to any characteristics of the carpet provided by Defendant L.D. Brinkman to Defendant Polish Power which was subsequently sold to Plaintiff Moore, including but not limited to the formaldehyde content, formaldehyde emission rate and issue as to whether the carpet in question is unreasonably dangerous be excluded from the hearing of the jury in the trial of this matter.
Brinkman's motion did not otherwise identify the Sprague testimony sought to be excluded. On October 7, 1985, after the jury was seated, the trial court granted Brinkman's motion to exclude. The excluded evidence is as reflected in the trial court's following order:
After hearing, IT IS ORDERED that the motion to exclude testimony of defendant L.D. Brinkman & Co. (Texas), Inc., filed October 3, 1985, [sic] is granted, and the following deposition testimony of Dr. Donald E. Sprague is excluded:
page 9, line 23page 11, line 14; page 12, lines 7-23; page 13, line 5page 14, line 25; page 15, lines 4-25; page 18, line 7page 20, line 13; page 26, lines 10-23; page 35, lines 1-6; page 57, lines 16-22; and page 75, lines 16-21. Signed: October 7, 1985.
Sprague's excluded testimony follows:
Page 9, line 23 through page 11, line 14
Q Following the examination and test or testing done, Doctor, were you able to come to an opinion or conclusion as to in reasonable probability what was ailing this lady?
A Well, the one thing that struck me was that the only real change that had occurred in her environment was that she had new carpet put in the house approximately a month before the symptoms began; otherwise, she had been fairly stableshe was an allergic person and had had a lot of difficulty in the past but she was coping, and approximately a month after that happening, her health began to deteriorate markedly and she began the merry-go-round that she was on when I saw her.
What was the rest of that question or does that answer it?
Q Were you able to come to an opinion or conclusion as to what her problem was?
A Yes.
Q What was that opinion, please, sir?
A I felt that the exposure to the carpet was what triggered the symptomology that she came to me with and that she had been suffering with prior toyou know, prior to seeing us and was probably responsible for the whole clinical picture that she was undergoing at the time.
Q Doctor, what, in your opinion, was it about the carpet that was the cause of the *186 clinical picture you were seeing at that time in your opinion?
A I think probably the largest problem with the carpet was the formaldehyde offgassing that occurs with new carpet for two to three years. There are probably other chemicals involved, the formaldehyde being the major one.
Q Doctor, from you[r] experience in environmental medicine, have you come to know what certain types of synthetic carpets are made with formaldehyde in their processes?
A Yes, synthetic carpets, particularly Dacron, nylon, things along that line. You don't see this in like Persian carpets, things that are hand woven [sic]. You don't see it in wool but you do find it most frequently in synthetic carpet.
Page 12, lines 7-23
Q What is it about formaldehyde, Doctor, as it's used in manufacturing these carpets, the nature of the product as used, that causes it to emit formaldehyde vapors once it's put down?
A I'm not exactly sure. Well, first off, I don't know that putting it down is what the problem is. The formaldehyde, I think, is used in the actual construction of the material from which the carpet is made. As the carpet manufacturers we've talked to deny the use of formaldehyde, but nevertheless we measure the carpet for formaldehyde and it's present.
There are two things that occur. Number one, the padding under the carpet is usually urea formaldehyde foam rubber and off-gases [sic] formaldehyde for a number of years, and the carpet itself will off-gas formaldehyde usually in the range of .03 or .05 parts per million for about three years.
Page 13, line 5 through page 14, line 25
Q I would ask you, Doctor, are there other products that are used in the home that also are made with formaldehyde that give off free formaldehyde?
A There is [sic] a number of products.
Q Like what?
A Particle board is probably the biggest single emitter that we find. It will off-gas formaldehyde for twenty years, as long as it's got any form. Paneling will usually off-gas formaldehyde for about a year and-a-half. Plywood, the indoor-type plywood with a urea formaldehyde glue. The problem basically is the urea formaldehyde molecule is really unstable and it will break down under the influence of moisture in the air to off-gas free formaldehyde. There are other formaldehyde products that aren't near so unstable. Indoor/outdoor plywood is made with phenol formaldehyde and it's fairly safe.
One of the other problems with these products is that they push these reactions to completion by using excess formaldehyde. Particle board, for instance, will offgas free formaldehyde for a year and then this breaking down process begins. Insulation, when we first became aware with the fact that formaldehyde could cause problems with the urea formaldehyde foam insulation and that opened the door to the realization that there were a lot of other products in the home that had that same problem.
Q Let me ask you to assume, Doctor, that the presence in this lady's home of not particle board but wood veneer paneling that was in the home in October of 1975, when they first moved in, in your opinion in November of 1979, would that product likely be giving off free formaldehyde into the air in any significant quantities?
A Not that period of time. Usually about a year to a year and-a-half is what it takes for paneling to off-gas. First off, it's not very porous and it's not very thick and it usually doesn't cover near the surface area that carpet will.
Q Doctor, do you have an opinion as to whether or not the condition that you saw and treated this lady for that you gave us your opinion as to earlier was caused by free formaldehyde being given off the carpet that was installed November, '79?
A Yes, I think that was the large contributing cause.
Q What is that opinion?
*187 Page 15, lines 4-25
Q Let me ask you this, Doctor: Then assuming your knowledge, training, and experience, history, physical exams and the diagnostic testing on this lady including history of installation of this synthetic carpet in November of 1979, I would ask you to assume the following definition of producing cause, the definition being that cause with which one or more other causes produces an event, and without which such event would not have occurred when it did, and ask you, sir, if you have an opinion as to whether or not the carpet installation, in giving off a formaldehyde in November of 1979, was a producing cause of this lady's problem?
A Yes.
[BRINKMAN'S COUNSEL]: I object. Can I make an objection?
[MOORE'S COUNSEL]: Certainly.
[BRINKMAN'S COUNSEL]: I object to the form of the question and also to the fact it's calling for a legal conclusion on the part of the doctor.
Q [MOORE'S COUNSEL]: Your answer, please, Doctor?
A Yes.
Page 18, line 7 through page 20, line 13
Q Doctor, I would ask you to assume with your knowledge, training, and experience in the area, I'll ask you as to whether or not you have an opinion as to whether the carpet made such a matter with chemicals that would give off free formaldehyde in a home environment, would or would not be reasonably fit for use in that household environment?
[BRINKMAN'S COUNSEL]: I object to the form of the question and to the legal conclusion which is called for on the part of the witness.
Q [MOORE'S COUNSEL]: First, do you have an opinion?
A I lost the question. The question is do I feel that the carpet
Q Let me state it this way, Doctor: I would ask you whether or not, based on your knowledge, training, and experience, do you have an opinion as to whether carpets, by virtue of their manufacturing process, when installed give off free formaldehyde, is that type of product reasonably fit for use by humans in households?
A I don't think so.
[BRINKMAN'S COUNSEL]: I'd like to make an objection, please. I object to the form of the question. I object to calling for a legal conclusion on the part of the doctor. I object to any opinions which the doctor makes or continues to make on carpet manufacturing and carpet processes as he has not been established as an expert in that area.
Q [MOORE'S COUNSEL]: My understanding, Doctor, you have an opinion in that regard?
A Yes.
Q What is that opinion?
A I think that the synthetic carpets are fairly toxic and I think that they are a problem and I think they're a problem to most people, and that everyone suffers to a greater or lesser degree. I don't think they're safe.
This is a very common problem that we see.
[BRINKMAN'S COUNSEL]: Objection. Nonresponsive. No question before the witness.
Q [MOORE'S COUNSEL]: Doctor, let me ask you this: In your practice, is [sic] the history and symptoms related to you by Mrs. Moore and your resulting diagnosis rare or unusual?
A No, it's not unusual at all. The extent to which it affected her, we've seen before but carpeting is one of the most common pollutants in the Metroplex area for sure that we've seen and it does cause a number of symptoms, not just central nervous system symptoms.
Q Let me, Doctor, if I could, shift gears, as it were, and get away from the
A New carpet, by the way.
Q the carpet aspects and let me concentrate a little bit on the chemical itself *188 and relate it particularly to Mrs. Moore, including what her symptoms are, how your treatment has progressed, and where we are now, if I could, sir. I would ask you, sir, what is it[?]
Page 26, lines 10-23
A [I]n this area where most of the office buildings are fairly new and closed ventilation with a lot of carpet, particle board, cigarette smoke, and the whole nine yards. I know you heard the term the sick building syndrome. Essentially what she's got is what we call the 20th century syndrome, where the chemical pollutants that we live with normally are a level to which she cannot function in, and when you talk about the work environment in this area particularly, it's extremely polluted and I think she will have difficulty finding a job or a work environment that she could function in because of people smoking, because of carpet, because of particle board cubicle dividers, because of the pesticiding practices that occur in this area, on down the line.
Page 35, lines 1-6
A The first thing was the carpet would have to go and we would recommend hard surface floors, whether they be tile, terrazzo, or hardwood. We would recommend an air handling system that was capable of pulling out chemical pollution. Usually these are a series of charcoal filters.
Page 57, lines 16-22
A [The] thing that I find significant is that her health at the time, according to the history, was stable, had been for several years up until a month after she put the carpet in, and that's basicallythat's what I was basing my diagnosisnot my diagnosis but my prognosis on, was the fact that she had been fairly stable for a number of years and then went down the tubes. She had a long
Page 75, lines 16-21
A Yeah, I think the mobile home business is significant. I think it might well have set the stage for the rapidity with which she got ill after she got exposed to carpet, although I've seen people in two or three months get done in with carpet, but that history would certainly have pre-disposed her to it.
Brinkman advanced these two reasons for its objection:
(1) Dr. Sprague is not qualified as an expert in the area of carpeting manufacture and composition, more specifically, formaldehyde content, of the carpet in question; and
(2) Dr. Sprague has no personal knowledge of facts learned elsewhere on which to base his opinions as to the characteristics of the carpet in question, and more specifically, the formaldehyde content of said carpet.
Brinkman supported its reasons for its objection by directing the trial court to Sprague's deposition testimony as follows:
Page 79, Line 24
Q You've never had any training in the testing of carpet; have you?
A No.
Q Or its contents?
A For formaldehyde, is that what you mean?
Q Anything about carpet content.
A No.
Page 68, Line 4
Q Have you ever done any testing on any of the carpet that Mrs. Moore had in her house or on any of the panelling that was in her house?
A No, I haven't.
Q Do you know anyone who has? I mean, have you seen any results of any of that?
A I don't recall offhand if she had that house tested for formaldehyde or not. I haven't seen the results. I don't recall if she had it done....
Page 68, Line 19
Q So the answer is no, you don't have any of that tested, her carpet or the panelling in question?
A No.
*189 Q You have no personal knowledge as to the formaldehyde contents of any of those items; do you?
A Not in her home.
Following the exclusion of Sprague's testimony, Moore's counsel advised the trial court that "in light of the Court rulings ... [Moore] has no evidence of causal link, and instructed verdict would be proper. "To expendite matters, and in the interest of it appears that the case judicial economy, it appears that the case was then tried before the court on this basis:
[MOORE'S COUNSEL]: I would like to have the record reflect that the deposition testimony of Doctor Sprague is the only testimony that plaintiff intended to call with regard to certain elements of plaintiff's case including causation, merchantability and product defect. And forin light of the ruling of the Court to which plaintiff does except, that it is obvious that at the close of the evidence an instructed verdict would be rendered. Therefore, to save the time and effort of the facade of a trial before the jury it was suggested by counsel for plaintiff that another procedure be instituted and therefore it is the, well, what is to be accomplished is that the jury is to be discharged and that we are going to proceed before the Court by introducing as exhibits certain Exhibits and deposition testimony which will be plaintiff's case. Anything you want to add, [Brinkman's Counsel]?
[BRINKMAN'S COUNSEL]: No.
[MOORE'S COUNSEL]: Judge, my understanding is you want to do it before you bring the jury in and discharge them?
THE COURT: Right.
Moore's exhibits and deposition testimony were introduced and admitted, including Sprague's deposition and the deposition of Brinkman's chemistry expert, John Lynch. It further appears that the parties agreed as to what Brinkman's witness, Thomas Moore, would testify.
We have noted that at the "bench trial" Sprague's deposition was admitted into evidence. Brinkman did not object to the admission of Sprague's deposition on this occasion. Indeed, during the friendly accommodating procedure at the "bench trial", Brinkman's counsel remarked, "[f]or the limited purpose only of this record, Your Honor, we have no objections to the previous Exhibits offered." Nevertheless, we treat, as do all counsel on appeal, Brinkman's September 9, 1985, objection to Sprague's testimony as applicable to, and made during, the "bench trial"; and the trial court's pre-"bench trial" ruling of October 7, 1985, on the admissibility of Sprague's testimony as applicable to, and made during, the "bench trial". For this court to do otherwise, and hold that Sprague's testimony, offered without objection at the "bench trial", was in evidence, would make a mockery of the efforts of able counsel for both parties to save the trial court's valuable time. We decline to do so. Instead, we commend their professional approach. Therefore, we treat the case before us as one in which Brinkman stated its objections to Sprague's testimony in the language of its September 9, 1985 motion to exclude and the trial court sustained the objection to the extent expressed in the trial court's order of October 7, 1985.
After the parties had made their "bench trial" record, Brinkman moved for an instructed verdict, Polish Power adopted the Brinkman motion and the trial court granted the joint motion. The record indicates that during the "bench trial" the jury had been waiting in the jury room and had heard nothing of the evidence. The record also reflects that the parties waived jury trial, that the trial court instructed Brinkman's counsel to prepare a form of judgment and that the trial court "informally... turned the jury loose." With this background, we reach the propriety of the trial court's evidentiary ruling and its instructed verdict against Moore.
In her first point of error, Moore contends that the trial court erred in excluding Sprague's testimony because his opinions were admissible under TEX.R.EVID. 702 and 703. Rule 702 reads: *190 If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise.
Rule 703 provides:
The facts or data in the particular case upon which an expert bases an opinion or inference may be those perceived by or made known to him at or before the hearing. If of a type reasonably relied upon by experts in the particular field in forming opinions or inferences upon the subject, the facts or data need not be admissible in evidence.
With these rules before us, we summarize the evidence relied upon by Moore to allow Sprague's testimony. Sprague is a medical doctor licensed in the State of Texas and a fellow in the American Academy of Environmental Medicine. Sprague is board certified in the American Academy of Family Practice, a member of the American Academy of Preventive Medicine and other societies. Sprague has been a physician since 1972 and practices in the specialty of environmental medicine which he defined as "the study of the impact of the environment as a whole on the body." He has practiced environmental medicine since about 1975. Sprague has a background in aerospace medicine, is an aviation medical officer with the United States Navy and has been a senior medical examiner with the Federal Aviation Administration for ten years. As a senior medical examiner for the Federal Aviation Administration for that period of time, Sprague has done all classes of pilot medicals including first class. Sprague has measured carpet and detected the off-gassing of formaldehyde. Sprague's clinic is known as the Environmental Health Center of Dallas. Sprague has spoken at conferences and presented approximately twelve papers about formaldehyde over the last five years. Sprague has had experience with patients who have had problems with formaldehyde exposure because of living in mobile homes and has performed a study involving forty patients affected by formaldehyde. Sprague has obtained information regarding formaldehyde exposure from Dr. Thad Godisch in charge of the Environmental Department of Ball State University, Dr. Zamm from California and Bruce Small, a physical engineer from Canada. Sprague testified about studies he has relied upon in giving his opinions including an allergy immunology textbook pending publication in England, a textbook called Clinical Ecology by Dr. Dicky, "ten articles off-hand mentioning spreading phenomena", and some sixty articles written by Dr. Rae (also a member of the Environmental Health Center of Dallas). Further, Sprague stated that he assumed, based on his experience, that there was formaldehyde in the carpet and pad in question. Sprague testified that, based upon his examination, testing and treatment of Moore, she suffered chemical poisoning and damage to her immune system from exposure to formaldehyde. Sprague was of the opinion, based upon the history given by the patient as to the time of beginning of the symptoms, that the formaldehyde that was causing her problems was the result of "off-gassing" that occurs with new carpet for two or three years. Sprague was also of the opinion that: (1) carpets, which when installed give off formaldehyde, are not reasonably fit for use by humans in households; (2) synthetic carpets are fairly toxic; (3) synthetic carpets are a problem to most people; and (4) synthetic carpets are a source of suffering to everyone to a greater or lesser degree because they are not safe. In addition to Sprague's testimony, Moore also directs us to her exhibits thirty-two and thirty-three showing two tests for formaldehyde done by the City of Dallas in her home; one prior to the removal of the carpet and pad and the second after its removal. These tests show a thirty-seven and one-half percent (37½%) drop in the formaldehyde concentration in her home following removal of the carpet.
Moreover, Moore introduced the deposition of Brinkman's chemistry expert, John *191 Lynch, at the "bench trial". Lynch tested samples of the carpet and carpet padding in question. We quote Lynch's testimony:
Q. [MOORE'S COUNSEL]: All you were able to determine is that the carpet and padding, the indoor/outdoor type, when you tested it, was emitting some formaldehyde, free formaldehyde.
A. Yes.
Q. Likewise you were able to determine that the brown shag carpet was emitting some free formaldehyde.
A. Yes.
Q. And that the padding, the sample that you were supplied, was emitting some free formaldehyde.
A. Yes, sir.
Furthermore, the record in the "bench trial" contains opinion testimony by Sprague which is important to our disposition of the case. In the quotation from Sprague's deposition which immediately follows, the question and answer without underscoring appears on page fifteen and was excluded.
Q Let me ask you this, Doctor: Then assuming your knowledge, training, and experience, history, physical exams and the diagnostic testing on this lady including history of installation of this synthetic carpet in November of 1979, I would ask you to assume the following definition of producing cause, the definition being that cause with which one or more other causes produces an event, and without which such event would not have occurred when it did, and ask you, sir, if you have an opinion as to whether or not the carpet installation, in giving off a formaldehyde in November of 1979, was a producing cause of this lady's problem?
A Yes.
* * * * * *
Q And your opinion is?
A My opinion is that formaldehyde was the cause of her problem.
Q I will ask you, Doctor, as an environmental physician, would a product which would cause the emitting of free formaldehyde vapors in a home environment cause a health risk to certain humans?
A Yes.
Q To everybody?
A Yes, it causes a health risk to everybody. The susceptibility is individual. Some people will be able to withstand that without getting in the condition that [Mrs. Moore] did.
In connection with this quotation, we point out that the underscored part of Sprague's above-quoted testimony is found on page sixteen of Sprague's deposition and was not excluded. By reference to the trial court's order of October 7, 1985 the reader will note that none of Sprague's testimony on page sixteen was excluded. Moreover, we do not read the underscored part of Sprague's above-quoted testimony to "relate to any characteristics of the carpet." Hence, we conclude that Brinkman made no objection in its motion to exclude to the underscored part of Sprague's above-quoted testimony. Thus, we have a record containing the quoted causal medical opinion.
The last sentence of rule 703 appears to be the focal point of the controversy between the parties. Moore maintains that the last sentence allows the trial court to admit Sprague's excluded testimony. Brinkman, on the other hand, while agreeing that rule 703 permits an expert to base his opinion upon facts or data reasonably relied upon by experts in his field and that the facts or data need not be admissible into evidence, argues that the record is completely devoid of any representation made by Sprague that his opinions were, in fact, based upon:
(1) Any facts or data relevant to the carpet and padding in question;
(2) Any identification as to what those facts or data were, upon which he was basing his opinion; and
(3) That other experts in his field would base their opinions upon such facts or data.
Under rule 703 an expert is able to base his opinion on inadmissible data only if the data is of a type reasonably relied upon by experts in the particular field. Sutton, Article *192 VII: Opinions and Expert Testimony, 20 Hous.L.Rev. 445, 465 (1983 Tex.R. Evid.Handbook). Whether experts in the field reasonably rely on such data is a matter for preliminary determination by the trial court pursuant to TEX.R.EVID. 104(a). Sutton, 20 Hous.L.Rev. at 465. We conclude that the trial court erred as a matter of law in its implied finding concerning data relied upon by Sprague. We reach this conclusion based on the record as a whole. Appellate courts may look to the record as a whole in reviewing the trial court's preliminary determination. See Bauman v. Centex Corp., 611 F.2d 1115, 1120 (5th Cir.1980). From the record as a whole, we conclude that the data relied upon by Sprague is of a type reasonably relied upon by experts in the particular field. Therefore, we conclude that Sprague's testimony excluded in the trial court's October 7, 1985 order was admissible under rules 702 and 703 over the reasons given by Brinkman for the exclusion of the evidence in its September 9, 1985 motion to exclude.
We also conclude that the trial court erred in excluding Sprague's testimony in light of the interpretation given the federal hearsay rule which came to be adopted as the federal rule of evidence from which our rule 703 is taken. As stated in United States v. Williams, 447 F.2d 1285, 1290 (5th Cir.1971) (en banc), cert. denied, 405 U.S. 954, 92 S. Ct. 1308, 31 L. Ed. 2d 591 (1972):
The rationale for this exception to the rule against hearsay is that the expert, because of his professional knowledge and ability, is competent to judge for himself the reliability of the records and statements on which he bases his expert opinion. Moreover, the opinion of expert witnesses must invariably rest, at least in part, upon sources that can never be proven in court. An expert's opinion is derived not only from records and data, but from education and from a lifetime of experience. Thus, when the expert witness has consulted numerous sources, and uses that information, together with his own professional knowledge and experience, to arrive at his opinion, that opinion is regarded as evidence in its own right and not as hearsay in disguise.
We reason that the record in the present case reflects sufficient education, lifetime experience, consultation with numerous sources and use of the information obtained, and professional knowledge and experience to allow the admission of the excluded testimony into evidence. Therefore, we again conclude that Sprague's testimony excluded in the trial court's October 7, 1985 order was admissible under rules 702 and 703 over the reasons given by Brinkman for the exclusion of the evidence in its September 9, 1985 motion to exclude. Thus, we conclude further that the trial court erred in excluding the testimony.
It follows that the excluded evidence establishes the causal link between Brinkman's conduct and the release of formaldehyde fumes in Moore's home. We conclude that Sprague's excluded testimony together with his admitted testimony is proof that Brinkman furnished, and that Polish Power installed, carpet and carpet pad in Moore's home which contained formaldehyde. Moreover, we conclude further that Lynch's testimony and Moore's exhibits thirty-two and thirty-three are proof of the release of formaldehyde fumes in Moore's home from this carpet and carpet pad. Hence, we conclude further that in the present case Moore has adduced some evidence that Brinkman's and Polish Power's conduct caused an eventthe release of formaldehyde fumes in Moore's home. Morgan, 675 S.W.2d at 731. Furthermore, we conclude that the underscored part of Sprague's above-quoted testimony is proof that the eventthe release of formaldehyde fumes in Moore's home caused Moore to suffer injuries for which compensation in damages should be paid. Morgan, 675 S.W.2d at 731. It follows, and we so hold, that at the "bench trial" Moore established the two causal nexuses required to be shown in order for her to recover. First, a causal nexus between Brinkman's and Polish Power's conduct and the event sued upon. Second, a causal *193 nexus between the event sued upon and Moore's injuries. Morgan, 675 S.W.2d at 731.
Aside from the evidentiary matters discussed in this opinion, Brinkman advances no additional reason in support of the directed verdict. Consequently, having held that the trial court erred in excluding the testimony, we conclude that the trial court erred in directing a verdict against Moore. Because she suffered a directed verdict, we conclude that Moore has met her burden to show that the trial court error in excluding Sprague's testimony resulted to her prejudice and contributed in a substantial way to bring about an unjust result. See Wilson v. City of Port Lavaca, 407 S.W.2d 325, 331 (Tex.Civ.App.Corpus Christi 1966, writ ref'd n.r.e.); Klimist v. Bearden, 374 S.W.2d 783, 785 (Tex.Civ. App.Tyler 1964, no writ). Hence, we are of the opinion that the error amounted to such a denial of the rights of Moore as was reasonably calculated to cause and probably did cause rendition of an improper judgment in the case. Moreover, it appears to the court that the error affects the entire matter in controversy. TEX.R.APP.P. 81(b)(1). Consequently, we must remand the case to the trial court and order a new trial of the entire cause on the merits. We sustain Moore's first point of error. In view of our disposition of her first point, we need not address Moore's remaining two points of error.
We reverse the judgment of the trial court and remand the case to the trial court for a new trial of the entire cause on the merits.
NOTES
[1] The Honorable W.A. Hughes, Justice, retired, Second Court of Appeals, Fort Worth, sitting by assignment.
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720 S.W.2d 211 (1986)
HARLEY-DAVIDSON MOTOR COMPANY, INC., et al., Appellants,
v.
George YOUNG, Appellee.
No. C14-85-506-CV.
Court of Appeals of Texas, Houston (14th Dist.).
November 6, 1986.
*212 C.J. Kling and Frank Steelman, Bryan, for appellants.
Bryan F. Russ, Jr., Hearne and Evette M. Correa, College Station, for appellee.
Before JUNELL, ROBERTSON and CANNON, JJ.
OPINION
JUNELL, Justice.
Appellants, Harley-Davidson Motor Company, Inc. and C.E. Hodde, appeal a summary judgment in favor of appellee, George Young. The suit was originally filed by Young against C.E. Hodde, d/b/a Aggieland Harley-Davidson (Hodde) and Harley-Davidson Motor Company, Inc. (Harley-Davidson) and involved alleged violations of the Deceptive Trade Practices/Consumer Protection Act (DTPA/CPA) concerning repairs on a 1980 Harley-Davidson motorcycle purchased by Young from Hodde. The controlling issue concerns the sufficiency of the summary judgment proof to support the summary judgment. We reverse and remand.
In our consideration of this case we will assume the summary judgment proof included *213 admissions by Harley-Davidson by reason of its failure to timely file answers to two sets of requests for admissions and admissions by Hodde by reason of his failure to timely file answers to the first set of requests for admissions submitted to him. We make this assumption although there is great uncertainty in the record before us as to whether the trial court did in fact deem the requests admitted. During the hearing of the motion for summary judgment the trial court stated, "They have not been deemed admitted." Shortly thereafter the court stated, "My understanding of the appellate court's interpretation of the rule is unless they're not filed at all at the time of some decision of the merits, such as trial or a motion for summary judgment, then it's discretionary with the court whether to deem them admitted or not."
In this case the answers were on file at the time of the summary judgment hearing, but the court had not ruled on appellants' motions for leave to make a late filing thereof. The summary judgment signed by the trial court stated that the court considered "admissions on file" along with other things.
For the reasons set forth below we have concluded that the summary judgment against both appellants must be reversed even if we assume the summary judgment proof included all these admissions.
In point of error number one Harley-Davidson contends the trial court erred in considering the affidavit of Young in support of appellee's motion for summary judgment because the affidavit contains Young's conclusions and opinions. In its brief before this court Harley-Davidson sets forth two typewritten pages of Young's affidavit statements that Harley-Davidson contends constitute opinions and conclusions. We will not discuss each of those statements separately. We agree, however, with Harley-Davidson's contention that statements of opinions and conclusions made in an affidavit are not competent summary judgment proof and should be disregarded in determining the sufficiency of proof to support the summary judgment. Hidalgo v. Surety Savings and Loan Association, 487 S.W.2d 702 (Tex. 1972); Inwood Forest Community Improvement Association v. R.J.S. Development Company, Inc., 630 S.W.2d 751 (Tex. Civ.App.Houston [1st Dist.] 1982, no writ); Manges v. Astra Bar, Inc., 596 S.W.2d 605 (Tex.Civ.App.Corpus Christi 1980, writ ref'd n.r.e.); Booher v. Criswell, 531 S.W.2d 844 (Tex.Civ.App.Dallas 1975, no writ); Schultz v. General Motors Acceptance Corporation, 704 S.W.2d 797 (Tex.App.Dallas 1985, no writ).
Appellee argues that Harley-Davidson has waived its contention in this regard because (1) it filed no response to the motion for summary judgment and (2) this contention is an objection to the form of the affidavit and has been waived by failing to make such objection in the trial court. Appellee's argument is without merit.
Harley-Davidson's point one attacks the substance, not the form, of the affidavit. Under the supreme court's decision in City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671 (Tex. 1979) Harley-Davidson, as non-movant, needs no answer or response to the motion for summary judgment to contend on appeal that the grounds expressly presented to the trial court by the movant's motion are insufficient as a matter of law to support summary judgment. Motions for summary judgment and accompanying summary judgment proof must stand on their own merits, and the non-movant's failure to answer or respond cannot supply by default the summary judgment proof necessary to establish the movant's right. Even though we will not consider opinions and conclusions stated in Young's affidavit, it is appropriate to consider Young's factual statements; and the trial court did not err in so considering them. Therefore, we overrule Harley-Davidson's point of error number one.
In points of error numbers two through fourteen Harley-Davidson contends the trial court erred in rendering summary judgment *214 against Harley-Davidson for many reasons. We hold the trial court erred in rendering summary judgment against Harley-Davidson.
To understand the matters presented here some factual background is necessary. On April 24, 1981 Young bought from Hodde a new 1980 Harley-Davidson motorcycle manufactured by Harley-Davidson. Hodde was an authorized Harley-Davidson dealer engaged in sales and service of Harley-Davidson motorcycles. At the time of the sale and as a part of the terms of the sale Young was furnished a written "Harley-Davidson Motorcycle Limited Warranty." That written warranty contained the following provisions:
Harley-Davidson warrants to the first purchaser only of our 1980 model motorcycles that our Selling Dealer will repair or replace without charge any parts (except tires and maintenance items) found under normal use in the U.S.A. or Canada to be defective in factory materials or workmanship, and upon the following terms and conditions:
1. The warranty period is six months or six thousand miles, whichever comes first, measured from the date of delivery ...
. . . . .
5. This warranty does not cover:
(a) parts and labor for normal maintenance as recommended in the applicable Owner's Manual, including such items as the following: ... clutch and chain adjustment (including chain replacement).
. . . . .
6. Our dealers are independently owned and operated and may sell other products. Because of this HARLEY-DAVIDSON IS NOT RESPONSIBLE FOR THE SAFETY, QUALITY, OR SUITABILITY OF ANY NON-HARLEY-DAVIDSON PART, ACCESSORY OR DESIGN MODIFICATION, INCLUDING LABOR WHICH MAY BE SOLD AND/OR INSTALLED BY OUR DEALERS.
THERE IS NO OTHER EXPRESSED WARRANTY (OTHER THAN EMISSIONS WARRANTY) ON THE MOTORCYCLE. ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS IS LIMITED TO THE DURATION OF THIS WARRANTY.
TO THE FULLEST EXTENT ALLOWED BY LAW, HARLEY-DAVIDSON AND ITS DEALERS SHALL NOT BE LIABLE FOR LOSS OF USE, INCONVENIENCE, LOST TIME, COMMERCIAL LOSS OR OTHER INCIDENTAL OR CONSEQUENTIAL DAMAGES.
As to Harley-Davidson the summary judgment proof consisted of the following: (1) admissions made by Harley-Davidson by failing to timely answer two sets of Requests for Admissions; (2) the affidavit of appellee George Young; (3) answers of George Young to interrogatories propounded by appellant Hodde; and (4) the affidavit of appellant Hodde (to the extent that statements made by Hodde do not conflict with admissions made by Harley-Davidson).
By its failure to timely answer the two sets of Requests for Admissions Harley-Davidson has made the following relevant factual admissions:
1. A defective rotor was placed in the motorcycle when it was manufactured.
2. At the time of Young's purchase, the motorcycle contained a defective ignition rotor.
3. Defective workmanship in manufacturing the motorcycle resulted in the ignition timing being set improperly.
4. In about the first week in February, 1982 Young returned the motorcycle to Hodde and informed him of its defective condition.
5. Hodde agreed to make any and all necessary repairs and replacements under warranty with Harley-Davidson parts.
6. The defects in the motorcycle referred to in paragraphs number one, *215 two and three just above, were not cured by Hodde.
7. When Hodde returned the motorcycle to Young, Hodde assured Young that the motorcycle was repaired.
8. When Hodde returned the motorcycle to Young, Hodde assured Young that all replacements had been performed with authorized Harley-Davidson parts, as warranted.
9. Hodde replaced the authorized Diamond brand primary chain with a worn out Duckworth brand primary chain.
10. The defects in the motorcycle's ignition timing and rotor were the direct cause of the motorcycle's breakdown on or about the first week in February 1982.
11. The defects in the motorcycle's ignition timing and rotor were the direct cause of the motorcycle's breakdown on or about May 14, 1982.
12. On or about May 14, 1982 Young specifically requested Hodde to repair the motorcycle only with authorized Harley-Davidson parts.
13. Hodde used unauthorized replacement parts on the motorcycle.
14. While repairing the motorcycle, Hodde used some parts which were oversized.
15. While repairing the motorcycle, Hodde had to force some parts into position, thereby cracking one of the cyclinder heads.
16. The front cyclinders Hodde placed into the motorcycle had been improperly rebored and were therefore ruined.
17. The back cylinders Hodde placed into the motorcycle had been improperly rebored and were therefore ruined.
18. On or about May 14, 1982 Hodde offered to convert the motorcycle's oil system so that it would comply with Harley-Davidson's 1982 specifications.
19. When Hodde returned the motorcycle to Young, Hodde assured Young that the oil system conversion had been performed with authorized Harley-Davidson parts.
20. Hodde charged Young for the oil system conversion.
21. Hodde never performed such an oil system conversion on the motorcycle.
22. On or about May 14, 1982 Young requested that Hodde repair the motorcycle's sticky clutch.
23. When Hodde returned the motorcycle to Young, Hodde assured Young that the sticky clutch had been repaired.
24. Hodde did not repair the sticky clutch on or about May 14, 1982.
25. On or about May 14, 1982 Hodde informed Young that the motorcycle required a complete engine overhaul.
26. On or about May 14, 1982 Young asked Hodde to perform a complete engine overhaul on the motorcycle.
27. When Hodde returned the motorcycle to Young, Hodde assured Young the engine overhaul had been performed.
28. When Hodde returned the motorcycle to Young, Hodde assured Young only authorized Harley-Davidson parts had been used on the motorcycle.
29. Hodde charged Young for the engine overhaul.
30. The defective ignition rotor was replaced by Hodde on or about May 14, 1982.
31. Improperly set ignition timing caused excessive heat to build up in the motorcycle.
The above listed admissions were binding on Harley-Davidson, and it could not take advantage of any summary judgment proof contrary to such admissions.
In Young's answers to interrogatories propounded by appellant Hodde, Young *216 stated that at the time of the first breakdown of the motorcycle (February 1982) the motorcycle had been driven 17,524 miles and at the time of the second breakdown in May 1982, it had been driven 24,589 miles.
In Young's affidavit in support of his motion for summary judgment he made the following factual statements:
1. Young observed a defective ignition rotor and defective workmanship in setting the ignition timing (Young gives no date on which he made these observations).
2. In February 1982 Harley-Davidson and Hodde verbally agreed to extend the warranty to cover any necessary repairs with authorized Harley-Davidson parts (presumably this refers to defects referred to in paragraph 1 just above).
3. The motorcycle engine failed on or about the first week in February 1982 and Hodde assured Young he would repair the motorcycle with authorized Harley-Davidson parts, as warranted by Harley-Davidson.
4. When the motorcycle was returned to Young, he was assured by Hodde that the work had been performed as warranted.
5. The motorcycle's engine failed the second time on or about May 14, 1982. Young again contacted Hodde and requested that the motorcycle be repaired. Hodde informed Young that a complete overhaul of both the upper and lower portions of the engine would be required and that the manufacturer would not warrant the work.
6. At that time, May 14, 1982, Young requested that Hodde do a complete engine overhaul, using only authorized Harley-Davidson parts, and a complete conversion of the machine's oil system to meet Harley-Davidson's 1982 specifications.
7. Hodde returned the motorcycle to Young on or about May 20, 1982, and Hodde charged Young for the work. Hodde represented to Young that all the repair work had been performed on the motorcycle, that it had all been done with authorized Harley-Davidson parts and all the work was performed in accordance with the 1982 Harley-Davidson specifications. The total amount Hodde charged Young was approximately $1,800.
8. The conversion of the oil system to 1982 Harley-Davidson specifications had not been performed.
9. The motorcycle's Diamond brand primary chain had been replaced with a worn out Duckworth brand substitute.
In addition to these factual statements Young's affidavit contains a list of five separate amounts of money he stated he had paid for specified repairs, totalling as follows: $920.67 to rebuild the upper portion of the engine; $97.00 to replace the worn out primary chain; $130.00 to replace the motor mounts and stabilizers; $150.00 to replace a ruined rear tire and $89.05 to clean the clutch.
In the affidavit Young also stated that it would cost him $1,779 to install a 1982 oil system, head fittings, to replace bearings and to repair the lower portion of the engine with 1982 components; or, alternatively, $2,200 to install a new 1982 engine in the motorcycle. He also stated that it would cost him $400 to replace the damaged FLT Fairing.
For several reasons the summary judgment proof is insufficient to support a judgment for these items of claimed damages. There is no competent summary judgment proof that any conduct of Harley-Davidson or Hodde, as detailed in the affidavit, was a producing cause of such damages. Young's affidavit statement to that effect is no more than an opinion or conclusion and cannot be considered competent summary judgment proof. Also, there is no summary judgment proof that the amount of each of the listed repair items was the reasonable, usual or customary charge for such repair. Furthermore, a *217 number of the listed repair items are specifically excluded from the terms of the written warranty. For example, tire replacements, clutch and chain adjustment and maintenance and chain replacement are all expressly excluded.
Finally, Young's affidavit lists several items of claimed damages that he specifically states are incidental and consequential damages. These include $2,000 in business loss by having to close down his business to attend to the motorcycle repairs made by another dealer in Austin, $32 in telephone bills, $100 for food and lodging in Austin and $30 in travelling expense to Austin. These are clearly consequential damages, as appellee concedes, and are not recoverable under the terms of the written warranty. G-W-L, Inc. v. Robichaux, 643 S.W.2d 392 (Tex.1982); Ellmer v. Delaware Mini-Computer Systems, Inc., 665 S.W.2d 158 (Tex.App.Dallas 1983, no writ); Ganda, Inc. v. All Plastics Molding, Inc., 521 S.W.2d 940 (Tex.Civ.App.Waco 1975, writ ref'd n.r.e.).
In this summary judgment the trial court awarded appellee recovery against both appellants of $10,960.16 in additional damages under Tex.Bus. & Com.Code Ann. § 17.50(b)(1). Such additional damages are not recoverable unless the summary judgment proof was sufficient to establish that the "conduct of the defendant was committed knowingly." We hold there was insufficient summary judgment proof to support an award of such additional damages. The only summary judgment proof that the conduct of Harley-Davidson was committed knowingly is the following statement by appellee in his affidavit: "I viewed the conduct of defendants as described in this petition (sic) to be committed knowingly; that is, that defendants were actually aware of the falsity, deception, and unfairness of the conduct about which I complained and they were actually aware of the acts constituting the breach of warranty described above." This statement is nothing more than the opinion and conclusion of the appellee and, as such, is insufficient to support the summary judgment against Harley-Davidson.
Appellant's Harley-Davidson's points two through fourteen are sustained.
In Hodde's appeal from the summary judgment, he brings five points of error (erroneously referred to in his brief as "statements"). In the first three points of error Hodde makes various arguments that the trial court erred in granting the summary judgment against Hodde. These three points of error raise essentially the same contentions made by Harley-Davidson in its appeal.
The holdings made above with respect to Harley-Davidson apply equally as well to appellant Hodde. In fact there are many more reasons why the summary judgment against Hodde cannot stand. The second set of requests for admissions addressed to Hodde were identical to the second set submitted to Harley-Davidson. Hodde had timely filed his answers to the second set of requests for admissions and in such answers had denied thirty-nine of the forty-one requests. Also, Hodde had filed his affidavit in response to appellee's motion for summary judgment and in that affidavit he made statements that clearly raised numerous fact issues. We sustain Hodde's first three points of error.
In his fourth point of error Hodde claims the trial court erred in severing his counterclaim for recovery of attorney's fees under Section 17.50(c) of the DTPA-CPA. It is clear from the order of severance itself that the trial court did not sever that part of Hodde's counterclaim against appellee but severed only Hodde's counterclaim for recovery of $1,800 for repairs to the motorcycle. Hodde's fourth point of error is overruled.
It is not necessary to discuss Hodde's fifth point of error in view of our holdings on his first three points of error. However, we find no merit in point five and it is overruled.
In conclusion, we feel we should say that in our opinion, this is not the type of case that is amenable to summary judgment. *218 See Hittner, Summary Judgments in Texas, 22 Houston Law Review 1109 (1985).
The summary judgment against both appellants is reversed and the cause is remanded for trial on the merits.
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720 S.W.2d 703 (1986)
290 Ark. 428
Gilberto DOMINGUEZ and Jose Luis Montalvo, Appellants,
v.
STATE of Arkansas, Appellee.
No. CR 86-85.
Supreme Court of Arkansas.
December 8, 1986.
*704 Charles A. Potter, Texarkana, for appellants.
Steve Clark, Atty. Gen., Little Rock, by Joel O. Huggins, Asst. Atty. Gen., for appellee.
HAYS, Justice.
This case involves the validity of a regulatory inspection pursuant to Ark.Stat.Ann. § 73-1760(c) and § 73-1773(b) (Repl.1979), contained in the Motor Carrier Act of 1955 (§§ 73-1754-73-1779 [Repl.1979 & Supp. 1985]).
Two agents of the Arkansas Transportation Commission, Richard Birtcher and Charles Colwell were parked by the median of the interstate when they observed a U-Haul truck drive by. The truck was occupied by the two male appellants, Gilberto Dominguez and Jose Montalvo. The transportation enforcement officers decided to stop the truck "to see what they were hauling" and the appellants were pulled over. According to the officers, no violation was observed, it was merely a "routine stop."
Birtcher checked the registration, lease agreement and appellants' drivers' licenses and found no problem with any of these documents. Appellants said they were hauling furniture for a man in San Antonio who was going to Indiana. They had no address, but did have a telephone number they were supposed to call when they got to Evansville. Communication was hampered by appellants' limited English. When, at the direction of the officers the appellants opened the back of the truck, the odor of marijuana was apparent. The officers had appellants drive to the next exit for a more thorough search away from the traffic.
The officers mentioned other things they found suspicious: the furniture was used but had been cleaned, and the furniture was not complete for any room but just made up of odd lots. One of the officers went into the truck and opened up a box containing marijuana. The appellants were then handcuffed and read their rights.
Appellants were found guilty of possession with intent to deliver and sentenced to six years and a fine of $15,000. From these judgments, appellants bring this appeal. They raise only one argument, that the court erred in refusing to suppress the evidence as the result of an illegal search.
The question on appeal is whether the stop and resulting search were authorized under the Arkansas Motor Carrier Act as a constitutionally permissible administrative inspection, as the state argues, or whether, as appellants argue, the stop was not within the scope of the act and therefore the search was illegal and the evidence tainted.
The statute from which the ATC agents claim their authority is part of the Arkansas Motor Carrier Act of 1955, Ark.Stat. *705 Ann. §§ 73-175473-1779. Section 73-1760(c) provides for the appointment of enforcement officers with full authority throughout the state to make arrests. The pertinent portion reads:
Such enforcement officers upon reasonable belief that any motor vehicle is being operated in violation of any provisions of this Act, shall be authorized to require the driver thereof to stop and exhibit the registration certificate issued for such vehicle, to submit to such enforcement officer for inspection any and all bills of lading, waybills, invoices or other evidences of the character of the lading being transported in such vehicle and to permit such officer to inspect the contents of such vehicle for the purpose of comparing same with bills of lading, waybills, invoices or other evidence of ownership or of transportation for compensation. (Emphasis added).
The Fourth Amendment's prohibition against unreasonable searches applies to administrative inspections of private commercial property as well as criminal investigations, Donovan v. Dewey, 452 U.S. 594, 101 S. Ct. 2534, 69 L. Ed. 2d 262 (1981), and a vehicular stop and detention of its occupants constitutes a seizure under the Fourth Amendment. Delaware v. Prouse, 440 U.S. 648, 99 S. Ct. 1391, 59 L. Ed. 2d 660 (1979). Not every search and seizure is forbidden by the Fourth Amendment, only unreasonable ones. The central inquiry is the reasonableness under all the circumstances of the particular governmental invasion of a citizen's personal security and that inquiry becomes a dual onewhether the officer's action was justified at the inception and whether it was reasonably related in scope to the circumstances which justified the interference in the first place. Webb v. State, 269 Ark. 415, 601 S.W.2d 848 (1980); Terry v. Ohio, 392 U.S. 1, 88 S. Ct. 1868, 20 L. Ed. 2d 889 (1968). The burden of proof is on the party seeking the exemption from the requirement of a warrant. Rowland v. State, 262 Ark. 783, 561 S.W.2d 304 (1978); Asher v. City of Little Rock, 248 Ark. 96, 449 S.W.2d 933 (1970). The state must prove that a warrantless intrusion was not in violation of the Fourth Amendment and not subject to constitutional protection. The state has failed to make that showing.
It is not necessary for us to consider the propriety of the search itself under § 73-1760(c), as the initial stop was not authorized by the statute and therefore the search was not proper. Webb v. State, supra.
The stated purpose of the Motor Carrier Act is the regulation of motor carriers, §§ 73-175573-1756. Motor carriers are any persons, who directly or indirectly transport property or passengers for compensation. §§ 73-1756, 73-1758(a)(7), (8), (9). The act does not include all vehicles transporting for compensation. It specifically states that nothing in the act shall be construed to include certain vehicles. Specifically exempted from the act are "occasional" or "reciprocal" transporters, those not engaged in transportation by motor vehicle as a regular business. Duck v. Arkansas Corporation Commission, 203 Ark. 448, 158 S.W.2d 24 (1942); § 73-1758(b)(6). Also exempted are private carriersthose which transport property by motor vehicle where such transportation is incidental to or in furtherance of a commercial enterprise of such persons, other than transportation. Private carriers are subject to the act only with respect to safety of operation and equipment standards. § 73-1758(a)(14), (b)(3). Also excluded are: transporters of a large number of agricultural commodities (with exception of safety operations), several types of building and quarry materials, gasoline and certain related products, certain wood products, all taxi cabs licensed by municipalities, vehicles operated by an agricultural cooperative, and school buses.
Appellants correctly contend the agents went beyond the authority granted by § 73-1760(c). The state does not base the agents' authority on this statute but relies primarily on another section of the act. We think it necessary to address the point, however, to correct a misinterpretation of *706 § 73-1760(c) by the agents. They testified they had authority to make routine stops without evidence of a violation, and further, that their jurisdiction extended to "anything that might be hauling for hire," which included taxicabs, pickup trucks, panel trucks or anyone being paid to transport goods. It was on this basis the agents believed their authority to stop appellants was derived, that is, the authority to make a routine check of any vehicle that might be hauling for hire.
We reemphasize that all vehicles "hauling for hire" are not within the jurisdiction of the act, rather, numerous exceptions are made. But irrespective of whether appellants were within the jurisdiction of the act, the agents were mistaken as to their powers, as there is no authority under § 73-1760(c) to make a "routine check" of any vehicle within their jurisdiction. To the contrary, § 73-1760(c) clearly recites that authorization to make a stop is dependent on a reasonable belief that a vehicle is in violation of the act. The agents admitted they detected no violation, that appellants were simply subjected to a "routine stop." That being so, the agents went beyond the authority granted by the legislature and the stop was therefore unlawful.
The state argues the agents' authority is found under another provision of the act which it interprets as allowing administrative inspections such as the one involved in this case. § 73-1773(b) provides:
The Commission or its duly authorized agents shall, at all times, have access to all lands, buildings, or equipment of motor carriers used in connection with their operation and also all pertinent accounts, records, documents and memoranda now or hereafter existing, and kept or required to be kept by motor carriers.
Administrative inspections have been allowed for routine stops of motor carriers in one jurisdiction, see State v. Williams, 8 Kan. App. 2d 14, 648 P.2d 1156 (1982). The two cases are distinguishable, however, both on the facts and on the wording of the statute. And State v. Williams is not helpful for our purposes. An examination of our own act points to some initial difficulties with the state's contention. We first note there are hurdles that must be overcome in meeting minimum constitutional standards which would include finding sufficient safeguards against unbridled discretion by enforcement officers. See Marshall v. Barlow's, Inc., 436 U.S. 307, 98 S. Ct. 1816, 56 L. Ed. 2d 305 (1978). Too, a conflict is readily apparent between § 73-1760(c) and § 73-1773, casting doubt on whether the latter authorizes highway stops on demand for routine checks of motor carriers. For § 73-1760(c) authorizes stops only on a reasonable belief of a violation, with other language indicating the statute is clearly applicable to motor carriers (references to the inspection of bills of lading and waybillsterms that would apply only to motor carriers.) However, the case before us does not require a determination of the intended purpose or constitutionality of § 73-1773. For as we shall see, even if it could be said the statute authorized routine checks of motor carriers, such an administrative basis would not be sufficient to justify the constitutionality of the stop which occurred here.
The act provides for the inspection of "motor carriers," which includes both authorized and unauthorized carriers. § 73-1758(a)(9). How an agent determines in advance whether a carrier is authorized is not apparent from the act nor anything presented in the record, however, under § 73-1777, all carriers are required to affix to the side of the vehicle the name of the carrier and the certificate or permit number. Certainly, if the statute were to authorize a routine regulatory search, which included highway stops, vehicles so identified could properly be stopped. The problem is determining under what circumstances a vehicle not so identified, as in this case, is subject to a regulatory stop.
The limitations of a vehicle stop are stated in Delaware v. Prouse, 440 U.S. 648, 99 S. Ct. 1391, 59 L. Ed. 2d 660 (1979), reiterating the standard announced in United States v. Brignoni-Pounce, 422 U.S. 873, *707 95 S. Ct. 2574, 45 L. Ed. 2d 607 (1975), that warrantless stops of motor vehicles are prohibited by the Fourth Amendment absent specific articulable facts which reasonably support an inference of a violation of the laws respecting use of the vehicle.
Under administrative searches, however, the Fourth Amendment requirement of reasonableness of any intrusion is supported by grounds other than probable cause (or reasonable suspicion.) Essentially, business inspections are justified without warrants or probable cause when the need for governmental inspection outweighs the invasion of the individual. This balancing process includes the critical consideration that individuals subject to search are aware of the potential of an inspection and its scope because of their participation in the regulated activity. See Donovan v. Dewey, 452 U.S. 594, 101 S. Ct. 2534, 69 L. Ed. 2d 262 (1981); United States v. Biswell, 406 U.S. 311, 92 S. Ct. 1593, 32 L. Ed. 2d 87 (1972); Marshall v. Barlow's Inc., 436 U.S. 307, 98 S. Ct. 1816, 56 L. Ed. 2d 305 (1978); Camara v. Municipal Court, 387 U.S. 523, 87 S. Ct. 1727, 18 L. Ed. 2d 930 (1967). The business inspection exception to the probable cause requirement would not support a search under § 73-1773 of vehicles not clearly within the regulated business.
Those vehicles not clearly identifiable as motor carriers which could conceivably fall within this act include a significant number of vehicles using the highways. Of these, a substantial number could be stopped which are not motor carriers. For such individuals, the essential element is absent which makes an administrative search reasonablethey have no participation in the regulatory scheme and therefore have no awareness or anticipation of an inspection. A search on the basis of the administrative authority would be constitutionally objectionable for those not within the business. Donovan, supra, 452 U.S. at 599, 101 S.Ct. at 2538. Therefore, neither is it justified, as the state suggests, to use that authority to make stops of those who might be avoiding regulation through anonymity or disguise. It would be a circumvention of the Fourth Amendment if the business exception to the probable cause or warrant requirement could be used wholly out of the context of its justification and applied to those searches intended for what amounts to no more than the detection of illegal activity from amidst other lawful conduct.
Neither have we found cases dealing with administrative searches that have held or suggested that the administrative basis alone can be used as justification to extend searches beyond those in the business in order to find individuals whose specific violation is the avoidance of regulation. The reason is plain, as we have seen. Such administrative authority requires more in order to broaden it to one of a regulatory scheme which includes those not in the business. It was stated in Delaware v. Prouse, supra:
There are certain "relatively unique circumstances" in which consent to regulatory restrictions is presumptively concurrent with participation in the regulated enterprise. [Cites omitted.] Otherwise, regulatory inspections unaccompanied by any quantum of individualized articulable suspicion must be undertaken pursuant to previously specified "neutral criteria." Marshall v. Barlow's, Inc., 436 U.S. at 323, 98 S.Ct. at 1826.
Here, § 73-1773 could not permit any extension of the administrative authority beyond those in the business. It obviously contains no criteria providing a basis for stops of suspected unauthorized carriers and would be left to the unfettered and unbridled discretion of the agents. Nor did the agents' testimony indicate guidelines had been set up within the agency. To the contrary, their testimony revealed that the stops were no more defined than anyone "who was hauling for hire," a basis wholly lacking in "neutral criteria."
We do not suggest that neutral guidelines alone could replace the requirements in Prouse and meet constitutional standards. See Marshall v. Barlow's, Inc., supra, 436 U.S. at 321-323, 98 S.Ct. at 1824-1826. We merely observe that as a possible alternative to either Prouse or a business *708 inspection, such an approach would fail under § 73-1773.
More significantly we note that the state offered no proof below, nor even suggested that stops that might go so far as to involve the innocent driver of a pickup, panel truck or U-Haul, or even a passenger car under a statute intended to regulate motor carriers, were either crucial to the statutory scheme and its purpose or sufficiently productive to justify the intrusion on a driver's Fourth Amendment rights where there was no expectation of such an intrusion and less intrusive means were available. See Delaware v. Prouse, supra. There was not even evidence presented to show justification for such stops of vehicles that were within the act.
The burden of proof was on the state to show an exception to the Fourth Amendment requirements. The state was incorrect in its initial assertion and under the business inspection theory § 73-1773 cannot authorize routine checks of vehicles not clearly identified as motor carriers operating within the regulated business. But neither did the state demonstrate there were any guidelines used in conjunction with the statute or any evidence to suggest the need for extending the authority under § 73-1773 to stops that would include vehicles not within the act. Such stops would therefore be constitutionally impermissible under § 73-1773. Delaware v. Prouse, supra; Marshall v. Barlow's Inc, supra.
In order to meet minimum constitutional requirements, the state must show under Prouse there were articulable facts which reasonably supported an inference of a violation of the laws respecting use of the vehicle. Under § 73-1773, the agents would have to demonstrate that the facts reasonably supported an inference that appellants were nonauthorized motor carriersthat appellants were transporting property or persons for compensation on a regular basis without the proper authorization from the commission.
The agents testified the truck was being driven by two men, whereas a U-Haul "usually had one driver or a man and his wife and family, or pulling a car." They also thought it pertinent that the vehicle had a Connecticut license,"which is a long way from Arkansas and it appeared to be going back in that direction to return the truck or return a load, and it was two male subjects in there which appeared that they may have a load that would take two subjects to load and unload."
While it can be assumed the U-Haul was carrying goods of some kind, the fact that the cab was occupied by two men rather than a single man or a couple does not support an inference pertinent to the Motor Carrier Actincluding an inference that the occupants were transporting goods for compensation. We note in this regard the presence of both male and female truckers on the highways today and the fact that single people with or without a companion will make moves as well as married couples. In short, the sex of the occupants of a truck does not tell us much, and why Connecticut license plates on a truck from an interstate rental agency should arouse suspicion, is not explained.
Aside from suspicion that appellants were transporting for hire, the agents had no other basis for a belief they were carriers under the act. Specifically exempted are occasional transporters who do not regularly engage in transportation for compensation. The agents in this case had no idea whether the appellants were engaged on a regular basis, if in fact they were being paid. Even by the time of trial, the agents did not have any idea on this point, nor did they think it was significant. There is no contention the appellants were acting as unauthorized carriers.
In United States v. Cortez, 449 U.S. 411, 101 S. Ct. 690, 66 L. Ed. 2d 621 (1981) the Supreme Court found under certain circumstances a police officer may rely on his experience and make "inferences and deductions that might well elude an untrained person." The inferences and deductions made by the agents in this case have escaped us. The fact that an officer is experienced does not obligate a court to accept all of his suspicions as reasonable. Nor *709 does experience alone mean an officer's perceptions are justified by the objective facts. United States v. Buenaventura-Ariza, 615 F.2d 29 (2d Cir.1980). And in Cortez, the inferences and deductions had been fully explained at the suppression hearing so that both a particularized and an objective basis for the stop were established. That was not the case here, and we can say that two men in a U-Haul with Connecticut license plates, absent further explanation by the agents, does not support an inference that appellants were transporting goods for hire on a regular basis, and were unauthorized to do so. The state has failed to show that the stop was justified under the minimal constitutional standards of Delaware v. Prouse, supra.
Reversed and dismissed.
HICKMAN, J., dissents.
HICKMAN, Justice, dissenting.
I believe the state proved that these officers had reasonable cause to stop and inspect this U-haul driven by two males with a Connecticut license plate. It was not a routine stop and there was probable cause for the search. The officers believed the vehicle could be either carrying contraband or illegally transporting goods. From their experience the officers thought something was amiss, and that suspicion justified the stop. After talking with the two men from Texas, who had Indiana drivers' licenses, the officers' suspicions were further aroused and the search ensued. The marijuana was found in a box behind some junk furniture.
Since the initial stop was proper, the search was not unreasonable. I would affirm the convictions.
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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/1525970/
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290 B.R. 584 (2002)
In re PROTEVA, INC. and Proteva Marketing Group, Inc., Debtors.
Liquidating Grantor's Trust of Proteva, Inc. and Proteva Marketing Group, Inc., Plaintiff,
v.
Finova Capital Corporation, William Lynch, Brian Jordan and John Roberts, Defendants.
Bankruptcy Nos. 99 B 26880, 99 B 26884, Adversary No. 01 A 00022.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
May 31, 2002.
*585 Frances F. Gecker, Freeborn & Peters, Chicago, IL, for Plaintiff.
J. Douglas Bacon, Latham & Watkins, Catherine A. Van Horn, Mandell, Menkes & Surdyk, Chicago, IL, for Defendant.
MEMORANDUM OPINION
SUSAN PIERSON SONDERBY, Bankruptcy Judge.
This cause comes to be heard on the motion of Finova Capital Corporation ("Finova"), one of the defendants herein, to dismiss and/or for entry of summary judgment with respect to Counts I through IV and VI of the Complaint. For the reasons stated herein, the motion is denied.
I.
JURISDICTION AND VENUE
This Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1334 and Internal Operating Procedure 15(a) of the United States District Court for the Northern District of Illinois. This matter is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (F), (H) and (O). Venue is proper pursuant to 28 U.S.C. § 1409(a).
II.
BACKGROUND
A. Procedural Background
On August 30, 1999 (the "Petition Date"), Proteva, Inc. ("Proteva") and Proteva Marketing Group ("PMG") filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code, 11 U.S.C. § 101 et seq. (the "Bankruptcy Code") commencing this chapter 11 case (the "Chapter 11 Case"). Proteva and PMG are sometimes collectively referred to as the "Debtors." On September 13, 1999, an official committee of unsecured creditors (the "Committee") was appointed *586 pursuant to section 1102 of the Bankruptcy Code.
On February 15, 2000 (the "Confirmation Date"), this Court entered an order confirming the Committee's Amended Liquidating Plan of Reorganization dated January 11, 2000 (the "Plan"). Under the Plan and Confirmation Order, the estates of the separate Debtors were substantively consolidated pursuant to Rule 1015 of the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"), and their assets were transferred to the Liquidating Grantor's Trust (the "Trust"), which was established pursuant to the Plan. The Plan and Confirmation Order authorized the Trust to inter alia administer the Debtors' assets from the Confirmation Date, distribute estate funds to creditors with allowed claims, and prosecute claims and causes of actions belonging to the estates.
Prior to the Petition Date, the Debtors produced build-to-order computers for retail sale throughout the United States. Proteva operated from facilities in Illinois and Wisconsin. PMG's facility was located in Marietta, Georgia. Finova, a Delaware corporation with offices located in King of Prussia, Pennsylvania, provided financing to the Debtors. The obligations of the Debtors to Finova were guaranteed by three shareholders and officers of the Debtors, William Lynch, Brian Jordan and John Roberts (collectively, the "Guarantors").
On January 3, 2001, the Trust filed a seven-count complaint against Finova and the Guarantors (the "Complaint") which commenced this adversary proceeding. Counts I through IV and VI seek relief against Finova and Counts V and VII seek relief against the Guarantors.[1]
As for the counts against Finova which are the subject of this opinion, the Trust seeks to:
(i) avoid the grant of a security interest to Finova as a preferential transfer under section 547 of the Bankruptcy Code (Count I);
(ii) recover payments totaling $11,083,671.85 made by the Debtors to Finova in the 90-days preceding the Petition Date (the "Preference Period") as preferential transfers under sections 547 and 550 of the Bankruptcy Code (Count II);
(iii) avoid the lien held by Finova in the Debtors' assets as a fraudulent transfer under section 548 of the Bankruptcy Code (Count III);
(iv) recover a total of $2,263,833.30 of postpetition transfers made by the Debtors to Finova (the "Postpetition Transfers") pursuant to section 549 of the Bankruptcy Code, or, in the alternative recover a total of $1,033,330.43 of the Postpetition Transfers pursuant to Section 9-306(4)(2) of the Uniform Commercial Code (Count IV); and
(v) equitably subordinate Finova's claims to the claims of all other creditors pursuant to section 510(c) of the Bankruptcy Code (Count VI).
On February 2, 2001, Finova filed a motion to dismiss counts I through IV and VI of the Complaint under Fed.R.Civ.P. 12(b)(6) made applicable herein by Bankruptcy Rule 7012(b) and/or for entry of summary judgment under Fed.R.Civ.P. 56 made applicable herein by Bankruptcy Rule 7056. Local Bankruptcy Rule 403 governs summary judgment practice in this Court and requires the movant to file with its summary judgment motion a Statement of Undisputed Material Facts setting forth in separate paragraphs the *587 facts that movant believes demonstrate the lack of a genuine issue of material fact (the "Rule 403(M) Statement"). The nonmovant must file a response to the Rule 403(M) Statement admitting or denying each fact. The nonmovant can also file its own statement of facts that it believes precludes summary judgment (the "Rule 403(N) Statement").
Finova filed its Rule 403(M) Statement with the Affidavit of John Sawn, a Vice-President of Finova ("Sawn") and copies of various documents and court orders. The Trust filed a response to the motion and a response to Finova's Rule 403(M) Statement. The Trust also filed its Rule 403(N) Statement setting forth additional facts that Finova believes raise genuine issues of material fact that preclude the entry of summary judgment. Finova filed a reply with respect to the motion and a reply to the Rule 403(N) Statement. The Court thereafter took the motion under advisement.
B. The Finova Security Interest
Unless otherwise noted, the following facts are undisputed. On August 3, 1995, Finova entered into an agreement entitled "Dealer Loan and Security Agreement" (the "08/95 Security Agreement") with Fountain Marketing Group, Inc. ("Fountain") whereby Finova agreed to make loans to Fountain in exchange for two types of security interests. First, Fountain granted Finova a purchase money security interest in ". . . Inventory, the Proceeds thereof and all General Intangibles related thereto." The purchase money security interest covered only the loans used by Finova to acquire rights in the Inventory. Fountain also granted Finova a security interest "to secure repayment . . . of all debts and liabilities . . . under this Agreement or any other agreement" in Inventory, Accounts and General Intangibles and the Proceeds of the same.
Finova filed a UCC-1 financing statement[2] on August 10, 1995 with the Office of the Secretary of State of Illinois to perfect its security interest in the Collateral (the "First UCC-1 Financing Statement"). Finova and Fountain are listed on the First UCC-1 Financing Statement as "secured party" and "debtor", respectively. The collateral description in the First UCC-1 Financing Statement included some items, such as fixtures, equipment, chattel paper and contract rights that were not described in the 08/95 Security Agreement as being part of the collateral subject to the security interest. No one has raised the issue of the effect of this discrepancy.
Finova made loans to Fountain, pursuant to the 08/95 Security Agreement, on an ongoing basis beginning in 1995. In his Affidavit, Sawn indicated that loans were made by Finova not only to Fountain but to Proteva, which Finova argues is in fact Fountain under a new name.[3] Since this *588 statement about loans to Proteva from Sawn's Affidavit was not included in Finova's Rule 403(M) Statement, the Trust did not admit or deny whether Finova made loans to Fountain when its name became Proteva.
Early in 1997, Fountain moved from South Holland, Illinois to an address in Posen, Illinois. On February 5, 1997, Finova and Fountain entered into another Dealer Loan and Security Agreement, with identical provisions, but reflecting the new address of Fountain on the first page.
On February 20, 1997, a UCC-3 financing statement amending the First UCC-1 Financing Statement to reflect Fountain's new address was filed with the Office of the Secretary of State of Illinois. The UCC-3 statement was signed by Fountain. In addition, a UCC-1 financing statement, which except for the new address, contained the same information as the First UCC-1 Financing Statement, was filed on February 20, 1997 (the "Second UCC-1 Financing Statement"). Finova and Fountain were identified as "secured party" and "debtor," respectively on the Second UCC-1 Financing Statement.
The Trust contends that despite the filing of the Articles of Amendment, Fountain did not cease to operate as an entity separate from Proteva. Rather, the Trust alleges that Fountain remained in existence separate from Proteva from the filing of the Articles of Amendment to the Petition Date. In support of this contention, the Trust submits Proteva's Statement of Financial Affairs filed in the Chapter 11 Case, which lists a number of checks being sent by PMG to Fountain at the Posen address and to Proteva at the Wisconsin address in the Preference Period. Notably, the Statement of Financial Affairs is the only evidence submitted by Finova with respect to the factual issue of whether Proteva is a successor of Fountain or a distinct corporate entity.
On July 16, 1997, a Dealer Loan and Security Agreement was entered into between Finova and Proteva (the "07/97 Security Agreement"). On the first page of the 07/97 Security Agreement, Proteva's name at the same Posen, Illinois address was listed opposite Finova's name and address. Otherwise, the agreement was identical to the prior two agreements. On that date, Finova also entered into an identical but separate Dealer Loan and Security Agreement with PMG (the "PMG Security Agreement"). PMG's address was listed as being in Alpharetta, Georgia. On October 22, 1997, a UCC-1 financing statement signed by Finova and PMG was filed with the Office of the Secretary of State of Georgia identifying PMG as the debtor. This financing statement listed Finova as secured party.
On November 26, 1997, two UCC-3 financing statements both signed by Finova and Proteva were filed with the Office of the Secretary of State of Illinois, amending the debtor's name on the First UCC-1 Financing Statement and the Second UCC-1 Financing Statement from Fountain to Proteva. Finova did not include in its materials any UCC-1 financing statements filed in Illinois identifying Proteva as the debtor.
Finally, on July 9, 1998, a UCC-1 financing statement signed by Proteva and Finova was filed in the State of Wisconsin (the "Wisconsin Financing Statement"). The Wisconsin Financing Statement reflects Proteva as the debtor at an address located in Iron Ridge, Wisconsin. So, *589 based on the materials presently before the Court, the only filed UCC-1 financing statement in Proteva's name is the Wisconsin Financing Statement.
C. Pertinent Provisions of the Security Agreements
All of the security agreements are identical, with the exception of the debtor's name and/or address. The agreements are written in the form of a letter from the debtor to the secured party, e.g. "Gentlemen: We are an authorized dealer of goods . . . We may, . . . from time to time obtain loans from you in order to finance the purchase of certain of such goods. . . ."
The following effectiveness clause is in the penultimate paragraph of each agreement:
22. THIS AGREEMENT SHALL BE DEEMED EFFECTIVE WHEN ACCEPTED AND EXECUTED BY YOU [Finova] IN THE COMMONWEALTH OF PENNSYLVANIA, AND THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA.
Directly below this clause is a signature block for the debtor and the following signature block for Finova:
APPROVED AND ACCEPTED IN KING OF PRUSSIA, PENNSYLVANIA
FINOVA CAPITAL CORPORATION
(Secured Party)
By:
Date:
All of the agreements were signed by either Fountain, Proteva or PMG. The 07/97 Security Agreement was not signed by Finova. The Trust contends that Finova signed the 07/97 Security Agreement during the Preference Period. Finova disputes that it ever signed the 07/97 Security Agreement.
All of the agreements contain the following clause which the parties refer to as a "merger clause:"
In connection with each loan requested, we will deliver to you such other rights as you shall require, which may include notes or other appropriate evidence of debt. Such notes or other evidence of debt, Manufacturer invoices, and other like materials as may be revised from time to time ("Collateral Documents"), together with this Agreement, contain our entire understanding, and we acknowledge that we will not be relying upon any prior oral or written promises or undertakings or future oral promises between us.
All of the agreements contain the following "authorization clause":
We authorize and empower you or your employees, agents or representatives, on our behalf, and in our name, to complete and supply any omission or blank spaces in this agreement and in any documents or financing statements executed by us and including amendments and continuations thereof under the [the Uniform Commercial Code]; to execute and/or have acknowledged any form of security instruments, notes, drafts and documents; and to make any requisite affidavits which may be necessary or required by you, and/or which you may desire to evidence or secure advances made by you pursuant to the terms of this Agreement. All of the foregoing may be executed in such form and substance as you in your sole discretion may deem necessary or proper, and this power of attorney, *590 being coupled with an interest, is irrevocable.
Finally, all of the agreements contain a provision providing that all of the secured debtor's obligations under the agreements bind its successors and assigns:
This Agreement may be assigned by you, but we may not assign this Agreement without your prior written consent. If you assign this Agreement, you shall have no further obligations hereunder. All of your rights hereunder shall inure to the benefit of your successors and assigns and all our obligation shall bind our successors and assigns. If there be more than one party obligated to you under this Agreement, their obligations hereunder shall be joint and several, and the terms "we" "us" or "our" as used herein shall refer to them jointly and severally.
D. Arguments of the Parties
The Trust contends that there are material issues of fact with respect to whether the "merger clause" operated to supercede the prior security agreement as each successive agreement was signed. If the "merger clause" had that effect, then the last agreement, the 07/97 Security Agreement, is the operative agreement as to Proteva. Moreover, because the 07/97 Security Agreement and the PMG Security Agreement, which conditioned the effectiveness of the agreements on Finova's signature and acceptance, were not signed by Finova until during the Preference Period, the Trust argues that Finova's security interest in Proteva and PMG's collateral attached during the Preference Period. Consequently, the granting of the security interest and the payments received in the Preference Period are avoidable preferences or fraudulent transfers.
Finova contends that the "merger clause" did not work to supercede the prior agreements. As such, Finova's security interest arose from the 08/95 Security Agreement and attached in advance of the Preference Period, which would shield it from avoidance as a preference, and prior to one year before the Petition Date (the "Fraudulent Transfer Period"), which would shield it from a fraudulent transfer attack.
Finova argues that it makes no difference to the validity of its security interest if and when Finova signed the 07/97 Security Agreement (even if the 07/97 Security Agreement is the operative agreement) and the PMG Security Agreement. Finova contends that attachment occurred when Proteva signed the 07/97 Security Agreement and the PMG Security Agreement and the absence of or timing of Finova's signature makes no difference to the validity of the security interest.
E. The Postpetition Transfers to Finova
After the Petition Date, on September 2, 1999, the Court entered an order entitled "Interim Order Pursuant to 11 U.S.C. § 364(c) and Bankruptcy Rule 4001, Authorizing the Debtors to Obtain and Incur Post-Petition Financing and Post-Petition Indebtedness with Superpriority over Certain Administrative Expenses" (the "Interim Order"). The Interim Order authorized the Debtors to obtain postpetition financing from BTSA, Inc. and incur postpetition indebtedness related thereto. BTSA was granted, pursuant to section 364(c)(1) of the Bankruptcy Code, a superpriority claim, secured in accordance with section 364(c)(2) of the Bankruptcy Code, by first priority liens on and security interest in all of the Debtor's assets, "subject only to the Finova Liens." Finova Liens are defined in Exhibit A to the Interim Order as the liens and security interests in favor of Finova. Exhibit A *591 contains the language that Finova ". . . asserts a valid and perfected lien on a security interest in all of the Debtor's inventory, accounts receivable, general intangibles, and the proceeds of each (`FINOVA Collateral')."
In addition, the Interim Order provides inter alia:
32. By September 2, 1999, the Debtors shall provide FINOVA with a detailed accounts receivable aging, together with a list of all accounts receivable that were outstanding as of the Petition Date . . . together with a detailed listing of all inventory owned by Debtors as of the Petition Date.
33. Any cash or cash equivalents received by either of the Debtors on or after the Petition Date that constitute proceeds of the FINOVA Collateral, shall be segregated upon receipt by the Debtors, accounted for, and promptly delivered to FINOVA for application to the FINOVA Claim. Nothing in this Order authorizes the Debtors to expend any cash collateral that consists of proceeds of the FINOVA Collateral.
34. By Tuesday of each week, beginning September 7, 1999, the Debtors shall provide FINOVA and its counsel with detailed written reports clearly identifying the sources of all cash proceeds received by the Debtor on a cumulative basis since the Petition Date through the preceding Friday, and identifying any FINOVA Collateral that has been collected or sold.
35. FINOVA is authorized to apply any payments received by FINOVA to the FINOVA Claim, subject to the rights of the Debtors or any party in interest to challenge the FINOVA Claim, or the liens and security interests claimed by FINOVA, and, if appropriate, to seek disgorgement of any postpetition payments made to FINOVA.
The Court thereafter entered a series of orders authorizing the Debtors to increase the amount of the interim financing on the same terms and conditions set forth in the Interim Order.
On September 14, 1999, the Court entered an order granting the Debtors' emergency motion for authority to make payments to Finova (the "Finova Payment Order"). The Finova Payment Order provided inter alia:
IT IS HEREBY ORDERED THAT Debtors are authorized to pay the sum of $497,080.07 to Finova Capital Corporation ("Finova") forthwith, without prejudice to the right of any party in interest to challenge the application of such payment if Finova's claim is ultimately determined to be undersecured.
IT IS FURTHER ORDERED that Debtors are authorized to continue to make payments to Finova from the proceeds of Finova's collateral until Finova's debt is fully paid, without prejudice to the right of any party in interest to challenge the application of such proceeds in the event that Finova's claim is ultimately determined to be undersecured.
In the 30 days after the Petition Date the Debtors paid Finova a total of $2,263,833.30.
III.
DISCUSSION
Finova brings its motion under Bankruptcy Rules 7012(b)(6) and 7056. If a motion under Rule 7012(b)(6) is supported *592 by matters outside the pleadings, the Court must treat the motion as one under Bankruptcy Rule 7056. Since Finova filed the Sawn Affidavit, which included and incorporated documentary exhibits, the Court will treat the entire motion as a request for entry of summary judgment.
A. Standards for Summary Judgment
The well-established standard on a motion under Fed.R.Civ.P. 56(c) and Bankruptcy Rule 7056 is that summary judgment is to be granted "when 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." E.g., Bellaver v. Quanex Corp., 200 F.3d 485, 491 (7th Cir.2000); Feldman v. American Memorial Life Ins. Co., 196 F.3d 783, 789 (7th Cir.1999). In ruling on the motion, the court reviews the record in the light most favorable to the nonmoving party and it draws all reasonable inferences therefrom in the nonmovant's favor. Schneiker v. Fortis Ins. Co., 200 F.3d 1055, 1057 (7th Cir.2000); Filipovic v. K & R Express Systems, Inc., 176 F.3d 390, 395 (7th Cir.1999).
The task on a motion for summary judgment is to determine whether there is a genuine issue of material fact for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986); Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir.1996), cert. denied, 519 U.S. 1115, 117 S. Ct. 957, 136 L. Ed. 2d 843 (1997); Waukesha Foundry, Inc. v. Industrial Engineering, Inc., 91 F.3d 1002, 1007 (7th Cir.1996). On such a motion, it is not the court's function to resolve factual disputes or to weigh conflicting evidence. Id. Summary judgment is appropriate when there is only one logical conclusion that the fact finder can reach. Marozsan v. United States, 90 F.3d 1284, 1290 (7th Cir.1996), cert. denied, 520 U.S. 1109, 117 S. Ct. 1117, 137 L. Ed. 2d 317 (1997).
The nonmovant must do more than demonstrate a factual disagreement between the parties; the factual issue must be "material". Logan v. Commercial Union Ins. Co., 96 F.3d 971, 978 (7th Cir.1996). "Irrelevant or unnecessary facts do not preclude summary judgment even when they are in dispute." Id. (citation omitted). Issues of fact are "material" and preclude summary judgment if they raise ". . . disputes that could affect the outcome of the suit under governing law. . . ." McGinn v. Burlington Northern R.R. Co., 102 F.3d 295, 298 (7th Cir.1996) (citation omitted). Factual disputes are "genuine" only when there is "sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Liberty Lobby, 477 U.S. at 249, 106 S. Ct. 2505. Factual disputes that are colorable, not significantly probative, or speculative are not genuine. Id. at 249-50, 106 S. Ct. 2505.
"Hearsay is inadmissable in summary judgment proceedings to the same extent that is inadmissible in trial, except that affidavits and depositions which (especially affidavits) are not generally admissible at trial, are admissible in summary judgment proceedings to establish the truth of what is attested or deposed, Fed.R.Civ.P. 56(c), (e), provided, of course, that the affiant's or deponent's testimony would be admissible if he were testifying live." Eisenstadt v. Centel Corp., 113 F.3d 738, 742 (7th Cir.1997). Mere conclusory assertions are not sufficient to defeat a properly supported motion for summary judgment. First Commodity Traders Inc. v. Heinold Commodities, Inc., 766 F.2d 1007, 1011 (7th Cir.1985).
*593 B. Summary Judgment on the Preference, Fraudulent Transfer and Equitable Subordination Counts
(i) General Considerations
Section 547(b) provides:
(b) Except as provided in subsection (c) of this section, the trustee may avoid any transfer of an interest of the debtor in property
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547.
Section 548(a)(1) provides:
(a)(1) The trustee may avoid any transfer of an interest of the debtor in property, or any obligation incurred by the debtor, that was made or incurred on or within one year before the date of the filing of the petition if the debtor voluntarily or involuntarily
(A) made such transfer of incurred such obligation with actual intent to hinder, delay, or defraud any entity to which the debtor was or became, on or after the date that such transfer was made or such obligation was incurred, indebted; or
(B)(i) received less than a reasonably equivalent value in exchange for such transfer or obligation; and
(ii)(I) was insolvent on the date that such transfer was made or such obligation was incurred, or became insolvent as a result of such transfer or obligation;
(II) was engaged in business or a transaction, or was about to engage in business or a transaction, for which any property remaining with the debtor was an unreasonably small capital; or
(III) intended to incur, or believed that the debtor would incur, debts that would be beyond the debtor's ability to pay as such debts matured.
11 U.S.C. § 548(a)(1).
The actions to recover a preference and to recover a fraudulent transfer share the common element of a transfer of an interest of the debtor in property. What constitutes a "transfer" is a matter of federal law. Barnhill v. Johnson, 503 U.S. 393, 397-98, 112 S. Ct. 1386, 1389, 118 L. Ed. 2d 39 (1992).
Under the Bankruptcy Code, a transfer is made at the time the transfer takes effect, if such transfer is perfected at, or within 10 days after such time or at the time the transfer is perfected, if the transfer is perfected after the 10 days. 11 U.S.C. § 547(e)(2). A transfer is perfected when a "creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee." 11 U.S.C. § 547(e)(1).
*594 A security interest has to attach to the debtor's property in order to be perfected. It is immaterial, however, whether attachment or perfection occurs first. In re Southwest Pennsylvania Natural Resources, Inc., 11 B.R. 900, 901 (Bankr.W.D.Pa.1981). "Attachment . . . is unique to the secured transaction because it refers to the notion that the creditor's interest in personal property clamps down on specified personal property as soon as the requisites set forth in section 9-203 (of the UCC) are complied with. The concept of attachment may thus be thought of as a giant hand of a secured creditor hovering in the universe; as soon as the requirements set forth in section 9-203 are met, the giant hand, the security interest, clamps down upon the property agreed to between the parties, and thereafter, at least to some extent, the property is subject to the security interest." 8 William D. Hawkland, HAWKLAND UNIFORM COMMERCIAL CODE SERIES § 9-203:3 (2001).
In this matter, the dispute centers around when the attachment occurred. The Trust argues that attachment, if it occurred, took place in the 90-days preceding the Petition Date. Finova argues that there is no genuine issue of material fact that the attachment occurred outside of the Preference Period and the Fraudulent Transfer Period.
As for the equitable subordination count, of which there is little discussion in the motion, the Trust alleges that the claims of Finova should be subordinated, because when Finova brought a motion in the Chapter 11 Case to be paid on account of its secured claim, it knew or should have known that its security interest was not perfected. In addition, Finova's failure to disclose to the Court that it executed the 07/97 Security Agreement and PMG Security Agreement one month prior to the Petition Date is inequitable conduct to the detriment of the Debtors' other creditors. There is therefore an argument that if the Court finds that Finova's security interest is valid, then the basis of the equitable subordination count as it is presently plead now would necessarily fail.
(ii) Has Finova established as a matter of law that its security interest attached prior to the Preference Period and the Fraudulent Transfer Period?
(a) The effect of the "Merger Clause" on the timing of the attachment.
The Trust argues that the "merger clauses" in the agreements unambiguously demonstrate that each security agreement superceded the former security agreement, therefore the last agreement, the 07/97 Security Agreement, is the operative one as it relates to Proteva. In a sense, the Trust is arguing that as each agreement was signed, the security interest arising under the prior agreement was superceded. Moreover, because Finova signed the 07/97 Security Agreement and the PMG Security Agreement in the Preference Period the security interest attached in the Preference Period and the lien should be avoided. Finova argues that the merger clause unambiguously demonstrates that only the secured debtor was bound by the merger clause because the word "our" in the clause is limited to the secured debtor and the prior agreements survived.
Words used in a contract can be construed according to their ordinary, natural and commonly accepted meaning, unless the parties clearly intended a peculiar meaning. First Commodity, 766 F.2d at 1014. Ordinarily the words "our," "us" and "we" in a contract between two parties refer collectively to the two parties to the contract.
*595 Here, however, the agreements are written as letters, so the words "we," "our," and "us" appear to refer only to the debtor, its successors and assigns. In fact, as noted above, a clause in the agreements states that "our," "us" and "we" refer to the secured debtor and its successors and assigns, as used therein. On the other hand, the merger clause contains a statement that "we" will not be relying upon any prior oral or written promises or undertakings or future oral promises between us. The words "between us" could be read to refer to the secured debtor and Finova. This creates an ambiguity that needs to be resolved.
Moreover, there is an ambiguity in the merger clause when it is examined in light of other provisions in the security agreements. See Beanstalk Group, Inc. v. AM General Corp., 283 F.3d 856, 860 (7th Cir.2002)(Contract must be interpreted as a whole. "Sentences are not isolated units of meaning, but take meaning from other sentences in the same document."). As stated above, all of the security agreements provide that all of the obligations under the security agreement or any other agreement are subject to the security interest and bind successors and assigns. The question then is what did the parties really intend. Was the signing of each new security agreement a re-documentation of the security interest as changes to the name and address of the debtor occurred, or did the parties intend to create entirely new security interests? Again, this is a factual question that needs to be resolved.
If it turns out that the prior agreements were not superseded and provided Proteva and Fountain are the same entity, there really was no need for a new security agreement when Fountain changed its name to Proteva. See In re Serrins Automotive Warehouse, Inc., 18 B.R. 718, 719 (Bankr.W.D.Pa.1980). On the other hand, if the 07/97 Security Agreement did supersede the prior agreement then the effect of the lack or timing of Finova's signature is an issue. The signature issue is also germane to the validity of the security interest with respect to PMG. A discussion of this issue follows.
(b) Effect of the Lack of or Timing of Finova's Signature on the 07/97 Security Agreement and the PMG Security Agreement
The parties agree that Pennsylvania law governs. Under Pennsylvania law in effect at the relevant time, attachment of a security interest occurs when collateral is in possession of the secured creditor, or the debtor signs a security agreement which contains a description of the collateral, value has been given and the debtor has rights in the collateral. 13 PA. CONST. STAT. § 9203(a) and (b) (1997). A security agreement is defined as "an agreement that creates or provides for a security interest." 13 PA. CONST. STAT. 9102 (1997).
The date of attachment can be postponed, but the agreement to postpone the timing of the attachment must be explicit. 13 PA. CONST. STAT. 9204 (1997). Postponement of attachment cannot be inferred from words or conduct. In re Dolly Madison Industries, Inc., 351 F. Supp. 1038, 1041 (E.D.Pa.1972), aff'd 480 F.2d 917 (3d Cir.1973); Appeal of Copeland, 531 F.2d 1195, 1207 (3d Cir.1976); Allegaert v. Chemical Bank, 657 F.2d 495, 503-04 (2d Cir.1980).
The steps to obtain proper attachment are relatively easy by design. Nevertheless, there are from time to time problems with attachments. In this proceeding, the security agreement had a provision purportedly conditioning effectiveness of the security agreement on the *596 execution and acceptance of the secured lender. The parties are in litigation today, in part, because the lender's signature is missing on one of the security agreements.
This scenario is remarkably similar to the facts in In re Vic Supply Co., Inc., 227 F.3d 928 (7th Cir.2000). The dispositive issue in Vic Supply was whether under Illinois' version of the UCC, one secured party had standing to attack the validity of a competing secured party's security interest. The security agreement in Vic Supply conditioned its effectiveness of the agreement on the signature of the secured party "the terms and provision of this agreement shall not become effective and Bank shall have no duties hereunder unless and until this agreement is accepted by Bank as provided below." Directly below the quoted language was a blank for a signature that was not signed by the bank. Based on this conjunction of the effectiveness clause and the signature block, the Seventh Circuit equated acceptance by the bank with the bank's signature. In this matter, the 07/97 Security Agreement and the PMG Security Agreement provided essentially the same effectiveness conditioned upon execution and acceptance followed by a signature block saying "accepted and approved."
The Seventh Circuit held that the competing secured party did not have standing to attack the effectiveness of the other secured party's security interest. The Court proceeded to examine the validity of the security interest. The Court found that the security agreement was effective for three reasons. First, the UCC provides that only the debtor has to sign a security agreement and the signature and other statutory requirements of attachment were met. Second, the Court reasoned that because the bank had authority to fill in any blanks, including the signature blank, at any time, that the requirement for the bank's signature was solely for the bank's protection. Finally, the Court found that even though the agreement equated acceptance with signature, the bank could also accept by performance. In this regard, performance was demonstrated because the bank lent money to the debtor against its inventory and both parties assumed this credit was extended on account of the agreement. In short, the parties behaved in a way that showed a binding contract.
Another case decided by the Supreme Court of Michigan had similar facts and results as Vic Supply. In NBD-Sandusky Bank v. Ritter, 437 Mich. 354, 471 N.W.2d 340 (1991), John Deere Company ("John Deere") held a purchase money security interest in the debtor's equipment. The financing agreement between the parties specified that "if this Loan Contract is accepted by Lender" the debtor promised to pay the amount loaned and grant a security interest in the equipment. The agreement had a signature clause prefaced with the words "accepted by" and contained a space for an authorized signature and date. Before the agreement was signed by John Deere, a financing statement was filed covering the subject equipment. In a subsequent priority dispute, the trial court held that because John Deere did not accept the agreement until it signed the agreement that it lost its perfected status in the equipment. The decision was affirmed by the court of appeals that held that an agreement was not reached until the agreement was signed.
The Supreme Court of Michigan reversed, noting
First, we underscore that the loan contract and security agreement document does not specify a method of acceptance, i.e., that it may only be accepted by John Deere's signature *597 on the document. Second, we find convincing the uncontroverted testimony presented at trial which established that it is John Deere's practice to accept a security agreement prior to the date that financing statement is filed. John Deere filed its financing statement on August 7, 1985. Thus, we conclude that John Deere both "accepted" the loan contract and security agreement and satisfied the "agreement" element of attachment as of August 7, 1985. . . . The record also indicates that on July 31, 1985 John Deere authorized [the debtor] to take an immediate credit on its account with John Deere. This is additional evidence of John Deere's acceptance of the agreement by performance . . . the language of the relevant provisions of the Uniform Commercial Code and their underlying purpose compel the conclusion that John Deere gave value on July 31, 1985 and accepted the loan and security agreement at least by August 7, 1985. Thus the "value" and "agreement" elements necessary for attachment were satisfied by August 7, 1985.
Id. at 345-46.
In International Harvester Credit Corporation v. Pefley, 458 N.E.2d 257 (Ind.App.2d Dist.1983), the Indiana appellate court addressed the issue of the secured lender's signature on a security agreement. In that case, the secured lender signed the security agreement, which contained blanks for the secured lender's signature, eleven days after the debtor signed the agreement. Before the lender signed the agreement, the debtor sold the tractor that was the subject of the security interest without the consent of the lender. The lender sued the purchaser for conversion. The purchaser argued that it was not liable for conversion because the security interest had not attached when the tractor was sold because the secured party had not signed the agreement. The court disagreed
It must be remembered that the dispute regards attachment of a security interest and is governed by the UCC. We are not considering date of execution of a contract per se. The UCC itself provides that it is to be liberally construed and applied to promote its underlying purposes and policies. See § 1-102. The courts may not create exceptions or add requirements to the clear dictates of the Code other than those specified. Therefore, we note that the content required of a security agreement is minimal in nature. An enforceable security interest must be created in a written agreement granting a security interest, the collateral must be described, and the debtor must sign the agreement. The Code does not require the date of the security agreement to appear therein, and a security agreement which contains neither the date nor the signature of the creditor is valid. If [the lender's agent] had never signed or dated the instrument, the outcome would not be affected. That he did sign and date the installment sales contract-security agreement on February 14th has no effect on the validity of the agreement or the date on which the security interest attached.
Pefley, 458 N.E.2d at 261.
The holding in Vic Supply is obiter dicta and the NBD-Sandusky and International Harvester cases were decided under Michigan and Indiana law, respectively, so none of the cases are controlling on this Court. The cases are compelling, however, especially in light of the express purpose of the UCC to "simplify, clarify and to permit the continued expansion of common *598 practices" and the fact that "medieval, dogmatic insistence upon the precise performance of all formalities, with disastrous results attending the neglect of them, no longer holds dominant sway in the law of secured transactions. Pragmatism and realism have been brought to commercial law. It is a welcomed relief to those concerned with and dependent upon it". In re Hargrove, 2 U.C.C. Rep. Serv. (West) 40 (Bankr.D.Conn.1964)(deciding issue of the lack of lender's signature on a financing statement). The question is whether the reasoning of the Vic Supply, NBD-Sandusky and International Harvester cases is valid under Pennsylvania law.
In Pennsylvania, as a matter of general contract law, an unsigned contract with a provision conditioning effectiveness on signature is "something less than a contract." Franklin Interiors v. Wall of Fame Management Co., Inc., 510 Pa. 597, 511 A.2d 761, 762 (1986). In Franklin the creditor inserted language in its service contract requiring the creditor's signature before the contract became effective. The contract remained unsigned by the creditor. The Supreme Court of Pennsylvania would not allow the creditor to confess judgment on the contract because it was not effective due to the lack of signature. The Court left open the question, however, of whether the creditor could prevail on an assumpsit action.
Assumpsit actions are common law actions for breach of an implied promise. BLACK'S LAW DICTIONARY 122 (6th ed.1990). The basis of the action is the promise implied by law by the performance of the consideration. Id. In other words, the conduct of the parties can evidence intent to create a contract. This of course is black letter law
Parties rarely express a direct intention as to the moment when they conceive themselves to be bound by a contract. The law attaches legal obligations, whether they will or not, when their acts fulfill the requirements of the law. If, therefore, the parties have agreed upon the terms that approved written contract shall contain, there is a contract, for they have made positive promise to one another, certain in their content and sufficient as consideration for another . . . where the parties act under a preliminary agreement, they will be held to be bound, notwithstanding the fact the form contract has not been executed; and it seems that even where signing by both parties is originally contemplated, subsequent agreement manifested by acts may dispense with the requirement.
Samuel Williston, WILLISTON ON CONTRACTS § 278a (3d ed.1957); see also RESTATEMENT OF CONTRACTS § 26 (1932).
Pennsylvania law provides that a meeting of the minds can be found by conduct, course of dealing or performance. Valhal Corp. v. Sullivan Associates, Inc., 44 F.3d 195, 201 (3d Cir.1995) reh'g denied 48 F.3d 760 (3d Cir.1995) (course of dealings between the parties demonstrated consent to a limitation of liability clause in an unsigned contract); InfoComp, Inc. v. Electra Products, Inc., 109 F.3d 902, 905 (3d Cir.1997) (same); see also In re Hance, 181 B.R. 184, 185 (Bankr.M.D.Pa.1993) (acceptance by conduct sufficient to demonstrate intent); and Sullivan v. Allegheny Ford Truck Sales, Inc., 283 Pa.Super. 351, 423 A.2d 1292, 1295 (1980). Given the above, the Court concludes that the analysis of this situation under Pennsylvania law is consistent with the reasoning of the Vic Supply, NBD-Sandusky and International Harvester cases.
*599 In this matter, it is clear that the three elements of attachment were met, i.e. an agreement to give security was made, the secured debtor signed the security agreement, and the agreement described the collateral. Kendrick v. Headwaters Production Credit Ass'n, 362 Pa.Super. 1, 523 A.2d 395, 397 (1987) appeal denied 515 Pa. 614, 530 A.2d 867 (1987) (security interest exists as soon as all requirements of section 9-203 have been satisfied). There was not an explicit agreement to postpone the date of attachment. The provision for Finova's signature was in place for Finova's benefit and it was clear that the secured debtor authorized Finova to fill in the blank at any time. The 07/97 Agreement and the PMG Security Agreement were not signed by Finova, but an agreement can be found by performance. The only indications of performance, however, are discussed in a footnote in Finova's motion.[4] These statements are not in evidence as undisputed facts, so Finova is not entitled to summary judgment.[5]
C. Summary Judgment on the Postpetition Transfer Count
As stated above, in Count IV of the Complaint, the Trust seeks to recover certain payments made by the Debtors to Finova after the Petition Date, which were previously defined herein as the Postpetition Transfers. The Trust relies on Section 549 of the Bankruptcy Code, or in the alternative, Section 9-306(4) of the UCC[6] as its basis of recovery.
Section 549 of the Bankruptcy Code provides that a trustee may avoid a transfer of property of the estate that occurs after the petition date that is not authorized under the Bankruptcy Code or by the court. 11 U.S.C. § 549(a). Section 9-306(4) of the UCC provides that:
In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest only in the following proceeds:
(a) in identifiable non-cash proceeds and in separate deposit accounts containing only proceeds;
(b) in identifiable cash proceeds in the form of money which is neither commingled with other money nor deposited in a deposit account prior to the insolvency proceedings;
(c) in identifiable cash proceeds in the form of checks and the like which are not deposited in a deposit account *600 prior to the insolvency proceedings; and
(d) in all cash and deposit accounts of the debtor in which proceeds have been commingled with other funds, but the perfected security interest under this paragraph (d) is
(i) subject to any right of set-off; and
(ii) limited to an amount not greater than the amount of any cash proceeds received by the debtor within 20 days before the institution of the insolvency proceedings less the sum of (I) the payments to the secured party on account of cash proceeds received by the debtor during such period and (II) the cash proceeds received by the debtor during such period to which the secured party is entitled under paragraphs (a) through (c) of this subsection (4).
Various orders were entered in the Chapter 11 Case approving sales of assets of the estates and providing inter alia for the payment of a portion of the proceeds of the sales to Finova on account of Finova's security interest. The Trust contends that the Postpetition Transfers are recoverable under section 549(a) of the Bankruptcy Code as the payments were not authorized by the Bankruptcy Code because Finova did not have a perfected unavoidable security interest in the collateral that generated the sales proceeds for the reasons set forth in the prior portion of this opinion. In the alternative, the Trust argues that the Postpetition Transfers are recoverable under Section 9-306(4) of the UCC because Finova has failed to provide evidence that the funds out of which the Postpetition Transfers came were made from identifiable, non-commingled cash proceeds.
Finova urges dismissal of Count IV of the Complaint because Section 9-306(4) of the UCC is inapplicable.[7] Finova argues that Section 9-306(3) is the appropriate statutory provision for the Trust to seek recovery of the Postpetition Transfers. Section 9-306(3) provides that:
The security interest in proceeds is a continuously perfected security interest if the interest in the original collateral was perfected but it ceases to be a perfected security interest and becomes unperfected 20 days after receipt of the proceeds by the debtor unless,
(a) a filed financing statement covers the original collateral and the proceeds are collateral in which a security interest may be perfected by filing in the office or offices where the financing statement has been filed and, if the proceeds are acquired with cash proceeds, the description of collateral in the financing statement indicates the types of property constituting the proceeds; or
(b) a filed financing statement covers the original collateral and the proceeds are identifiable cash proceeds;
(c) the original collateral was investment property and the proceeds are identifiable cash proceeds; or
(d) the security interest in the proceeds is perfected before the expiration of the 20 day period.
The Court agrees with the Trust that a decision with respect to Count IV is premature, given that under either section 549(a) of the Bankruptcy Code, UCC section 9-306(4) or UCC Section 9-306(3), Finova has to demonstrate that it has a *601 valid perfected security interest in the underlying collateral as a matter of law and it has not done so at this point.
Finally, the Court finds that a decision on Count VI (the equitable subordination count) is also premature until it is determined whether Finova's security interest is valid.
IV.
CONCLUSION
For the reasons stated herein, the motion of Finova Capital Corporation to dismiss and/or for entry of summary judgment as to Counts I through IV and VI of the Complaint is denied.
ORDER
For the reasons stated in its Memorandum Opinion entered on this date, the Court denies the motion of Finova Capital Corporation to dismiss and/or for entry of summary judgment as to Counts I through IV and VI of the Complaint. A status hearing on this adversary proceeding will be held on July 10, 2002 at 10:30 a.m.
NOTES
[1] Count VII of the Complaint is misnumbered as a second Count VI.
[2] In order for a secured creditor to perfect certain types of security interests, such as the interests here, it must file a financing statement in the appropriate governmental office in accordance with the applicable provisions of the Uniform Commercial Code ("UCC"). The financing statement is commonly known as a UCC-1 financing statement and identifies the names and addresses of the secured party and debtor and the collateral that is subject to the interest. See generally, Barkley Clark, THE LAW OF SECURED TRANSACTIONS UNDER THE UNIFORM COMMERCIAL CODE chapter 2 (rev. ed.2001). A UCC-3 financing statement is completed and filed to indicate changes to the original UCC-1 financing statement, such as changes in the debtor's name or address, termination of the UCC-1 financing statement, etc. Id.
[3] On April 2, 1997, Fountain filed Articles of Amendment with the Office of the Secretary of State of Illinois indicating that Fountain's Articles of Incorporation were amended to provide for, among other changes, a change of the corporation's name from Fountain to Proteva, Inc. The Office of the Secretary of State of Illinois issued a certificate of the amendment to the Articles of Incorporation on April 2, 1997.
[4] In footnote 4 of its motion, Finova states, inter alia,"Proteva would hardly have signed loan agreements or UCC statements, arranged on-site inspections of the collateral or sent periodic reports to FINOVA if FINOVA has no rights in the collateral."
[5] The analysis does not end here, however. As referenced above, there does not appear to have been a UCC-1 financing statement identifying Proteva as the debtor filed in Illinois, although one was filed in Wisconsin. With the facts presently before the Court, the perfection of Finova's security interest on collateral in Illinois is predicated on the last UCC-3 financing statement that amended the name of the debtor from Fountain to Proteva. The Trust has raised facts appearing to indicate that Fountain and Proteva may be distinct entities. But, as noted above, the only evidence the Trust brings in is the Statement of Financial Affairs which indicates some checks being written to Proteva and other checks written to Fountain. The actual checks (front and back) were not brought in, affidavits not presented, nor were charters of incorporation produced. See Ernest Freeman & Co. v. Robert G. Regan Co., 332 Ill.App. 637, 76 N.E.2d 514 (1st Dist.1947). The issue is material but the facts brought by the Trust do not make it genuine.
[6] The applicable Pennsylvania version is 13 PA. CONS. STAT. 9306(d).
[7] Finova makes no argument as to whether and how section 549(a) of the Bankruptcy Code applies.
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552 F. Supp. 581 (1982)
Philip S. SHAPIRO, Plaintiff,
v.
Chief Judge Lawrence H. COOKE and Associate Judges Matthew J. Jasen, Domenick L. Gabrielli, Hugh R. Jones, Sol Wachtler, Jacob D. Fuchsberg and Bernard S. Meyer as the Court of Appeals of the State of New York, Defendants.
No. 82-CV-487.
United States District Court, N.D. New York.
October 27, 1982.
*582 McGinn & Brown, P.C., Albany, N.Y., for plaintiff; Arthur F. McGinn, Jr., Albany, N.Y., of counsel.
Robert Abrams, Atty. Gen. of N.Y., Albany, N.Y., for defendants; David B. Roberts, Asst. Atty. Gen., Albany, N.Y., of counsel.
MEMORANDUM-DECISION and ORDER
MINER, District Judge.
I
This is an action pursuant to 42 U.S.C. § 1983, challenging the constitutionality of 22 NYCRR § 520.9(a), which sets forth the standards for admission to the New York State bar without examination. Specifically, plaintiff disputes the rule's requirement for five years of experience in lieu of successful completion of the bar examination, insofar as it fails to credit as "actual practice" the time spent in the performance of legal services by New York State employees admitted to the bars of other states. Plaintiff claims that § 520.9(a) denies him rights secured under the Equal Protection Clause, U.S. Const. amend. XIV, § 1, and the Privileges and Immunities Clause, U.S. Const. article IV, § 2 and discriminates against interstate commerce, U.S. Const. article I, § 8, cl. 3. Jurisdiction is conferred upon this Court by 28 U.S.C. §§ 1331 and 1343. Before this Court are plaintiff's motion for summary judgment and defendants' cross-motion for summary judgment. Fed.R. Civ.P. 56.
II
Part 520 of Title 22 of the NYCRR sets forth the rules which have been promulgated by the New York Court of Appeals for admission of attorneys to practice law in this state, as authorized under New York Judiciary Law § 53. Under these regulations and New York Judiciary Law § 90, the function of examining and admitting candidates for the bar is performed primarily by the New York State Board of Law Examiners and the New York Supreme Court Appellate Divisions. However, the Court of Appeals retains two functions under Part 520. Under 22 NYCRR § 520.12, the Court of Appeals may "vary the application or waive any provision of these rules where strict compliance will cause undue hardship on the applicant," and, correspondingly, under § 520.9(a)(2)(i)(d), the court may certify that a combination or cumulation of service satisfies the requirement of five years of experience for admission without examination. With the exception set forth in § 520.9(a)(2)(i)(d), the Appellate Division determines all applications for admission without examination.[1]
*583 The facts here are uncontroverted. On March 8, 1982 plaintiff applied to the New York Court of Appeals for a determination that his combined or cumulative legal experience qualified him for admission to the New York bar without examination, pursuant to 22 NYCRR § 520.9. In his petition, plaintiff represented that he had been a domiciliary of the State of New York since 1980, that he was admitted to the bar in the State of Maryland on December 30, 1976, that he had practiced law in that state from December, 1976 to January, 1980, and that, since January 14, 1980, plaintiff had served as an Intervenor Attorney for the New York State Consumer Protection Board. Plaintiff applied to the Court of Appeals, pursuant to § 520.9(a)(2)(i)(d), for a determination that his three years of actual practice in Maryland, combined with his two years and two months of experience as an Intervenor Attorney, was the equivalent of five years of "actual practice" at the bar of the jurisdiction where he was admitted. By letter dated March 23, 1982, the Clerk of the Court of Appeals informed plaintiff that his application was denied on the ground that "[e]mployment in New York State by the Consumer Protection Board as an Intervenor Attorney is not actual practice in the contemplation of Rule 520.9(a)(2)(i)(a)."
On April 7, 1982, plaintiff petitioned for reargument or reconsideration of the court's determination. In the plaintiff's second petition, plaintiff represented that he had performed substantially the same functions in Maryland as an "Assistant People's Counsel" as he was performing in New York as an Intervenor Attorney. The plaintiff contended that on July 12, 1979 and in February, 1982, the court had permitted the admission of attorneys who possessed less than five years actual practice in their states of admission, but possessed additional experience in New York as administrative hearing officers for the Public Service Commission. The plaintiff represented that he had been recruited for employment with the New York State Consumer Protection *584 Board, and that his decision to accept employment was influenced by his knowledge of the court's determination of July 12, 1979. The Court of Appeals rejected these arguments and denied plaintiff's second petition by letter dated April 20, 1982.
Plaintiff did not seek judicial review of the Court of Appeals' administrative determination in the state courts. However, on May 21, 1982, plaintiff initiated this action pursuant to 42 U.S.C. § 1983, seeking declaratory and injunctive relief striking down § 520.9(a) as repugnant to the Commerce Clause, Privileges and Immunities Clause, and Equal Protection Clause of the United States Constitution, insofar as it applies to attorney-employees of New York State who are admitted to practice in other states. In addition to this § 1983 action, plaintiff has applied to the United States Supreme Court for review of the Court of Appeals' determination of his individual application by way of writ of certiorari pursuant to 28 U.S.C. § 1257.[2]
III
As a threshold matter, defendants argue that this Court should decline to exercise jurisdiction over the plaintiff's claims, so that a state court of competent jurisdiction might have an opportunity to construe § 520.9. Defendants contend that, in passing upon the plaintiff's application pursuant to § 520.9, the Court of Appeals acted in an administrative, not judicial, capacity. The court's power to regulate the admission of attorneys to the New York bar was delegated to it by the Legislature pursuant to New York Judiciary Law § 53, and does not arise under the court's judicial power, conferred under New York Constitution article VI, § 3.
This administrative determination, defendants maintain, was subject to review in the state courts under Article 78 of the New York Civil Practice Law and Rules, which provides for judicial review of a determination made by any governmental body or officer. Defendants further maintain that plaintiff could have challenged the Court of Appeals' administrative determination by way of a state declaratory judgment action[3] or a state court review of the rules governing admission to practice. Therefore, defendants argue, since constitutional issues at bar rest upon an unsettled interpretation of state law, and since federal court construction here of rights defined under a complex state regulatory scheme would interfere with state efforts to establish coherent policy in a matter of substantial state concern, abstention in this case is warranted and plaintiff should seek state court review of the administrative determination at issue here.[4]
This Court rejects defendants' abstention contentions. Abstention is a court created doctrine first articulated in 1941 in Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941). Although the doctrine has expanded in several different forms since Pullman, it is still broadly defined as a doctrine "under which a District Court may decline to exercise or postpone the exercise of its jurisdiction, [and it] is an extraordinary and narrow exception to the duty of a District Court to adjudicate a controversy properly before it." Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, 813, 96 S. Ct. 1236, 1244, 47 L. Ed. 2d 483 (1976), quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 188-89, 79 S. Ct. 1060, 1062-63, 3 L. Ed. 2d 1163 (1959).
The Supreme Court has confined the circumstances appropriate for abstention to *585 three categories, none appropriate for the present case. Colorado River Water Cons. Dist. v. United States, supra, 424 U.S. at 814-17, 96 S.Ct. at 1244-46. First, "[a]bstention is appropriate `in cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law.'" Id. at 814, 96 S.Ct. at 1244. See, e.g., Lake Carriers Ass'n. v. MacMullen, 406 U.S. 498, 92 S. Ct. 1749, 32 L. Ed. 2d 257 (1972). However, in the present case there are no ambiguities in § 520.9 for state courts to resolve, and "absent issues of state law that might affect the posture of the federal constitutional claims this Court has uniformly held that individuals seeking relief under 42 U.S.C. § 1983 need not present their federal constitutional claims in state court before coming to a federal forum." Zablocki v. Redhail, 434 U.S. 374, 380 n. 5, 98 S. Ct. 673, 678 n. 5, 54 L. Ed. 2d 618 (1978). See, e.g., Patsy v. Florida Bd. of Regents, ___ U.S. ___, 102 S. Ct. 2557, 73 L. Ed. 2d 172 (1982). Wisconsin v. Constantineau, 400 U.S. 433, 91 S. Ct. 507, 27 L. Ed. 2d 515 (1971). Section 520.9 is clear, and the plaintiff has not raised any state law issue regarding its application; accordingly, abstention under the Pullman doctrine is not proper here. Ohio Bureau of Employment Services v. Hodory, 431 U.S. 471, 481, 97 S. Ct. 1898, 1904, 52 L. Ed. 2d 513 (1977).
Second, abstention is appropriate when, "absent bad faith, harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings, Younger v. Harris, 401 U.S. 37 [91 S. Ct. 746, 27 L. Ed. 2d 669] (1971); Douglas v. City of Jeannette, 319 U.S. 157 [63 S. Ct. 877, 87 L. Ed. 1324] (1943); state nuisance proceedings antecedent to a criminal prosecution, which are directed at obtaining the closure of places exhibiting obscene films, Huffman v. Pursue, Ltd., 420 U.S. 592 [95 S. Ct. 1200, 43 L. Ed. 2d 482] (1975); or collection of state taxes, Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293 [63 S. Ct. 1070, 87 L. Ed. 1407] (1943)." Colorado River Water Cons. Dist. v. United States, supra, 424 U.S. at 816, 96 S.Ct. at 1245. Since there are no pending state proceedings involving plaintiff and § 520.9, this branch of the abstention doctrine is clearly inapplicable. See also Middlesex County Ethics Committee v. Garden State Bar Assoc., ___ U.S. ___, 102 S. Ct. 2515, 73 L. Ed. 2d 116 (1982).
The third branch of the abstention doctrine, known as Burford -type abstention, taking its name from Burford v. Sun Oil Co., 319 U.S. 315, 63 S. Ct. 1098, 87 L. Ed. 1424 (1943), is not as clearly defined as the other two. See generally 17 Wright & Miller, Federal Practice and Procedure § 4244 (1978). Burford abstention "is ... appropriate where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar." Colorado River Water Cons. Dist. v. United States, supra, 424 U.S. at 814, 96 S.Ct. at 1244. See also Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 S. Ct. 1070, 3 L. Ed. 2d 1058 (1959); Alabama Pub. Serv. Comm'n v. Southern R. Co., 341 U.S. 341, 71 S. Ct. 762, 95 L. Ed. 1002 (1951). The present case does not fit within Burford -type abstention since this action does not present a difficult question of state law; indeed, it does not present any question of state law.
For these reasons, abstention here is inappropriate.[5] Accordingly, this Court will now turn to the merits of plaintiff's claims.
IV
Plaintiff first attacks the New York rule as a denial of equal protection of the law, in violation of the fourteenth amendment. He argues that the distinction between applicants who have practiced five years in the state in which they were licensed and those who have practiced for five years in a state in which they are not licensed bears no rational relation to the apparent objective of the New York rule to insure the competence of attorneys entering New *586 York practice without taking the bar examination. Plaintiff contends that, had he worked in Maryland as an "Assistant People's Counsel" for the past five years, he would clearly satisfy the requirements of the New York rule. Therefore, even though the work he has performed for the Consumer Protection Board in New York is substantially similar to the work he might have performed in Maryland, plaintiff contends that he has been denied admission under § 520.9 because the actual location of his practice has not been in a state in which he is licensed.[6]
The Equal Protection Clause commands that "all persons similarly circumstanced shall be treated alike." F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415, 40 S. Ct. 560, 561, 64 L. Ed. 989 (1920). However, "[t]he Constitution does not require things which are different in fact or opinion to be treated in law as though they were the same." Tigner v. Texas, 310 U.S. 141, 147, 60 S. Ct. 879, 882, 84 L. Ed. 1124 (1947). The initial discretion to determine classifications resides with the states and they "must have substantial latitude to establish classifications that roughly approximate the nature of the problem perceived, that accommodate competing concerns both public and private, and that account for limitations on the practical ability of the State to remedy every ill." Pyler v. Doe, ___ U.S. ___, ___, 102 S. Ct. 2382, 2394, 72 L. Ed. 2d 786 (1982). Therefore, in applying the Equal Protection Clause "to most forms of state action, we ... seek only the assurance that the classification at issue bears some fair relationship to a legitimate public purpose." Id.
The standard for review here, then, is whether there is a "rational basis" for the classification in question. Vance v. Bradley, 440 U.S. 93, 97, 99 S. Ct. 939, 942, 59 L. Ed. 2d 171 (1979); New Orleans v. Dukes, 427 U.S. 297, 303, 96 S. Ct. 2513, 2516, 49 L. Ed. 2d 511 (1976). "A state can require high standards of qualification, such as good moral character or proficiency in its law, before it admits an applicant to the Bar, but any qualification must have a rational connection with the applicant's fitness or capacity to practice law." Schware v. Board of Bar Examiners, 353 U.S. 232, 239, 77 S. Ct. 752, 756, 1 L. Ed. 2d 796 (1957). Moreover, when applying the rational basis test, this Court is free to uphold a classification based upon "a[ny] state of facts that reasonably can be conceived to constitute a distinction or difference in State policy ...." Allied Stores v. Bowers, 358 U.S. 522, 530, 79 S. Ct. 437, 442, 3 L. Ed. 2d 480 (1959).
Here, the State has a legitimate interest in preventing professional misconduct in the practice of law. It cannot be said that a continuous period of employment in a jurisdiction which has granted a license and is concerned with the policing of its licensees is not some assurance of the character and fitness of those licensees when they apply for admission to another bar. Although plaintiff has practiced for over the past two years in New York, it is a state in whose courts he has not been licensed to practice and which lacks authority to revoke or suspend the license he holds. Although professional misconduct occurring in New York could be brought to the attention of Maryland, "this constitutes at best an attenuated disciplinary mechanism." Lowrie v. Goldenhersh, 521 F. Supp. 534 (N.D.Ill.1981).
Moreover, as the court in Lowrie points out, the rule at bar is rationally related to the state's interest in an applicant's general competency, see Keenan v. Board of Law Examiners, 317 F. Supp. 1350, 1361 (E.D.N.C.1970), particularly when the applicant is an alien practitioner seeking admission without taking the bar examination. Indeed, to the extent that Canon 6 and Disciplinary Rule 6-101 of the New *587 York Code of Professional Responsibility[7] require that an attorney act competently in his practice, competency is crucial to questions of moral character and fitness, and is especially relevant when the applicant is a practicing attorney. When the usual test of competency for applicants, the bar examination, is waived as a requirement for admission:
[t]he state can look for alternative methods to insure that an applicant is competent. The ... requirement that an alien practitioner have practiced for an extended period of time in his licensing state provides for a reasonable means to discover factors bearing upon his competency, ... and the job of the licensing state to police an attorney is made simpler when the attorney practices in that state.[8]
Lowrie v. Goldenhersh, supra, 521 F.Supp. at 539. See, e.g., Ricci v. State Board of Law Examiners, 427 F. Supp. 611, 618 (E.D. Pa.1977). But see Stein v. Coleman, No. K80-445-CA4, (W.D.Mich. June 25, 1982). For the foregoing reasons, § 520.9 is rationally related to a legitimate state purpose, and is not violative of the equal protection clause.
Moreover, this Court finds that the rule does not constitute a violation of the Privileges and Immunities Clause of the United States Constitution. The standard for review of an Article IV, § 2 challenge is to be found in the Supreme Court's most recent application of the Privileges and Immunities Clause in Hicklin v. Orbeck, 437 U.S. 518, 98 S. Ct. 2482, 57 L. Ed. 2d 397 (1978). That case involved an attack upon the constitutionality of an Alaskan statute giving residential preference in oil and gas pipeline employment. Citing Ward v. Maryland, 79 U.S. (12 Wall.) 418, 20 L. Ed. 449 (1871)[9] and Toomer v. Witsell, 334 U.S. 385, 68 S. Ct. 1156, 92 L. Ed. 1460 (1948),[10] the court developed a two-step analytical framework. The first inquiry is whether there is a substantial reason for the discrimination beyond residence. This is also stated as a requirement for a showing that the non-residents "constitute a peculiar source of the evil" the state seeks to address. Hicklin v. Orbeck, supra, 437 U.S. at 525-26, 98 S.Ct. at 2487. The second inquiry is whether there is a reasonable relationship between the means chosen and the end desired. The relationship must be "substantial", id. 437 U.S. at 527, 98 S.Ct. at 2488, and the means selected "closely tailored" to meet the purpose, id. at 528, 98 S.Ct. at 2488. Here, plaintiff's privileges and immunities claim must fail, since the first prong of the Hicklin test has not been demonstrated.
*588 As the Supreme Court in Hague v. C.I.O., 307 U.S. 496, 511, 59 S. Ct. 954, 962, 83 L. Ed. 1423 (1939) observed, the intent of the Privileges and Immunities Clause is to prevent "a state from discriminating against citizens of other states in favor of its own." Here § 520.9 does not discriminate against the out-of-state practitioner since the rule actually confers a preference on the migrant attorney, a preference which one who has been a life-long citizen of New York could not avail himself of. Simply because the plaintiff cannot qualify for this preference, but must qualify on the same terms as the life-long citizen of New York, gives him no right to complain. "So long as a state does not subject a migrant attorney, seeking the right to practice in the state, to no [sic] more onerous requirements than those imposed on its own citizens seeking such [a] right, it cannot be said that the state has violated" the Privileges and Immunities Clause. Hawkins v. Moss, 503 F.2d 1171, 1180 (4th Cir.1974), cert. denied, 420 U.S. 928, 95 S. Ct. 1127, 43 L. Ed. 2d 400 (1975).
Nor does the rule interfere with plaintiff's right to interstate travel to pursue his profession. The constitutional "right to travel" under the Equal Protection and Privileges and Immunities Clauses of the Constitution does not imply that a citizen "carries with him from state to state an absolute right ... to practice ... a profession ...." Id. at 1178-79. Admission to practice in one state is not automatic admission to practice in the courts of another state.[11]Application of Wasserman, 240 F.2d 213, 214-15 (9th Cir.1956). The Supreme Court, in Shapiro v. Thompson, 394 U.S. 618, 638 n. 21, 89 S. Ct. 1322, 1333 n. 21, 22 L. Ed. 2d 600 (1969), noted that residency requirements to obtain a license to practice a profession are not necessarily penalties upon the exercise of the constitutional "right to travel". See also Memorial Hospital v. Maricopa County, 415 U.S. 250, 259 n. 13, 94 S. Ct. 1076, 1082 n. 13, 39 L. Ed. 2d 306 (1974). This Court finds that the requirement that an applicant to the New York bar reside and practice for a period in the state in which he is licensed is not so burdensome as to constitute a "penalty" against the exercise of the constitutional right of interstate travel.[12]
Finally, plaintiff alleges that § 520.9 discriminates against interstate commerce. The burden to show such discrimination rests on the plaintiff who is challenging the validity of this rule. Hughes v. Oklahoma, 441 U.S. 322, 336, 99 S. Ct. 1727, 1736, 60 L. Ed. 2d 250 (1979); Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 353, 97 S. Ct. 2434, 2446, 53 L. Ed. 2d 383 (1977). The plaintiff must demonstrate that the rule favors residents vis-a-vis non-residents, either on its face or in its practical effects. Service Machine & Shipbuilding Corp. v. Edwards, 617 F.2d 70, 74 (5th Cir.1980).
Here, the plaintiff has failed to meet his burden of showing such discrimination. Moreover, this Court agrees with defendants' argument that § 520.9 actually encourages and enhances interstate commerce by exempting qualified attorneys from passing the bar examination and allowing their admission on motion. This argument is especially compelling because of the well settled rule that it is within a state's prerogative to require all applicants to the bar to take and pass its bar examination. See, e.g., Attwell v. Nichols, 466 F. Supp. 206 (N.D.Ga.1979), aff'd, 608 F.2d 228 (5th Cir. *589 1979), reh. denied, 612 F.2d 579 (5th Cir. 1979). Therefore, if a state may constitutionally require all applicants to take the examination, the Commerce Clause is not offended by a rule which permits some, but not all, out-of-state attorneys to be admitted on waiver of the examination.[13]
V
Accordingly, plaintiff's motion for summary judgment is denied and defendants' cross-motion for summary judgment is granted.
It is so Ordered.
NOTES
[1] 22 NYCRR §§ 520.2 through 520.8 set forth the requirements for admission to the bar upon satisfactory completion of the bar examination. 22 NYCRR § 520.9 sets forth the requirements for admission without examination, and provides in part:
520.9 Admission without examination. (a) General. In its discretion the Appellate Division may admit to practice without examination an applicant who:
(1) has been admitted to practice in the highest law court in any other state or territory of the United States or in the District of Columbia or has been admitted to practice as an attorney- and counselor-at-law or the equivalent in the highest court in another country whose jurisprudence is based upon the principles of the English Common Law; and
(2)(i) while admitted to practice as specified in paragraph (1) of this subdivision, has actually practiced for a period of at least five years:
(a) in its highest law court or highest court of original jurisdiction in the state or territory of the United States, in the District of Columbia or in the common law country where admitted; or
(b) in Federal military or civilian legal service in a position which requires admission to the bar for the appointment thereto or for the performance of the duties thereof; or
(c) in legal service as counsel or assistant counsel to a corporation in the state or territory of the United States, the District of Columbia or in the common law country where admitted; or
(d) in a combination or cumulation of service among the above categories of practice or legal service even if the government service, civilian or military, was not in a jurisdiction in which the applicant was admitted to practice, where the Court of Appeals has determined that such five years of combined or cumulative service is the equivalent of the practice required in clause (a) of this subparagraph; or
(ii) is a graduate of and has received a first degree in law from an approved law school as defined in section 520.3(b) of this Part and, for a period of at least five years immediately preceding the application for admission without examination, has been employed in this State or in any other state or territory of the United States or in the District of Columbia as a full-time member of the law faculty teaching in a law school or schools on the approved list of the American Bar Association and has attained the rank of professor or associate professor; and
(3) has had the substantial equivalent of the legal education which would have been required under section 520.3 of this Part, or its predecessor section or sections, to qualify applicant to take the New York State bar examination at the time of applicant's admission to practice in such other state, territory, district or common law country, or at the time of application for admission under this section; and
(4) is over 26 years of age.
[2] Shapiro v. Cooke, petition for cert. filed, ___ U.S. ___, 103 S. Ct. 133, 74 L. Ed. 2d 114 (1982).
[3] N.Y.Civ.Prac.Law § 3001.
[4] Defendants concede that plaintiff may be confronted with a statute of limitations defense in the context of an Article 78 proceeding or declaratory judgment action at this juncture. However, defendants maintain that the policies served by the abstention doctrine are not nullified by plaintiff's alleged failure to seek timely state court review of the Court of Appeals' April 20, 1982 administrative determination.
[5] But see Brown v. Supreme Court of Virginia, 359 F. Supp. 549, 551 (E.D.Va.1973).
[6] In addition, plaintiff argues that there is no rational basis for crediting legal service in a jurisdiction other than the state of admission for federal attorney-employees and law professors, but not crediting plaintiff's experience as an attorney-employee of the State of New York.
[7] New York Code of Professional Responsibility Canon 6 (1978) provides that "[a] lawyer should represent a client competently." Disciplinary Rule 6-101 requires that a lawyer shall not:
1. Handle a legal matter which he knows or should know that he is not competent to handle, without associating with him a lawyer who is competent to handle it.
2. Handle a legal matter without preparation adequate in the circumstances.
3. Neglect a legal matter entrusted to him.
[8] The exception in § 520.9 for federal attorney-employees, apparently based upon considerations of federal-state comity, is rationally based upon the premise that such individuals are actually engaged in the practice of federal law in the course of their employment, even where such services are rendered in a state other than the state of admission. The provision in § 520.9 which accepts five years of legal professorial experience in lieu of actual practice is rationally based upon the premise that such experience is sufficient to assure that the applicant meets minimum standards. The plaintiff's equal protection rights are not violated simply because the rule does not afford a third exception for the category of individuals into which he falls. "[T]he Equal Protection Clause does not require that a state must choose between attacking every aspect of a problem or not attacking the problem at all." Dandridge v. Williams, 397 U.S. 471, 486-87, 90 S. Ct. 1153, 1162, 25 L. Ed. 2d 491 (1970); South Carolina v. Katzenbach, 383 U.S. 301, 331, 86 S. Ct. 803, 820, 15 L. Ed. 2d 769 (1966); Railway Express Agency v. New York, 336 U.S. 106, 110, 69 S. Ct. 463, 465, 93 L. Ed. 533 (1949). The mere fact that the rule here treats one category of applicants differently than others is irrelevant.
[9] Ward involved the licensing of non-resident merchants.
[10] Toomer involved the legality of the cost of a non-resident shrimping license that was 100 times that of a resident license.
[11] "[L]icenses to practice law ... have no extraterritorial effect or value and can vest no right in the holder to practice law in another state." Hawkins v. Moss, supra, 503 F.2d at 1175-76.
[12] See, e.g., Zobel v. Williams, ___ U.S. ___, 102 S. Ct. 2309, 72 L. Ed. 2d 672 (1982) (Alaska dividend distribution plan favoring long-time residents violates equal protection and the right to travel); Memorial Hospital v. Maricopa County, supra, 415 U.S. at 257-59, 94 S.Ct. at 1081-82 (denial of "basic necessities of life" including non-emergency hospitalization and medical care a violation of constitutional rights); Dunn v. Blumstein, 405 U.S. 330, 340-42, 92 S. Ct. 995, 1002-1003, 31 L. Ed. 2d 274 (1972) (denial of right to vote violates right to travel); Shapiro v. Thompson, supra, 394 U.S. at 638 n. 21, 89 S.Ct. at 1333 n. 21 (denial of "basic necessities of life" found to violate right to travel).
[13] Moreover, as pointed out in the above discussion of equal protection, the rule effectuates a legitimate local public interest and therefore overcomes any minimal burden on interstate commerce that might exist. See Minnesota v. Clover Leaf Creamery, 449 U.S. 456, 101 S. Ct. 715, 66 L. Ed. 2d 659 (1981).
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169 N.J. Super. 511 (1979)
405 A.2d 411
STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
ROBERT RANSOM, WILLIAM STILL AND LAWSON WORTHY, DEFENDANTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Argued February 5, 1979.
Decided July 13, 1979.
*512 Before Judges FRITZ, BISCHOFF and MORGAN.
Mr. Anthony J. DeSalvo, Assistant Prosecutor, argued the cause for appellant (Mr. James T. O'Halloran, Prosecutor of Hudson County, attorney).
Mr. Jon P. Campbell argued the cause for respondent Robert Ransom (Mr. Eric A. Summerville, Director, Patrick House Legal Clinic, attorney).
The opinion of the court was delivered by FRITZ, P.J.A.D.
This is an appeal by the State, by leave, from an order suppressing evidence discovered by municipal policemen during a warrantless search of a Jersey City tavern. Involved are defendants Worthy, proprietor of the tavern, Still, the bartender, and Ransom, a patron reputed to have been dealing drugs therein. The order being appealed denied suppression with respect to Worthy, but granted suppression of the evidence found on the premises "as it pertains" to Still and Ransom, and wholly suppressed evidence found on the person of Ransom. There is no appeal from *513 the refusal to suppress with regard to Worthy. We reverse the suppression orders.[1]
The police activity was initiated by information from a police informant that Still and Ransom were "dealing" cocaine for Worthy from his tavern. Police officers went to the premises. Pursuant to the agreed plan, two of them went immediately toward the men's room which is where they were advised the narcotics were stored and the area of the premises in which the cocaine was ultimately found. The third immediately "apprehended" Ransom. Having also been advised that Ransom might be armed, the officer patted him down. Concerned by "a bulge in his right pants pocket," the officer asked Ransom "to remove it." Ransom disgorged "five $20 pieces of cocaine."
Ransom and Still were arrested and transported to police headquarters. It appears that shortly thereafter one of the officers was discussing the matter with the informant,[2] who inquired as to whether they seized "the guns" and suggested there might be more narcotics in the safe. The police returned to the tavern with Still. There is evidence that Still volunteered to open the safe for the officers. Two revolvers were taken from the safe.
*514 The judge below doubted that there was justification for the warrantless search of the premises based on the information obtained from the informant. He was of this opinion, first, because he found no "independent * * * verification of the informant's information." Beyond that, he opined that since "the informer first gave his information a week before the raid * * * there was a lack of exigent circumstances justifying the warrantless search." However, he believed that N.J.S.A. 33:1-35 authorized the search of the premises and of the safe located therein.
In this latter regard the trial judge had this to say in his written opinion:
Nevertheless, in spite of the fact that there were no exigent circumstances justfying the warrantless search, the nature of the search in question, or more particularly, where the search took place, distinguishes this case from one involving a typical warrantless search, and thus requires careful consideration. The uniqueness of this case stems from the fact that the search was of a licensed tavern. The State argues that because the subject of the search was a tavern, the police did not require probable cause or exigent circumstances to conduct their search. The authority to conduct the search did not arise from typical constitutional consideration, but, according to the State, from N.J.S.A. 33:1-35. The statute in relevant part states:
The commissioner and each other issuing authority may make, or cause to be made, such investigations as he or it shall deem proper in the administration of this chapter and of any and all other laws now or which may hereafter be in force and effect concerning alcoholic beverages, or the manufacture, distribution or sale thereof or the collection of taxes thereon, including the inspection and search of premises for which the license is sought or has been issued, of any building containing the same, of licensed buildings, examination of the books, records, accounts, documents and papers of the licensee or on the licensed premises.[3]
The leading case interpreting the statute is State v. Zurawski, 89 N.J. Super. 488 (App. Div. 1965) [aff'd o.b. 47 N.J. 160 (1966)]. The defendant was charged with bookmaking. The charge *515 came about because of a warrantless search of a licensed premises, a tavern, in which an illegal lottery slip was discovered. The question presented was whether the result of the search could be used against the tavern owner in a criminal prosecution.
The defendant argued that the statute "was intended to facilitate investigations and searches for the sole purpose of ferreting out violations of the Commissioner's rules with the end of suspension or revocation of the privileges of liquor licenses." State v. Zurawski, supra, at 490. The court responded by stating that the "language granting the search power should be `liberally construed' in accordance with the mandate of N.J.S.A. 33:1-73." Id. at 492. The court also said that the position of a liquor licensee was unique.
* * * from the earliest history of our State, the sale of intoxicating liquor has been dealt with by the Legislature in an exceptional way. Because of its "sui generis" nature and significance, it is a subject by itself, to the treatment of which all the analogies of the law, appropriate to other administrative agencies, cannot be indiscriminately applied. State v. Zurawski, supra, at 491.
Moreover, the court stated that the "sale of intoxicating liquor * * * is not one of the privileges or immunities of citizenship protected by the * * * Constitution * * *, but is rather a business subject to prohibition or regulation." Id. Also, see Blanck v. Mayor, etc., of Magnolia, 38 N.J. 484 (1962).
Other jurisdictions have held similarly. In Hurless v. Department of Liquor Control, 136 N.E.2d 736 (1955), the Ohio supreme court [sic: Court of Appeals] stated that:
By securing his permit and electing to operate under the Liquor Control Act, he has waived the Constitutional protection, if any, of the Ohio Constitution as to the right to search his premises and seize property if found to be in violation of the law. at [sic] 737.
More recently, the United States Supreme Court in dictum also addressed itself to the pervasive government regulation to which a liquor licensee normally must submit. The Court said that "* * * Certain industries have such a history of government oversight that no reasonable expectation of privacy * * * could exist for a proprietor over the stock of such an enterprise. Liquor * * * and firearms * * * are industries of this type; when an entrepreneur embarks upon such a business, he has voluntarily chosen to subject himself to a full arsenal of governmental regulation." Ray Marshall, Secretary of Labor v. Barlow's Inc., supra [, 429 U.S. 1347, 97 S.Ct. 776, 50 L.Ed.2d 739]
In Marshall v. Barlow's Inc., the court held that warrantless inspections to enforce the Occupational Safety and Health Act (OSHA) were unreasonable under the Fourth Amendment. It *516 distinguished its holding from previous decisions having to do with warrantless searches of liquor establishments (Colonnade Catering Corp. v. United States, 397 U.S. 72, 74, 77, 90 S.Ct. 774 [, 25 L.Ed.2d 60] (1970) by stating that "businessmen engaged in such federally licensed and regulated enterprises accept the burdens as well as the benefits of their trade, whereas the petitioner here was not engaged in any regulated or licensed business. The businessman in a regulated industry in effect consents to the restrictions placed upon him." Id. Also see Almeida-Sanches [sic: Sanchez] v. United States, 413 U.S. 266, 271; 92 S.Ct. 2050 [sic: 93 S.Ct. 2535] [, 37 L.Ed.2d 596] (1973).
This is the position of the State that defendant Lawson Worthy, the licensed owner of the 418 Club, by the very nature of his license, consented to the mandate of N.J.S.A. 33:1-35. State v. Zurawski, supra, states that where N.J.S.A. 33:1-35 is employed it is to be "loosely construed" in accordance with N.J.S.A. 33:1-73. In fact, not only does N.J.S.A. 33:1-73 demand loose construction, but the statute in question, N.J.S.A. 33:1-35, makes a similar requirement. It states that the "above enumeration of purposes and powers shall not be construed as exclusive and shall not limit such power to investigate, examine and subpoena for any purpose consonant with the administration and enforcement of this chapter."
To lend additional support to the contention that the search power of N.J.S.A. 33:1-35 is to be loosely construed one need to only look at the decision in Colonnade Corp. v. United States, supra. While the Supreme Court stated that the federal regulatory scheme governing the sale of liquor precluded forcible entries, it did so because the federal statute provided an exclusive sanction against those licensees who denied entry to the authorities. 26 U.S.C.A. § 7342 calls for the imposition of a $500 fine for every time a liquor licensee refuses the authorities entry to inspect. This, according to the court, is an exclusive sanction formulated by Congress.
The statute now in question on the other hand, N.J.S.A. 33:1-35, is not to be construed as providing an exclusive sanction against its violators. On the contrary, the statute states that "the enumeration of purposes and powers shall not be construed as exclusive." Therefore, based on State v. Zurawski, supra, and N.J.S.A. 33:1-35 and 33:1-73, as well as the history behind the regulation of liquor establishments, this court finds that the contraband found on the shelf at the 418 Club is admissible evidence against defendant Lawson Worthy.
The subsequent search of the safe in which the police confiscated firearms falls into the same category as the search leading to the discovery of the cocaine. Both searches apparently were made under the authority of N.J.S.A. 33:1-35. Therefore, as with the *517 cocaine found on the shelf, the evidence seized from the safe may also be introduced at trial and is admissible evidence against defendant Lawson Worthy.
We incline to agreement with the foregoing, substantially for the reasons expressed in the quoted portion of the trial judge's opinion.
However, without regard for statutory authority, we also believe the search of the premises was neither unreasonable nor constitutionally prohibited.
Correctly aware of and concerned with the catechism of Aguilar v. Texas, 378 U.S. 108, 84 S.Ct. 1509, 12 L.Ed.2d 723 (1964), and Spinelli v. United States, 393 U.S. 410, 89 S.Ct. 584, 21 L.Ed.2d 637 (1969), the trial judge had no problem with the proven reliability of the informer. We are of the opinion that reliability of the confidant is amply demonstrated on the record by unchallenged evidence which is wholly credible.
But the trial judge found the absence of "independent police verification of the informant's information" to be a fatal defect in the procedure. We think that this conclusion, as well as that underlying the absence of exigent circumstances because the "first" information preceded the raid by a week, demonstrates the failure of the trial judge to understand the testimony of the police regarding the nature of the informer's activity and the basis for police reliance. This was not at all the usual case of a one-time report to the authorities by an informer. The ultimate advice, on the day of the raid, represented, rather, the fruition of an information gathering tour by one who had theretofore assisted the police in such an effort and who kept them advised of his activity. An understanding of this methodology quite apparent from the record and, perhaps predictably, uncontradicted serves to assure not only that the informant's information was on skillfully gleaned personal knowledge, but also that the raid could not have transpired (or been justified) on the "first" information.
*518 Engagingly credible testimony demonstrates beyond cavil (a) the personal nature of the knowledge which the informer had and (b) why an earlier warrant could not have been obtained. The following is abstracted from cross-examination of one of the raiding police officers by the attorney for Still:
Q Detective Winterhalter, just very briefly, do I understand that you went to these premises because of information received from an informer?
A Yes, sir.
Q Was that information received by you from this informer the day of the arrest?
A Yes, sir.
Q Did you receive any information prior to the day of the arrest with respect to these premises?
A I believe that most of the conversation with the informant is the people he was setting up for us and locating where the contraband was being stored. He had nothing definite prior to the day of the arrest.
Q No. I'm saying did the information received, which was the basis, I am assuming, for your entry into the premises
A On that afternoon, sir, yes.
Q Prior to that, did you receive any information that you utilized in your effort to enter the premises and conduct your search, or was it just the information you received that particular day?
A Just that particular day.
Q So, we can assume then that any information received from the informer prior to the day of the entry into the bar had nothing to do with this bar.
A No, sir. He hadn't mentioned the bar. He said he was working on these people, and he is going to locate where they were storing the cocaine.
Q So, in other words, he had indicated to you that he was trying to get some information which he can bring back to you, which you can then utilize for your basis of an entry into the bar.
A Or an entry into a home or whatever. Yes, sir.
Prior to that testimony Officer Winterhalter had been asked on cross-examination by Ransom's attorney whether he encouraged his informant to go inside the tavern in order to get more information. After his reply assuring his interrogator *519 that he "[n]ever had to encourage the informant," the following question and answer occurred:
Q I take it that your answer is there was no such discussion.
A The discussion I had with the informant on all occasions, when the informant brought me the facts that he had gathered.
Irrespective of whether the police had corroboration or verification of the information provided by the informant, it is abundantly clear to us that there is readily demonstrated here "the underlying circumstances from which the informer" arrived at the conclusions he imparted to the police. Spinelli, supra, 393 U.S. at 416, 89 S.Ct. at 589. His earlier refusal prematurely to point the finger, and the nature of his participation in the procedure, both serve to reassure that the informer was "relying on something more substantial than a casual rumor circulating in the underworld or an accusation based merely on an individual's general reputation." Id. We believe that probable cause was apparent, the search of the premises was reasonable in the circumstances and that our conclusion in this regard offends neither Aguilar nor Spinelli. The fact that the hearsay of an informer's statement is uncorroborated is not enough to defeat probable cause. Other sufficient reasons for crediting the out-of-court statement, as here, will do. United States v. Harris, 403 U.S. 573, 584, 91 S.Ct. 2075, 29 L.Ed.2d 723 (1971).
Further, since it seems obvious as well that it was not until the day of the raid that the informer supplied the final piece to make the puzzle picture of probable cause complete and apparent, the exigent circumstances which eluded the trial judge do appear even though the first pieces had been earlier furnished. Irrespective of that which had occurred before during a time when knowledge of it was not sufficiently complete, and with due regard for its incipiency being discerned with increasing probability in the preceding week, the fact of the matter is the total event was, in street parlance, going down now. Simply put, theretofore there had been no sufficient *520 grounds for a warrant; now there was no time. State v. Smith, 129 N.J. Super. 430 (App. Div. 1974), certif. den. 66 N.J. 327 (1974).
Accordingly, we affirm the conclusion of the trial judge respecting the validity of the search of the premises, both for the reasons he gave and on the basis of the reasonable persuasion of probable cause combined with exigent circumstances.
Toward the end of total disposition regarding the search of the premises, we observe that although the trial judge found "no need, in this case, to rule on the issue of consent" by Still to search the safe, we are satisfied that even under State v. Johnson, 68 N.J. 349, 353 (1975), standards, referred to by the trial judge, Still, an employee and agent of the owner, not only consented to the search of the safe, but voluntarily agreed to open it for the authorities.
The question of standing to impeach the search has bobbed to the surface throughout this case. In view of our determination of the propriety of this search of the premises, we need not address the standing issue. But it would appear that those who assert "neither a property nor a possessory interest in the [premises searched], nor an interest in the property seized" may well lack the necessary standing. Rakas v. Illinois, 439 U.S. 128, 148, 99 S.Ct. 421, 433, 58 L.Ed.2d 387 (1978).
Thus we decide that the evidence discovered on the shelf and in the safe shall not be suppressed but shall be available to the State and evidential as proof of the charges. Nobody doubts nor challenges its relevance with respect to Worthy, who owned and operated the tavern and whose control over the premises may be conclusively presumed. Different questions are presented with respect to Still and Ransom. Whether the evidence has sufficient relevance, i.e., any tendency in reason to prove any material fact, Evid. R. 1(2), with respect to them seems to constitute a question to be decided by the trial judge at the trial on the evidence adduced. Still's position as a bartender, employee and agent of the *521 owner might well permit reasonable persons to conclude he had sufficient control of the premises to charge him with responsibility for what was found therein. On the other hand, on the abbreviated record before us it would appear that as far as the contraband found other than on his person, Ransom was only a patron in the bar. For now it is sufficient for us to say that the evidence is not suppressed as to anyone. Its availability to the jury as against any of the individual defendants is a matter to be decided on the evidence at trial.
We turn to the issue of the search of Ransom's person. At the outset we note that the error into which the trial judge fell in this regard might well have been predicated on two misstatements which appear in his written opinion; one of law, the other of fact.
First, with reference to a Terry (Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968)) search, the judge stated, "Once it is determined that a defendant does not have a gun on his person or within his reach, the purpose of the pat-down or stop and frisk is satisfied." (Emphasis supplied.) While Terry was concerned with the seizure of revolvers, it is quite clear that the pat-down search there approved met the constitutional muster of reasonableness by virtue of a policy designed to protect police officers not only from the danger of hidden guns but from the threat to their safety implicit in hidden weapons of any kind. The intrusion there thought to be justified involved one "reasonably designed to discover guns, knives, clubs, or other hidden instruments for the assault of the police officer." 392 U.S. at 29, 88 S.Ct. at 1884. The opinion in Terry observes:
* * * American criminals have a long tradition of armed violence, and every year in this country many law enforcement officers are killed in the line of duty, and thousands more are wounded. Virtually all of these deaths and a substantial portion of the injuries are inflicted with guns and knives. [At 23-24, 88 S.Ct. at 1881, footnote omitted]
Clearly, a police officer does not need to perceive tactile recognition of a firearm before he may protect himself further by *522 insisting on deliverance of the suspected weapon. It is not even necessary for him to identify by species the object of his concern, so long as the fear for his safety resulting from the pat-down is reasonable. A police officer is not required by his occupation or the Constitution of the United States to take unnecessary risks in the performance of his duties or to refrain from the taking of "necessary measures to determine whether the person is in fact carrying a weapon [or the neutralizing of a] threat of physical harm." Terry, supra at 24, 88 S.Ct. at 1881.
Second, the judge said, "The State's witnesses testified that they did not receive any information indicating that defendant Ransom would be armed." That statement is simply not correct. Very early in his direct testimony Officer Winterhalter testified that "the informant had stated that Mr. Ransom might be armed." As a matter of fact, he also testified that this is why his particular assignment in the allocation of duties on the raid was to apprehend Ransom whom he knew "from the street," an undertaking he performed immediately upon the raiding party's entry. He repeated in response to the cross-examination of attorneys for Ransom and for Worthy the fact that the informant had cautioned him that "Deek [Ransom] might be armed."
The trial judge based his suppression of the Ransom search of his finding "it incredible that five tinfoil packets could be mistaken for a gun." He had posited his judicial inquiry in terms of whether the bulge produced by the packets "could lead the officer to believe that it was a gun."
The difficulty here is produced not only by the judge's misconception of the law to the effect that the threatening bulge had to produce the effect of being in fact a gun, but by the proposition that neither Officer Winterhalter nor the State forwarded the theory that the officer feared a gun. The testimony clearly demonstrates that Winterhalter did not know exactly what it was: he resisted all sorts of cross-examination coaxing designed to have him state it was or was not thought *523 to be a gun. At one point he even testified, "It could have been a knife. I don't know."
Whatever it was or was not when it existed as a bulge in the pocket of the recently apprehended drug dealer there in the ambience of an ongoing tavern raid, it is perfectly obvious from Winterhalter's testimony and perfectly credible that to him it represented the source of the caution from the informant that "Deek might be armed," and as such it caused him concern for his safety. We do not think that such a concern, in all the circumstances then and there existing, was at all unreasonable. It was no more than an assertion of the entitlement guaranteed by Terry: "for the protection of himself and others in the area to conduct a carefully limited search of the outer clothing * * * in an attempt to discover weapons which might be used to assault him." 392 U.S. at 30-31, 88 S.Ct. at 1884-1885.
In re State in Interest of D.S., 125 N.J. Super. 278, dissent at 283 (App. Div. 1973), rev'd on the dissent, 63 N.J. 541 (1973), in which police officers were merely "checking out" three juveniles who were talking on the street "to see if anything had happened or if anything was being transacted" (at 283), is clearly distinguishable from the instant case where defendant was presently involved in a reported criminal happening and was reputed to be armed. Terry instructs us that the careful balancing of interests in the pat-down problem must be decided on the circumstances of the individual case. 392 U.S. at 30, 88 S.Ct. 1868.
The suppression order is reversed. The case is remanded for trial. We do not retain jurisdiction.
NOTES
[1] Only Worthy and Ransom moved below to suppress. However, counsel for Still appeared on the hearing of the motion. The assistant prosecutor volunteered that the motion was being brought by "[a]ll three defendants," and the judge acceded to Still's "just joining in." Still did not appear on this appeal. Of course, his interests are before us nevertheless. Gnapinsky v. Goldyn, 23 N.J. 243, 250 (1957).
[2] The factual finding by the trial judge in this regard arrived in terms of "another informant then informed the police that there were guns and possibly more narcotics contained in a safe located at the tavern." Each of two police officers testified to receiving this information. The question as to whether it was the same or another informant presents neither a contradiction nor any significant problem.
[3] The opinion of the trial judge does not accurately quote the statute as amended subsequent to the amendment by L. 1935, c. 257, p. 808. The differences are not significant.
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297 B.R. 893 (2003)
In re Carl VASILE and Teresa Vasile, Debtors.
Automotive Finance Corporation, Plaintiff,
v.
Carl Vasile and Teresa Vasile, Defendants.
Bankruptcy No. 02-1465-3F7, Adversary No. 02-131.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
August 12, 2003.
*894 *895 *896 Elizabeth M. Bohn, Miami, FL, for Plaintiff.
Richard R. Thames, Jacksonville, FL, for Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
JERRY A. FUNK, Bankruptcy Judge.
This adversary proceeding came before the Court upon a complaint filed by Automotive Finance Corporation ("Plaintiff"). Plaintiff seeks to have the debt owed to it by Carl and Teresa Vasile ("Defendants") excepted from Defendants' discharge pursuant to 11 U.S.C. § 523(a)(2)(A).[1] Defendants consent to the entry by the Court of a final judgment regarding dischargeability but not a final judgment awarding damages. The Court conducted a trial on February 27, 2003 and April 10, 2003 and took the matter under advisement. Upon review of the evidence entered at trial and upon review of the post-trial submissions, the Court makes the following Findings of Fact and Conclusions of Law.
Plaintiff is in the business of making short term loans to [automobile] dealers to purchase inventory. (Tr. at 35.) Plaintiff finances the actual purchase price paid by a dealer. (Tr. at 35.) Defendants were the owners of four related businesses: (i) the Volusia Car Clinic, Inc. (the "Car Clinic"), an automobile collision repair shop; (ii) Union Credit Sales and Leasing, Inc. ("Union Credit"), a wholesale dealer of automobiles and motorcycles; (iii) United Pacific Leasing, Inc., an automotive and motorcycle sales and leasing company which conducted business under the fictitious name Auto Temps Rental Cars and Sales ("Auto Temps"), and (iv) R.C. Towing, Inc. ("R.C. Towing"), a company which provided towing services for the other three entities.
The Car Clinic was the first of the four businesses to be incorporated and began doing business in 1993. (Defs.' Ex. 61.) Although Teresa Vasile is the sole shareholder of the corporation and was its initial president, Carl Vasile ran its day-to-day operations and made all of its business decisions. The Car Clinic operated from leased premises at 526 Mason Avenue in Daytona Beach, Florida. (Tr. at 411.)
Union Credit was formed in 1996. (Tr. at 411.) As with the Car Clinic, although Teresa Vasile is the sole shareholder of the corporation and was its president until February, 2001, Carl Vasile ran its day-to-day *897 operations and made all of its business decisions. Union Credit operated from the same facility as the Car Clinic. (Tr. at 411.)
A profitable and mutually beneficial relationship developed between the Car Clinic and Union Credit. Union Credit purchased wrecked vehicles at the auction, R.C. Towing towed them to the Car Clinic, and the Car Clinic repaired them. (Tr. at 419.) Union Credit then sold 90-95 % of the repaired vehicles on a wholesale basis at the auction. Over the years Union Credit purchased, repaired and sold thousands of vehicles in this manner.
Union Credit's business flourished. In 1997 its gross sales were $6,066,502.00 (Defs.' Ex. 23.); In 1998 its gross sales were $9,811,810.00 (Defs.' Ex. 24.); In 1999 its gross sales were $10,782,352.00 (Defs.' Ex. 25); and in 2000 its gross sales were $15,485,382.00. (Defs.' Ex. 26.) Union Credit's growth and sales volume enabled it to obtain credit from a number of automobile floor-plan financiers, including Plaintiff.
In June 1997 Union Credit obtained a $40,000.00 line of credit with Plaintiff to enable it to purchase inventory. By January, 2000 Plaintiff had increased Union Credit's line of credit to $200,000.00. Teresa Vasile personally guaranteed the loan. (Pl.'s Ex. 1 at 4.) The loan agreements contained the following provisions:
2.1-Discretionary Advances. AFC may, it its sole discretion, from time to time make an Advance to or on behalf of Dealer for the purpose of enabling Dealer to purchase and/or hold Purchase Money Inventory for resale
2.2-Advance Requests. Dealer may request an Advance by providing AFC with: (a) a copy of the bill of sale which indicates the vendor and the actual purchase price of the Purchase Money Inventory; and (b) as to Vehicles, a completed Odometer Disclosure Statement and the Title duly assigned by the Dealer.
Many of the vehicles that Union Credit floor planned with Plaintiff were purchased by Union Credit at auction, in which case Plaintiff paid the auction directly. (Tr. at 3.) Union Credit also enjoyed outside privileges with Plaintiff which enabled it to finance the acquisition of vehicles purchased as outside buys, purchases from sources other than the auction. In order to obtain financing for an outside purchase, Union Credit was required to present Plaintiff with a vehicle's title and bill of sale indicating the seller and the actual purchase price. Plaintiff advanced credit based upon the lower of: (i) the purchase price reflected on the bill of sale or (ii) the average value reflected in the "Blackbook", a published guide of wholesale prices for automobile dealers. If the "Blackbook" did not contain a given vehicle, Plaintiff based its lending decision on its relationship with the dealer.
In November, 1998 Defendants formed United Pacific Leasing, Inc. with the idea of getting into the rental car business. (Defs.' Ex. 57, Tr. at 415.) On October 15, 1999 Carl Vasile became United Pacific's president. (Defs.' Ex. 57.) United Pacific was dormant until June 2000 at which time Defendants leased a lot at 837 Mason Avenue and registered for and obtained the fictitious name Auto Temps. Over the next several months Carl Vasile began acquiring wrecked motorcycles, utilizing Union Credit's license and relationship with various auctions. R.C. Towing retrieved the motorcycles from the auctions and delivered them to the Car Clinic for repair. The repaired motorcycles were titled in Auto Temps' name. Carl Vasile testified that often parts from several motorcycles were used to create one motorcycle.
*898 Auto Temps did not get off to the great start Carl Vasile had hoped for. Carl Vasile decided to terminate Auto Temps' business operations and to consolidate his businesses at 526 Mason Avenue. Carl Vasile testified that he decided not to immediately sell the motorcycles he had acquired and repaired because he wanted to sell them closer to "Bike Week", an annual gathering of motorcycle enthusiasts in Daytona Beach. Instead, he opted to floor plan the motorcycles with Plaintiff.
On December 6, 2000 Carl Vasile presented Plaintiff a bill of sale evidencing the purchase by Union Credit from Auto Temps of a 1998 Ford Explorer XLT and a 1996 Dodge Ram with purchase prices of $12,500.00 and $10,000.00 respectively. (Pl.'s Ex. 37 at 402.) (AFC Stock Nos. 481, 482.) Union Credit purchased both vehicles on August 2, 2000 for $1,600.00 and $1,550.00 respectively. (Defs.' Exs. 92 at 4538, 93 at 4417.) On October 4, 2000 both vehicles were titled in Auto Temps' name. (Defs.' Exs. 92 at 4527, 93 at 4411.) Although the Explorer and the Ram were wrecked when Union Credit originally purchased them and when it sought financing, the purchase prices set forth on the bill of sale represented their repaired value. (Tr. at 339, 477.) In reliance upon the bill of sale and the titles, Plaintiff issued a check to Union Credit in the amount of $22,500.00 on that same day. (Pl.'s Ex. 8.)
On December 11, 2000 Carl Vasile presented Plaintiff with a bill of sale evidencing the purchase by Union Credit from Auto Temps of ten motorcycles and two cars. Included in the bill of sale were the following motorcycles for which Plaintiff has not been repaid:
1.) a 2000 Honda CBR 800 motorcycle with a purchase price of $9,000.00. (Pl.'s Ex. 37 at 405.) (AFC Stock No. 496.) Union Credit purchased the motorcycle for $1,730.00 on November 21, 2000. (Pl.'s Ex. 38 at 4376.) The title included the notation "SALVAGE TITLE: REBUILDABLE". (Id. at 4365.)
2.) a 1998 Suzuki Katana 600 motorcycle with a $4,500.00 purchase price. (Pl.'s Ex. 37 at 405.) (AFC Stock No. 498.) Union Credit purchased the motorcycle for $2,035.00 on November 8, 2000. (Pl.'s Ex. 39 at 4231.)
3.) a 1994 Yamaha XJ 600 motorcycle with a $4,000.00 purchase price. (Pl.'s Ex. 37 at 405.) (AFC Stock No. 500.) Union Credit purchased the motorcycle for $1,060.00 on November 6, 2000. (Pl.'s Ex. 40 at 9203.)
4.) a 1999 Kawasaki Vulcan 800 motorcycle with a $7,000.00 purchase price. (Pl.'s Ex. 37 at 405.) (AFC Stock No. 501.) Union Credit purchased the motorcycle for $1,475.00 on October 27, 1999. (Pl.'s Ex. 42 at 9416.)
5.) a 2000 Kawasaki Ninja 900 motorcycle with a $9,000.00 purchase price. (Pl.'s Ex. 37 at 405.) (AFC Stock No. 503.) Union Credit purchased the motorcycle for $4,320.00 on September 7, 2000. (Pl.'s Ex. 41 at 4140.) The title included the notation "REBUILT". (Defs. Ex. 97 at 9429.)[2]
*899 Carl Vasile presented the bill of sale to Plaintiff in order to obtain financing in the amounts of the purchase prices reflected on the bill of sale. Ordinarily, Plaintiff did not inspect vehicles before it extended credit. However, because it had little experience with motorcycle financing, Plaintiff sent its representative, Toygar Par, to Union Credit on December 12, 2000 to inspect the motorcycles.[3] Par testified that during his brief visit he inspected the ten motorcycles and two cars. He testified that neither the motorcycles nor the cars were wrecked. (Tr. at 41-42.) Carl Vasile testified that one of the cars which Par inspected had already been repaired and the other was on the frame machine being finished up. (Tr. at 440-441.) Carl Vasile also testified that he showed Par a second batch of motorcycles which were wrecked and indicated that he planned to floor plan them with Plaintiff later in December or early January. (Tr. at 441.) Par testified that he did not remember whether Carl Vasile showed him any other motorcycles that day but indicated that Carl Vasile did not tell him that any of the vehicles he was financing either on that day or at a later date were vehicles that he "built". (Tr. at 502.) Par testified that he would have inspected them if Carl Vasile had made such a comment. (Id.) Following Par's verification that the motorcycles and cars existed, Plaintiff gave Union Credit a check for $118,500.00, of which $33,500.00 represented the above motorcycles. Because there was no "BlackBook" for motorcycles, Plaintiff relied solely on the invoices presented by Carl Vasile as accurately representing the purchase prices paid for the motorcycles.
Carl Vasile testified that he told Par during the December 12, 2000 visit that Auto Temps was his company. (Tr. at 124.) Par testified that he was not aware that Auto Temps was Carl Vasile's company and that Carl Vasile did not tell him during the December 12, 2000 visit. (Tr. at 42-43, 501.) Gainey testified that Plaintiff learned Auto Temps was Carl Vasile's company only after the account was in default. (Tr. at 284-285.) Additionally, none of the financial documents supplied by Defendants to Plaintiff reflected an interest in Auto Temps. (Comp. Ex. 3, Tr. at 284.)
On December 18, 2000 Carl Vasile presented Plaintiff a bill of sale evidencing the purchase by Union Credit from Auto Temps of a 1998 Honda 1520 motorcycle and a 1997 Harley Davidson Buell motorcycle with purchase prices of $10,000.00 and $7,500.00 respectively. (Pl.'s Ex. 37 at 404) (AFC Stock Nos. 508, 509.) Union Credit purchased the Honda on November 2, 2000 for $2,995.00 (Pl.'s Ex. 43 at 4316) and the Harley Davidson on November 7, 2000 for $2,900.00. (Pl.'s Ex. 44 at 9500.) Both titles included the notation "REBUILT". (Pl.'s Ex. 43 at 4310, Pl.'s Ex. 44 at 9477.) In reliance on the purchase prices set forth on the bill of sale, on December 18, 2000 Plaintiff issued a check to Union Credit in the amount of $28,500.00, of which $17,500.00 represented floor plan financing for the two motorcycles. (Pl.'s Ex. 8.)
On December 21, 2000 Carl Vasile presented Plaintiff with a bill of sale evidencing the transfer from Auto Temps to Union Credit of the following:
*900 1.) a 1999 Suzuki 600 motorcycle with an $8,000.00 purchase price. (Pl.'s Ex. 37 at 403.) (AFC Stock No. 510.) Union Credit purchased the motorcycle on August 17, 2000 for $2,395.00. (Defs.' Ex. 101 at 4299.)
2.) a 1999 Suzuki 750 with an $8,500.00 purchase price (Pl.'s Ex. 37 at 403.) (AFC Stock No. 511). The Court was presented with no evidence as to the original purchase price of the motorcycle.
3.) a 2000 Yamaha Royal Star with a $14,500.00 purchase price (Pl.'s Ex. 37 at 403.) (AFC Stock No. 512.) Union Credit purchased the motorcycle on November 7, 2000 for $3,620.00. (Pl.'s Ex. 47 at 4556.) The title Carl Vasile presented to Plaintiff to obtain financing included the notation "ASPT". (Id. at 4546.)[4]
4.) a 2000 Kawasaki 750 with a $10,000.00 purchase price (Pl.'s Ex. 37 at 403.) (AFC Stock No. 513.) Union Credit purchased a 1999 Kawasaki ZX 900 on November 7, 2000 for $3,875.00. (Pl.'s Ex. 48 at 4581, 4585.) The title Carl Vasile presented to Plaintiff to obtain financing included the notation "ASPT". (Id. at 4578.)
5.) a 2000 Suzuki 600 with a $9,000.00 purchase price. (Pl.'s Ex. 37 at 403.) (AFC Stock No. 514.) Union Credit purchased a 1999 Suzuki GSXR750 on October 10, 2000 for $2,800.00. (Pl.'s Ex. 50 at 4646.) The motor and body parts from that motorcycle along with the frame of another were used to create the 2000 Suzuki 600 for which Auto Temps was issued an "ASPT" title. (Pl.'s Ex. 49 at 4661, 4655.)
6.) a 2000 Suzuki 750 with a $10,000.00 purchase price. (Pl.'s Ex. 37 at 403.) (AFC Stock No. 515.) The frame of the 1999 Suzuki GSXR750 along with the motor, transmission, body molding, front end and gas tank of another motorcycle were used to create the 2000 Suzuki 750 for which Auto Temps was issued an "ASPT" title. (Pl.'s Ex. 49 at 4662, Ex. 50 at 4626.)
7.) a 2000 Kawasaki 750 with a $10,000.00 purchase price. (Pl.'s Ex. 37 at 403.) (AFC Stock No. 516.) Union Credit purchased a 1998 Kawasaki 750 motorcycle on November 9, 2000 for $1,420.00. (Pl.'s Ex. 51 at 4607.) On that same day Union Credit purchased a Kawasaki 750 motor for $330.00. (Pl.'s Ex. 51 at 4621.) Union Credit used the frame, front end, body molding, and gas tank from the 1998 Kawasaki 750 motorcycle along with the Kawasaki 750 motor to create the 2000 Kawasaki 750 for which Auto Temps was issued a 2000 "ASPT" title. (Pl.'s Ex. 51 at 4619, 4620, 4621, and 4597.)
In reliance on the purchase prices set forth on the bill of sale, on December 22, 2000 Plaintiff issued a check to Union Credit in the amount of $50,000.00 to floor plan AFC Stock Nos. 510-514. (Pl.'s Ex. 45 at 4289.) On December 26, 2000 Plaintiff issued a check to Union Credit in the amount of $20,000.00 to floor plan AFC Stock Nos. 515 and 516. (Pl.'s Ex. 8.)
On January 8, 2001 Carl Vasile presented Plaintiff a wholesale order evidencing the purchase by Union Credit of a 2000 *901 Chevrolet Metro for $7,500.00. (Pl.'s Ex. 37 at 406.) (AFC Stock No. 517.) Union Credit purchased the automobile from North American Fleet Sales ("North American"), a company for which Carl Vasile was an agent. (Tr. at 168-160.) North American had purchased the vehicle on October 11, 2000 for $1,200.00. (Pl.'s Ex. 52 at 4525.). On January 9, 2001 Plaintiff issued a check to Union Credit in the amount of $7,350.00 to floor plan the vehicle. (Pl.'s Ex. 8.)
On January 9, 2001 Carl Vasile presented Plaintiff a wholesale order evidencing the purchase by Union Credit from Auto Temps of a 1999 Suzuki 600 motorcycle for $9,800.00 (Pl.'s Ex. 37 at 398.) (AFC Stock No. 518.) The title presented to Plaintiff included the notation "REBUILT". (Pl.'s Ex. 53 at 4234.) Union Credit purchased the motorcycle on November 2, 2000 for $1,545.00. (Id. at 4250.) In reliance on the purchase price set forth on the wholesale order, on January 9, 2001 Plaintiff issued a check to Union Credit in the amount of $9,800.00 to floor plan the motorcycle. (Pl.'s Ex. 8.)
On January 9, 2001 Carl Vasile presented Plaintiff a wholesale order evidencing the purchase by Union Credit from Auto Temps of a 2000 Kawasaki 600 motorcycle for $11,200.00. (Pl.'s Ex. 37 at 400.) (AFC Stock No. 519.) The title presented to Plaintiff includes the notation "REBUILT". (Pl.'s Ex. 54 at 4144.) Union Credit purchased the motorcycle on November 2, 2000 for $1,695.00. (Id. at 4145.) In reliance on the purchase price set forth on the wholesale order, on January 9, 2001 Plaintiff issued a check to Union Credit in the amount of $11,200.00 to floor plan the motorcycle. (Pl.'s Ex. 8.)
On January 15, 2001 Carl Vasile presented Plaintiff a wholesale order evidencing the purchase by Union Credit from Auto Temps of a 2000 Ford Explorer 4X4 with a purchase price of $18,200.00. (Pl.'s Ex. 37 at 399.) (AFC Stock No. 520.) Union Credit purchased the vehicle on January 4, 2001 for $3,095.00 (Pl.'s Ex. 55 at 4691-4692.) On January 15, 2001 the vehicle was titled in Auto Temps' name. (Id. at 4686.) Although the Explorer was wrecked when Union Credit originally purchased it and when it sought financing, the purchase price set forth on the wholesale order represented its repaired value. (Id. at 4693-4696.) In reliance on the purchase price set forth on the wholesale order, on January 15, 2001 Plaintiff issued a check to Union Credit in the amount of $18,200.00 to floor plan the vehicle. (Pl.'s Ex. 8.)
On January 16, 2001 Carl Vasile presented Plaintiff a wholesale order evidencing the purchase by Union Credit from Auto Temps of a 2000 Pontiac Grand Prix with a purchase price of $12,000.00. (Pl.'s Ex. 37 at 401.) (AFC Stock No. 521.) Union Credit purchased the car on January 11, 2001 for $2,090.00. (Pl.'s Ex. 56 at 4430.) On January 16, 2001 the vehicle was titled in Auto Temps' name. (Id. at 4426.) Although the Grand Prix was wrecked when Union Credit originally purchased it and when it sought financing, the purchase price set forth on the wholesale order represented its repaired value. (Id. at 4431-4433.) In reliance on the purchase price set forth on the wholesale order, on January 17, 2001 Plaintiff issued a check to Union Credit in the amount of $12,000.00 to floor plan the vehicle. (Pl.'s Ex. 8.)
Carl Vasile testified that when he financed the motorcycles and vehicles with Plaintiff his investment therein approximated or exceeded the amounts for which he floor-planned them. (Tr. at 434.) However, he admitted that [Union Credit's] high volume of business made it impossible to keep track of every receipt for *902 every vehicle that was repaired and that the absence of repair receipts for a given vehicle was "not extraordinary". (Tr. at 160.)
There was a relationship of trust between the parties. (Tr. at 287-288.) Prior to the December 6, 2000 financings Union Credit had floor planned and paid off the loan balances on over 480 vehicles and had never missed a payment. (Tr. at 292-293.) Gainey testified that Union Credit was an ideal customer and that based upon Union Credit's and Carl Vasile's history with Plaintiff, he had no reason to doubt that the purchase prices on the bills of sale and wholesale orders reflected the prices Union Credit originally paid for the vehicles and motorcycles. (Id.)
Union Credit first missed a payment on January 22, 2001. Shortly thereafter, Gainey visited Union Credit's lot for the first time. (Tr. at 290.) During the visit Gainey learned that the four vehicles represented by AFC Stock Nos. 481, 482, 520, and 521 were wrecked, "cut in half and not retail ready". (Tr. at 294, 340.) Thereafter, Plaintiff declared a default and demanded payment of the outstanding loan balance.
Teresa Vasile testified that she was not aware of Carl Vasile's practice of floor planning vehicles for a higher price that what he paid in order to cover repair costs. (Tr. at 247.)
CONCLUSIONS OF LAW
Plaintiff seeks to have the debt owed it by Defendants excepted from Defendants' discharge under § 523(a)(2)(A) of the Bankruptcy Code. That section provides in pertinent part:
(a) A discharge under section 727, 1141, 1228(a), 1228(b), or 1328(b) of this title does not discharge an individual debtor from any debt
(2) for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by
(A) false pretenses, a false representation, or actual fraud;
11 U.S.C. § 523(a)(2)(A).
In order to except the debt from Defendants' discharge under 11 U.S.C. § 523(a)(2)(A), Plaintiff must prove that: (1) Defendants made a false representation with the purpose and intent to deceive Plaintiff; (2) Plaintiff justifiably relied upon the representation; and (3) Plaintiff sustained a loss as a result of the representation. Lang v. Vickers (In re Vickers), 247 B.R. 530, 534 (Bankr.M.D.Fla.2000). Plaintiff bears the burden of proving the above elements by a preponderance of the evidence. Grogan v. Garner, 498 U.S. 279, 291, 111 S.Ct. 654, 112 L.Ed.2d 755 (1991). Exceptions to discharge must be strictly construed in order to give effect to the "fresh start" policy of the Bankruptcy Code. See Equitable Bank v. Miller (In re Miller), 39 F.3d 301, 304 (11th Cir.1994).
Preliminarily, the Court addresses the issue of Teresa Vasile's liability. Plaintiff contends that Carl Vasile's fraud should be imputed to Teresa Vasile because during February 2001 she withdrew money from the account in which Plaintiff's December 2000 and January 2001 advances to Union Credit were deposited. Fraudulent intent may not be imputed from one spouse to another simply based on the marital relationship of the parties. Synod of S. Atlantic Presbyterian Church v. Magpusao (In re Magpusao), 265 B.R. 492, 498 (Bankr.M.D.Fla.2001). In order for liability to attach, the person to whom intent is sought to be imputed must be aware of the spouse's misconduct and must participate in the use or enjoyment of the ill-gotten gains. Id. at 498. There is not a scintilla of evidence before the Court that Teresa Vasile was aware of Carl Vasile's *903 practice of floor planning vehicles for a higher price than what he paid for them in order to cover repair costs. Accordingly, to the extent that the Court finds that Carl Vasile's conduct constitutes fraud, the Court will not impute Carl Vasile's fraudulent intent to Teresa Vasile and will enter a judgment in favor of Teresa Vasile.
I. FALSE REPRESENTATION
The Court must first determine whether Carl Vasile made a false representation to Plaintiff in order to obtain credit. Plaintiff asserts that the bills of sale and the wholesale orders (collectively, "the invoices") prepared by Carl Vasile and presented to Plaintiff misrepresented the actual purchase price Union Credit paid for the cars and motorcycles. Plaintiff points out that Union Credit had previously acquired the vehicles from other sources for far less money than the purchase prices represented on the invoices. Plaintiff contends that when a dealer submits an invoice in order to obtain floor plan financing there is an implicit assumption that the purchase and purchase price represent an arms length transaction. Defendants concede that the sales prices reflected on the invoices do not reflect the prices Union Credit originally paid for the vehicles and motorcycles in their wrecked condition but argue that the purchase prices were not false when they were submitted to Plaintiff. Defendants point out that Union Credit purchased the vehicles at salvage auctions after which the Car Clinic repaired them, utilizing parts in inventory or outside vendors. Defendants assert that by the time the motorcycles and cars were reassembled, Carl Vasile's investment approximated or exceeded the amounts reflected on the invoices.
The Court finds that the invoices Carl Vasile presented to Plaintiff were false. The Court thoroughly and meticulously reviewed every file folder representing the vehicles and motorcycles for which Plaintiff was not repaid (Defs.' Exs. 92-112.) The four vehicles represented by AFC Stock Nos. 481, 482, 520, and 521 were wrecked when Union Credit purchased them, when AFC financed them, and when Gainey visited Union Credit's lot at the end of January, 2001. Union Credit purchased the vehicles for $1,600.00, $1,550.00, $3,095.00, and $2,090.00 respectively. On the invoices he presented to Plaintiff to obtain floor-plan financing, Carl Vasile represented that the vehicles' respective purchase prices were $12,500.00, $10,000.00, $18,200.00, and $12,000.00. Defendants presented no evidence documenting any repairs to the vehicles. Because Carl Vasile's investment in the vehicles was the amounts for which Union Credit originally purchased them, Defendants' assertion that the invoices were not false when submitted is itself false. Additionally, the vehicle folders for the motorcycles contained scant and confusing documentation. Even taking into account the documented repair and rebuilding expenses, the Court did not identify even one instance in which Carl Vasile's investment approximated the amount set forth on the invoice. In the absence of corroborative documentary evidence, Carl Vasile's assertion that his investment approximated or exceeded the purchase prices set forth on the invoices is insufficient.
II. INTENT TO DECEIVE
The next issue before the Court is whether Carl Vasile submitted the invoices with the purpose and intent to deceive Plaintiff. Defendants contend that Carl Vasile did not intend to deceive Plaintiff because: 1) he made no attempt to conceal the relationship between Union Credit and Auto Temps; 2) Defendants did not personally benefit from the financings; 3) Carl Vasile cooperated with Plaintiff before *904 and after the default; and 4) Carl Vasile was unfamiliar with the "fine print" on the back of the promissory notes and security agreements. Defendants' arguments are without merit. First, the lack of an affirmative effort on the part of Carl Vasile to conceal the relationship between Union Credit and Auto Temps does not establish that Carl Vasile did not intend to deceive Plaintiff. The Court finds that Carl Vasile was aware that Plaintiff did not know that he owned Auto Temps and consciously chose not to inform Plaintiff of that fact. Secondly, Defendants' post-default infusion into the business of $55,000.00 from draws on lines of credit on their otherwise exempt homestead, as well as Carl Vasile's cooperation with Plaintiff, establish an effort to repay the debt to Plaintiff but are not probative of, or relevant to, Carl Vasile's state of mind when he presented the invoices to Plaintiff. Although it does not doubt that Carl Vasile intended to repay Plaintiff, the Court cannot turn a blind eye to the method and mindset by which he obtained the money in the first instance. Finally, despite his assertion that he did not read the "fine print" on the loan documents, the Court finds that Carl Vasile, a savvy and experienced businessman, knew that the loan agreement required proof of the actual purchase price and that the agreement contemplated either: 1) an arms-length transaction between two unrelated companies or 2) disclosure by the dealer of the relationship between two related companies. Based upon the foregoing, the Court finds that Carl Vasile intended to deceive Plaintiff when he presented the invoices in order to obtain floor-plan financing.
III. JUSTIFIABLE RELIANCE
The third issue before the Court is whether Plaintiff justifiably relied on the invoices submitted by Carl Vasile to obtain financing. "To constitute justifiable reliance, `[t]he plaintiff's conduct must not be so utterly unreasonable, in the light of the information apparent to him, that the law may properly say that his loss is his own responsibility.'" City Bank & Trust Co. v. Vann (In re Vann), 67 F.3d 277, 283 (11th Cir.1995) quoting W. Page Keeton, Prosser & Keeton on Torts § 108 at 749 (5th ed.1984). However, justifiable reliance does not require objective reasonableness. Vann at 283. "Justifiable reliance is gauged by `an individual standard of the plaintiff's own capacity and the knowledge which he has, or which may be fairly charged against him from the facts within his observation in the light of his individual case.'" Vann at 283 quoting Prosser & Keeton on Torts § 108 at 751. "Additionally, `[i]t is only where, under the circumstances, the facts should be apparent to one of [plaintiff's] knowledge and intelligence from a cursory glance, or he has discovered something which should serve as a warning that he is being deceived, that he is required to make an investigation of his own.'" Id. at 283 quoting Prosser & Keeton on Torts § 108 at 752. Finally, "`the plaintiff is entitled to rely upon representations of such a character as to require some kind of investigation or examination on his part to discover their falsity, and a defendant who has been guilty of conscious misrepresentation can not offer as a defense the plaintiff's failure to make the investigation or examination to verify the same'" Field v. Mans, 516 U.S. 59, 71, 116 S.Ct. 437, 133 L.Ed.2d 351 (1995) quoting 1 F. Harper & F. James, Law of Torts § 7.12 pp. 581-583 (1956).
The Court finds that Plaintiff's reliance on the purchase prices on the invoices as representing the prices for which Union Credit initially paid for the vehicles was justified. The hallmark of the relationship between the parties was trust. (Tr. at 287-288.) Prior to the December 6, *905 2000 financings Union Credit had floor planned and paid off the loan balances on over 480 vehicles and had never missed a payment. (Tr. at 292-293.) Gainey testified that Union Credit was an ideal customer and that based upon Union Credit's and Carl Vasile's history with Plaintiff, he had no reason to doubt that the purchase prices on the invoices reflected the prices Union Credit originally paid for the vehicles and motorcycles. Plaintiff wanted to accommodate Carl Vasile and did so by floor planning the motorcycles for the amounts set forth on the invoices.
Defendants contend that there were numerous "red flags" which should have caused Plaintiff to 1) more closely scrutinize the values reflected on the invoice, 2) understand the nature of Union Credit's business, and 3) be aware of the relationship between Union Credit and Auto Temps.
Defendants contend that Par's visit to Union Credit on December 12, 2000 should have alerted Plaintiff that Carl Vasile was in the business of repairing wrecked vehicles and that the motorcycles and vehicles on the December 11, 2000 invoice (and subsequent invoices) had been wrecked and repaired prior to the floor planning.[5] Defendants point to the presence of a sign which read "The Car Clinic-Collision Specialists" and contend that the two cars for which Union Credit sought financing were still in their wrecked condition. Par testified that his visit was brief and that the primary focus of his visit was the motorcycles for which Carl Vasile sought financing, not the surrounding activity.[6] He also testified that the two cars included on the December 11, 2000 bill of sale were not wrecked. Defendants also point to Carl Vasile's alleged comment concerning the financing of the second batch of motorcycles. The Court does not find Carl Vasile's testimony on this point convincing. The Court finds that nothing which occurred during Par's December 12, 2000 visit to Union Credit establishes that Plaintiff's reliance upon the purchase prices set forth on the invoices was not justified.
Defendants also point to the fact that many of the motorcycle titles had the words "REBUILT" OR "ASPT" on the face of the titles. Defendants argue that Plaintiff should have known the difference between a "clean" title, a "REBUILT" title, and an "ASPT" title. In light of its inexperience with motorcycle floor plan financing, Plaintiff probably should have familiarized itself with the various motorcycle title designations. If it had done so, it may have been alerted to the fact that the motorcycles it financed had been wrecked and rebuilt or constructed from parts and that the purchase prices reflected on the invoices were not the prices for which Union Credit originally purchased them. However, it is clear to the Court that Plaintiff based its lending decisions on its *906 relationship and past dealings with Carl Vasile and attempted to accommodate him as best it could. It is also clear to the Court that Plaintiff relied on the titles primarily to ensure that Union Credit actually owned the motorcycles for which it sought financing. Plaintiff's failure to thoroughly analyze the various motorcycle title designations prior to extending credit does not render its reliance unjustified.
CONCLUSION
When he submitted invoices to Plaintiff which misrepresented the actual purchase prices of vehicles he sought to floor plan, Carl Vasile made false representations to Plaintiff in order to obtain credit.[7] Carl Vasile's 1) knowledge that Plaintiff was unaware that Auto Temps, the seller of the vehicles, was a related company and 2) failure to inform Plaintiff of the relationship between Union Credit and Auto Temps, evidence an attempt to deceive Plaintiff. In light of its relationship and past dealings with Carl Vasile, Plaintiff's reliance on the invoices as representing the actual purchase prices of the vehicles and motorcycles was justified. The Court makes no determination of Carl Vasile's liability to Plaintiff nor the amount of the indebtedness, if any. The Court will not except the debt owed to Plaintiff by Teresa Vasile as a result of her January 19, 2000 personal guaranty from Teresa Vasile's discharge. The Court will enter a separate judgment consistent with these Findings of Fact and Conclusions of Law.
NOTES
[1] Although the Complaint sought an exception to Defendants' discharge pursuant to 11 U.S.C. §§ 523(a)(2)(A)(Count I), 523(a)(2)(B)(Count II), and 523(a)(6)(Count III), Plaintiff's post-trial memorandum referred only to § 523(a)(2)(A)(Count I). The Court therefore deems Counts II and III abandoned and will only address Count I in its Findings of Fact and Conclusions of Law. The Court will enter a judgment in favor of Defendants as to Counts II and III.
[2] Carl Vasile testified that a rebuilt title is issued when a motorcycle which was purchased with a salvage title or certificate has been repaired. (Tr. at 186.) "Maybe it just needed a fender, a headlight, a front wheel and some forks . . . you still have to repair the vehicle, you have to get it inspected by the D.M.V., and at that point they will issue you a new title that will retain the same VIN number, the same year, but it will have the word `rebuilt' on it." (Tr. at 187.)
[3] Alonzo Gainey, Plaintiff's branch manager since June 2000, testified that except for the occasional auction purchase for which Plaintiff paid the auction directly, Plaintiff did not floor-plan motorcycles. However, it financed the motorcycles for Union Credit as outside buys because Union Credit was a great customer whom Plaintiff wanted to accommodate. (Tr. at 287-288.)
[4] Carl Vasile explained that an "ASPT" title is issued for a motorcycle that is assembled from parts. "It is a title that is issued by the State of Florida that you, in a sense, are building a motorcycle . . . you're taking pieces from one motorcycle and creating a new creation . . . It's a bike that was assembled from various parts to create a whole new entity, a whole new VIN number, whole new year, and a whole new title." (Tr. at 185.)
[5] Defendants cannot be referring to AFC Stock Nos. 481, 482, 520, and 521 because they were not repaired before Plaintiff financed them.
[6]
Q: You're talking you didn't see any wrecked vehicles being repaired there?
A: I mean, now it could be there are other vehicles getting repaired, but I can't tell you if it's wrecked or not, no.
Q: Did you see the repair the mechanics there working on the vehicles?
A: Yes. You know, I have a dealer lot in Apopka, and I have three bays. That doesn't make mea you know, I don't build wrecked cars. And I just recondition my cars. Doesn't make me a wreck builder, no. Because all dealers, they have most of the dealers I know, they have one or two bays that they can work on cars, get them ready to sell. (Tr at 61-62.)
[7] The invoices represent AFC Stock Nos. 481, 482, 496, 498, 500, 501, 503, 508, 509, and 510-521.
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297 B.R. 848 (2003)
In re OLDE FLORIDA INVESTMENTS, LTD, Debtor.
Olde Florida Investments, Ltd, Plaintiff,
v.
Port of the Islands Community Improvement District, Arthur R. Piper, Charles J. Alaimo, Collier County Tax Collector, First Union National Bank, as Custodian for Fundco, Inc., First Union National Bank, as Custodian for Holdco, Inc., First Union National Bank, As Custodian for Direct Lien Funding Co., Heartwood `88, Inc., Leon McCaskey, Nellie Kirby, Robert L. Hill, and Rose Marie Desimone and the State of Florida, Department of Revenue, et al., Defendants.
Bankruptcy No. 01-5321-9P1, Adversary No. 01-213.
United States Bankruptcy Court, M.D. Florida, Fort Myers Division.
June 6, 2003.
*849 Louis X. Amato, Louis X. Amato, P.A., Naples, FL, for debtor.
Drew M. Dillworth, Esquire, c/o Stearns, Weaver, Miller, et al., Miami, FL, Warren S. Bloom, Nabors, Giblin & Nickerson, P.A., Orlando, FL, Robert B. Glenn, Glenn, Rasmussen, Fogarty & Hooker, P.A., Tampa, FL, for creditors.
T. Patrick Tinker, Office of U.S. Trustee, Tampa, FL, U.S. Trustee.
ORDER ON MOTION FOR RECONSIDERATION AND REHEARING OF FINAL JUDGMENT DATED MAY 2, 2003
(Doc. No. 1176)
ALEXANDER L. PASKAY, Chief Judge.
The matter under consideration in this yet to be confirmed Chapter 11 case of Olde Florida Investment, Ltd. (Debtor) is "Plaintiff, Olde Florida Investments, Ltd.'s Motion for Reconsideration and Rehearing of Final Judgment Dated May 2, 2003" (Doc. No. 1176), filed by the Debtor. The Motion is filed pursuant to Fed.R.Civ.P. 59 and Fed.R.Civ.P. 60.
It should be noted at the outset that the Debtor did not seek, in its Motion, either a new trial or an amendment of the Final Judgment, thus Fed.R.Civ.P. 59 is not applicable. This leaves for consideration the alternative ground for relief based on Fed.R.Civ.P. 60, as adopted by F.R.B.P. 9024. This Section provides in sub-clause (a) that relief may be granted based on "Clerical Mistakes." In sub-clause (b), relief may be granted under this Rule for "Mistakes; Inadvertence; Excusable Neglect, Newly Discovered Evidence, Fraud, Etc."
In sub-clause (b)(6), relief may be granted for any other reason justifying relief from the operation of the judgment. Although this Court is satisfied that this record finds no support for the Motion and is equally satisfied that a Motion for Reconsideration was never designed to operate as a substitute for an appeal, it is also recognized that it may be appropriate, if the court committed an egregious error of law, and not to require litigants to seek relief through the appellate process. For this reason, a court should be given an opportunity to correct the error. National Trust v. Dept. of State, 834 F.Supp. 453, 455 (D.D.C.1993) (quoting Virgin Atlantic Airways, Ltd. v. National Mediation Bd., 956 F.2d 1245, 1255 (2d Cir.), cert. denied, 506 U.S. 820, 113 S.Ct. 67, 121 L.Ed.2d 34 (1992)). However, this Court is satisfied that under either Rule cited by the Debtor, it failed to satisfy the standard required to justify reconsideration. Carr v. Brennan (In re Clark), 252 B.R. 550 (Bankr.M.D.Fla.2000); *850 In re DEF Investments, Inc., 186 B.R. 671 (Bankr.D.Minn.1995); Capital Factors, Inc. v. General Plastics Corp. (In re General Plastics Corp.), 184 B.R. 996 (Bankr.S.D.Fla.1995).
In the Motion, the Debtor contends that this Court previously held that it has jurisdiction based on 11 U.S.C. § 505, to determine the issues raised in the Debtor's Complaint and based on the case of In re Piper Aircraft Corp., 171 B.R. 415 (Bankr.S.D.Fla.1994), the defenses laches, estoppel or waiver was held not to be available in an action based on Section 505 of the Code. In support of this proposition, the Debtor relies on a statement in this Court's Order Granting Motion to Dismiss (Doc. No. 58), which in part denied the Defendants' Motion to Dismiss the Complaint for lack of jurisdiction. On page 8 of the Order, this Court did in fact state "although it appears that the special assessment involved here is not a tax . . . under Florida law, [it] may be deemed to be taxes, which this Court may consider under Section 505(a) of the Bankruptcy Code" emphasis supplied. Based on the foregoing, this Court held that it had jurisdiction and denied that aspect of the Motion to Dismiss.
It should be also pointed out that in the same Order, this Court also held, as an alternative basis for jurisdiction, that pursuant to 28 U.S.C. § 157(b)(2)(K), this Court had "core" jurisdiction to determine the validity, priority and extent of a lien. Moreover, the previous holding on this issue was made in the context of a ruling on a motion to dismiss the complaint where this Court denied the motion because it is well established that if a plaintiff may ultimately prevails on any theory under the complaint, it should not be dismissed. In re Johannessen, 76 F.3d 347 (11th Cir.1996).
The holding, by this Court, in its Memorandum Opinion based upon the Final Judgment is entered and is under challenge by this Motion, while it held that the special assessment was indeed not a "tax," this Court based its final ruling in the context of a determination of the validity, priority or extent of the lien, which encumbers the property of the Debtor by the special assessment. Based on this, this Court held that the holding of Piper was not applicable and the defenses of laches, estoppel or waiver were available defenses.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Motion for Reconsideration be, and the same is hereby, denied.
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297 B.R. 521 (2003)
In re INFORMATION PACKAGING INC., et al., Debtors.
Information Packaging, Inc., et. al., Plaintiffs,
v.
Golden Eagle Products, Inc., Defendant.
Bankruptcy No. 00-07204, Adversary No. 302-0597A.
United States Bankruptcy Court, M.D. Tennessee.
April 17, 2003.
*522 Robert J Gonzales, Nashville, TN, for Debtor.
MEMORANDUM & ORDER
GEORGE C. PAINE, II, Chief Judge.
This matter is before the court on the adversary complaint filed by the debtors seeking to recover allegedly preferential transfers made to Golden Eagle Products, Inc.[1] At issue is (1) whether Golden Eagle received from the Debtor avoidable preferential transfers pursuant to Section 547(b) of the Bankruptcy Code and if so, (2) whether these transfers were offset by the new value exception of Section 547(c)(4). For the reasons contained herein, the court finds that Golden Eagle received preferential transfers which were completely offset by its extensions of subsequent new value. The following constitutes the court's findings of fact and conclusions of law. Fed. R. Bankr.P. 7052.
Facts
The parties to this proceeding submitted a Joint Stipulation of Facts. The following facts are relevant to the court's decision:
1. During the ninety days preceding the Petition Date, one or more transfers of property were made to or for the benefit of the Defendant, Golden Eagle Products, Inc.
2. The Transfers were transfers of interest in property of one or more of the Debtors.
3. The Transfers were transfers to or for the benefit of the Defendant.
4. The Transfers were transfers for or on account of antecedent debt owed by one of the debtors before such transfers were made.
5. The Transfers were made while the relevant Debtors were insolvent or were presumed to be insolvent pursuant to 11 U.S.C. § 547(f).
6. As of the bankruptcy filing, (8/15/00 to 8/18/00) Golden Eagle Products, Inc. was owed approximately $1,000,000 by the Debtors for products and materials *523 sold on credit account by Golden Eagle to Brookstone.
7. $220,341.38 of products and materials were sold, shipped, and delivered by Golden Eagle Products to Brookstone, Inc. during the ninety day preference period as shown on accounts receivable detail aging report.
8. Of the complained transfers totaling $66,973.05, $34,891.13 was directed to particular antecedent invoices with $32,081.92 paid "on account."
9. Golden Eagle asserts that absent the stream of payment complained of as a preferential transfer, the $220,341.38 of shipments made during the ninety day period prior to bankruptcy would not have been made.
In addition to this proof, the parties offered as exhibits, copies of the invoices and checks relevant to the preference period.
Discussion
A. Section 547(b)
Under Section 547(b), preferential transfers are presumptively voidable by the trustee or debtor-in-possession of the bankruptcy estate. 11 U.S.C. § 547(b). A transfer is deemed a preference if found to be:
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days and one year before the date of the filing of the petition; or
(B) between ninety days and one year before the date of the filing of the petition, if such creditor at the time of such transfer was an insider; and
(5) a transfer that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
11 U.S.C. § 547(b) (2003). The debtor has the burden of proving the five elements of Section 547(b). Since these elements were stipulated to by the Defendant, the proof is uncontroverted that the payments within the ninety days prior to filing are preferential payments pursuant to section 547(b). However, a payment that is a preference may remain unavoided if it falls within one of the exceptions enumerated in section 547(c).
B. Subsequent New Value Under Section 547(c)(4)
Golden Eagle argues that even if the payments were preferential, section 547(c)(4) provides an exception allowing setoff to the extent of any subsequent new advances. Section 547(c)(4) creates an exception for transfers "to or for the benefit of a creditor, to the extent that, after such transfer, such creditor gave new value to or for the benefit of the debtor." 11. U.S.C. § 547(c)(4). This new value exception applies only to the extent that the new value is "not secured by an otherwise unavoidable security interest," and is not the proceeds of a loan that has been repaid with an "otherwise unavoidable transfer." Id. Accordingly, Section 547(c)(4) gives a creditor who receives a preference the ability to offset that preference to the extent that the creditor advances subsequent, unsecured credit.
Because Section 547(c)(4) only applies to subsequent advances, a transfer of *524 new value can be used to offset against preferences paid before that transfer but not against preferences paid after it. Waldschmidt v. Ranier (In re Fulghum Constr. Corp.), 706 F.2d 171, 173 (6th Cir.1983), cert. denied, 464 U.S. 935, 104 S.Ct. 342, 343, 78 L.Ed.2d 310 (1983). The timing of a creditor's extensions of new value is therefore crucial in calculating offset.[2]
"This `new value' exception to preference recovery is directed at debtors and creditors who had multiple transactions during the preference period." Van Dyck/Columbia Printing, v. Katz (In re Van Dyck/Columbia Printing), 289 B.R. 304, 315 (D.Conn.2003) (quoting Allied Companies, Inc. v. Broughton Foods Co., 155 B.R. 739 741 (Bankr.S.D.Ind.1992)). Section 547(c)(4) is properly described as a subsequent advance rule meaning that a preferential transfer may be set off only against new value advanced after the preference is received In re Van Dyck/Columbia Printing, 289 B.R. at 315. "[Section] 547(c)(4) contemplates carrying forward the net balance of prior preferences in determining the effect of subsequent value on the total preference claimed." In re Van Dyck/Columbia Printing, 289 B.R. at 315 (quoting Baumgold Bros. v. O. Censor & Co., 103 B.R. 436, 440 (Bankr.S.D.N.Y.1989)). Section 547(c)(4) was not "designed to limit credit for subsequent advances only to advances that remained unpaid, as such an interpretation would limit the exemption in § 547(c)(4) to one subsequent advance when Congress clearly contemplated its application to more than one exchange." Id. (citing In re Paula Saker & Co., Inc., 53 B.R. 630 (Bankr.S.D.N.Y.1985)).
According to the documentary evidence submitted by the parties, the following transactions are involved in application of the subsequent advance defense:
Subsequent Preferential
Amount Paid Date Paid Advance Amount Net Balance
$26,041.68 5/17/00
$130,687.78
$ 0
$14,422.27 6/14/00
$ 4,566.00
$ 9856.27
$ 2,071.84 6/15/00
$ 1,988.00 6/15/00
$ 10,774.40
$ 3141.71
*525
$ 3,464.24 6/21/00
$ 115.90 6/21/00
$ 86.00
$6,635.85
$ 3,266.08 06/28/00
$15,015.04 06/28/00
$ 49,427.54
$ 0
$ 418.00 07/12/00
$ 160.00 07/12/00
$ greater than
$100,000
$ 0
Based upon mathematical application of the subsequent advance rule to the stipulated evidence, the court finds that section 547(c)(4) protects Golden Eagle from avoidance on all of the preferential payments received.
Conclusion
Accordingly, the court dismisses the plaintiff's adversary complaint, and finds that Golden Eagle is not required to return any payments it received during the preference period. The subsequent advances of new value negated any preferential payments pursuant to 11 U.S.C. § 547(c)(4), and the court therefore dismisses the plaintiff's complaint with prejudice.
It is therefore so ORDERED.
NOTES
[1] Although the debtor is the named plaintiff in the action, this adversary proceeding was prosecuted by the Official Committee of Unsecured Creditors on the debtor's behalf.
[2] For example, assume a creditor receives a preference of $1000 on January 1, extends new value of $2000 on January 2, receives another preference of $500 on January 3, and extends new value of $200 on January 4. The new value of $2000 can be used to offset the earlier $1000 preference but may not be used to offset the later $500 preference. Only the new value of $200 applies to offset against the $500 preference, leaving a preferential balance of $300 that the creditor must return to the bankruptcy estate as voidable.
Now assume that the preferences are switched so that the creditor extends $200 of new value on January 2 and $2000 of new value on January 4. The new value of $200 can be used to offset against the preference of $1000, leaving an initial preferential balance of $800. The new value of $2000 can then be used to offset this $800 as well as the preference of $500. In this second scenario, the final preferential balance would be $0 so that the creditor would not have to return anything to the bankruptcy estate.
The facts of this case resemble the second hypothetical.
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720 S.W.2d 261 (1986)
Yvette Velma CURRY, Appellant,
v.
The STATE of Texas, Appellee.
No. 3-86-079-CR.
Court of Appeals of Texas, Austin.
November 19, 1986.
Discretionary Review Refused February 18, 1987.
*262 James H. Kreimeyer, Kreimeyer, Cain & Jezek, P.C., Belton, for appellant.
Arthur C. Eads, Dist. Atty., Kevin M. Wilson, Asst. Dist. Atty., Belton, for appellee.
Before POWERS, GAMMAGE and ABOUSSIE, JJ.
PER CURIAM.
This is an appeal from an order by the trial court amending nunc pro tunc appellant's judgment of conviction for voluntary manslaughter.[1]
In June, 1985, a jury found appellant guilty of voluntary manslaughter and assessed punishment at imprisonment for five years. Although appellant gave notice of appeal, she subsequently withdrew her notice and surrendered herself to the Department of Corrections. On February 27, 1986, appellant was released on parole.
On March 7, 1986, the State filed a motion in the trial court for entry of judgment nunc pro tunc. In this motion, the State alleged that the jury at appellant's trial had affirmatively found that appellant used a deadly weapon during the commission of the offense, but that this finding had been erroneously omitted from the original judgment of conviction. On March 18, after a hearing on the State's motion, the trial court found that the jury had indeed made an affirmative finding and that this finding was omitted from the original judgment of conviction due to a clerical error, and ordered that a nunc pro tunc judgment be entered containing the affirmative finding. The court further ordered appellant returned to custody because, in light of the affirmative finding, she was not eligible for parole when released. See Tex.Code Cr.P. Ann. art. 42.18, § 8(b) (Supp.1986).
The appellate transcript contains the punishment charge and jury verdict forms from appellant's original trial. These documents reflect that a special issue on the use of a deadly weapon was submitted to the jury, and that the jury did make an affirmative finding that appellant used or exhibited a deadly weapon during the commission of this offense. The record further reflects that this affirmative finding was not entered in the original judgment. The question presented in this appeal is whether the trial court was authorized to correct this omission by entering the judgment nunc pro tunc.
In her first point of error, appellant contends the trial court was without authority to enter the judgment nunc pro tunc because the failure to enter the finding in the original judgment was a judicial, rather than a clerical, error. The function of a judgment nunc pro tunc is to correct clerical errors in the entry of judgment. Coleman v. Zapp, 151 S.W. 1040 (Tex. 1912); Nolan v. Bettis, 562 S.W.2d 520 (Tex.Civ.App.1978, no writ). A clerical error is one which does not result from judicial reasoning or determination. Alvarez v. State, 605 S.W.2d 615 (Tex.Cr.App.1980); Nolan v. Bettis, supra. The classification of an error as judicial or clerical does not depend on who made the error, but on the nature of the error. Reavley and Orr, Trial Court's Power to Amend Its Judgment, 25 Baylor L.Rev. 191, 195 (1973). Thus, whenever the judgment entered by the court incorrectly records the judgment rendered, the error is clerical so long as a product of judicial reasoning is not involved. Alvarez v. State, supra; Nolan v. Bettis, supra.
Tex.Code Cr.Ann. art. 42.12 § 3g(a)(2) (Supp.1986) provides, in pertinent part:
Upon affirmative finding that the defendant used or exhibited a deadly weapon during the commission of an offense or during immediate flight therefrom, the trial court shall enter the finding in the judgment of the court. Upon an *263 affirmative finding that the deadly weapon the defendant used or exhibited was a firearm, the court shall enter that finding in its judgment.
This section clearly contemplates a two-step process. First, there must be an affirmative finding that the defendant used or exhibited a deadly weapon; this finding is made by the trier of fact. Ex parte Thomas, 638 S.W.2d 905 (Tex.Cr.App.1982). Second, after the affirmative finding is made by the trier of fact, the finding shall be entered in the judgment by the trial court.
Such discretion as exists in this process resides in the first step, the affirmative finding by the trier of fact. Once that finding is made, the statute imposes a mandatory duty on the trial court to enter the finding in the judgment. The legislature's purpose in imposing this duty on the trial court is obvious from the facts of this case. Without the entry of the affirmative finding in the judgment, the Department of Corrections and Board of Pardons and Paroles would be unable to determine which prisoners are to receive the special time computation that results from the finding. Polk v. State, 693 S.W.2d 391, 393 n. 1 (Tex.Cr.App.1985).
Because the entry of the affirmative finding in the judgment is mandatory, the trial court's failure to make the entry cannot be the product of judicial reasoning. Therefore, we hold that the trial court's failure to enter the jury's affirmative finding in the judgment was a clerical error, and overrule appellant's first point of error.
In her second point of error, appellant contends the trial court's entry of the affirmative finding by way of a judgment nunc pro tunc constitutes an improper effort to alter the terms of her sentence after she had already suffered partial punishment under the original sentence. See Ex parte Brown, 477 S.W.2d 552 (Tex.Cr. App.1972). Appellant correctly points out that such belated attempts at altering the terms of a defendant's sentence have consistently been declared null and void. See Ex parte Dickerson, 702 S.W.2d 657 (Tex. Cr.App.1986); Ex parte Brown, supra.
It is undisputed that the jury, as trier of fact, made an affirmative finding that appellant used a deadly weapon in the commission of this offense. It is this finding, and not the entry of the finding in the judgment, that has the effect of delaying the parole eligibility date. The entry of the finding in the judgment is merely a clerical step necessary to see to it that the affirmative finding is given effect. Thus, the trial court did not alter the punishment assessed when it entered the judgment nunc pro tunc, but merely corrected the judgment to reflect the punishment that in fact had been assessed.
We conclude that the trial court was authorized to enter the jury's affirmative finding that appellant used a deadly weapon during the commission of this offense by way of a judgment nunc pro tunc. The Amarillo Court of Appeals reached the same conclusion in McGinnis v. State, 664 S.W.2d 769 (Tex.App.1983, no pet.). In McGinnis, unlike the instant cause, the nunc pro tunc judgment was entered before the defendant was paroled. However, we consider this a distinction without a difference. Appellant does not contend that appellant's release on parole in any way barred the entry of the judgment nunc pro tunc, and such an argument would be inconsistent with the result reached in the many cases dealing with the erroneous release of prisoners. See Ex parte Morris, 626 S.W.2d 754 (Tex.Cr.App. 1982); Ex parte Hurd, 613 S.W.2d 742 (Tex.Cr.App.1981); Ex parte Esquivel, 531 S.W.2d 339 (Tex.Cr.App.1976).
We also find support for our decision in Shaw v. State, 539 S.W.2d 887 (Tex.Cr.App. 1976). In Shaw, it was held that the trial court did not abuse its discretion in entering a nunc pro tunc sentence correcting an erroneous recital as to the amount of jail time credit to which the defendant was entitled.
Appellant's erroneous premature release on parole was due to no fault of hers. *264 Therefore, she is entitled to credit against her sentence for the time that she was at liberty on parole. Ex parte Morris, supra; Ex parte Esquivel, supra. Further, she is entitled to credit for the period of incarceration beginning with the entry of the trial court's judgment nunc pro tunc. However, appellant is not entitled to credit against her sentence for the time she has been at large on bond pending her appeal from the nunc pro tunc order. Tex.Code Cr.P.Ann. art. 42.03 (1979 and Supp.1986); Ex parte Allen, 548 S.W.2d 905 (Tex.Cr. App.1977).
The order of the trial court entering judgment nunc pro tunc is affirmed.
POWERS, J., not participating.
NOTES
[1] This Court previously ordered that appellant be released on bond pending the outcome of this appeal. Curry v. State, 712 S.W.2d 878 (Tex.App.1986, no pet.).
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46 Pa. Commw. 90 (1979)
Commonwealth of Pennsylvania, Department of Transportation, Appellant
v.
Evelyn M. Lishon et al., Appellees.
No. 493 C.D. 1977.
Commonwealth Court of Pennsylvania.
Argued September 26, 1978.
September 18, 1979.
*91 Argued September 26, 1978, before President Judge BOWMAN and Judges CRUMLISH, JR., WILKINSON, JR., ROGERS, BLATT, DiSALLE and MacPHAIL. Judges MENCER and CRAIG did not participate. Reargued March 22, 1979, before President Judge BOWMAN and Judges CRUMLISH, JR., WILKINSON, JR., MENCER, ROGERS, BLATT, DiSALLE, CRAIG and MacPHAIL.
Stuart M. Bliwas, Assistant Attorney General, with him Robert W. Cunliffe. Deputy Attorney General-Chief Counsel, and Edward G. Biester, Jr., Acting Attorney General, for appellant.
*92 Carl K. Zucker, with him Harry Norman Ball, and Cohen, Shapiro, Polisher, Shiekman and Cohen, for appellees.
OPINION BY JUDGE ROGERS, September 18, 1979:
This is a suit in equity against the Commonwealth of Pennsylvania. An issue is the Commonwealth's immunity as sovereign. The suit was begun prior to July 14, 1978, the date on which the Pennsylvania Supreme Court abrogated sovereign immunity. Mayle v. Pennsylvania Department of Highways, 479 Pa. 384, 388 A.2d 709 (1978). The case was first argued in this Court on September 28, 1978, the same day during which the General Assembly enacted, effective immediately, Act No. 152-1978, retroactively restoring the doctrine of sovereign immunity except with respect to eight categories of claims. The claim in this case is not within any of the eight categories. We therefore set this matter, as well as others, down for reargument in order to gain enlightenment for our consideration of the effect of both Mayle, supra and Act 152.
The appellees, Evelyn M. Lishon and Tidewater Inland Express, Inc. are, respectively, the owner and tenant of a parcel of real estate designated and known as 4185 East Thompson Street, Philadelphia. They commenced this litigation by filing a complaint in equity in the Court of Common Pleas of Philadelphia County in which they averred that the defendant Commonwealth of Pennsylvania, Department of Transportation (PennDOT), had filed a Declaration of Taking of a part of the East Thompson Street premises in August 1972; that in June 1973 the parties to their action and others had entered into a stipulation concerning the amendment of the Declaration of Taking; and that the plaintiffs' execution of the stipulation was upon condition and pursuant to an "understanding" *93 with PennDOT (a) that Thompson Street[1] would be closed off, (b) that a gate would be erected across Thompson Street, (c) that the appellees would have a key to the gate, and (d) that PennDOT would obtain for the plaintiffs a lease of land owned by the Delaware River Port Authority. The plaintiffs, here appellees, further alleged that PennDOT failed to erect the fence across Thompson Street in the manner required by the alleged "understanding" or agreement and instead had commenced construction of a fence near and across Thompson Street inconsistent with its obligation, and that PennDOT has failed to obtain for the plaintiffs a lease of land from the Port Authority. The plaintiffs' prayer for relief asks for a decree enjoining PennDOT from erecting a fence across Thompson Street in any manner inconsistent with the appellees' alleged agreement with PennDOT; ordering PennDOT to obtain a lease from the Port Authority; enjoining PennDOT from erecting a fence across any part of Thompson Street without providing the plaintiffs with access to Thompson Street and their property; and enjoining PennDOT from erecting a fence which would interfere with the use by the plaintiffs of Port Authority land.[2]
PennDOT filed preliminary objections, one of which was a petition raising a question of the jurisdiction of the Court of Common Pleas, citing Section 401(a)(1)[3] of the Appellate Court Jurisdiction Act of *94 1970, Act of July 31, 1970, P.L. 673, as amended, formerly, 17 P.S. § 211.401(a)(1), which confers original jurisdiction of civil actions against the Commonwealth except, inter alia, "proceedings under the Eminent Domain Code," upon the Commonwealth Court. The Court of Common Pleas of Philadelphia County overruled this preliminary objection on the ground that the exception to Section 401 (a)(1) for "proceedings under the Eminent Domain Code" applied because the agreement sued on arose out of an eminent domain case. Our reading of the complaint convinces us that the only connection of this litigation with "proceedings under the Eminent Domain Code" or eminent domain generally that the filing of an amended Declaration of Taking was the occasion or perhaps the consideration for the alleged "understanding" or agreement that PennDOT would erect a fence and obtain a lease is too tenuous to justify a conclusion that this case is a proceeding under the Eminent Domain Code. There is no allegation in the complaint that the eminent domain proceedings, if they have not already been completed, will be in any way involved in this equity action. Therefore, it seems to us that this Court had original jurisdiction. We will therefore vacate the order of the court below but in order to save time, treat the matter as though transferred to this Court.
As we have already noted, the Commonwealth filed a preliminary objection based on the doctrine of sovereign immunity, and in Mayle v. Pennsylvania Department of Highways, supra, the doctrine was abrogated. However, as we have also noted, Act 152 restored the doctrine of sovereign immunity with reference to some claims against the Commonwealth, including those made here, and it restored it retroactively. In Brungard v. Hartman, 46 Pa. Commw. 10, 405 A.2d 1089 (1979), we held that the General Assembly *95 could constitutionally retroactively invoke the doctrine of sovereign immunity. Therefore, the doctrine would apply here. The difficulty, however, is that by reason of the inspecificity of the complaint, we are unable to form a judgment as to whether the agreements alleged in the complaint to have been entered into by the Commonwealth were incident to litigation between the parties, in which case the Commonwealth would be bound regardless of the doctrine of sovereign immunity, or whether they were made in circumstances in which the doctrine would apply. Since we are here requiring the filing of an amended complaint by the reason of the present complaint's lack of specificity we will not rule on the preliminary objections based on sovereign immunity.
PennDOT's motion for a more specific pleading raises the failure of the complaint to state whether the claim against PennDOT is based upon a writing, citing Pa. R.C.P. No. 1019(h). The objection is well taken. Pertinent paragraphs of the complaint read as follows:
5. . . . on or about June 3, 1973, the parties herein along with certain other parties affected hereby, entered into a Stipulation amending the Declaration of Taking that had been filed on August 3, 1972.
6. The execution and agreement to the terms of the Stipulation by plaintiffs was upon condition and pursuant to an understanding with PennDOT that, inter alia;
(a) Thompson Street would be closed off at Juniata Street to all public traffic and a fence and a gate erected across Thompson Street;
(b) plaintiffs would be given a key to the gate across Thompson Street and have access to *96 the closed off portion of Thompson Street, adjacent to said premises; and
(c) PennDOT would obtain for plaintiffs a lease upon reasonable terms from the Delaware River Port Authority (hereinafter referred to as `DRPA') of land adjacent to plaintiff's premises that had been acquired by DRPA, which land was under the then proposed, now existing, access ramp of the Betsy Ross Bridge. Said land was to be used by plaintiffs for parking purposes. A copy of the letters confirming this agreement is attached hereto, made a part hereof and marked `Exhibit A'.
Pa. R.C.P. No. 1019(h) requires the pleading to state specifically whether any claim set forth therein is based upon a writing and, if so, that a copy of the writing be attached. The complaint here is susceptible of a reading that the claim was based on an oral understanding or an oral understanding confirmed by letters or on a writing the attached letters. The court below believed the claim was based on a writing. In their brief, the appellees say that the claim is based on inducement by "action, conduct and written agreement." The complaint clearly lacks specificity with respect to the form of the agreement.
Further, Pa. R.C.P. No. 1019(a) requires that the material facts on which a cause of action is based shall be stated in a concise and summary form. It seems to us that the identity by name or position of the person or persons who represented the Commonwealth in making the alleged agreement is a material fact, the absence of which additionally exposes the complaint to the charge of lack of specificity.
Finally, the Commonwealth has filed a preliminary objection in the nature of a demurrer based on the asserted noncompliance of the parties with statutory *97 requirements for the execution of contracts by the Department of Transportation. This would seem to be an affirmative defense. Since we will sustain the motion for more specific complaint, a clearer statement of the appellees' claim may remove this difficulty.
ORDER
AND NOW, this 18th day of September, 1979, the order of the court below is vacated; the defendant's motion for a more specific complaint is granted and the plaintiff is directed to file an amended complaint in this Court within 20 days after notice of this order; the Commonwealth's other preliminary objections to the Complaint are overruled, without prejudice.
Judge DiSALLE concurs in the result only.
NOTES
[1] Among one of a number of matters not made clear in the complaint is whether Thompson Street and East Thompson Street are the same.
[2] It is noted that it was not alleged that this subject was a part of the "understanding" between the parties.
[3] Section 401 of the Appellate Court Jurisdiction Act is now Section 761 of the Judicial Code, 42 Pa. C.S. § 761. The exception noted in the text now reads "except . . . eminent domain proceedings."
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405 A.2d 137 (1979)
Brenda Jo BARNES and Charles Barnes, Plaintiffs,
v.
Carol B. TOWLSON and Monumental Life Insurance Company, A Maryland Corporation, Defendants.
Superior Court of Delaware, Kent County.
Submitted May 23, 1979.
Decided June 8, 1979.
Douglas B. Catts, of Schmittinger & Rodriguez, Dover, for plaintiffs.
Wayne N. Elliott, of Prickett, Sanders, Jones, Elliott & Kristol, Wilmington, for defendant Towlson.
William F. Taylor, and David C. McBride, of Young, Conaway, Stargatt & Taylor, Wilmington, for defendant Monumental Life Ins. Co.
*138 O'HARA, Judge.
Defendant, Monumental Life Insurance Company ("Monumental") has moved for summary judgment alleging that, as a matter of law, it is not vicariously liable for the alleged torts of defendant Carol B. Towlson ("Towlson"), or in the alternative, that she was not Monumental's servant nor was she acting within the scope of her employment at the time the accident occurred.
This personal injury action arises out of an automobile accident involving the plaintiff Brenda Jo Barnes and Towlson. At the time the accident occurred Towlson was in the midst of a fourteen week training session as an agent for Monumental. Her duties were to include sales and collections. The employees of Monumental were expected to use their own cars while on the job. Towlson understood and consented to this condition. She was also receiving a salary during this training period which was adjusted to cover automobile expenses.
At the time of the accident, Towlson was en route to meet the vice-president and sales manager of Monumental who was supervising her training. From their meeting point in Milford, Delaware, they were to proceed to visit customers in the area. The accident, which is the subject of this suit, occurred before Towlson reached her destination.
Monumental makes a distinction between the terms "agent" and "servant" *139 alleging that Towlson was merely an agent at the time of the accident and, thus, it is not vicariously liable to the plaintiffs. The distinction drawn between these terms centers on the principal's right of control over the activities of the agent/servant. Smalich v. Westfall, Pa.Super., 440 Pa. 409, 269 A.2d 476 (1970); Restatement of Agency 2d, § 250. While it may be primarily a problem of semantics, this jurisdiction has followed the Restatement in referring to the opposing roles as "agent" and "independent contractor" and shall continue to do so. McCrady v. National Starch Products, Del. Super., 2 Terry 392, 23 A.2d 108 (1941).
Restatement of Agency 2d, § 2(2) and (3) defines the aforesaid terms as follows:
"(2) A servant is an agent employed by a master to perform service in his affairs whose physical conduct in the performance of the service is controlled or subject to the right to control by the master.
"(3) An independent contractor is a person who contracts with another to do something for him but who is not controlled by the other nor subject to the other's right to control with respect to his physical conduct in the performance of the undertaking. He may or may not be an agent."
Therefore, the distinguishing factor between the two legal terms centers on the principal's right to control the activities of the agent/independent contractor.
The rule of law applicable to the facts of this case was succinctly stated by Judge Terry in McCrady v. National Starch Products, supra, as follows:
"Taking the state of the law as I have found it, together with the facts that are before me in this case, I am of the opinion that the defendant is not liable even though it had knowledge that [plaintiff] used his automobile in furtherance of its business, unless the plaintiff proves that the defendant had the right to exercise actual or potential control over [plaintiff] concerning the operation of his automobile while in the performance of his duties as employee, or that the use of the automobile by [plaintiff] was so vital to the furtherance of the defendant's business that the defendant's right to exercise actual or potential control over [plaintiff] concerning the operation of his automobile could be reasonably inferred."
It is undisputed that Towlson was an agent of Monumental at the time of the accident. The nature of such agency is the point of contention. A prerequisite for application of the aforesaid rule of law is a finding as to whether Towlson was acting within the scope of her employment at the time of the accident.
The issue concerning an agent's scope of employment is composed of time and spatial elements. The guiding rule of law in this area is agreed upon by the parties. Simply stated, it is to the effect that a master is not liable for the tort's of his agent committed while driving to and from his place of employment. The plaintiffs have urged, however, that this Court find an exception to this general rule to the effect that where there are no work premises established as such, an employee who uses his own car in furtherance of his job is within the scope of his employment while driving to a business appointment. Rappaport v. International Playtex Corp., N.Y. Supr., 43 A.D.2d 393, 352 N.Y.S.2d 341 (1974); Whetzel v. Metropolitan Life Insurance Company, Fla.App., 266 So. 2d 89 (1972) (involving an insurance salesman). Restatement of Agency 2d, § 228.[1]
Delaware has not heretofore considered the aforesaid exception. In Coates v. Murphy, Del.Supr., 270 A.2d 527 (1970), the Supreme Court held that an employee, *140 therein a traveling salesman, was not within the scope of his employment when traveling to and from lunch, relying on Johnson v. E. I. duPont deNemours & Company, Del.Super., 4 Storey 574, 182 A.2d 904 (1962). The Johnson Court, however, did not consider the exception to the "premises rule" in arriving at its decision. Nor was this issue before that Court. The focus of attention in Johnson was on the purpose of the trip to the employee's home for lunch. Finding no purpose of the employer was served, the Court found the employee not to be within his scope of employment at the time of the accident.
The exception to the "premises rule" was succinctly stated in Rappaport v. International Playtex Corp., supra, as follows:
"... an exception to this rule would exist, in case of an employee who uses his car in furtherance of his work and while he is driving to a business appointment, since such a person is working and under his employer's control from time he leaves the house in the morning until he returns at night."
It is undisputed that Towlson was required to use her own vehicle when working for Monumental. It is established that the purpose of the trip was to meet her supervisor so that they could make business calls together.
Based upon the undisputed facts of this case and without doing violence to the case law in this jurisdiction, the facts call for an application of the exception to the "premises rule." Therefore, it is this Court's conclusion that Towlson was acting within the scope of her employment as a matter of law.
The next issue is whether Towlson was a "servant" or an "independent contractor" at the time of the accident, in light of the aforesaid rule enunciated in McCrady. The Restatement in $220 provides several criteria for consideration in making this determination.[2] The defendant has also collected an impressive array of cases from other jurisdictions essentially holding that a person in the defendant driver's position is deemed to be an "agent" and not a servant of the employer.[3] However, this Court holds that the rule of McCrady governs in this jurisdiction.
Thus, the undisputed facts of this case present a question for the jury as to whether the use of the automobile was so vital in the furtherance of Monumental's business that its potential right to exercise control could be reasonably inferred. Monumental's *141 motion for summary judgment, therefore, must be denied.
IT IS SO ORDERED.
NOTES
[1] Restatement of Agency 2d, § 228 provides as follows:
"Conduct of a servant is within the scope of employment if, but only if:
(a) it is of the kind he is employed to perform;
(b) it occurs substantially within the authorized time and space limits;
(c) it is actuated, at least in part, by a purpose to serve the master; and
(d) if force is intentionally used by the servant against another, the use of such force is not unexpected by the master."
[2] Restatement of Agency 2d, § 220, the term "servant" is defined as:
"(1) A servant is a person employed to perform services in the affairs of another and who with respect to the physical conduct in the performance of the services is subject to another's control or right to control.
(2) In determining whether one acting for another is a servant or an independent contractor, the following matters of fact, among others, are considered:
(a) the extent of control which, by agreement, the master may exercise over the details of the work;
(b) whether or not the one employed is engaged in a distinct occupation or business;
(c) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
(d) the skill required in the particular occupation;
(e) whether the employer or the workmen supplies the instrumentalities, tools, and place of work for the person doing the work;
(f) the length of time for which a person is employed;
(g) the method of payment, whether by time or by the job;
(h) whether or not the work is a part of the regular business of the employer;
(i) whether or not the parties believe they are creating the relation of master and servant;
(j) whether the principal is or is not in business.
[3] See, Henkelmann v. Metropolitan Life Ins. Co., Md.App., 180 Md. 591, 26 A.2d 418 (1942); Wesolowski v. John Hancock Mut. Life Ins. Co., Pa.Supr., 308 Pa. 117, 162 A. 166 (1932); Hutchins v. John Hancock Mut. Life Ins. Co., N.H.Supr., 89 N H. 79, 192 A. 498 (1937); Kelleher v. State Mut. Life Assur. Co., Etc., N.Y. App., 51 A.D.2d 872, 380 N.Y.S.2d 146 (1976); Sartain v. Southern National Life Insurance Co., Tex.Civ.App., 364 S.W.2d 245 (1963).
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10-30-2013
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176 Conn. 227 (1978)
STATE OF CONNECTICUT
v.
JOSEPH M. SPATES
Supreme Court of Connecticut.
Argued October 3, 1978.
Decision released November 7, 1978.
COTTER, C. J., LOISELLE, BOGDANSKI, LONGO and PETERS, JS.
*228 Joseph M. Spates, pro se, the appellant (defendant), and, as his legal advisor, Donald D. Dakers, assistant public defender.
Ernest J. Diette, Jr., assistant state's attorney, with whom, on the brief, were Arnold Markle, state's attorney, and John J. Kelly, assistant state's attorney, for the appellee (state).
LONGO, J.
The defendant was charged in a four-count information with first degree manslaughter, in violation of General Statutes § 53a-55 (a) (3), with second degree robbery, in violation of General Statutes § 53a-135 (a) (2), and with two counts of first degree unlawful restraint, in violation of General Statutes § 53a-95 (a). The defendant was convicted by a jury and, from the judgment rendered on the verdict, he has appealed claiming that the *229 trial court erred in certain of its instructions to the jury, in its denial of his request for instructions, in its charge concerning the elements of manslaughter under § 53a-55 (a) (3), in its denial of his motion to dismiss, and in its denial of his motion to set aside the verdict.
From a review of the evidence, the jury could have found the following: In the early afternoon hours of May 3, 1974, Mr. and Mrs. Elwyn Murdock of Hamden, Connecticut, received a telephone call from the defendant, identifying himself as Dr. J. Merriwether, who inquired as to whether the Murdocks had antique jewelry and silverware for sale. The Murdocks used a portion of their residence for the sale of antiques by appointment, and arrangements were made for a visit that afternoon by the defendant. At approximately 4 p.m., the defendant arrived and, after viewing the Murdocks' antiques, made arrangements to return later that evening with funds to purchase the items of antique silver that he had selected. During the conversation of that afternoon, Mrs. Murdock, thinking that the defendant was a medical doctor, informed him that her husband had retired to their home to conduct the antique business because of his health, that he had previously had four heart attacks, and that she was now working together with Mr. Murdock. The defendant replied that Mr. Murdock had been lucky so far. At about 9 p.m., the defendant returned and, after casual discussion over a cup of coffee with the Murdocks, drew Mr. Murdock aside and handed him a note informing him that he (the defendant) intended to rob Mr. Murdock. The defendant then forced the Murdocks down to the basement of their home, displaying what appeared to the Murdocks to be a handgun.
*230 Upon reaching the basement, the defendant produced from a briefcase two sets of handcuffs and some rope. He handcuffed Mrs. Murdock's hands and tied her legs, forcing her to lie on her stomach on the basement floor. Mr. Murdock was similarly bound, but the defendant allowed him to lay face up on the floor. At this point, Mr. Murdock began to breathe very heavily and said to the defendant, "Please call a doctor. I'm having a heart attack." After this plea had been repeated several times, the defendant propped up Mr. Murdock's head with a vase; a doctor was never called, however. The defendant then left Mr. and Mrs. Murdock in the basement and proceeded through the house, taking several items of value, and approximately $300 in cash.
After the defendant left the house, Mr. Murdock again stated that he could not breathe and Mrs. Murdock, upon freeing herself, was able to summon an ambulance, which arrived within ten minutes. Mr. Murdock was given mouth-to-mouth cardiopulmonary resuscitation at the Murdocks' residence, but appeared unresponsive. He was pronounced dead at the Yale-New Haven Hospital shortly after arrival. Medical testimony at trial established that the cause of Mr. Murdock's death was a heart attack, brought on by the emotional stress resulting from the action of the defendant. Medical evidence further established that Mr. Murdock had suffered at least two previous heart attacks and was, on May 3, 1974, under a doctor's care for his heart condition. An autopsy performed subsequent to Mr. Murdock's death confirmed the testimony that he had had several prior heart attacks, leaving his heart in a weakened condition.
*231 At the outset, we note that the defendant testified at trial and conceded virtually all of the state's case, with two exceptions, hereinafter to be discussed. Thus, the issues that merit our attention have, by virtue of the defendant's testimony, been considerably narrowed. The defendant's primary claim of error involves two related concepts. He claims that actual, direct physical injury is an element of the crime of manslaughter, as defined by General Statutes § 53a-55 (a) (3),[1] and, in relation to this, that the infliction of external physical injury upon a victim must be found before a causal relation between the defendant's conduct and the victim's death may be found to exist. Thus, the defendant argues, the trial court erred in its instruction to the jury concerning "proximate causation" in relationship to the defendant's "conduct" under § 53a-55 (a) (3). The defendant appears to argue that since the cause of Murdock's death was not a physical blow inflicted by the defendant, but rather a heart attack caused by the stress of the situation into which the defendant had placed Murdock, he could not, as a matter of law, be found to have "caused" Murdock's death. We disagree.
It may have been the law at one time that there could be no culpable homicide that was not the result of some kind of corporal harm inflicted upon the victim. See, e.g., Regina v. Murton, 3 Fost. & Fin. 492, 176 Eng. Rep. 221 (1862). Today, however, almost all courts have rejected this view of criminal *232 liability. See annot., 47 A.L.R. 2d 1072. In the present case, we have only to look to the words of the manslaughter statute. Section 53a-55 (a) (3) merely proscribes "conduct which creates a grave risk of death to another person." (Emphasis added.) We find no case where this court has construed that word to require the actual infliction of a physical blow.[2] We hold that the acts of the defendant constituted "conduct"[3] within the intendment of General Statutes § 53a-55 (a) (3), and that the trial court did not err in charging the jury that they could convict the defendant of manslaughter if they found that the defendant inflicted "emotional injury, stress or trauma" which proximately caused Murdock's death, notwithstanding that the death-inducing act of the defendant was not a physical blow. In this connection, we are further of the opinion that the consequences of the defendant's act of binding Murdock and placing him in extreme fright and *233 shock, which act was the proximate cause of Murdock's heart attack, are not excused, nor is the defendant's criminal liability lessened, by the preexisting heart condition of Murdock which rendered him unable to withstand the situation which the defendant had thrust upon him. See 40 Am. Jur. 2d, Homicide, §§ 18, 20, p. 313; annot., 47 A.L.R. 2d 1072, 1077; LaFave & Scott, Criminal Law, Causation, § 35, p. 257. The defendant took Murdock as he found him: "Every person is held to be responsible for the natural consequences of his acts, and if he commits a felonious act and death follows, it does not alter its nature or diminish its criminality to prove that other causes cooperated to produce that result." State v. Leopold, 110 Conn. 55, 61, 147 A. 118; State v. Alterio, 154 Conn. 23, 30, 220 A.2d 451; see Perkins, Criminal Law (2d Ed.), Causation, § 9, p. 727; People v. Stamp, 2 Cal. App. 3d 203, 82 Cal. Rptr. 598, cert. denied, 400 U.S. 819, 91 S. Ct. 36, 27 L. Ed. 2d 46; Commonwealth v. Tatro, 346 N.E.2d 724 (Mass. App.). If Murdock's death came about as a result of the conjunction of his heart disease and the violence, shock or excitement caused by the defendant's acts, it was still brought about by the criminal "conduct" of the defendant, for the consequences of which he is answerable. People v. Stamp, supra; see State v. Luther, 285 N.C. 570, 206 S.E.2d 238.
The defendant's claim that the trial court erred in instructing the jury on the meaning of "proximate cause" under General Statutes § 53a-55 (a) (3) is without merit. "Proximate cause" in the criminal law does not necessarily mean the last act of cause, or the act in point of time nearest to death. The concept of proximate cause incorporates the notion that an accused may be charged with a criminal *234 offense even though his acts were not the immediate cause of death. An act or omission to act is the proximate cause of death when it substantially and materially contributes, in a natural and continuous sequence, unbroken by an efficient, intervening cause, to the resulting death. It is the cause without which the death would not have occurred and the predominating cause, the substantial factor, from which death follows as a natural, direct and immediate consequence. See State v. Tomassi, 137 Conn. 113, 75 A.2d 67; State v. Leopold, supra; 40 C.J.S., Homicide, § 11 (b), p. 854; see, generally, Cardozo, The Paradoxes of Legal Science, pp. 81 et seq.; Beale, "The Proximate Consequences of an Act," 33 Harv. L. Rev. 633. It is unnecessary for "proximate cause" purposes that the particular kind of harm that results from the defendant's act be intended by him. In many situations giving rise to criminal liability, the harm that results is unintended, yet is directly or indirectly caused by an act of the defendant.[4] In such cases, where the death or injury caused by the defendant's conduct is a foreseeable and natural result of that conduct, the law considers the chain of *235 legal causation unbroken and holds the defendant criminally responsible. See People v. Kibbe, 35 N.Y.2d 407, 321 N.E.2d 773, rev'd on other grounds, 534 F.2d 493 (2d Cir.), rev'd in part, 431 U.S. 145, 97 S. Ct. 1730, 52 L. Ed. 2d 203. A review of the trial court's charge discloses that it instructed the jury substantially in accord with those principles.[5] The test to be applied to any part of a charge is whether the charge considered as a whole presents the case to the jury so that no injustice will result. State v. Mullings, 166 Conn. 268, 274, 348 A.2d 645. When considered in this context, the instruction complained of was not erroneous. State v. Annunziato, 169 Conn. 517, 535, 363 A.2d 1011.
*236 The defendant next claims error in the trial court's denial of his request to charge the jury as to the meaning of "extreme indifference to human life" under General Statutes § 53a-55 (a) (3) and in the court's failure to define that term for the jury. No definition of "extreme indifference to human life" is found in title 53a (Penal Code) of the General Statutes. The court, however, charged the jury extensively on the meaning of "recklessly." In this connection, the court instructed the jury as to the meaning of "extreme indifference to human life": "Mere carelessness is not enough, nor is ordinary recklessness sufficient. The law here requires extreme indifference to human life." Although the code does not define the term, the significance of the omission of an instruction on "extreme indifference to human life" under the code may be evaluated by a comparison with the instructions that were given. See Henderson v. Kibbe, 431 U.S. 145, 156, 97 S. Ct. 1730, 52 L. Ed. 2d 203. The court's extensive charge on the meaning of "recklessly," coupled with the evidence before the jury, adequately indicated the nature of acts that would qualify as "extremely indifferent to human life." By returning a guilty verdict on the manslaughter charge, the jury could reasonably conclude, in accordance with the court's instruction on recklessness, that the defendant exhibited an "extreme indifference to human life." There was evidence before the jury that the defendant was well aware of Murdock's heart condition, and that Murdock was having a heart attack at the time of the robbery. Yet the defendant failed to desist from his course of conduct by unbinding Murdock or by taking any steps to remove Murdock from the position of peril in which the defendant had placed him. Thus, the *237 jury could easily have determined that the defendant acted "recklessly" and with an "extreme indifference to human life." Moreover, the defendant's requested instruction on that term did not materially differ from the instruction the court gave. The court is not required to charge in the exact language requested. State v. Maresca, 173 Conn. 450, 460, 377 A.2d 1330. Nor, in light of the evidence, did the court err in refusing the defendant's instruction on the term "extreme indifference to human life," when the defendant has not shown that the phrase was used in anything other than its ordinary meaning. Id., 461.
The defendant next claims that the trial court's charge, in toto, as to the elements of the crime of manslaughter in the first degree was inaccurate and confusing and that it thereby prejudicially misled the jury. We have already determined that the portion of the court's charge with respect to proximate cause was clear and accurate. A review of the remainder of the charge indicates that it did not mislead the jury, nor was the charge confusing. Although there were certain deficiencies in the charge, any confusion that was thereby engendered was adequately cleared up by subsequent, supplemental instructions by the court. The trial court did not abuse its discretion in making reasonable comments on the evidence; State v. Vincenzo, 171 Conn. 240, 244, 368 A.2d 219; and it is not "reasonably probable that the jury [could have been] misled" by the entire charge. State v. Rose, 169 Conn. 683, 687-88, 363 A.2d 1077; State v. Ralls, 167 Conn. 408, 422, 356 A.2d 147; see Cupp v. Naughten, 414 U.S. 141, 147, 94 S. Ct. 396, 38 L. Ed. 2d 368.
Finally, the defendant makes a somewhat broadside "due process" attack on the trial court's denial *238 of his motion to dismiss certain counts of the information and the denial of his motion to set aside the verdict. Both motions had as their premise the assertion that the state did not produce evidence sufficient to sustain the jury verdict of guilty as to all counts of the information.[6] As we have previously stated, the defendant testified at trial and admitted almost all of the state's case, with two exceptions. The defendant (1) denied that he was informed on the afternoon of the robbery that Murdock had a heart condition and (2) denied that Murdock told him that he (Murdock) was having a heart attack during the course of the robbery. Both of those facts bear on the defendant's "indifference to human life" and his reckless engagement in "conduct which creates a grave risk of death to another person," which elements the state is required to prove beyond a reasonable doubt under the manslaughter statute. By its verdict, the jury could reasonably have believed the state's witness, Mrs. Murdock, and disbelieved the defendant's version of the events surrounding the robbery. The credibility of witnesses is to be determined by the jury as trier of fact; State v. Malley, 167 Conn. 379, 381, 355 A.2d 292; State v. White, 155 Conn. 122, 123, 230 A.2d 18; and the evidence must be given a construction most favorable to sustaining the jury's verdict. State v. Benton, 161 Conn. 404, 409, 288 A.2d 411. As we recently stated: "`This court's task in reviewing the sufficiency of the evidence to sustain the verdict of a jury is to construe the evidence as favorably as possible with a view toward sustaining the verdict and then to decide whether *239 the verdict is one which jurors acting reasonably could have reached.'" State v. Jones, 173 Conn. 91, 94, 376 A.2d 1077; State v. Jeustiniano, 172 Conn. 275, 281, 374 A.2d 209. Within this context, clearly the evidence presented by the state at trial was sufficient to sustain the jury in their verdict on all counts of the information. There was no error in denying the defendant's motions.
There is no error.
In this opinion the other judges concurred.
NOTES
[1] "[General Statutes] Sec. 53a-55. MANSLAUGHTER IN THE FIRST DEGREE: CLASS B FELONY. (a) A person is guilty of manslaughter in the first degree when: ... (3) under circumstances evincing an extreme indifference to human life, he recklessly engages in conduct which creates a grave risk of death to another person, and thereby causes the death of another person." (Emphasis added.)
[2] The defendant argues that cases such as State v. Tomassi, 137 Conn. 113, 75 A.2d 67, State v. Leopold, 110 Conn. 55, 147 A. 118, and State v. Block, 87 Conn. 573, 89 A. 167, hold that the infliction of physical injury as the proximate cause of death must be found to sustain a manslaughter conviction under the statute. The defendant misreads those cases. In Tomassi (gunshot wound to spinal column caused blood clot resulting in death), Leopold (defendant set fire causing burns that resulted in victim's death), and Block (head injury caused by defendant's reckless driving caused delirium tremens resulting in death), it was sufficient for criminal liability, although not necessary, that a physical act, followed by an intervening event, caused death. These cases did not hold, however, that a direct physical injury is necessary before the actor can be said to have been the "proximate cause" of another's death.
[3] One of the defendant's claims of error, that the trial court erred in instructing the jury that the defendant's "inaction" could constitute "conduct" within § 53a-55 (a) (3), can be dismissed with little discussion. We approved the principle long ago that a cause of death sufficient to establish criminal liability could be an act, or omission to act. State v. Tomassi, 137 Conn. 113, 119, 75 A.2d 67; see Perkins, Criminal Law (2d Ed.), Causation, § 9, pp. 732 et seq.
[4] For example, in People v. Stamp, 2 Cal. App. 3d 203, 82 Cal. Rptr. 598, cert. denied, 400 U.S. 819, 91 S. Ct. 36, 27 L. Ed. 2d 46, the defendants, during the course of a robbery, forced one of the victims, a sixty-year-old man with a history of heart disease, to lie down on the floor. Fifteen minutes after the robbery, the victim suffered a heart attack and died. The jury found that the fright and shock induced in the deceased triggered the heart attack, resulting in death. Although the defendants did not intend that result, the jury found that the conduct of the defendants proximately caused the heart attack and death. See also State v. Luther, 285 N.C. 570, 206 S.E.2d 238, in which the defendant assaulted the victim with a pipe, which blow was not alone sufficient to cause death. The jury found, however, that the victim's preexisting heart condition had weakened him, that the increased cardiac demand occasioned by the assault caused death, and that the defendant's conduct was not excused because death only "indirectly" followed from the assault.
[5] The court instructed the jury as to the concept of proximate cause as follows:
"In legal terms, proximate cause of death is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the death, and without which the death would not have occurred. It is the efficient cause of death, the one that necessarily sets in operation the factors that accomplish the death. Note particularly in this context that even though there may have been some causative influence from intervening factors or events, such as in this case Mr. Murdock's preexisting heart condition, it is yet sufficient to proximate cause and to the legal responsibility of the defendant thereupon that the defendant's conduct set in motion the chain of events which ultimately produced Mr. Murdock's death as their sufficiently direct result or consequence. If the defendant's conduct in his relations with Mr. Murdock inflicted upon the latter physical or emotional injury or stress or trauma which was in this sense the proximate cause of his death, then the defendant's conduct, under the circumstances, caused his death and satisfied this element of the law or charge upon this offense, even though such physical or emotional stress or trauma were not the only cause of Mr. Murdock's death, and although Mr. Murdock had already been enfeebled by poor physical condition or severe heart disease, and even though it is probable that a person in sound physical condition would not have succumbed from the effects of the defendant's conduct upon him, and even though it is probable that the defendant's conduct only hastened Mr. Murdock's death, or that he would have died soon thereafter from another cause or causes."
[6] The defendant in his brief does not seriously pursue a claim that there was insufficient evidence to sustain the robbery and unlawful restraint counts. We thus limit our discussion to the evidence supporting the manslaughter count.
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10-30-2013
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176 Conn. 107 (1978)
STATE OF CONNECTICUT
v.
MIGUEL A. MIRANDA
Supreme Court of Connecticut.
Argued June 7, 1978.
Decision released September 12, 1978.
LOSELLE, BOGDANSKI, LONGO, SPEZIALE and PETERS, JS.
*108 Bourke G. Spellacy, special public defender, with whom, on the brief, was John C. King, for the appellant (defendant).
Richard A. Schats, assistant state's attorney, with whom, on the brief, was George D. Stoughton, state's attorney, for the appellee (state).
LONGO, J.
A jury found the defendant, Miguel A. Miranda, guilty of the crime of manslaughter in the first degree in violation of § 53a-55 (a) (1) of the General Statutes. The defendant admitted that he shot the victim, Daniel Germany, and testified that he acted in self-defense when Germany attacked him with a knife. His only claim on appeal is that the trial court erred in excluding from evidence Germany's record of convictions of crimes of violence. We agree.
Germany had a lengthy criminal record. The defendant's offer of proof was limited to two convictions of breach of peace by assault in 1965, a conviction of carrying a dangerous weapon in 1969, and a conviction of assault in the second degree in 1973. Those convictions, of which the defendant was unaware at the time of the shooting in 1975, were offered as evidence of Germany's violent character, as tending to show that Germany was the aggressor in the fatal incident. Thus the evidentiary issue resolves itself into two distinct questions: (1) In *109 a homicide trial where the accused claims selfdefense, may the accused introduce evidence of the victim's violent character to establish that the victim was the aggressor, regardless of the accused's lack of prior knowledge of such character or the evidence? (2) If such evidence is generally admissible, is the victim's record of convictions of crimes of violence acceptable proof of character?
I
In a trial for homicide the character of the deceased ordinarily is irrelevant to the accused's guilt or innocence. It is well settled, however, that an accused may introduce evidence of the violent, dangerous or turbulent character of the victim to show that the accused had reason to fear serious harm, after laying a proper foundation by adducing evidence that he acted in self-defense and that he was aware of the victim's violent character. State v. Padula, 106 Conn. 454, 456, 138 A. 456; 1 Wharton, Criminal Evidence (13th Ed.) §236; annot., 1 A.L.R. 3d 571, 596 § 7. The reason for the rule was explained in State v. Padula, supra: "If the reputation of the deceased be that of a violent, dangerous, or turbulent character, such reputation, if known to the defendant, may be a circumstance contributing to a reasonable belief by the accused that his life is in peril and his consequent state of mind as to the necessity of defending himself and the means justifiably to be taken in so doing."
Logically, evidence of a homicide victim's violent character might be offered by the accused for yet another purpose, to show that the victim was the aggressor in their encounter, irrespective of the accused's knowledge of the victim's character. This view was considered and rejected in State v. Padula, *110 supra, 459. See also State v. Johnson, 139 Conn. 89, 93, 90 A.2d 905. We have not had occasion to reconsider the matter since.
The case for admissibility of character evidence on the vital issue of who was the aggressor has been cogently stated by Professor Wigmore. When evidence of the deceased's violent character is offered to show the defendant's state of mind, "it is obvious that the deceased's character, as affecting the defendant's apprehensions, must have become known to him; i.e. proof of the character must indispensably be accompanied by proof of its communication to the defendant; else it is irrelevant." 1 Wigmore, Evidence (3d Ed.) §63, p. 470. But when evidence of the deceased's character is offered to show that he was the aggressor, "this additional element of communication is unnecessary; for the question is what the deceased probably did, not what the defendant probably thought the deceased was going to do. The inquiry is one of objective occurrence, not of subjective belief." 1 Wigmore, loc. cit.
We are no longer persuaded that these forceful arguments are outweighed by the objections raised in State v. Padula, supra, 459, that admitting such evidence would unfairly prejudice the prosecution's case and would tempt the jury "to measure the guilt of the accused by the deserts of the victim." When an accused chooses to place the deceased's violent character in issue, the state may enjoy the same right of rebuttal as when the accused places his own nonviolent character in issue. See State v. Martin, 170 Conn. 161, 167, 365 A.2d 104; 1 Wharton, Criminal Evidence (13th Ed.) § 236, pp. 514-17. There is always the risk that the jury may be unduly diverted and confused by collateral matters such as *111 character; the sound discretion of the court is relied upon to focus the jury's attention on the material issues in the trial.
In cases which have observed the distinction between using evidence of the deceased's violent character to show the accused's state of mind and using it to show that the deceased was the aggressor, it has generally been held that when competent evidence of character is offered for the latter purpose it is admissible regardless of the extent of the accused's knowledge of such character or of the particular evidence in question. We adopt the majority rule. See United States v. Burks, 470 F.2d 432, 434-35 (D.C. Cir.); State v. Griffin, 99 Ariz. 43, 47, 406 P.2d 397; People v. Cellura, 288 Mich. 54, 64, 284 N.W. 643; State v. Keaton, 258 Minn. 359, 367, 104 N.W.2d 650; Commonwealth v. Amos, 445 Pa. 297, 302-303, 284 A.2d 748; State v. Infantolino, 116 R.I. 303, 313-14, 355 A.2d 722; 1 Wharton, op. cit. § 236, p. 513; annot., 1 A.L.R. 3d 571, 601 § 8.
II
The next stage of our inquiry is whether it is permissible to prove a homicide victim's violent character and hence the allegation that he was the aggressor by evidence of his prior convictions of crimes of violence. In theory, a trait of character may be proved in three ways: (1) by testimony concerning the individual's reputation in the community as to the trait; (2) by testimony of those who have had an opportunity to form, and have formed, an opinion as to whether the individual possessed the trait; (3) by evidence of specific acts of the individual under similar circumstances, from which the existence of the character trait may be inferred. The first method is universally acceptable in situations *112 where character evidence is permitted. State v. Blake, 157 Conn. 99, 104, 249 A.2d 232; McCormick, Evidence (2d Ed.) § 186. Although the second method is not allowed in a number of states, Connecticut adopted it in Richmond v. Norwich, 96 Conn. 582, 594,115 A. 11, on the rationale that " [p] ersonal observation and personal knowledge are a more trustworthy reliance than general reputation." Both methods are appropriate to prove the character for violence of a homicide victim. See State v. Padula, 106 Conn. 454, 456-57, 138 A. 456; State v. Jacoby, 260 N.W.2d 828, 837 (Iowa).
The third method of proving character, evidence of specific acts, has consistently been disapproved in Connecticut and other jurisdictions except in cases where character is directly in issue. State v. Townsend, 167 Conn. 539, 561, 356 A.2d 125; 1 Wigmore, Evidence (3d Ed.) §§ 191-213. Such evidence of specific instances of conduct is excluded not because it is unconvincing, but because it has the potential to surprise, to arouse prejudice, to multiply the issues and confuse the jury, and to prolong the trial. Richmond v. Norwich, supra, 597; Verdi v. Donahue, 91 Conn. 448, 454, 99 A. 1041.
These considerations have led many courts to limit proof of a homicide victim's character for violence to reputation testimony and opinion testimony, excluding evidence of prior convictions and other specific acts of violence unknown to the defendant.[1]Sainders v. State, 245 Ark. 321, 324, 432 S.W.2d 467; People v. Flores, 189 Colo. 209, 211, 539 P.2d 1236; *113 State v. Jacoby, supra, 838; Henderson v. State, 234 Ga. 827, 829-30, 218 S.E.2d 612; McDonald v. State, 218 So. 2d 21, 22-23 (Miss.); State v. Infantolino, supra. On the other hand, in similar circumstances a growing number of jurisdictions have recognized an exception to the rule that prior convictions and other specific acts of violence may not be used to prove character. United States v. Burks, 470 F.2d 432, 434, 438 (D.C. Cir.); United States v. Akers, 374 A.2d 874, 877 (D.C. App.); People v. Rowland, 262 Cal. App. 2d 790, 797, 69 Cal. Rptr. 269; State v. Taylor, Minn. , 258 N.W.2d 615, 620; State v. Alderette, 86 N.M. 600, 605, 526 P.2d 194; Commonwealth v. Amos, 445 Pa. 297, 302, 284 A.2d 748; Dempsey v. State, 159 Tex. Crim. 602, 605, 266 S.W.2d 875; Stover v. Commonwealth, 211 Va. 789, 794, 180 S.E.2d 504.
We are presented in this appeal only with the question of the admissibility of convictions of crimes of violence. We agree with the reasoning of the latter group of decisions that the nature of such evidence and the victim's absence from the trial warrant a narrow exception to the rule that conduct may not be used to prove character. That a homicide victim has a record of violent crime should not come as a surprise to the prosecution. Nor is introduction of the victim's criminal record likely to confuse the jury and waste time, since the fact of the convictions is beyond dispute and inquiry must necessarily be limited to the time the events occurred and the nature of the conduct for which the victim was convicted. Commonwealth v. Amos, supra, 302-303; see also State v. Mason, 208 Kan. 39, 41, 490 P.2d 418; State v. Conyers, 58 N.J. 123,133, 275 A.2d 721; People v. Cruz, 65 P.R.E. 160, 168. Most important, such evidence can be highly relevant in helping the *114 jury to determine whether the victim had a violent disposition and whether the defendant's story of self-defense is truthful. See Evans v. United States, 277 F.2d 354, 356 (D.C. Cir.).
We hold that in a homicide prosecution where the accused has claimed self-defense, the accused may show that the deceased was the aggressor by proving the deceased's alleged character for violence. The deceased's character may be proved by reputation testimony, by opinion testimony, or by evidence of the deceased's convictions of crimes of violence, irrespective of whether the accused knew of the deceased's violent character or of the particular evidence adduced at the time of the deathdealing encounter. We emphasize that the accused is not permitted to introduce the deceased's entire criminal record into evidence in an effort to disparage his general character; only specific convictions for violent acts are admissible. People v. Miller, 39 N.Y.2d 543, 553, 349 N.E.2d 841. Nor is the accused authorized to introduce any and all convictions of crimes involving violence, no matter how petty, how remote in time, or how dissimilar in their nature to the facts of the alleged aggression. In each case the probative value of the evidence of certain convictions rests in the sound discretion of the trial court. Commonwealth v. Amos, supra.
In this case, the fatal shooting took place in 1975 and the defendant's offer of proof consisted of two convictions of breach of peace by assault in 1965, a conviction of carrying a dangerous weapon in 1969, and a conviction of assault in the second degree in 1973. Those convictions can perhaps be questioned as being too remote in time or lacking elements of violence, depending on the underlying *115 facts and circumstances. The record indicates, however, that the trial court excluded the convictions not for lack of probative value, but for lack of a showing that the defendant knew of them, which was a correct application of the law stated in State v. Padula, 106 Conn. 454, 459, 138 A. 456. Having concluded that the law should be changed, we cannot say under the circumstances that the court's ruling could not reasonably have affected the jury's rejection of the self-defense claim and was therefore harmless. State v. Tropiano, 158 Conn. 412, 427, 262 A.2d 147, cert. denied, 398 U.S. 949, 90 S. Ct. 1866, 26 L. Ed. 2d 288.
There is error, the judgment is set aside and a new trial is ordered.
In this Opinion BOGDANSKI, SPEZIALE and PETERS,
Js., concurred.
LOISELLE, J. (dissenting). I agree with the majority opinion extending the rule of admissibility of evidence of aggression on the part of the victim on the issue of self-defense, but I do not agree that evidence of specific acts is admissible for that purpose. The rationale for the rule which we have always followed, making specific acts inadmissible to prove a character trait, was well stated in Richmond v. Norwich, 96 Conn. 582, 597, 115 A. 11, and I see nothing in this case to warrant overruling this time-honored practice. See also State v. Townsend, 167 Conn. 539, 561, 356 A.2d 125.
NOTES
[1] There is a marked trend towards admitting evidence of prior convictions and other instances of violent conduct known to the defendant as probative of the defendant's state of mind. See People v. Miller, 39 N.Y.2d 543, 349 N.E.2d 841; Maggitt v. Wyrick, 533 F.2d 383, 386n (8th Cir.).
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552 F. Supp. 728 (1982)
Ronald TAYLOR, et al.
v.
UNITED STATES DEPARTMENT OF LABOR, et al.
Civ. A. No. 75-1437.
United States District Court, E.D. Pennsylvania.
December 7, 1982.
*729 *730 Thomas K. Gilhool, Michael Churchill, Frank Finch III, Public Interest Law Center of Philadelphia, Philadelphia, Pa., for plaintiffs.
Jay S. Berke, U.S. Dept. of Labor, Philadelphia, Pa., for Employment Standards.
Heidi D. Miller, Civ. Rights Div., U.S. Dept. of Labor, Washington, D.C., for defendants.
MEMORANDUM
RAYMOND J. BRODERICK, District Judge.
In this class action suit, the named plaintiffs, five black construction workers and an organizational plaintiff, Resurrection, Inc., seek declaratory and injunctive relief to compel the defendants, federal agencies and officials, to achieve the minority worker utilization goals of Executive Order 11246 (hereinafter "E.O. 11246") in connection with affirmative action in Philadelphia construction trades. In particular, plaintiffs seek to have this Court order the defendants to ensure construction contractor compliance with the procedures of the "Philadelphia Plan" designed to achieve equal employment opportunity for minority construction workers in connection with federally assisted construction in this area, and to fulfill the goals of the Plan.[1] This Court has jurisdiction pursuant to 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1343 (civil rights), 28 U.S.C. § 1361 (mandamus) and 5 U.S.C. §§ 701, et seq. (the Administrative Procedure Act). On July 31, 1980, plaintiff class was certified pursuant to Fed.R.Civ.P. 23(b)(1) and (b)(2) on behalf of all black construction workers and black persons qualified for and seeking construction work in the Philadelphia area who may have, due to defendants' alleged failure to enforce E.O. 11246, and the requirements of the Philadelphia Plan, lost or may lose employment opportunity in federally assisted construction work in the Philadelphia metropolitan area. Trial was held before this Court sitting as a finder of fact. For the reasons hereinafter set forth, the Court must deny the relief sought by plaintiffs and enter judgment in favor of defendants.
I. The Background of This Litigation
Executive Order No. 11246, 30 Fed.Reg. 12319 (Sept. 24, 1965), 3 C.F.R., 1969 Comp. 133 was issued by former President Lyndon Johnson in 1965. The Executive Order requires all contractors seeking to do business with the federal government or participating in projects that receive federal assistance to include in their construction contracts specific provisions respecting fair employment practices. Section 202(1) of the Order provides
The contractor will take affirmative action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, religion, sex or national origin.
The Order requires that the contract between a builder and the government, and all contracts between the contractor and subcontractors, contain this non-discrimination clause. The Labor Department's Office of Federal Contract Compliance (OFCC) was given responsibility for supervising *731 the efforts of various federal agencies to obtain compliance with this portion of the order. Specifically, Section 201 of E.O. 11246 provides that the "Secretary of Labor shall be responsible for the administration of [the government contracts and federal assistance affirmative action requirements] of this Order and shall adopt such rules and regulations and issue such orders as he deems necessary and appropriate to achieve the purposes thereof."
However, until October of 1978, each federal agency administering contracts or federal aid for construction was responsible, in the first instance, for securing compliance. All low bidders on projects were reviewed for equal employment prior to the official award of the contract. In projects involving larger (more than 50 employees) contractors or larger (more than $50,000) expenditures, affirmative action plans were required of the contractor. The agency for whom the project was being built was responsible for making periodic checks to ascertain whether there was compliance with the affirmative action plan. These efforts were to be coordinated by OFCC. Where contractors failed to comply with the Order, the agency was authorized to suspend or cancel the contract, or to debar the contractor from future federal contracts. See generally Leiken, Preferential Treatment in the Skilled Building Trades: An Analysis of the Philadelphia Plan, 56 Cornell L.Rev. 84, 87-91 (1970); see also Comment, The Philadelphia Plan: A Study in the Dynamics of Executive Power, 39 U. Chicago L.Rev. 723, 725-26 (1972) (discussing history of executive orders dealing with discrimination which preceded E.O. 11246).
The Order empowers the Secretary of Labor to issue rules and regulations necessary and appropriate to achieve its purpose. On June 27, 1969 Assistant Secretary of Labor Arthur Fletcher issued an order implementing the Executive Order in the five-county Philadelphia area. The June 27, 1969 order, known popularly as the "Philadelphia Plan," required bidders, prior to the award of contracts, to submit "acceptable affirmative action" programs "which shall include specific goals of minority manpower utilization" for all contracts concerning federal or federally assisted projects whose total cost exceeded $500,000.
The June 27, 1969 Order also contained a finding that enforcement of the affirmative action requirement of E.O. 11246 had posed special problems in the construction trades. In these trades, contractors and subcontractors must hire a new group of employees for each job. In conducting such hiring, the contractors rely on craft unions as their prime source of labor. In many instances, craft unions comprise the sole source of labor for a given project. Historically, craft unions have provided such labor through the operation of hiring halls, which receive a contractor's request for labor and workers and fill this request with appropriately skilled workers who have reported to the hiring hall and made themselves available for work on that day. The June 27, 1969 Order noted that "[b]ecause of the exclusionary practices of labor organizations, there traditionally has been only a small number of Negroes employed in [seven major craft] trades." The trades which the June 27, 1969 Order found to have historically excluded blacks were: iron-workers, plumbers and pipefitters, steamfitters, sheetmetal workers, electrical workers, elevator construction workers, and roofers and waterproofers. Later, the Secretary removed the roofers and waterproofers craft from the list of discriminatory craft unions.
The June 27, 1969 Order provided that the Area Coordinator of the Office of Federal Contract Compliance, in conjunction with the federal contracting and administering agencies in the Philadelphia area, would determine definite standards for specific goals in a contractor's affirmative action programs. After such standards were determined, each bidder would be required to commit itself to specific goals for minority manpower utilization. The order set forth factors to be considered in determining *732 definite standards, including: (1) the current extent of minority group participation in the trade; (2) the availability of minority group persons for employment in such trade; (3) the need for training programs in the area and/or the need to assure demand for those in or from existing training programs; (4) the impact of the program upon the existing labor force.
In August, 1969, the Department of Labor held public hearings in Philadelphia pursuant to the Secretary's Order of June 29, 1969. On September 23, 1969, Assistant Labor Secretary Arthur Fletcher made findings regarding the factors heretofore noted and ordered that certain percentage ranges be established as the standards for minority manpower utilization for each of the designated trades in the Philadelphia area for the years 1970, 1971, 1972 and 1973. The Secretary's Order of September 23, 1969 further specified that on each invitation to bid for a federally funded construction project, each bidder would be required to further submit an affirmative action program. Specifically, the Order provided that
No bidder will be awarded a contract unless his affirmative action program contains goals falling within the range set forth ... above.
* * * * * *
The purpose of the contractor's specific goals as to minority manpower utilization is to meet his affirmative action obligation under the equal opportunity clause of the contract. This commitment is not intended and shall not be used to discriminate against any qualified applicant or employee. Whenever it comes to the bidder's attention that the goals are being used in a discriminatory manner, he must report it to the Area Coordinator of the Office of Federal Contract Compliance of the U.S. Department of Labor in order that appropriate sanction proceedings may be instituted.
* * * * * *
The bidder agrees to keep such records and file such reports relating to the provisions of this Order as shall be required by the contracting or administering agency.
The Orders of June 7, 1969 and September 23, 1969 as modified by subsequent executive pronouncements supported by the presidential authority and directive of Executive Order 11246, became known as the "Philadelphia Plan." These orders cumulatively enunciated a policy of non-discrimination in federally financed construction in the area, set minority employment goals for contractors doing federal business in the Philadelphia area, and provided a procedure for encouraging and observing progress toward the attainment of the minority hiring goals set forth in the Plan. The legality of the Philadelphia Plan was upheld in Contractors Association of Eastern Pennsylvania v. Secretary of Labor, 442 F.2d 159 (3d Cir.1971) (affirming 311 F. Supp. 1002 (1970)); cert. denied, 404 U.S. 854, 92 S. Ct. 98, 30 L. Ed. 2d 95 (1971).
Both the June 7, 1969 order and the Order of September 23, 1969 provide that in the event a contractor has failed to meet the applicable minority manpower utilization goals, he will be given an opportunity to demonstrate that he has made every good faith effort to meet such goals.
On February 13, 1971, the Philadelphia Plan was amended to include all construction activities by contractors and subcontractors working on federally assisted construction sites. On April 7, 1978, the Department of Labor issued regulations which abolished the Philadelphia Plan as a separate regulation but established uniform equal employment opportunity requirements for all federal construction contractors (see 43 Fed.Reg. 14,888 (1978); 41 C.F.R. Part 60-4). These regulations, which became effective May 8, 1978, govern all contractors and subcontractors who have a federal or federally-assisted contract in excess of $10,000. On March 20, 1979, the Labor Department published goals for minority utilization in the operating engineers *733 trade within the jurisdiction of Operating Engineers Local 542. The Department issued these goals on the basis of the findings of fact in Commonwealth of Pennsylvania v. Local Union 542 of the Operating Engineers, 469 F. Supp. 329 (E.D.Pa.1978), aff'd, 648 F.2d 923 (1981), rev'd and remanded, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982). The minority employment goal for metropolitan Philadelphia was 17.3%. On September 7, 1979, the Department of Labor issued a nation-wide proposed formula for determining the minority utilization goals to be established for each metropolitan area regarding crafts and trades for each contractor working on federal or federally-assisted construction contracts or subcontracts in excess of $10,000 (see 44 Fed.Reg. 52,348). The proposed formula was implemented on November 3, 1980.
On October 8, 1978, Executive Order 12086 (43 Fed.Reg. 46501) transferred all compliance and enforcement responsibility under E.O. 11246 to the Secretary of Labor. The Secretary has delegated these duties to the Office of Federal Contract Compliance Programs (OFCCP) of the Labor Department. As heretofore noted, E.O. 11246 originally provided that the agency for whom the federal project was being constructed or for whom the contractor did the bulk of his business would act as the compliance and review agency responsible for supervising compliance with E.O. 11246.
This litigation commenced in 1975 when plaintiffs filed their complaint, which alleged that the defendants (the U.S. Department of Labor, the Secretary of Labor, the OFCCP, the OFCCP Director, the Labor Department's Bureau of Apprenticeship and Training (BAT) and the BAT Associate Administrator) had failed to enforce the obligations of contractors and subcontractors working on federal or federally-assisted construction projects in the Philadelphia area. Specifically, plaintiffs alleged that defendants had not required the contractors to comply with E.O. 11246 and the Philadelphia Plan, which required that the contractors make good faith efforts to employ minority workers in the skilled trades utilized in federal construction projects. Plaintiffs also charged that the defendants BAT and the BAT Associate Administrator had failed to enforce the National Apprenticeship Act of 1937, 29 U.S.C. § 50 et seq. by failing to properly implement the non-discrimination and affirmative action obligations of the Pennsylvania Apprenticeship and Training Council and sponsors conducting apprenticeship programs registered with BAT pursuant to federal regulations requiring that those engaged in BAT-supervised programs comply with certain non-discrimination provisions (see 30 C.F.R. § 30.1, et seq.).
During pretrial proceedings, several motions were filed by the parties. Because the parties repeatedly assured the Court that settlement was imminent, the Court delayed ruling on the motions until July 31, 1980 when it became apparent that settlement could not be achieved. In its Order of July 31, 1980, the Court certified this case as a class action (see p. 730, supra). As heretofore noted, trial was held before the Court sitting as a trier of fact. Based on the evidence presented at trial, the Court finds the following facts.
II. Findings of Fact
A. Discrimination in Philadelphia-area Building Trades Today
The named individual plaintiffs in this action, Ronald Taylor, David King, Nathaniel Brown, are black men who sought to work in the skilled building trades but were unable to consistently find such work due to the discriminatory practices of their respective union hiring halls. For all three, efforts to obtain satisfactory trades work have proven so futile that they have either left the Philadelphia area or their chosen trade.
Taylor, an ironworker, has returned to school to study accounting. At trial, he *734 testified that he wished to work as an ironworker but that he could not find sufficient work in the Philadelphia area under the current arrangement between the contractors and the unions. David King, also an ironworker, moved to Winston-Salem, North Carolina. There, he has been able to obtain work in his trade with non-union affiliated contractors but, as a non-union ironworker in the South, has not received the same level of pay and benefits that he would have received working an equivalent amount of time through Local 405 of the Ironworkers in Philadelphia. Nathaniel Brown moved to Phoenix, Arizona. There, he has been able to work as a plumber for non-union contractors, though he was unable to progress through the apprenticeship program and find sufficient plumbers' work in Philadelphia when he sought employment through the hiring hall procedure of Plumbers Local 690.
The Assistant Secretary's findings of fact which accompanied the Labor Department's Order of September 23, 1969 noted that discrimination against black workers was a common occurrence in the skilled craft union hiring halls of Philadelphia and that these hiring halls held the key to employment in these fields since nearly all such construction contractors in Philadelphia obtained their workers through the union's hiring halls. Concluded the Labor Department:
Equal employment opportunity in [the skilled craft] trades in the Philadelphia area is still far from a reality. The unions in these trades still have only about 1.6 percent minority group membership and they continue to engage in practices, including the granting of referral priorities to union members and to persons who have work experience under union contracts, which result in few Negroes being referred for employment.
Order of June 27, 1969, p. 4.
Subsequent events have shown that the inability of many minority workers to obtain jobs results not only from slavish adherence to traditional preference practices but also from overt discrimination on the part of the union. See, e.g., Commonwealth of Pennsylvania v. Local 542 Int'l Union of Operating Engineers, 469 F. Supp. 329 (E.D.Pa.1978), aff'd 648 F.2d 923 (1981), rev'd and remanded, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982); United States v. Elevator Contractors Local 5, 398 F. Supp. 1237 (E.D.Pa.1975), aff'd 538 F.2d 1012 (3d Cir.1976). The experiences of Messrs. Taylor, King, and Brown illustrate the difficulties faced by black construction workers seeking work through the union hiring halls in Philadelphia.
Taylor participated in the apprenticeship programs of Ironworkers Local 405 in Philadelphia, and became a journeyman ironworker. He lived in Philadelphia and thus sought work in the area. However, when he participated in the local's hiring hall, he could only infrequently get work, usually at the most undesirable jobs and job sites. He was eventually driven to seek work outside the area and found work in Northern New Jersey. Prior to that, he had directly applied for work with contractors at job sites in the Philadelphia area but was turned down because he had not been referred to the job by the ironworkers local, and because this was the only means whereby a contractor would hire an ironworker.
David King's experiences paralleled those of Taylor. King joined Local 405 as an apprentice member in 1969. In 1971, he became a journeyman ironworker. At that time, frustrated by what he perceived as discrimination, he and Taylor and others filed suit against Local 405 pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e, et seq. In that suit (E.D.Pa. Civil Action No. 76-810), King claimed that Local 405's hiring hall discriminated against black union members by referring for employment white members whose names were lower on the referral priority list than the names of the black *735 members. King also claimed that white union members received the most desirable Philadelphia area work. King testified that on two occasions, he sought work, knew that work was available, had been specifically requested by the contractor seeking ironworkers, but that in both cases white union members below King on the referral priority list were sent to fill the job opening. Prior to commencing suit, King had filed a complaint with the Equal Employment Opportunity Commission (EEOC). King testified that he was unable to obtain any work through the hiring hall after he brought his discrimination complaint. He believed that he had been retaliated against by the union and subsequently moved to North Carolina where he has been working as an ironworker.
From 1969 to 1972, plaintiff Brown participated in the apprenticeship training program of Plumbers Local 690. During this period, he was able to find employment. Brown was one of only a few black members of the plumbers union at that time. While working on federal construction projects as an apprenticeship member of Local 690, Brown was occasionally transferred on short notice from one federal project to another for short periods of time. This is a process commonly known as "bicycling." Its purpose is to create the appearance of more black workers on the construction sites than the actual number working there whenever the construction contractor was facing an "on-site compliance review" by the federal government and needed to create the impression that he had achieved or was close to achieving the minority employment goals of the Philadelphia Plan.
In September, 1972, Brown was suspended from the Local 690 apprenticeship program without prior notice or opportunity to be heard because of the union's policy against beards or other facial hair. Brown alleged that the policy discriminated against blacks since many more blacks than whites are not able to shave closely without making their skin prone to staph infections. After his suspension, Brown was unsuccessful in securing employment. In March, 1975, he filed a Title VII action against Local 690 (Brown v. Local 690, Plumbers and Pipefitters Union, (E.D.Pa. Civil Action No. 75-861)). The suit was subsequently settled. Despite the settlement, Brown perceived that his status as a "troublemaker" would preclude him from progressing through the Local 690 apprenticeship program and obtaining regular work in the area; he subsequently moved to Arizona.
Apparently, the situations described above are not infrequent. Five of the seven trade unions named in the original Philadelphia Plan of September, 1969, which have been subject to the minority utilization goals of the Plan, have been defendants in race discrimination litigation brought pursuant to Title VII. In addition to the cases heretofore cited involving Taylor and King, and Brown, other cases are: Ray v. Ironworkers Local 401, (E.D.Pa. Civil Action No. 75-3657), Commonwealth of Pennsylvania v. Local 542 Operating Engineers, 469 F. Supp. 329 (E.D.Pa.1978), aff'd 648 F.2d 923 (1981), rev'd and remanded, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982), United States v. Elevator Contractors Local 5, 398 F. Supp. 1237 (E.D.Pa. 1975), aff'd 538 F.2d 1012 (3d Cir.1976), and Young v. Local 19, Sheetmetal Workers, (E.D.Pa. Civil Action No. 70-2103). As heretofore noted, in Local 542 and Local 5 the Court made findings of discrimination on the part of the union and/or the contractors. The Local 401 and Local 19 cases have resulted in court-approved settlement and a consent order, respectively.
The evidence in this case shows that there is an ample supply of minority workers who either could work or could be trained to work in the building trades and who would seek and accept such work but for the barriers of discrimination. The Labor Department's *736 September 23, 1969 Order found as fact based on the Department's hearings of August 26, 27 and 28, 1969 that:
The nonwhite unemployment rate in the Philadelphia area is approximately twice that for the labor force as a whole and the total number of non-white persons unemployed is approximately 21,000. There is also a substantial number of persons in the nonwhite labor force who are under-employed. Testimony adduced at the hearing indicates that there are between 1,200 and 1,400 minority craftsmen presently available for employment in the construction trades who have been trained and/or had previous work experience in the trades.
In addition it was revealed at the hearing that there is a pool of 7,500 minority persons in the Laborers Union who are working side by side with journeymen in the performance of their crafts in the construction industry. Many of these persons are working as helpers to the journeymen in the designated trades. Also, testimony at the hearings established that between 5,000 and 8,000 prospective minority craftsmen would be prepared to accept training in the construction crafts within a year's time if they would be assured that jobs were available to them upon completion of such training.
Based upon the number of minority group persons employed in the designated trades for all industries (construction and non-construction) and those minority group persons who are unemployed but qualified for employment in the designated trades, a survey by the Manpower Administration [of the Labor Department] indicated that minority group persons are now in the area labor market as follows:
Identification of
Trades Number Available
Ironworkers ...........................302
Plumbers, Pipefitters
and Steamfitters ....................797
Sheetmetal workers ....................250
Electrical workers ....................745
A survey by the Office of Federal Contract Compliance indicated that the following number of minority persons are working in the designated trades and those who will be trained by 1970 by major Philadelphia recruitment and training agencies and those working in related occupations in non-construction industries who would be qualified for employment in the designated trades with some orientation or minimal training:
Identification
of Trades Number Available
Ironworkers ........................ 75
Plumbers, pipefitters ..............500
Steamfitters .......................300
Sheetmetal workers .................375
Electrical workers .................525
Elevator constructors .............. 43
Based upon this information it is found that a substantial number of minority persons are presently available for productive employment.
Order of September 23, 1969 (Pl. Ex. 4).
Testimony at the public hearing revealed that there is a need for training programs for willing minority group persons at various levels of skill. Such training must necessarily range from pre-apprenticeship training programs through programs providing incidental training for skilled craftsmen who are near the brink of full journeyman status. As discussed above, between 5,000 and 8,000 minority group persons are in a position to be recruited for such training within a year's time.
Testimony at the public hearings revealed the existence of several training programs which have operated successfully to train a number of craftsmen many of whom are now prepared to enter the trades in the construction industry. In order to further assure the availability of necessary training programs, the Manpower Administration of this Department has committed substantial funds for the *737 development of additional apprenticeship outreach programs and journeyman training programs in the Philadelphia area. It plans to double the present apprenticeship outreach program with the Negro Union Leadership Council in Philadelphia. Presently, this program is funded for $78,000 to train seventy persons. An additional $80,000 is being set aside to expand this program. In addition, immediate exploration of the feasibility of a journeyman-training program for approximately 180 trainees will be undertaken. Both these programs will be directed specifically to the designated trades.
Order of September 23, 1969.
The record in this and other cases is clear. Many of the job placement procedures of the Philadelphia area building trades have been discriminatory in either intent or effect or both. That was the situation in 1969 when the Philadelphia Plan was issued and it was such discrimination that Judge Higginbotham's Order in Local 542 was designed to remedy. Unchanged, however, is the area contractors' dependence on the union hiring hall procedure for obtaining workers at the job sites, both federal and non-federal. Pursuant to collective bargaining agreements between the contractors and the unions, the contractors rely on the unions to screen job applicants, certify that the worker is qualified in the skilled trade, and issue temporary work permits. The agreements provide that the contractor will hire skilled workers only from the respective union hiring hall unless the contractor requests workers and the hall does not respond to that request within 48 hours. Thus, if the unions discriminate, as they have been found to in the past, and the contractors take only union-sent workers, the net effect is to discriminate against minority workers in all but a few non-union construction projects in the Philadelphia area.
As heretofore noted, the Philadelphia Plan provided ranges of goals for minority workforce composition ranging from 4 and 9 percent (through 1970) to between 19 and 26 percent (through 1973). (See Pl. Ex. 4). Effective November 3, 1980, the minority worker utilization goals were set at 17.3 percent for all crafts in the Philadelphia construction area, which was redefined to include the New Jersey counties of Camden, Burlington, and Gloucester as well as the five counties of Southeastern Pennsylvania (Philadelphia, Bucks, Chester, Delaware, and Montgomery). See 45 Fed.Reg. No. 194, p. 65848 (Oct. 3, 1980). This change slightly lowered the minority utilization goals of the Plan. Regardless, the parties to this case agree that minority utilization in the skilled building trades on federal construction contracts in the Philadelphia area falls short of 17 percent.
Thus, in 13 years, equal opportunity in the building trades in Philadelphia has remained an unfulfilled goal. However, the question before this Court is not the legality of the conduct of the unions and the contractors, it is the conduct of the government. The unions have been found to have discriminated. The contractors have been found to have acceded to that discrimination through passively following the hiring hall procedures via the collective bargaining agreements. However, the Supreme Court held in General Building Contractors Association, Inc. v. Pennsylvania, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982), that this conduct does not justify the imposition of liability pursuant to 42 U.S.C. § 1981 against the contractors, since the contractors' actions themselves are not discriminatory in intent. Regardless, the question now before this Court is whether the defendants, federal government agencies and officials, owed the plaintiff class a non-discretionary duty pursuant to E.O. 11246, the Philadelphia Plan, and the Code of Federal Regulations, and whether these defendants have breached the duty in such a manner that this Court should invoke the writ of mandamus to confer some form of injunctive relief. Consequently, the key issue facing this Court is the performance of the *738 defendants, not the admittedly poor track record of the unions and the contractors. It is to the government's activities that the Court now turns.
B. The Labor Department's Supervision of the Philadelphia Plan
The evidence presented at trial shows that the Department of Labor has accomplished little by way of implementing the Philadelphia Plan. In certain areas of administration, the Department's performance invites criticism.
For example, at trial, more than 10 years after the formulation of the Plan, the Labor Department's Office of Federal Contract Compliance Programs still had not assembled data which would reveal whether Philadelphia-area contractors doing federal business have increased their utilization of minority workers. This basic data which one would expect to be collected in order to evaluate the plan has not been formulated even though all of the contractors and subcontractors under the Plan are, according to the terms of the Plan, required to submit minority utilization reports to the OFCCP which would show the number and percentage of work hours worked by minority workers. During the period 1975-80, the OFCCP has not attempted to conduct any type of survey to determine the availability of minority workers in the Philadelphia area. The Assistant Regional Administrator of the OFCCP (of the Labor Department) testified at trial that he does not even possess an opinion as to whether minority utilization by federal contractors has increased.
The testimony of Dr. John Flueck, professor of statistics at Temple University, shows that the Plan has not accomplished its goals of increased minority hiring and that in fact use of minority workers by federal contractors declined in the area since the mid-1970s. Dr. Flueck based this conclusion on a review of data contained in OFCCP or other Labor Department records. The one exception to this overall decline in minority worker utilization in the trades listed above is the Operating Engineers craft, where actual minority utilization was above the Philadelphia Plan goal of 17.3% minority utilization at the time of trial. At that juncture, Local 542 of the International Union of Operating Engineers was subject to a court order which directed federal contractors to engage in remedial hiring of minorities. See Commonwealth of Pennsylvania v. Local 542, IUEO, 469 F. Supp. 329 (E.D.Pa.1978), aff'd 648 F.2d 923 (3d Cir. 1981). The injunctive relief directed at the union by the district court and affirmed by the Third Circuit remains intact, though the Supreme Court has reversed the decision as to the building contractors. See General Building Contractors Association, Inc. v. Commonwealth of Pennsylvania, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982).
In order to fully assess the Labor Department's performance in administering the Philadelphia Plan, this Court must examine the defendants' actions from the inception of the Philadelphia Plan through the date of trial. Of particular relevance is the defendants' performance from October 18, 1978, the effective date wherein Executive Order 12086 consolidated the government contract compliance functions in the Labor Department's Office of Federal Contract Compliance Programs (OFCCP). See 43 Fed.Reg. 46501. A major factual defense raised by the Labor Department was the contention that the Department performance administering the Philadelphia Plan could not be fairly judged until the reorganization had taken place because the pre-1978 administration of the Plan posed logistical problems making administration of the Plan extremely difficult.
In assessing the available data, this Court has found the most significant statistic to be the percentage of minority hours worked on federal construction projects in the Philadelphia area. The Court finds this figure more meaningful than the number or percentage of minority workers hired or used *739 in connection with federal contracts. As the evidence in this case shows, some contractors have been able to achieve the goals of the Philadelphia Plan by hiring the requisite number of minority tradesmen but giving them only a small fraction of the total work in connection with the project, thus circumventing the spirit and thrust of the Philadelphia Plan.
With this in mind, the Court finds that during the period 1971 to October, 1978, the period during which the Philadelphia Plan was in effect but before the consolidation of Plan administration in the Department of Labor, the percent of minority utilization by hour ranged from 9% to 11% depending on the craft. This figure is based upon the monthly Post Contract Implementation Reports (PCIRs) compiled by the Labor Department during 1971 and 1972 (see N.T. 1.129; Pl. Exs. 48c to 54c). In 1972, the minority utilization was again between 9% and 11%. (See N.T. 1.130, Pl. Ex. 48c to 54c). The 1972 figures are based on 7 months of post-contract award compliance reports. (See Pl. Ex. 56). The linear plots of the minority utilization percentages show an increase in minority utilization early in the year and declining minority utilization in the later months of both years (see Pl.Ex. 56). For all but two of the seven trades (sheetmetal and electrical workers), the graphic plotting data showing this relationship is statistically significant at the .05 level. This means that there is only a five percent chance that the observed relationship seen on the graph results from random chance rather than the actual existence of this relationship (see N.T. 1.145-1.150).
The failure to realize the goals of the Philadelphia Plan has affected the area's minority workers in more than an intangible way. By examining the actual minority hours worked and comparing this to the number of minority hours that would have been worked had minority utilization equalled the Plan's goals, one can roughly calculate the number of "shortfall hours," that is, the number of hours that minorities would have worked had the Plan's goals been met but that were instead worked by non-minorities because of the failure to meet the plan's goals. During the period from 1971 to October, 1978 (the pre-reorganization period), the number of shortfall hours per month was approximately 9,000 (see Pl.Ex. 48-54, N.T. 1.154). After the reorganization, during the period from October, 1978 until May, 1980, the number of shortfall hours per month increased to approximately 12,000 per month. Even estimating conservatively that there have been 9,000 shortfall hours per month since the Plan's inception, there would be approximately 900,000 total shortfall hours since the institution of the Philadelphia Plan. Had the Plan's goals been met, minority workers in the area would have realized nearly an additional million hours of well-paying trades work, creating hundreds of jobs for minority workers and a better life for them and their families.
As heretofore noted, during the period 1971-78, various federal agencies had compliance responsibilities pursuant to the Philadelphia Plan and these agencies were generally supervised by the Labor Department. After October, 1978, responsibility for administering the Philadelphia Plan, by then codified as part of the Code of Federal Regulations (see generally 41 C.F.R. § 60.1 et seq.) and applicable to all federal construction projects (not just those in the Philadelphia area) was consolidated in the Labor Department's OFCCP. Between October, 1978 and May, 1980, however, the statistical data concerning minority utilization in the Philadelphia area fails to reflect any improvements correlated with the consolidation of Plan administration. In fact, the proportion of minority utilization hours declined during this time period as compared to the 1971-1978 period. Even where the Department entered into conciliation agreements with 24 area contractors due to perceived deficiencies in the minority hiring of these contractors, the minority utilization *740 rate of these particular contractors continued to fall short of the goals set forth in the Plan (see N.T. 1.159-1.168 and Pl.Ex. 72).
Many contractors failed to submit minority utilization reports. Evidence presented at trial suggests that the non-reporting contractors may have been the contractors with the worst minority utilization records but that these businesses sought to mask their minority utilization shortcomings by failing to file the required post contract implementation reports. Thus, the available data may actually overstate the rate of minority utilization in the area. Thus, the real rate of minority utilization may fall even farther below the goals set forth in the Philadelphia Plan.
Evidence presented at trial shows that the Department has generally failed to institute a comprehensive program designed to follow-up and investigate the absence of timely filed compliance reports by the contractors, who are required by Plan regulations to file such reports. In fact, the evidence shows that the Department has followed up on absent reports in only a small percentage of the cases, despite the regulations' requirement that contractors file minority utilization reports.
Furthermore, evidence presented at trial showed that many contractors delinquent in filing compliance reports (Post Contract Implementation Reports (PCIRs) and/or Form 257 Reports, in the jargon of the Department) have been permitted to continue to bid on federal or federally-financed projects in the Philadelphia area and that they have been low bidders on several contracts and are therefore likely to obtain future federal contract work (see Pl.Ex. 73).
Undoubtedly, many factors affect the rate of minority utilization in Philadelphia area federal construction projects. However, the evidence presented at trial permits this Court to conclude that the degree of government enforcement activity significantly affects the contractors' rate of minority utilization (see generally, N.T. Vol. 11, Testimony of Bennett O. Stalvey, Jr., OFCCP Miami office director). It appears from the evidence that enforcement activity in the Philadelphia area was stronger during the period 1971-75 when minority utilization rates were better and that weaker enforcement activity during the 1977 to 1980 period helped to produce a lower rate of minority worker utilization.
The Labor Department is armed with a wide array of enforcement mechanisms to deal with contractors that fail to cooperate in attempting to achieve the goals of the Philadelphia Plan. Pursuant to Executive Order 11246, there are four primary sanctions which may be applied to government contractors who fail to comply with the Executive Order or regulations (such as the Philadelphia Plan) issued to aid in implementing the order. The Labor Department may (1) cancel a contract; (2) terminate a contract at any stage of the project; (3) suspend a contract or the making of payments pursuant to a contract; and/or (4) debar a contractor from future government contract work. (See Pl.Ex. 1, E.O. 11246, §§ 209-212). To impose these sanctions, the Labor Department must first, pursuant to its own regulations, issue a notice to the contractor requiring the contractor to show cause why any of the heretofore described sanctions should not be imposed. (See 41 C.F.R. Part 60-63; 41 C.F.R. §§ 60-1.26, 1.28, 4.8.
The contractor's non-compliance need not be severe before the Department may initiate an enforcement proceeding. For example, 41 C.F.R. § 60-1.7(a)(4) permits commencement of enforcement measures against contractors for "[F]ailure to file timely, complete and accurate reports as required..." As heretofore noted, contractors subject to the Philadelphia Plan are required to file monthly reports showing the utilization of minorities and women in each of the six building trades. Furthermore, as also noted, many of the contractors *741 have not complied with this requirement. Despite the high incidence of non-compliance, the Department has not initiated a concerted program to achieve compliance with its own regulation.
The regulations also permit the Department to seek conciliation agreements with contractors who have failed to achieve or maintain minority utilization goals and are in violation of E.O. 11246. As part of any such conciliation agreement, the OFCCP may require that the conciliation agreement commit the contractor to make-up goals and timetables designed to remedy the contractor's past failure to comply with the Executive Order (see 41 C.F.R. § 60-4.8). The process of seeking a conciliation agreement begins when the Department issues a show cause notice to a contractor. After receiving the notice, the contractor has the option of either responding and making a showing that he has committed no violation of the Philadelphia Plan or the Executive Order, or entering into a conciliation agreement with the OFCCP. The OFCCP has broad discretion in drafting and entering into a conciliation agreement. In addition to requiring make-up minority utilization goals, conciliation agreements may contain other corrective measures such as back pay and seniority adjustment for minority workers hired after the conciliation agreement goes into effect. The conciliation agreement procedure and remedies are designed to encourage increased contractor efforts to meet the goals of the Plan without the prerequisite of lengthy enforcement proceedings and a finding of wrongdoing on the part of a contractor. Despite the advantages provided by this enforcement tool, the Department has made negligible use of the conciliation agreement technique.
The Court finds on the basis of the downward trend of minority utilization in the construction trades in connection with federally assisted contracts, the enforcement mechanisms of the Department of Labor have not been utilized to their fullest extent. Between 1970 and 1974, for example, the Department debarred several contractors for noncompliance with the Plan. No debarments have been effectuated since January 20, 1974 (see N.T. 11.69-11.73). During the first half of the decade, the Department more frequently suspended contract payments and withheld contracts as part of their administration of the Plan. During the 1970-75 period, the OFCCP also made affirmative efforts to contact minority community organizations as an aid in compiling and making available to contractors lists of qualified minorities who have worked in the six skilled trades encompassed by the Plan (N.T. 11.57-58). During this period, minority utilization approached and occasionally exceeded the goals set forth in the Plan.
In fact, since the E.O. 11246 enforcement responsibilities were consolidated in the Department of Labor by E.O. 12086 (43 Fed. Reg. 46501; effective date October 8, 1978), no debarment proceedings have been commenced or consummated (see Pl.Ex. 71; N.T. 13.128). From October 8, 1978 until the time of trial, no Philadelphia area construction contractor had been subjected to contract termination, cancellation or suspension. Furthermore, no conciliation agreement entered into since that time has made provision for make-up goals of minority hiring.
Only a few conciliation agreements have been entered into in any form. As of May, 1980, only 24 such agreements had been reached between the Labor Department and area contractors charged with insufficient justification for under-utilization of minority workers. Subsequent to these agreements, more than half the affected contractors reported no change in minority utilization or reported minority utilization which fell below the minimum goals set forth in the Plan. (Pl.Ex. 72).
As heretofore noted, the Labor Department's actions in connection with the enforcement of the Philadelphia Plan have *742 been minimal. For example, since October 8, 1978, contractors have been awarded new federal contracts during months in which they were not in compliance with minority utilization goals concerning their existing contracts, or when they were not filing timely reports as to their minority utilization. (See Pl.Exs. 73 and 74). For more than one year after October 8, 1978, due to Department re-organization efforts, OFCCP employees were in fact instructed not to issue show cause notices to contractors who had failed to submit timely minority utilization reports (see N.T. 12.25-12.39; 8.13).
Between October 8, 1978 and June, 1979, no show cause notices were issued to Philadelphia area construction contractors. Between June, 1979 and June, 1980, only one such notice was issued despite the fact that the Philadelphia area OFCCP office had issued five recommendations for such notices (see N.T. 12.51; 13.95; 13.109; 8.18; Pl.Ex. 167); Defendant's response to plaintiff's request for admission No. 43 (First Set).
Beyond doubt, the plaintiffs demonstrated at trial that the Department's administration of the Philadelphia Plan was far from perfect and that certain enforcement mechanisms were not being utilized as fully as one might expect. Furthermore, the evidence shows that minority utilization in the area building trades has tended to level out short of the goals of the Philadelphia Plan and may have declined during the late 1970s. However, this is an action seeking a writ of mandamus pursuant to 28 U.S.C. § 1361. Mandamus is an extraordinary remedy that may only be ordered where the defendants have failed to perform a clear duty owed to the plaintiffs. (See Section III, pp. 743-748, infra). Thus, the question before this Court is not whether the defendants have administered the Philadelphia Plan in a commendable manner or in the manner preferred by the plaintiffs or this Court. Clearly, the defendants have failed to accomplish any one of these objectives. However, the real issue as to mandamus in this litigation is whether the Labor Department has done nothing or has done so little as to amount to nothing in its administration of the Philadelphia Plan. It is clear to this Court that the plaintiffs have failed to prove by a preponderance of the evidence that the defendants have done nothing or so little as to amount to nothing in their enforcement of the Philadelphia Plan. The Labor Department's performance, while leaving much to be desired, is sufficient to preclude a mandamus order of this Court.
Since the reorganization of the Labor Department and the abolition of the Philadelphia Plan as a separate regulation (see 43 Fed.Reg. 14894), the Department's OFCCP has chosen to place supervisory emphasis on different segments of the Plan's regulations than those stressed by plaintiffs, particularly on 16 good faith steps which contractors must show in order to participate in federally aided projects (see 41 C.F.R. § 60-4.3).
While the Department has not done a good job of monitoring the contractors' duty to file regular minority utilization reports, the Labor Department's failings in this regard are not so deficient as to constitute the violation of a clear duty owed to the plaintiffs. Furthermore, many of the Labor Department's present shortcomings in this area result from previous inefficiencies in the division of compliance responsibilities among several different agencies and the subsequent revision of the Philadelphia Plan to vest compliance responsibilities within the OFCCP. (See N.T. 10.20-10.40; 10.136-137; 12.13-12.20; 12.127-12.131; 12.76; 14.35). Though the Labor Department might better have coped with these logistical difficulties, the evidence presented at trial shows that it did attempt to effectively administer the Plan. (See N.T. 4.35-4.40; 12.25-12.55; 14.10-14.32; Def. Exs. 61, 63; 13.40-13.68; Def.Exs. 36, 37).
After the abolition of the Philadelphia Plan as a separate regulation, the Labor Department in 1980 applied E.O. 11246 on a nationwide basis by establishing uniform regulations for the entire federally-assisted construction industry throughout the nation. The goals of the Philadelphia Plan *743 were considerably higher than the minority utilization goal of 17.3 percent which became effective on November 3, 1980. The salutary desire of the Labor Department in establishing minority utilization goals of 17.3% for all trades in the area based upon a national goal calculation formula could well have been accomplished without reducing the minority utilization goals which had been in effect for the Philadelphia metropolitan area under the Philadelphia Plan. The substitution of the 17.3% figure for the trades-specific goals set forth in the Philadelphia Plan resembles a discretionary act and does not violate any clear duty owed to the plaintiffs and does not support the issuance of a writ of mandamus.
The performance of the Labor Department's Bureau of Apprenticeship and Training (BAT), like that of the OFCCP and the other defendants, has been imperfect but has not violated a clear duty owed to the plaintiffs. Pursuant to the National Apprenticeship Act, 29 U.S.C. § 50 et seq., BAT is charged with implementing the duties and policies vested in the Secretary of Labor (see 29 C.F.R. Part 30, § 30.1-30.19). The regulations provide that BAT policy is to promote equal employment opportunity, non-discrimination and affirmative action in apprenticeship programs registered with the Labor Department. Apprenticeship programs that discriminate or fail to provide equal opportunity may be deregistered by BAT.
In the Philadelphia area, BAT operates as part of the Labor Department's regional office. In the five-county area of Southeastern Pennsylvania, most apprenticeship programs for the building and construction trades are operated by labor organizations. In order to attain union tradesman status, workers must normally have completed a union-run apprenticeship program. Apprenticeship programs in Pennsylvania are administered by the Pennsylvania Apprenticeship and Training Council. Pursuant to 29 C.F.R. § 30.9, the Labor Department is responsible for conducting compliance reviews of the registered apprenticeship programs and their sponsors. However, where a state apprenticeship council such as that of Pennsylvania exists, these state councils are delegated certain duties and responsibilities to bring non-complying apprenticeship programs into compliance (see 29 C.F.R. § 30.15(a)(4)) and to adopt a state equal opportunity plan for such programs (29 C.F.R. § 30.15(a)(2)).
As stated by the United States Supreme Court in United Steelworkers of America v. Weber, 443 U.S. 193, 199 n. 1, 99 S. Ct. 2721, 2725 n. 1, 61 L. Ed. 2d 480 (1979), "Judicial findings of exclusion from crafts on racial grounds are so numerous as to make such exclusion a proper subject for judicial notice" (citing cases). However, no Philadelphia area apprenticeship programs or their sponsors have been deregistered. The evidence presented at trial shows that BAT has chosen to vest primary enforcement responsibility in the Pennsylvania Council (see Deposition of Regional BAT Director Ballentine). This decision as to enforcement schemes lies within BAT's discretion as delimited by the applicable regulations (see 29 C.F.R. § 30.15).
In summary, the evidence presented at trial revealed an unimpressive Labor Department performance in its administration of the Philadelphia Plan. Since 1977, minority utilization in the construction trades in the metropolitan Philadelphia area has declined. The reorganization of enforcement functions, which took effect on October 3, 1978, has signalled little improvement in obtaining compliance. There is no doubt that the Philadelphia Plan has fallen far short of its minority utilization goals. This Court must determine whether the Department's failures are of sufficient magnitude to make mandamus an appropriate remedy.
III. The Law of Mandamus
Subject matter jurisdiction in this action is conferred pursuant to 28 U.S.C. § 1331 (federal question) and 28 U.S.C. § 1361 (mandamus). Section 1361 provides
The district courts [of the United States] shall have original jurisdiction of any action in the nature of mandamus to compel an officer or employee of the *744 United States or any agency thereof to perform a duty owed to the plaintiff.
The mandamus statute is a waiver of sovereign immunity and may be invoked against the federal government where a plaintiff has satisfied the prerequisites of mandamus relief (Huffstutler v. Bergland, 607 F.2d 1090, 1092 (5th Cir.1979) (per curiam); Beal v. Blount, 461 F.2d 1133, 1138 (5th Cir.1972).
To obtain mandamus relief, the plaintiff must establish, by a preponderance of the evidence, three elements: (1) the plaintiff must have a clear right to the relief requested; (2) the defendant must have a clear duty to act, and (3) no other adequate remedy must be available to the plaintiff. See Sheehan v. Army and Air Force Exchange Service, 619 F.2d 1132, 1139 (5th Cir.1980); Accord, Save the Dunes Council v. Alexander, 584 F.2d 158 (8th Cir.1978); Billiteri v. United States Board of Parole, 541 F.2d 938 (2d Cir.1976).
In order for mandamus to issue, a plaintiff must show that an officer or agency of the United States owes him a legal duty which is a specific, plain ministerial act devoid of the exercise of judgment or discretion. An act is ministerial only when its performance is positively commanded and so plainly prescribed as to be free from doubt. Richardson v. United States, 465 F.2d 844, 849 (3d Cir.1972); accord Mattern v. Weinberger, 519 F.2d 150, 156 (3d Cir. 1975).
In certain instances, mandamus relief has been granted where the performance of an act is not completely a ministerial duty but is in part committed to an official's discretion. Mandamus orders may in rare cases issue "where Federal officials are not acting within the zone of their permissible discretion but are abusing their discretion or otherwise acting contrary to law." Davis v. Shultz, 453 F.2d 497, 502 (3d Cir.1971). This limited adjustment to the mandamus requirement that the defendant owe plaintiff a clear ministerial duty does not permit a court to substitute its judgment for that of the government agency or official by characterizing the disapproved government conduct as an abuse of discretion. As the Third Circuit observed in Pennsylvania v. National Ass'n of Flood Insurers, 520 F.2d 11 (3d Cir.1975):
[M]andamus may issue to require the exercise of permissible discretion, see McQueary v. Laird, 449 F.2d 608, 611 (10th Cir.1971), although the manner in which the discretionary act is to be performed is not to be directed by the court. See Larson v. Domestic and Foreign Corp., 337 U.S. 682, 695, 69 S. Ct. 1457, [1464] 93 L. Ed. 1628 (1949).
520 F.2d at 27. Thus, a court may issue a writ of mandamus affecting government discretionary conduct only where the government agencies or officials have completely failed to act or are acting despite legal prohibitions barring such action. See J.E. Brenneman Co. v. Schramm, 473 F. Supp. 1316 (1979). Regarding the nature of an official's duty that is required in order to satisfy the first of the three elements required for mandamus, the Third Circuit has concluded "that where there has been an action taken by a government official contrary to law and so plainly prohibited as to be free from doubt, it may be remedied by the issuance of a writ of mandamus." Naporano Metal & Iron Co. v. Secretary of Labor, 529 F.2d 537, 542 (3d Cir.1976). See also Commonwealth of Pennsylvania v. National Ass'n of Flood Insurers, 520 F.2d 11, 25-27 (3d Cir.1975).
Because the mandamus remedy is an "extraordinary" one, the federal courts should be reluctant to craft too broad a definition of the terms "ministerial duty" and "abuse of discretion." See Cartier v. Secretary of State, 506 F.2d 191 (D.C.Cir. 1974), cert. denied, 421 U.S. 947, 95 S. Ct. 1677, 44 L. Ed. 2d 101; City of Highland Park v. Train, 374 F. Supp. 758 (N.D.Ill.), aff'd, 519 F.2d 681 (7th Cir.1974). Thus, an official's duty must be "clear, plainly defined, and peremptory" before mandamus will lie. As the Seventh Circuit noted in Save the Dunes Council v. Alexander, supra,
The peremptory duty must be either a ministerial one or an obligation to act within a specified range of discretion.... *745 [M]andamus jurisdiction does not lie to direct the exercise of administrative discretion within its lawful boundaries.
584 F.2d at 162. A court may not issue a writ of mandamus merely because it disagrees with the manner in which the government has exercised its discretion. Billiteri v. United States Board of Parole, 541 F.2d 938, 947 (2d Cir.1976); Leonhard v. Mitchell, 473 F.2d 709 (2d Cir.), cert. denied, 412 U.S. 949, 93 S. Ct. 3011, 37 L. Ed. 2d 1002 (1973).
The shortcomings of the defendants in this case do not constitute duties "so plain as to be free from doubt." Naporano Metal & Iron Co. v. Secretary of Labor, 529 F.2d 537 (3d Cir.1976). Here, the Labor Department has exercised its discretion to place enforcement emphasis on the 16 objective measures of affirmative action steps rather than upon other specific enforcement tools suggested by the plaintiffs. The Department, pursuant to adopting nationwide affirmative action plan for federal contractors and reorganizing and centralizing the administration of this program, has determined that the goal of non-discrimination in federal contract employment can best be achieved through the use of objective, nationally standardized measures, and has decided to give this enforcement scheme a try before shifting to new enforcement tactics, including those advocated by plaintiffs. Though this approach has not yet been shown to be effective in the Philadelphia area (see pp. 735-741, supra), this Court has not been vested with the authority to second-guess the discretionary conduct of federal executive branch officials but may only invoke mandamus where the defendants have failed to perform a clear duty owed to the plaintiffs. The preponderance of the evidence presented at trial does not support a finding that the defendants have violated a clear duty owed to the plaintiffs. The defendants have chosen a different path than that advocated by the plaintiffs. Although this Court agrees with the plaintiffs that the defendants have been engaged in a long circuitous journey which still leaves unfulfilled the goal of the Philadelphia Plan, even if the wisdom of the Department's choices is seriously suspect, the Department nevertheless retains the authority to make those discretionary choices as to the manner of administering the Philadelphia Plan. It has long been the law that "only in clear cases of illegality of action that courts will intervene to displace the judgments of administrative officers or bodies." Hammond v. Hull, 131 F.2d 23, 25 (D.C.Cir.1942).
The plaintiffs note that the Department, pursuant to its rulemaking power under the Plan, has promulgated certain regulations establishing enforcement tools which the Department may employ to deal with contractors who fail to comply with the Philadelphia Plan and its regulations affecting them. Thus, it cannot be said that the defendants have taken no action to seek to implement and administer the Philadelphia Plan.
It has, however, been held that mandamus jurisdiction "is properly invoked when it appears that a federal official may not have complied with the procedures promulgated to govern his conduct." Pacemaker Monitor Corp. v. United States Government, 440 F. Supp. 473, 480 (S.D.Ga. 1977). In particular, "a violation of a governmental agency's own regulations can be the basis [for mandamus jurisdiction.]" Andujar v. Weinberger, 69 F.R.D. 690, 693-94 (S.D.N.Y.1976); see also Ryan v. Shea, 525 F.2d 268 (10th Cir.1975); McMahon v. Califano, 476 F. Supp. 978, 982 (D.Mass. 1979). In this case, the evidence presented at trial shows that many area contractors have failed to comply with the Plan's regulations and that the Department has not succeeded in compelling the contractors to achieve compliance. In particular, the Department has failed to make follow-up inquiries of each of the federal contractors or sub-contractors who has failed to submit timely minority utilization reports each month. However, this shortcoming does not amount to an agency's "violation" of its own regulations within the meaning of the cases heretofore cited.
*746 In this case, having benefit of the evidence presented at trial, and having reviewed the relevant Executive Orders, the Labor Department regulations, and the Philadelphia Plan as a whole, this Court has determined that the Department regulations cited by the plaintiffs do not impose upon the defendants the type of clear, affirmative, peremptory duty which would entitle the plaintiffs to mandamus relief. The Philadelphia Plan itself sets forth a general policy directed toward achieving equal opportunity in federal construction contracts. The Executive Orders give the Labor Department an array of enforcement tools and discretion to place emphasis upon such enforcement measures as it feels will best effectuate the Plan. The Department is also given broad authority to promulgate internal regulations for administration of the Plan. Nowhere in the background and language of the Executive Orders is it suggested that the regulations affecting contractors drafted by the Department itself as part of the Department's broad discretionary enforcement authority under the Plan were in any way intended to impose an ironclad straight-jacket upon the Department which would permit an injunction directed against the Department merely because it had tried and failed to force the contractors into 100 percent compliance with its regulations. The plaintiffs do not have a right to require the defendants to achieve total satisfaction of this portion of their own internal regulations so long as the defendants are, as a whole, acting within the limits of their discretion to effectuate the goals of the Philadelphia Plan.
The need to accord the defendants at least this much discretion becomes all the more important in light of the limited resources available to government agencies such as the Labor Department. The Department could perhaps achieve 100 percent satisfaction of every internal operating rule, no matter how little contribution the rule made to the overall goal of the Plan, if the Department spent enough money and assigned enough personnel to the task. However, stringent follow-up of contractors who are delinquent in filing minority utilization reports simply has not been shown to be a clear duty owed to the plaintiffs. The Labor Department may believe, for very good reasons, that its resources should be invested in other enforcement techniques. The language and background of the Plan and related Executive Orders suggest that the Department should be given at least this much discretion to allocate funds in accordance with its judgment regarding the best means of reaching the Plan's goals. The Court therefore concludes that the plaintiffs have failed to show that they have a clear right to the relief sought or that the defendants have failed to fulfill a clearly defined duty owed to the plaintiffs.
At trial, plaintiffs contended that the decision Commonwealth of Pennsylvania v. Local 542, Int'l. Union of Operating Engineers, 469 F. Supp. 329 (E.D.Pa.1979), aff'd 648 F.2d 923 (1981), empowered this Court to issue a writ of mandamus requiring the Department to impose the heaviest of sanctions against federal contractors who had failed to achieve the minority utilization goals of the Philadelphia Plan. However, on June 29, 1982, the Supreme Court reversed the Local 542 decision as applied to the non-union defendants and remanded the case. See General Building Contractors Association, Inc. v. Pennsylvania, ___ U.S. ___, 102 S. Ct. 3141, 73 L. Ed. 2d 835 (1982). The Court held that the civil rights statutes, in particular 42 U.S.C. § 1981, do not permit sanctions to be imposed against a party unless that party is found to have committed some act of purposeful discrimination. In Local 542, only the union defendants were found to have purposefully discriminated. The Supreme Court specifically stated that employers may not be punished for race discrimination upon a theory of respondeat superior for the discriminatory acts of a union.
Were this Court to follow the approach suggested by the plaintiffs, it would be acting at odds with the General Building Contractors decision in that any such mandamus order of this Court would by implication not only permit but compel the Labor Department to punish federal contractors *747 for low minority utilization in spite of the Department's discretionary conclusion as to the proper course of action.
Admittedly, there is a distinction between requiring retroactive hiring and damage payments, as the Local 542 Order did, and withholding the benefits of federal contracts, as the plaintiffs urge this Court to direct the Labor Department to do. However, it would be an abuse of this Court's discretion to direct that the Labor Department employ measures against all contractors falling short of the Plan's goals, regardless of the fault of those contractors.
Plaintiffs have also contended that the decision Legal Aid Society of Alameda County v. Brennan (LASAC), 608 F.2d 1319 (9th Cir.1979) would support a writ of mandamus from this Court compelling the Labor Department through the OFCCP to fully satisfy each of its regulations whatever the cost even if the Department has determined that enforcement would best be enhanced by differential emphasis on the regulations. For example, plaintiffs seek an order requiring that the OFCCP make an inquiry whenever a contractor is delinquent in filing a timely post contract implementation report and contend that LASAC would support such an order.
LASAC, however, is distinguishable from the present case. In LASAC, the plaintiffs charged that the government agency failed to review the affirmative action programs of a majority of federal contractors within its compliance jurisdiction and that where such compliance reviews were undertaken, the officials had regularly approved programs that did not comply with E.O. 11246 and the applicable regulations. In this case, plaintiffs have not established that the Labor Department's shortcomings are so vast. Rather, the instant plaintiffs have established only that the Department's follow-up supervision of federal contractors who have not submitted acceptable affirmative action plans and compliance reports is deficient. Unlike the clear and mandatory regulations at issue in LASAC, the follow-up supervision regulations do not impose such a clear duty upon the defendants as to justify the issuance of a writ of mandamus.
In describing the rules at issue in LASAC, the Ninth Circuit noted
There is no discretion as to the presence of these components (goals and timetables) in an acceptable affirmative action plan. Programs that lack them do not comply with [the regulations]. Judicial review is available to insure that compliance officials perform their non-discretionary duty to refrain from approving plans that do not contain the elements mandated by the regulations.
* * * * * *
As appellants correctly argue, areas of the administrative process so laced with discretion are traditionally shielded from direct judicial intervention. But these are not the areas to which appellees sought and obtained relief. Appellees' claim went to a threshold matterthe required content of acceptable affirmative action plans. This issue is distinct from such subsequent questions as to whether a contractor is in compliance with a valid affirmative action program (to which the good faith standard is relevant), or what should be done to secure compliance once it is determined that a contractor has violated his affirmative action obligations [to which the conciliation provisions are directed]. Appellees seek only to require [compliance] officers ... to perform the ministerial duty of complying with their own regulations by disapproving programs that do not contain the elements required by the regulations.
608 F.2d at 1331 (citations and footnote omitted; emphasis supplied).
The Department regulations requiring contractors to file timely implementation reports and making non-complying contractors subject to various sanctions, when viewed as part of the enforcement mechanism of the Plan as a whole, simply do not require the Department to perform ministerial acts as did the regulations at issue in LASAC.
*748 However persuasive may be the plaintiff's arguments regarding better ways of administering the Plan, these arguments do not support the issuance of a writ of mandamus against any of the defendants. The Court will therefore enter an Order granting judgment in favor of the defendants. This Memorandum is in lieu of findings of fact and conclusions of law pursuant to Fed.R.Civ.P. 52(a).
ORDER
AND NOW, this 7th day of December, 1982, trial in this matter having been held before this Court, sitting without a jury on July 28-30, 1980, on February 23-27, 1981, March 3-5, 1981, and May 12-15, 18, 1981, for the reasons set forth in this Court's Memorandum of December 7th, 1982,
IT IS HEREBY ORDERED: JUDGMENT is entered in favor of defendants the United States Department of Labor, the Office of Federal Contract Compliance, the Bureau of Apprenticeship and Training, the United States Department of Housing and Urban Development, the United States Department of Health, Education and Welfare, John Dunlop, Phillip J. Davis, Hugh C. Murphy, Carla Anderson Hills, Wagner Jackson, Caspar W. Weinberger, Dewey Dodds, Russell E. Train, and George Dukes, and against plaintiffs Ronald Taylor, Nathaniel Brown, David King, Claude Bass, Sammy J. Paul, and Resurrection, Inc.
NOTES
[1] The Philadelphia Plan ceased to exist as an entity separate from general federal contracts anti-discrimination rules on April 7, 1978, and was incorporated into the general federal anti-discrimination provisions, see 43 Fed.Reg. 14,888 (1977). For ease of reference, the Court will refer to federal equal employment opportunity programs in the Philadelphia area construction trades as the "Philadelphia Plan," throughout this opinion.
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552 F. Supp. 771 (1982)
SCHIFFAHARTSGESELLSCHAFT LEONHARDT & CO. (G.M.B.H. & CO.), Plaintiff,
v.
A. BOTTACCHI S.A. DE NAVEGACION, Defendant.
No. CV482-201.
United States District Court, S.D. Georgia, Savannah Division.
December 9, 1982.
*772 Robert Glenn, Jr., Lamar C. Walter, Savannah, Ga., for plaintiff.
Lamar C. Walter (Chamlee, Dubus, Sipple & Walter), Savannah, Ga., for defendant.
ORDER
EDENFIELD, District Judge.
The Court has before it the defendant's motion pursuant to Supplemental Rule E(8), *773 Fed.R.Civ.P., to dismiss the complaint and quash the process of maritime attachment and garnishment. The defendant contends that the Court lacks personal jurisdiction over it and that the issuance of process of maritime attachment and garnishment under Admiralty Rule B(1), Fed.R.Civ.P., violates its right to due process of law guaranteed by the Fifth Amendment to the United States Constitution.
Procedural Background
The plaintiff Schiffahartsgesellschaft Leonhardt & Co. (G.M.B.H. & Co.) (hereinafter referred to as "Leonhardt") filed its complaint in admiralty and petition to compel arbitration against defendant A. Bottacchi S.A. De Navegacion (hereinafter referred to as "Bottacchi") on May 24, 1982. The plaintiff alleged that the defendant is a foreign corporation organized and existing under the laws of Argentina and that no officer could be found within this district but that certain property belonging to the defendant, the vessel M/V Puntas Malvinas, was or would be within this district during the pendency of the action. The plaintiff's attorney submitted an affidavit signed by him in support of the assertion that the defendant could not be found within the Southern District of Georgia. The facts giving rise to the institution of this suit as alleged in the complaint are as follows:
The defendant time-chartered the plaintiff's vessel, the M/V Barbara Leonhart, by a New York Produce Exchange Charter Party dated March 16, 1982. On or about April 14, 1982, while operating under the charter party on a voyage between St. John, New Brunswick, Canada, and Buenos Aires, Argentina, the M/V Barbara Leonhart encountered bad weather during which she and her cargo were damaged, allegedly due to the defendant's negligence and breach of contract. Upon arrival in Buenos Aires, the plaintiff was required to post security in the amount of $450,000.00 to secure the claims of the cargo recipients for the cargo lost or damaged during the voyage. Contending that it is entitled to indemnity and/or contribution from defendant with respect to any liability which may be adjudged against it in favor of the cargo interests (together with costs, expenses, and attorney's fees, and damages for the injury to the vessel and the posting of security), the plaintiff sought the issuance of a summons with process of attachment and garnishment against the defendant's vessel, the M/V Puntas Malvinas. On May 25, 1982, the plaintiff amended its complaint after discovering that the defendant was not the owner of the M/V Puntas Malvinas, but the bareboat charterer, and prayed for issuance of process of attachment and garnishment against certain bunkers and stores owned by the defendant aboard the vessel M/V Puntas Malvinas, as well as against certain freights and subfreights due the defendant. The summons was issued by the court clerk against the vessel on May 24, 1982, and against the bunkers and freights on May 25, 1982. On May 26, the parties came before the Court and argued the constitutionality of Admiralty Rule B(1). The vessel was released as were the bunkers and freights after the defendant posted security pursuant to Rule E(5).
The defendant filed its motion to dismiss on June 4, asserting a lack of jurisdiction over the person of the defendant because the defendant is not the owner of the vessel attached and has not been personally served and arguing the unconstitutionality of Admiralty Rule B(1). The parties have submitted briefs and the Court again heard oral argument.
The Contention of the Parties
The initial attachment of the M/V Puntas Malvinas in this case demonstrates the fallibility of Rule B(1), according to the defendant's argument that Rule B(1) is unconstitutional because it does not provide adequate safeguards to protect against wrongful or mistaken deprivation of property. The defendant does not argue that the plaintiff did not follow the procedures set forth in Rule B. Moreover, the defendant cannot argue that as applied in its case Rule B violated its constitutional right to due process, since the defendant's agent *774 received prior notice of the attachment and an opportunity for a prompt post-seizure hearing was afforded defendant. Bottacchi attacks the Rule on its face, contending that the issuance of the summons with process of attachment and garnishment by the court clerk upon the plaintiff's submission of a complaint and affidavit containing conclusory allegations, without provision for prior notice or a preseizure or prompt postseizure hearing, violates its right to procedural due process guaranteed by the Fifth Amendment of the United States Constitution.[1] The defendant's position, though not expressly articulated, relies on the application to Rule B(1) of the due process principles set forth in the Supreme Court's line of decisions in the area of state creditor's rights statutes, Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S. Ct. 1820, 23 L. Ed. 2d 349 (1969); Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972); Mitchell v. W.T. Grant Co., 416 U.S. 600, 94 S. Ct. 1895, 40 L. Ed. 2d 406 (1974); and North Georgia Finishing Co. v. Dichem, Inc., 419 U.S. 601, 95 S. Ct. 719, 42 L. Ed. 2d 751 (1975).
The plaintiff ably presents the counterargument that the considerations of due process in the admiralty context are different from those in state attachment proceedings because of the unique character of commercial practices in admiralty. Thus, the plaintiff urges, the process due the defendant is not the same process due the debtors in the Sniadach line of cases. The plaintiff argues that Rule B(1), as supplemented by the Federal Rules, local rules, and the court's inherent equitable power in admiralty, ensures the defendant all the process to which it is due.
Court's Commentary
That the admiralty rules of maritime seizure are not beyond attack, and even invalidation, has been well established in recent years by the initiation of suits questioning their constitutionality in light of Sniadach and its progeny and Shaffer v. Heitner, 433 U.S. 186, 97 S. Ct. 2569, 53 L. Ed. 2d 683 (1977). Though the case before the Court raises no challenge to Admiralty Rule C which governs actions in rem and does not broach the jurisdictional issue under Shaffer, some discussion of in rem actions and quasi in rem jurisdiction will be necessary.
Rules B and C "permit seizures pursuant to a warrant issued by the ex parte application of a party to the clerk of a federal district court without requiring that the owner of such property be given prior notice or an opportunity to be heard." Batiza & Partridge, The Constitutional Challenge to Maritime Seizures, 26 Loyola L.Rev. 203, 211 (1980). Though similar procedurally, the purposes of the two rules are quite different and any discussion of their constitutionality must take into account the critical distinctions. Rule B governs in personam actions instituted by attachment of the defendant's property if the defendant cannot be found within the district for personal service. Its salutary purpose is to permit suits in any district in which the defendant's property may be attached thereby obviating the need to follow the defendant to his residence. Though Rule B is, in theory, a device for obtaining personal jurisdiction over the defendant, in practice it is often used as a means of securing the plaintiff's claim. Maritime Seizures, supra, at 213.
*775 Where the plaintiff has acquired a maritime lien in any of the numerous ways by which it may do so, an action in rem will lie and Rule C will provide the means for enforcing the lien by authorizing the arrest of the vessel. The viability of an action in rem to enforce a maritime lien depends intrinsically upon the court's acquisition of custody of the vessel pursuant to Rule C. Maritime Seizures, supra, at 212. This is so because a maritime lien, unlike a common law lien, is actually a property right in the vessel which arises at the moment of the event which creates the lien. Amstar Corporation v. S/S Alexandros T., 664 F.2d 904, 908-09 (4th Cir.1981); see generally, Gilmore & Black, The Law of Admiralty, §§ 9-1, 9-2, at 586-89. The presence of the maritime lien, as a substantive element of maritime law, distinguishes Rule C arrest from Rule B attachment. Compare Grand Bahama Petroleum Co., Ltd. v. Canadian Transportation Agencies, Ltd., 450 F. Supp. 447 (W.D.Wash.1978) with Kodiak Fishing Co. v. M/V Pacific Pride, 535 F. Supp. 915 (W.D.Wash.1982). The action lies against the vessel herself and Rule C arrest provides the means of satisfying the lien. Amstar Corp., supra, at 909. Thus, Rule C is not merely a procedural device to obtain jurisdiction over the owner; this characterization more accurately describes the theoretical purpose of Rule B.
As I have already noted, though their purposes are markedly different, the procedures provided in Rules B and C are very similar: Upon the filing of a verified complaint stating "the circumstances from which the claim arises with such particularity that the defendant or claimant will be able ... to commence an investigation of the facts and to frame a responsive answer," Admiralty Rule E(2)(a), the clerk may forthwith issue a summons and process of attachment and garnishment or a warrant for the arrest of the vessel. Under Rule B, an affidavit signed by the plaintiff or his attorney must accompany the complaint stating that "to the affiant's knowledge or to the best of his information and belief, the defendant cannot be found within the district." There is no provision for prior notice and the Advisory Committee "assumed that the garnishee or custodian of the property attached will ... notify the defendant...." Advisory Committee's Notes to Admiralty Rule B(2). Nor is there any provision for a pre- or post-seizure hearing or for judicial supervision of the issuance of the process or the warrant.
The absence of safeguards, such as judicial supervision, specific factual allegations, notice and an opportunity to contest the seizure, to protect against mistaken or wrongful attachments or arrests has given rise to the procedural due process challenges. The substantive due process attacks began after Shaffer v. Heitner "established, as a matter of due process under the Fourteenth Amendment, that a state court could not exercise jurisdiction over a defendant's property where a court would not have jurisdiction over the defendant's person." Maritime Seizures, supra, at 210. Rule B provides the same method of obtaining jurisdiction over the defendant as the Delaware sequestration statute involved in Shaffer. Notwithstanding the surface similarities, the district court in the influential case of Grand Bahama Petroleum Co., supra, set the tone for most subsequent treatments of the relevance of Shaffer in the maritime seizure context by ruling that Shaffer "is inapplicable to Rule B(1) on either constitutional or analytical grounds." 450 F.Supp. at 456. In reaching this conclusion, Judge Beeks relied on the distinct nature of admiralty as separate from the common law and the autonomy of admiralty both of which derive from the independent source of judicial power in admiralty, U.S.Const. art. III, § 2, and on the historical significance of maritime attachment in admiralty jurisprudence. 450 F.Supp. at 452-54. After tracing the history of Admiralty Rule B(1), he held that "[t]he recognized autonomy of admiralty jurisdiction, although not absolute, and the long constitutional viability of maritime attachment compel me to conclude that Shaffer does not reach Rule B(1) attachment." 450 F.Supp. at 455. On the whole, the rationale and ruling of Grand Bahama have been *776 followed. See, e.g., Hjalmar Bjorges Rederi v. Tugboat Condon, 1979 A.M.C. 1696 (S.D. Cal.1976). But see Engineering Equipment Co. v. S/S Selene, 446 F. Supp. 706 (S.D.N.Y. 1978).
Interestingly, the articulation in Grand Bahama of the historical and constitutional grounds for rejecting a challenge to the quasi in rem nature of Rule B(1), has been adopted by later courts in upholding Rules B and C against procedural due process challenges. See, e.g., Amstar Corp. v. S/S Alexandros T., 664 F.2d 904 (4th Cir.1981); Merchants National Bank v. Dredge General G.L. Gillespie, 663 F.2d 1338 (5th Cir. 1981). But Judge Beeks himself did not find such reasoning persuasive in confronting the Sniadach line of cases. Instead, while acknowledging the historical importance of maritime attachment, he found that the Rule in its present form provides less protection than the procedures used before 1844. 450 F.Supp. at 459. The historical significance rationale was thus much weaker when the procedural, as opposed to substantive, validity of the rule was considered. In light of the pronouncements in Sniadach, Fuentes, Mitchell, and North Georgia Finishing, the court in Grand Bahama found Rule B(1) "insufficient to protect defendants from the mistaken deprivation of property." 450 F.Supp. at 459. Judge Beeks suggested that the defect could be cured by amendment of Rule B(1) to provide for an immediate opportunity for a post-seizure hearing and for judicial supervision of the issuance of the writ. 450 F.Supp. at 459 n. 84.
The Grand Bahama interpretation of the Sniadach line of cases has by no means been readily accepted. See, e.g., Amstar Corp., supra, at 910. Thus, most courts have engaged in a de novo review of the somewhat inconsistent messages delivered by the Supreme Court in Sniadach, Fuentes, Mitchell, and North Georgia Finishing.
In Sniadach v. Family Finance Corp., 395 U.S. 337, 89 S. Ct. 1820, 23 L. Ed. 2d 349 (1969), the court considered the validity of a wage garnishment procedure which did not provide for prior notice or hearing. Justice Douglas without extended argument concluded that "absent notice and a prior hearing (cit.) this prejudgment garnishment violates the fundamental principles of due process." Id. at 342, 89 S.Ct. at 1823. He commented, however, that "in extraordinary situations," notice and a prior hearing could be dispensed with. Id. at 339, 89 S.Ct. at 1821. In Fuentes v. Shevin, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 (1972), the court extended Sniadach's conception of due process to include seizure of any property where no pre-seizure notice and opportunity to challenge the seizure were provided. The replevin statutes at issue allowed private parties on ex parte application to obtain prejudgment writs of replevin. The writ would be issued after the recitation in a conclusory manner of the reasons supporting the application for the writ and after the posting of a security bond. The court also elaborated on Sniadach's passing reference to "extraordinary situations" which would warrant the postponement of notice and a hearing:
First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a governmental official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance.
407 U.S. at 91, 92 S.Ct. at 2000. The court cited as an example, Ownbey v. Morgan, 256 U.S. 94, 41 S. Ct. 433, 65 L. Ed. 837 (1921), a case which, according to the court, involved "attachment necessary to secure jurisdiction in state court clearly a most basic and important public interest." Id. at 91 n. 23, 92 S.Ct. at 1999 n. 23.
The court found the "extraordinary situations" test to be met in Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 94 S. Ct. 2080, 40 L. Ed. 2d 452 (1974). The Puerto Rican government had seized the plaintiff's yacht under a Commonwealth *777 statute providing for the seizure and forfeiture of vessels used to transport controlled substances:
First, seizure under the Puerto Rican statutes serves significant governmental purposes: Seizure permits Puerto Rico to assert in rem jurisdiction over the property in order to conduct forfeiture proceedings, thereby fostering the public interest in preventing continued illicit use of the property and in enforcing criminal sanctions. Second, pre-seizure notice and hearing might frustrate the interests served by the statutes, since the property seized as here, a yacht will often be of a sort that could be removed to another jurisdiction, destroyed, or concealed, if advance warning of confiscation were given. And, finally, unlike the situation in Fuentes, seizure is not initiated by self-interested private parties; rather, Commonwealth officials determine whether seizure is appropriate under the provisions of the Puerto Rican statutes.
416 U.S. at 679, 94 S.Ct. at 2089-90 (footnote omitted).
Two days prior to the decision in Calero-Toledo, the court handed down its decision in Mitchell v. W.T. Grant, 416 U.S. 600, 94 S. Ct. 1895, 40 L. Ed. 2d 406 (1974), which was authored by the dissenter in Fuentes, Justice White. At first glance, Mitchell appeared to overrule Fuentes, see 416 U.S. at 629-36, 94 S.Ct. at 1910-14 (Stewart, J., dissenting), by upholding a Louisiana sequestration statute which permitted seizures without pre-deprivation notice or opportunity to be heard. The court distinguished the statutes involved in Fuentes by noting that the Louisiana statute provided safeguards lacking from those statutes: (1) judicial control of the issuance of the writ; (2) specific, factual allegations in the supporting affidavit; (3) posting of a security bond by the creditor; (4) opportunity to seek dissolution of the writ contingent upon creditor's proof of grounds for the issuance of the writ. Echoing his dissent in Fuentes, Justice White expressed his concern for the interests of both the debtor and the creditor. He was particularly bothered by the danger that property left in the debtor's hands would deteriorate or would be sold, concealed or otherwise disposed of, thus depriving the creditor of his property right in the goods. 416 U.S. at 605, 94 S.Ct. at 1899. "The danger of destruction or alienation cannot be guarded against if notice and a hearing before seizure are supplied." Id. at 609, 94 S.Ct. at 1901. Balancing the interests of the creditor and debtor, the court concluded that
the Louisiana system seeks to minimize the risk of error of a wrongful interim possession by the creditor. The system protects the debtor's interest in every conceivable way, except allowing him to have the property to start with, and this is done in pursuit of what we deem an acceptable arrangement pendente lite to put the property in the possession of the party who furnishes protection against loss or damage to the other pending trial on the merits.
Id. at 618, 94 S.Ct. at 1905.
Again, in North Georgia Finishing, Inc. v. Di-chem, Inc., 419 U.S. 601, 95 S. Ct. 719, 42 L. Ed. 2d 751 (1975), the court engaged in a balancing of interests and found that a Georgia statute, which allowed the issuance of a process of garnishment by a clerk of court upon the filing of a conclusory affidavit and of a bond, without notice or a preor post-garnishment hearing, violated the Fourteenth Amendment due process clause. The Georgia statute had "none of the saving characteristics of the Louisiana statute." Id. at 607, 95 S.Ct. at 722. The court did not find material the fact that, unlike the debtors in Fuentes and Mitchell, the debtor in North Georgia Finishing was a corporation as was the garnishor. Nor was the posting of a security bond sufficient to protect the debtor against the "risk of initial error." 419 U.S. at 608, 95 S.Ct. at 723. The court made clear that it would not "distinguish among different kinds of property in applying the Due Process Clause." Id.
Last term, the Supreme Court in Lugar v. Edmondson Oil Co., ___ U.S. ___, 102 S. Ct. 2744, 73 L. Ed. 2d 482 (1982), explained *778 that implicit in the Sniadach cases was the determination that "when the state has created a system whereby state officials will attach property on the ex parte application of one party to a private dispute," the applicant may fairly be said to be a state action. 102 S.Ct. at 2757. Such a finding of state action necessarily preceded the application of the due process clause of the Fourteenth Amendment in Sniadach, Fuentes, Mitchell, and North Georgia Finishing. That "state agents aided the creditor in securing the disputed property" sufficed to establish state action. 102 S.Ct. at 2752.
Two tests for the constitutionality of state attachment or garnishment laws may be gleaned from the Sniadach line of cases, as noted by the authors of the article cited above:
Fuentes apparently stands for the proposition that a no-notice attachment is invalid except in "extraordinary situations." The Mitchell and Di-chem decisions hold that a no-notice attachment is invalid without "other safeguards." If one assumes that Mitchell did not impliedly overrule Fuentes, the rule of law that can be distilled from the Sniadach-Fuentes line is that a seizure of property is unconstitutional if it neither falls into the "extraordinary situations" exception of Fuentes nor provides "other safeguards" substantially similar to those in Mitchell.
Maritime Seizures, supra, at 209.
Analysis of the Case Law
At this point, constitutional challenges to Admiralty Rules B and C, on both substantive and procedural due process grounds, have been numerous enough to permit some elementary observations. Though the results of such challenges have not been uniform, in the main, courts have upheld the constitutionality of the Rules. See, e.g., Polar Shipping, Ltd. v. Oriental Shipping Corp., 680 F.2d 627 (9th Cir.1982), 1982 A.M.C. 2330 (Rule B(1); procedural due process); Merchants National Bank v. Dredge General G.L. Gillespie, 663 F.2d 1338 (5th Cir.1981) (Rule C; procedural due process); Kodiak Fishing Co. v. M/V Pacific Pride, 535 F. Supp. 916 (W.D.Wash.1982), 1982 A.M.C. 2089 (Rule C; procedural due process); Inter-American Shipping Enterprise, Ltd. v. The Tula, 1982 A.M.C. 951 (E.D.Va.1981) (Rules B(1) and C; procedural due process); Anti Costi Shipping Corp. v. Golar Martins, 1980 A.M.C. 2508 (S.D.N. Y.1979) (Rule B(1); procedural due process); United States v. Kaiyo Maru, 503 F. Supp. 1075 (D.Alaska 1980) (Rule C; procedural due process); Hjalmar Bjorges Rederi v. Tugboat Condor, 1979 A.M.C. 1696 (S.C.Cal.1979) (Rule C; substantive due process); Amoco Overseas Oil Co. v. Compagnie Nationale Algerienne, 459 F. Supp. 1242 (S.D.N.Y.1978), aff'd 605 F.2d 648 (2nd Cir.1979) (Rule C; substantive due process); Grand Bahama Petroleum Co., Ltd. v. Canadian Transportation Agencies, Ltd., 450 F. Supp. 447 (W.D.Wash.1977) (Rule B(1); substantive due process); Central Soya Co. v. Cox Towing Corp., 417 F. Supp. 658 (N.D. Miss.1976) (Rule C; procedural due process). But see Cooper Shipping Co. v. Century 21 Exposition, unpublished opinion, case no. 82-535-Civ-T-GC (M.D.Fla.1982) (Rule B(1); procedural due process); Alyeska Pipeline v. The Vessel Bay Ridge, 509 F. Supp. 1115 (D.Alas.1981), 1981 A.M.C. 1086 (Rule C; procedural due process); Cooke Industries v. Tokyo Marine Co., Ltd., 1978 A.M.C. 1979 (D.Alas.1978) (Rule B(1); procedural due process); Grand Bahama Petroleum Co., Ltd. v. Canadian Transportation Agencies, Ltd., 450 F. Supp. 447 (W.D.Wash.1978) (Rule B(1); procedural due process); Karl Senner, Inc. v. M/V Acadian Valor, 485 F. Supp. 287 (E.D.La. 1980) (Rule C; procedural due process); Engineering Equipment Co. v. S/S Selene, 446 F. Supp. 706, 1978 A.M.C. 809 (S.D.N.Y.1978) (Rule B(1); substantive due process) (minimum contacts with U.S. as a whole sufficient).
Though the courts have used different rationales in upholding the procedural and jurisdictional schemes of the Rules, some themes have predominated. With few exceptions, the courts have implicitly acknowledged the deficiencies of the Rules but have looked to the Federal Rules of Civil Procedure, *779 local district court rules, and/or the inherent equitable power of the district court sitting in admiralty to "bolster" the procedures set forth in the rules. See, e.g., Amstar Corp., supra, at 912; Merchants National Bank, supra, at 1344; Anti Costi Shipping, supra, at 2510-11. No court, either in upholding the Rules or in finding them unconstitutional, has rigidly applied the due process reasoning of the Sniadach line of cases. The courts have heeded well the Supreme Court's characterization of due process: "The requirements of due process of law `are not technical, nor is any particular form of procedure necessary' ... `The very nature of due process negates any concept of inflexible procedures universally applicable to every imaginable situation.' ...." Mitchell, 416 U.S. at 610, 94 S.Ct. at 1901 (citations omitted). The mobile nature of commerce in admiralty and the ease with which vessels could escape the court's jurisdiction, along with the historical and constitutional distinctions between admiralty and the common law, have influenced many decisions with regard to Rules B and C.
Indeed, none of the courts have found that pre-arrest or pre-attachment notice and opportunity to contest the seizure are mandated by the Fifth Amendment due process clause. Not only would pre-seizure notice and hearing be impractical (maritime attachment is not available unless the defendant cannot be found within the district), but it would defeat the very ends contemplated by the Rules, that is, the acquisition of jurisdiction and foreclosure of a maritime lien. As the court in Polar Shipping said,
The ship, if it were being libelled under Supplemental Rule C, could depart beyond the jurisdiction; the other property, to be seized under Supplemental Rule C, or attached under Supplemental Rule B, could be shipped out, otherwise disposed of, or concealed; credits such as are here involved, could be collected or transferred out of the jurisdiction.
680 F.2d at 638. This reasoning is consistent with Mitchell and North Georgia Finishing. The threat of destruction, sale, or concealment of the property sought to be attached is one of the creditor's interests, which, in this case, outweighs the debtor's interest in prior notice and opportunity to contest the seizure. See Amstar Corp., supra, at 911; Merchants National Bank, supra, at 1344. As for notice of the arrest or attachment itself either immediately prior thereto or upon receipt of the summons or warrant, it is difficult to disagree with the Advisory Committee's comment that the garnishee or custodian of the attached property will have an interest in giving immediate notice to the defendant of the attachment or garnishment. Nor does the Court have any doubt that, by local custom in many ports, the defendant's local agent or attorney is notified prior to seizure. This is exactly what occurred in the case at bar.
Attention has been focused primarily on the other alleged deficiencies: the absence of judicial supervision, the conclusory nature of the allegations in the complaint and the lack of a provision for a prompt postseizure hearing. These deficiencies have not convinced the courts of appeals, who have addressed the constitutionality of Rules B and C, to hold the Rules unconstitutional. See Polar Shipping, Ltd., supra; Amstar Corp., supra. The Fifth Circuit in Merchants National Bank (which is not binding on the Eleventh Circuit, see Stein v. Reynolds Securities, Inc., 667 F.2d 33 (11th Cir.1982)), questioned the value of a judge or magistrate's participation when complicated transactions are often involved. The danger of defeating the seizure which might "effectively dispose of the claim on the merits without trial," 663 F.2d at 1344, outweighed any value such supervision might have to the debtor. As for the lack of a prompt post-seizure hearing, the court adverted to the district court local rule which provides:
Whenever there is an arrest in rem or whenever property is attached, the party arrested or any person having a right to intervene in respect of the thing attached, may, upon evidence showing any improper practice or a manifest want of equity on the part of the libellant, be entitled to an order requiring the libellant *780 to show cause instanter why the arrest or attachment should not be vacated.
This rule, which guarantees a prompt postattachment or arrest hearing upon application and presentation of evidence of wrongdoing or mistake, cures the omission from Rule C of such a provision, according to the Fifth Circuit. Even where no such rule has been adopted, the same result obtains under the admiralty court's inherent powers. 663 F.2d at 1344. The Fourth Circuit found that Rule 12 of the Federal Rules of Civil Procedure would serve the same purpose as the local rule and therefore upheld Rule C despite the lack of a provision for a prompt post-arrest hearing.[2] 664 F.2d at 912. The Fourth and Fifth Circuits are in accord in holding that "[b]ecause of the historical uniformity and the unique character of the admiralty in rem procedures," 663 F.2d at 1350, the Sniadach line of cases with their two-fold test of constitutionality do not apply to Rule C procedures. See 664 F.2d at 910.
As I have already discussed, however, and as the Fifth Circuit made abundantly clear in its decision, the considerations which arise in the context of Rule C are by no means necessarily the same considerations that Rule B would raise. "A maritime lien represents a property interest entirely distinct from an in personam right." 663 F.2d at 1350.
In Polar Shipping Ltd., the Ninth Circuit found the Rule B(1) post-attachment hearing procedure, supplemented by a local rule identical to the one quoted above, adequate. The court rejected the contention that the Rule was unconstitutional in failing to provide for judicial participation in the issuance of the writ and found inaccurate the description of the verified complaint and affidavit as conclusory. The exact basis of its decision in this regard is difficult to discern. The court addressed the contentions, found them without substance because the complaint and affidavit contained specific allegations and because judicial participation "would add little protection, if any, to the defendants," 680 F.2d at 639, then rendered its discussion meaningless by finding that Rule B(1) fell within the "extraordinary situations" category, concluding with the comment that admiralty procedures have "a history and sanction of their own." Id. at 640.
The district court in Anti Costi Shipping, 1980 A.M.C. 2508 (S.D.N.Y.1979), also engaged in a balancing of interests exercise in addition to utilizing the "extraordinary situations" standard, a local rule and Rule E in order to find Rule B(1) constitutional. The district court in Cooper Shipping Co. v. Century 21 Exposition, unpublished opinion, Case No. 82-535-Civ-T-GC (M.D.Fla.1982), apparently balanced the interests and concluded that neither its own inherent powers in admiralty or Rule E could change the fact that "under Rule B, a party may attach property after merely filing a complaint with the clerk of court [with] no requirement for a judicial determination of the validity of the complaint [or] provisions for *781 either a pre-seizure or speedy post-seizure hearing." Id. at 3.
Judge Beeks' decision in Grand Bahama remains the most well-reasoned and thorough opinion on the constitutional validity of Rule B(1). Noting the similarity of the case before him and North Georgia Finishing, Judge Beeks proceeded to apply the "extraordinary situations" test to maritime attachment and garnishment. He found that the first prong of the test as implemented in Calero-Toledo was not met because the mere assertion of admiralty jurisdiction did not, in his opinion, serve a significant governmental purpose. In order to reach this conclusion, he had to distinguish the Supreme Court's citation of Ownbey v. Morgan, 256 U.S. 94, 41 S. Ct. 433, 65 L. Ed. 837 (1921), as an example of a seizure which served a governmental and public interest attachment of property necessary to secure jurisdiction. Other courts have relied on Ownbey and the court's comments about it to uphold Rule B and C. See Amstar Corp., supra, at 908; Polar Shipping, supra, at 640; Anti Costi Shipping, supra, at 2512; Central Soya Co., Inc. v. Cox Towing Corp., 417 F. Supp. 658, 664 (N.D.Miss.1976). The Grand Bahama court first found that the holding of Ownbey did not actually involve the precise point for which it was cited and then questioned the "continued vitality" of Ownbey in light of Shaffer v. Heitner, in which the court noted: "We do not read the recent references to Ownbey as necessarily suggesting that Ownbey is consistent with more recent decisions interpreting the Due Process Clause." 433 U.S. at 194 n. 10, 97 S.Ct. at 2574 n. 10. The Grand Bahama court further found that maritime attachment initiated by a private party was not a "`truly unusual'" situation. 450 F.Supp. at 457 (quoting Fuentes, 407 U.S. at 90, 92 S.Ct. at 1999).[3]
The court then distinguished the case before it from Mitchell and found that the safeguards which saved the sequestration statute there, were not provided by Rule B(1): judicial participation, specific, factual allegations showing a right to possession, posting of bond by the creditor, and the opportunity to seek immediate dissolution of writ which would be done unless the creditor proved his entitlement to the writ. The balancing of interests analysis employed in Mitchell, the court concluded, did not favor the creditor: "The vitality of maritime commerce depends as much on the availability of protections against the mistaken summary deprivation of the property of maritime defendants as it does on the availability of speedy remedies for maritime plaintiffs." 450 F.Supp. at 458. As I noted above, the historic role of maritime attachment in admiralty jurisprudence did not persuade the court to uphold its procedures. Nor did the fact that admiralty is an autonomous branch of federal law convince the court that the procedures were constitutionally adequate: "I can find no indication that maritime defendants may be constitutionally due less procedural protection against the mistaken deprivation of property than non-maritime defendants." 450 F.Supp. at 459 (footnote omitted).
Constitutionality of Admiralty Rule B(1)
Though I find persuasive parts of each of the opinions discussed, I cannot adopt any one opinion's reasoning in its entirety. I am convinced that Rule B(1) does not comport with the Fifth Amendment due process law in that it does not contain adequate safeguards to protect against the mistaken deprivation of property. It is important to note that not only could the defendant's property be mistakenly seized when the defendant is actually within the district for purposes of personal service, but also a third party's property may be mistakenly seized and effectively withdrawn from commerce. Plaintiffs must establish ownership, but because of *782 the existence of a pattern of complex corporate structures within the shipping industry, the facts are not always readily ascertainable. Because plaintiffs may be misled by registries of ship ownership,[4] it is simply not possible to guard against every mistaken seizure. The chance of depriving the defendant of property when it or its officers or agents are available in the district for personal service or when the claim is clearly meritless may however be substantially decreased by fashioning procedures which will be a constitutionally and commercially adequate accommodation of all interests involved. Such an accommodation may easily be reached by the addition of several procedural requirements, none of which would overly tax commercial practice and all of which would go far to ensure that the defendant's goods or credits would be seized only when probable cause to do so exists.
The court in Fuentes carved an exception to the notice and hearing requirement for "extraordinary situations" which are "truly unusual" and which "justify postponing notice and opportunity for a hearing." 407 U.S. at 90, 92 S.Ct. at 1999 (emphasis added). There has been universal agreement that both notice and an opportunity for a hearing should be postponed until after the attachment or garnishment. Whether one construes maritime attachment and garnishment as an "extraordinary situation" or whether the postponement is a facet of the flexible application of due process, through a balancing of interests, to a commercial practice, seems immaterial.
But it is certainly possible and perhaps helpful to consider the argument that Rule B(1) represents an "extraordinary situation." To distinguish Ownbey as of doubtful vitality in light of Shaffer, as the court in Grand Bahama did, begs the question when it is settled that Shaffer is not applicable to admiralty jurisdiction. Therefore, attachment to acquire jurisdiction in admiralty may still serve an important governmental or general public interest thus satisfying the first step of the "extraordinary situations" test. The need for prompt action, the second prong of the test, is evidenced by the very real threat that the property to be attached may simply sail out of the court's jurisdiction never to return. The third facet of the test, strict control by the state over its monopoly of legitimate force, simply is not satisfied in the case of Rule B(1). In order to meet the test of strict control, "the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance." 407 U.S. at 91, 92 S.Ct. at 2000. Although the government is a joint participant in the seizure, see Lugar v. Edmondson Oil Co., supra, a private party initiates the attachment. Moreover, the clerk of court who issues the writ performs a purely ministerial act in doing so upon the presentation of a complaint and affidavit containing conclusory allegations. Thus, I agree with the Grand Bahama court's conclusion, though not with its reasoning, that Rule B(1) attachment is not an "extraordinary situation" within the meaning of Fuentes and Calero-Toledo. I am, however, in full agreement with the conclusion of the majority of courts that pre-attachment notice and opportunity for a hearing is not warranted. Due process will not be construed so as to defeat entirely the remedies available to those to whom the defendant may be liable.
I cannot agree with the court in Polar Shipping, Ltd. that due process does not require the plaintiff or his attorney to present specific, factual allegations in the affidavit stating that the defendant cannot be found within the district. Though the Court has no doubt that plaintiff's counsel undertook a diligent search for officers of the defendant within the district, the Rule allows affidavits based upon mere information and belief. Cf. Polar Shipping, Ltd., supra, at 639-40. Where the whole thrust of the Rule is to provide a means of acquiring jurisdiction when the defendant cannot *783 be found within the district, the plaintiff must allege more than that upon information and belief the defendant cannot be found. By requiring the plaintiff to describe the various ways by which the defendant was sought, thereby ensuring that the plaintiff will exercise some diligence in searching for the defendant, its officers or agents for service, the chances of a mistaken deprivation of property will be lessened.
The complaint here did not lack specificity sufficient upon which to base the issuance of the writ of attachment. Unfortunately, however, the defendant did not own the property initially attached. The Rule could perhaps alleviate the chance for such mistaken seizures but as I have noted, even attaching what purports to be proof of ownership to the complaint will not guarantee that the defendant's property will be attached or garnisheed. Rule E requires that the complaint state the allegations with sufficient particularity to enable the defendant to frame an answer and commence an investigation of the facts. This is equivalent to the "notice pleading" requirement of Rule 8(a) of the Federal Rules of Civil Procedure. In the Court's opinion, to require more of the plaintiff in the way of proof of ownership or substantiation of its claim would be unduly burdensome, would hinder commercial practice, and would potentially defeat jurisdiction. The balance of interests does not weigh in the defendant's favor with regard to the complaint.
Moreover, the participation of a judicial officer in the issuance of the writ by reviewing the complaint and affidavit would render less threatening the conclusory nature of the allegations in the complaint. I cannot agree with the Ninth Circuit that judicial supervision would be of no benefit to the defendant. Polar Shipping, supra, at 639. To the contrary, I find that the interjection of a judicial officer would provide significant safeguards. The Supreme Court in Mitchell distinguished a constitutional statute from an unconstitutional statute on the basis, inter alia, of judicial supervision. This decision forecloses the argument that the element of judicial participation in the issuance of the writ does not rise to the level of constitutional significance. Weighing the balance of interests, I find that no interest of the plaintiff is implicated and that requiring the plaintiff to present its complaint and affidavit to a judicial officer, either judge or magistrate, will offer protection from wrongful attachment which is lacking in Rule B(1).
I am persuaded by the Ninth Circuit's argument that Rule E provides sufficient opportunity for the release of attached or garnisheed property upon the posting of a bond. Rule B(1), as supplemented by Rule E, is not inadequate in this respect. See Polar Shipping, supra at 640-42.
Rule B(1) does not provide for a post-garnishment or post-attachment hearing. However, as the court in Polar Shipping pointed out, "[p]roviding an immediate post-attachment hearing for a determination of whether an attachment is based on a frivolous or clearly meritless claim, or has been effected despite the presence of the defendant in the district is consistent with the language and purposes of Supplemental Rule B." 680 F.2d at 627. Thus, the Rule may be upheld despite the deficiency if a local rule provides for a prompt post-attachment hearing. Id. The Fifth Circuit, in Merchants National Bank, supra, in upholding the constitutionality of Rule C, expressed the opinion that even without a local rule, the district court, exercising its inherent powers in equity, could fashion relief in the form of a prompt post-attachment hearing.
The plaintiff here urges that the defendant was afforded such a hearing. However, it appears that the parties did not address themselves to the issue of the frivolity or merit of the plaintiff's claim but only to the constitutionality of Rule B(1). The plaintiff also directed the Court's attention to two local rules which, according to the plaintiff, guarantee the opportunity for a post-attachment hearing. Local Rule 5 governs the procedure for petitioning judges in chambers, requiring that notice shall be given to opposing counsel whenever *784 an ex parte motion or application is to be made to the court or when an attorney desires to confer with a judge regarding a pending case. Local Rule 11 supplements Rule E by setting forth procedures for the release of seizures, the payment of custodial costs, and the posting of bonds. Neither rule provides expressly for a post-attachment hearing.
The Court is somewhat troubled by the efforts to bolster the Rule by the use of local rules since the outcome renders the Rule "facially" constitutional in some districts and "facially" unconstitutional in other districts. I am even more bothered by the idea that the Court's inherent powers in admiralty make up for the Rule's constitutional deficiencies. The existence of such powers in no way informs the parties and interested third parties of a right to a post-attachment hearing. I cannot find that these inherent powers supply the necessary safeguards. And because this district does not have a Local Rule equivalent to those which afford interested parties a prompt post-attachment hearing, the Court cannot find Rule B(1) in its present form constitutionally adequate to protect the defendant from the danger of deprivations of property.[5]
The Court with its sister courts in the Brunswick and Augusta Divisions will act upon this recognition of the Rule's inadequacies by formulating a local rule to cure the defects.
Conclusion
For the foregoing reasons, I find Rule B(1) unconstitutional. The defendant's motion to quash the process of maritime attachment and garnishment is therefore granted and the complaint is dismissed.
NOTES
[1] Rule B(1) provides:
With respect to any admiralty or maritime claim in personam a verified complaint may contain a prayer for process to attach the defendant's goods and chattels, or credits and effects in the hands of garnishees named in the complaint to the amount sued for, if the defendant shall not be found within the district. Such a complaint shall be accompanied by an affidavit signed by the plaintiff or his attorney that, to the affiant's knowledge, or to the best of his information and belief, the defendant cannot be found within the district. When a verified complaint is supported by such an affidavit the clerk shall forthwith issue a summons and process of attachment and garnishment. In addition, or in the alternative, the plaintiff may, pursuant to Rule 4(e), invoke the remedies provided by state law for attachment and garnishment or similar seizure of the defendant's property. Except for Rule E(8) these Supplemental Rules do not apply to state remedies so invoked.
[2] The court in Amstar Corp. also relied on the security and release by stipulation provisions in Rule E. See 664 F.2d at 912. Pertinent portions of Rule E are as follows:
(5) Release of Property.
(a) Special Bond. Except in cases of seizures for forfeiture under any law of the United States, whenever process of maritime attachment and garnishment or process in rem is issued the execution of such process shall be stayed, or the property released, on the giving of security, to be approved by the court or clerk, or by stipulation of the parties, conditioned to answer the judgment of the court or of any appellate court.
(b) General Bond. The owner of any vessel may file a general bond or stipulation, with sufficient surety, to be approved by the court, conditioned to answer the judgment of such court in all or any actions that may be brought thereafter in such court in which the vessel is attached or arrested.
(8) Restricted Appearance. An appearance to defend against an admiralty and maritime claim with respect to which there has issued process in rem, or process of attachment and garnishment whether pursuant to these Supplemental Rules or to Rule 4(e), may be expressly restricted to the defense of such claim, and in that event shall not constitute an appearance for the purposes of any other claim with respect to which such process is not available or has not been served.
[3] Examples of the limited situations which satisfy the first prong of the "extraordinary situations" test are protection of the public from contaminated food, from bank failures, and from misbranded drugs; the collection of taxes and seizures to aid war efforts, and forfeitures under criminal statutes also justify the postponement of notice and hearing. Calero-Toledo, 416 U.S. at 678-9, 94 S.Ct. at 2089.
[4] This is what actually occurred in this case.
[5] A federal district court may hold a rule formulated by the U.S. Supreme Court unconstitutional. See Polar Shipping, Ltd., 680 F.2d at 634-5; Amstar Corp., 664 F.2d at 906; Alyeska Pipeline Service Co. v. The Vessel Bay Ridge, 509 F. Supp. 1115, 1123 n. 44; Grand Bahama, 450 F.Supp. at 449-51.
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266 Pa. Super. 480 (1979)
405 A.2d 535
COMMONWEALTH of Pennsylvania
v.
Roman SENYSZYN, Appellant.
Superior Court of Pennsylvania.
Submitted December 8, 1978.
Decided June 1, 1979.
*481 John W. Packel, Assistant Public Defender, Chief, Appeals Div., Philadelphia, and with him, Elaine G. DeMasse, Assistant Public Defender, for appellant.
Robert B. Lawler, Assistant District Attorney, Chief, Appeals Div., Philadelphia, for Commonwealth, appellee.
Before VAN der VOORT, WIEAND and LIPEZ, JJ.
LIPEZ, Judge:
Appellant was convicted, following a non-jury trial,[1] of two counts of aggravated assault, burglary, and possessing an instrument of crime generally.[2] He was sentenced on the burglary and aggravated assault convictions to three concurrent terms of two to ten years imprisonment. Sentence for possessing an instrument of crime was suspended. The "instrument of crime" in appellant's possession, with which he committed the aggravated assault of which he was convicted, was a baseball bat. He asserts, and the Commonwealth and the trial court concede, that a baseball bat, not especially adapted for criminal purposes, is not an "instrument of crime" within the meaning of the statutory definition. We agree. See Com. v. Rios, 246 Pa.Super. 479, 371 A.2d 937 (1977); 18 Pa.C.S. § 907. Appellant also requests a remand for resentencing on the convictions of burglary and aggravated assault in accordance, he claims, with Com. v. Lockhart, 223 Pa.Super. 60, 296 A.2d 883 (1972). Lockhart, however, relied on and quoted with approval from McGee v. United States, 462 F.2d 243 (2d Cir. 1972), where the Second *482 Circuit remanded for "some explanation . . . for allowing the original sentences on the valid counts to stand unaltered" because a conviction whose invalidity became apparent on appeal may have influenced the sentence. Id. at 246-47. The Court of Appeals noted, however, that such a conviction, subsequently held invalid, would not always influence "sentencing on other counts prosecuted simultaneously." The court stated that it would be clear that there had been no such influence "where the one count is for a less serious offense than the others[.]" Id. at 246 n. 5.
Possessing instruments of crime generally is a misdemeanor of the first degree, 18 Pa.C.S. § 907(a), while burglary is a felony of the first degree, 18 Pa.C.S. § 3502(c), and aggravated assault, under the only subsection applicable to the case at bar, is a felony of the second degree. 18 Pa.C.S. § 2702(b). See 18 Pa.C.S. § 2702(a)(1). "In these circumstances, a remand would be a mere procedural exercise." Com. v. Grant, 235 Pa.Super. 357, 341 A.2d 511 (1975). See also Com. v. Fant, 263 Pa.Super. 533, 398 A.2d 704 (1979).
The conviction and judgment of sentence on information No. 1974 are vacated, and judgments of sentence on informations No. 1970, No. 1971 and No. 1973 are affirmed.
NOTES
[1] Appellant alleges, in a footnote, that the jury waiver colloquy was "insufficient as a matter of law." Appellant then admits, in the same footnote, that this issue was not raised in the court below. It is, therefore, waived. Com. v. Clair, 458 Pa. 418, 326 A.2d 272 (1974).
[2] Informations No. 1970, Nos. 1971, 1973 and No. 1974, respectively.
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552 F. Supp. 554 (1982)
Craig TRAVIS, Faith Evans, Carmen Bostick, George Starbuck, Les Skillings, Laura Bolles and Dave Ellis, Plaintiffs,
and
Alice Scott, Anne F. Lee and Rhoda Miller, Plaintiffs in Intervention,
v.
Jean KING, Lieutenant Governor of the State of Hawaii; Ruben P. Mallari, John E.K. Akana, Franklin S. Kometani, Robert A. McFarlane, Franklin M. Mukai, Tom Okuda, D.W. Rose, James V. Hall and Carla Coray, Defendants.
HAWAII COUNTY COMMITTEE, Democratic Party of Hawaii, Catherine Filson, Frances Hasegawa, Dixie Kaetsu, Leslie Hill, William Kikuchi, Takeshi Kudo, Tracey Lauder, Luther Nathaniel, Sr., John Santangelo and James Simpson, individually and on behalf of all other persons similarly situated, Plaintiffs,
v.
Jean KING, in her capacity as Lieutenant Governor and Chief Elections Officer of the State of Hawaii, Defendant.
Civ. Nos. 81-0433, 81-0438.
United States District Court, D. Hawaii.
October 13, 1982.
*555 John S. Carroll, David A. Ezra, Michael F. O'Connor/Steven Thomas, Honolulu, Hawaii, for Craig Travis et al.
Peter J. Herman, Charles H. Hurd, Welcome S. Fawcett, Honolulu, Hawaii for intervenors Lee, Scott and Miller.
Tany S. Hong, Atty. Gen. by Francis Paul K.A. Keeno, Deputy Atty. Gen., James T. Funaki, Honolulu, Hawaii, for defendants.
Steven K. Christensen, Hilo, Hawaii, William J. McCarthy, Jr., Kealakekua, Hawaii, Wayne C. Metcalf, III, Robert P. Marx, Hilo, Hawaii, for Hawaii County Committee et al.
Before CHAMBERS, Circuit Judge, and KING and WILLIAMS, District Judges.
*556 OPINION
SPENCER WILLIAMS, District Judge:
In 1962, the United States Supreme Court found the issue of legislative malapportionment justiciable.[1] Since that time, efforts by the State of Hawaii to redraw the lines of local, state and congressional districts have been subjected to numerous attacks in both state and federal courts.[2] The present action involves a challenge to the state's most recent reapportionment effort, its 1981 legislative and congressional reapportionment plan as embodied in the Report and Reapportionment Plan of the 1981 Reapportionment Commission (1981 Plan), submitted to the state's Lt. Governor on September 28, 1981.
Plaintiffs and intervenors claim the 1981 Plan violates both State and Federal Constitutional provisions. The imminence of the upcoming 1982 primary and general elections mandated that this litigation be handled expeditiously.[3] The court, therefore, ordered the parties to submit all evidence in written form, in lieu of any live testimony. Oral argument on the matter was held before the full court on March 24, 1982. By its interlocutory order, dated March 25, 1982, the court announced its decision that (1) as it pertains to the state legislature's reapportionment, the 1981 Plan violates the equal protection clause of the fourteenth amendment of the United States Constitution and (2) as it pertains to the congressional reapportionment, the 1981 Plan violates article 1, § 2 of the United States Constitution as well as the equal protection clause of the fourteenth amendment.[4] The order stated that a full opinion would be issued at a later date. The following memorandum constitutes that opinion.
THE FACTS
The State of Hawaii's previous efforts at reapportionment, on both state and local *557 levels, are well documented in prior decisions of this and other courts.[5] The present effort began in March of 1981 with the formation of the 1981 Reapportionment Commission pursuant to article IV, § 2 of the Hawaii State Constitution. As to reapportionment of the state legislature, the state constitution directed the Commission to perform two primary tasks:
First, it was required to apportion the total number of seats in the State senate and the State house of representatives among the basic island units of the State. Second, it was required to apportion the members allocated to each basic island unit among the districts therein and to redraw district lines where necessary in such a manner that for each house the average number of registered voters per member in each district is as nearly equal to the average for the basic island units as practicable.[6]
The four basic island units of the state are Oahu, Maui, Hawaii and Kauai.[7] The state constitution requires that the "method of equal proportions" be used to apportion representatives of both houses among the basic island units.[8] The constitution also prohibits districts which cross basic island unit lines. The result is an allocation of legislators most nearly proportional to the actual population figures of each basic island units with each unit receiving at least one seat in each house.
As to the state's two congressional seats, state law requires that the Commission draw districts "in such a manner that the average number of registered voters per member district shall be as nearly equal as practicable."[9]
With these and other state and federal limitations in mind, the Commission proceeded to reapportion the state. Using voter registration figures from 1980, the Commission first distributed the twenty-five senate and fifty-one house seats among the four basic island units, using the method of equal proportions. The results were as follows:
SENATE HOUSE
Basic Island No. of Basic Island No. of
Unit Senators Unit Rep's
Hawaii 3 Haw. 6
Maui 2 Maui 5
Oahu 19 Oahu 37
Kauai 1 Kauai 3[10]
The Commission then attempted to draw district lines within each basic island unit so that "deviations from the basic island unit's average number of registered voters per legislator ... [would] be as low as practicable."[11] Once these lines were drawn, the Commission endeavored to test the results pursuant to Burns v. Richardson, 384 U.S. *558 73, 86 S. Ct. 1286, 16 L. Ed. 2d 376 (1966).[12] The Burns Court held that registered voters could be used as a base population for apportioning a state legislature but only if it is shown that the resulting plan produces "a distribution of legislators not substantially different from the use of a permissible population basis." Id. at 93, 86 S. Ct. 1297. The Commission determined that "resident-eligible-voters" (eligible voters) is a constitutionally permissible population base for apportionment purposes but found that data on this base was either unavailable or difficult to extrapolate from existing information. It decided, however, that the state's distribution of civilians closely approximated the distribution on eligible voters. While civilian population is not a permissible population base[13] the Commission decided to use it as a means of determining whether their registered voter based apportionment substantially approximated one based on eligible voters, the intended population base.[14]
The Commission was able to compare the interisland distribution of legislators based on both eligible voters and civilian citizens. It did not attempt, however, to determine civilian populations for any of the individual districts or for either of the congressional districts, nor were any comparisons made between civilians and registered voters on a district by district basis. As discussed infra, the evidence submitted shows that the Commission was satisfied that the plan met all federal standards because: (1) legislative districts were substantially equal in numbers of registered voters compared to basic island unit and statewide averages of registered voters per legislator; (2) use of a civilian population base would have resulted in substantially the same distribution of legislators among the basic island units; and (3) the congressional districts contained almost equivalent numbers of registered voters.
The final plan submitted was based on the state's 1980 registered voter population of 402,795. As a result, the statewide average number of registered voters per senator was 16,112 while the statewide average number of registered voters per representative was 7,898. The districting plan adopted for the state house of representatives called for twenty-eight representative districts, consisting of six single-member districts, twenty-one two-member districts and one three-member district. The state senate districting plan called for eight districts, consisting of one single-member district, one two-member district, two three-member districts and four four-member districts. The actual registered voter population for each of the eight senate and twenty-eight house districts are set forth in Appendix A of this opinion. Included also are the deviations from the basic island and statewide ideals on a district by district basis.
According to the Commission's calculations, the most populous senate district, district eight, consisting of the basic island unit of Kauai and apportioned one senator, contains 21,732 registered voters. Compared to the statewide average number of registered voters per senator, senate district eight is overpopulated by 34.88%. In contrast, the most underpopulated senate district, district six consisting of part of Oahu and containing four senators, has 14,775 registered voters per senator. Compared to the statewide average, senate district six is underpopulated by 8.30%. The result is a maximum deviation of 43.18% between the state's most underrepresented and overrepresented districts.
In the house, the most populous district is district twenty-three located on the island of Oahu and apportioned two representatives, each representing 8,509 registered voters. Compared to the statewide averages, district twenty-three is overpopulated by 7.74%. The most underpopulated house district is district twenty-eight consisting of *559 the island of Kauai and apportioned three representatives, each representing 7,244 registered voters. Compared to the statewide average, district twenty-eight is underpopulated by 8.28%. The result is a maximum deviation of 16.02% between the most overrepresented and the most underrepresented house districts.
DEVIATIONS IN THE STATE LEGISLATURE REAPPORTIONMENT PLAN
In Baker v. Carr, 369 U.S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962), the United States Supreme Court overruled its prior holding that a legislative malapportionment claim presents a "political question" and is thus non-justiciable. The Court found that such claims could be sustained under the equal protection clause of the fourteenth amendment. While Baker v. Carr recognized that a cause of action existed for legislative malapportionment, the decision was silent as to what standards a lower court should apply to such claims. This need was partially answered in the subsequent case of Reynolds v. Sims, 377 U.S. 533, 577, 84 S. Ct. 1362, 1389, 12 L. Ed. 2d 506 (1964), wherein the Court stated that "as a basic constitutional standard, the Equal Protection Clause requires that the seats in both houses of a bicameral state legislature must be apportioned on a population basis." As further stated by the Court, "Population is, of necessity, the starting point for consideration and the controlling criterion for judgment on legislative apportionment controversies." Id. at 567, 84 S.Ct. at 1384.
While Reynolds v. Sims established population as the overarching principle to be applied in all such cases, the Court acknowledged that establishment of a rigid mathematical equality standard "is neither practicable nor desirable." Roman v. Sinock, 377 U.S. 695, 710, 84 S. Ct. 1449, 1458, 12 L. Ed. 2d 620 (1964) (decided the same day as Reynolds v. Sims); accord, Mahan v. Howell, 410 U.S. 315, 324-25, 93 S. Ct. 979, 985, 35 L. Ed. 2d 320 (1972). Instead, the Court found "the proper judicial approach is to ascertain whether, under the particular circumstances existing in the individual state whose legislative apportionment is at issue, there has been a faithful adherence to a plan of population based representation, with such minor deviations only as may occur in recognizing certain factors that are free from any taint of arbitrariness or discrimination." Id. (emphasis added).
Relying on language from these and subsequent opinions, the state argues that the deviations present in the 1981 Plan are justified by the state's desire to preserve the physical integrity of the four basic island units so as to provide each unit meaningful representation in the state legislature. In Reynolds v. Sims, the Court expressly recognized that minor deviations in a state legislative plan could be justified as a means of providing political subdivisions a certain degree of representation as political subdivisions. The Court cautioned, however, that if "as a result of a clearly rational state policy of according some legislative representation to political subdivisions, population is submerged as the controlling consideration in the apportionment of seats in the particular legislative body, then the right of all the State's citizens to cast an effective and adequately weighted vote would be unconstitutionally impaired." Reynolds v. Sims, 377 U.S. at 581, 84 S.Ct. at 1391. The extreme deviations present in the Reynolds cases made application of this general principle unnecessary. Subsequent cases, however, have sketched out the boundaries of this limited exception to a strict population based system of apportionment.
In Kilgarlin v. Hill, 386 U.S. 120, 87 S. Ct. 820, 17 L. Ed. 2d 771 (1967), the Supreme Court had before it a reapportionment plan for the Texas state legislature which included a maximum deviation of 26.48%. The district court approved the plan relying, in part, on the state's policy of using county lines whenever possible in drawing legislative districts. The Supreme Court overturned the decision on alternative grounds but, in dicta, expressed strong reservations over whether "deviations evident here are the kind of `minor' variations which Reynolds v. Sims indicated might be justified by local policies counseling the maintenance of *560 established political subdivisions in apportionment plans." Id. at 123, 87 S.Ct. at 822.
In Abate v. Mundt, 403 U.S. 182, 91 S. Ct. 1904, 29 L. Ed. 2d 399 (1971), the Supreme Court approved the Rockland County, New York Board of Supervisors' 1968 reapportionment plan, despite the fact that use of the plan resulted in a maximum deviation from population equality of 11.9%. Citing Reynolds v. Sims, the Court upheld the plan, in part, because of the expressed desire of the county to preserve existing political subdivisions. While affirming use of this particular plan, the Court warned that "nothing we say today should be taken to imply that even these factors could justify substantially greater deviations from population equality." Id. at 187, 91 S.Ct. at 1907.
Finally, in Mahan v. Howell, 410 U.S. 315, 93 S. Ct. 979, 35 L. Ed. 2d 320 (1973), the Court considered the constitutionality of Virginia's 1971 reapportionment plan. The plan resulted in a maximum deviation of 16.4% in one of the state's legislative houses. The sole rationale advanced by the state as justification for this deviation was a consistent, historical state "policy of maintaining the integrity of political subdivision lines in the process of reapportioning the state legislature." Id. at 329, 93 S.Ct. at 987. The Court upheld the plan as constitutional based on uncontroverted evidence that the "plan, subject to minor qualifications, produces the minimum deviation above and below the norm, keeping intact political boundaries...." Id. The Court issued a caveat, however, that "this percentage may well approach tolerable limits." Id.
The Mahan Court laid out a three step method for analyzing state offered justifications for seemingly substantial population deviations. First, the reason advanced must be a rational one, "free from any taint of arbitrariness or discrimination." Id. at 325, 93 S.Ct. at 985 (quoting Roman v. Sincock, 377 U.S. at 710, 84 S.Ct. at 1458). "The inquiry then becomes whether it can reasonably be said that the state policy urged [as a justification for] the divergences in the legislative reapportionment plan ... is, indeed, furthered by the plan adopted by the legislature." Id. at 326, 93 S.Ct. at 986. Finally, "if so justified," the issue is whether "the divergences are also within tolerable limits." For no matter how rational a state justification may be, it "cannot constitutionally be permitted to emasculate the goal of substantial equality." Id.
In applying this test to the facts of the case, the Mahan Court first declined to find that Virginia's decision to grant the state legislature "the power to enact local legislation dealing with the political subdivisions is irrational." Id. Based on "uncontradicted evidence," the Court accepted the argument that the plan before them included the minimum deviations possible consistent with achievement of the state's policy. Finally, as noted, the Court held that the "16-odd percent maximum deviation" did not violate the equal protection clause. Id. at 329, 93 S.Ct. at 987. Again, however, the Court warned that "this percentage may well approach tolerable limits." Id.
Following the method of analysis expounded by the Mahan Court, we turn first to the question of whether the expressed reason given by the state for the present deviations is a rational one. As noted, the primary rationale advanced by the state in support of the deviations is its desire to provide each basic island unit with meaningful representation in the two state houses.[15] Based on the unique geographic and economic insularity of the four basic island units, along with the state's simplified and centralized form of government, we find that the state's policy is a rational one.
The question then becomes whether the 1981 Plan reasonably serves to advance this stated policy. Mahan v. Howell, 410 U.S. at 328, 93 S.Ct. at 987. In finding that the State of Virginia's reapportionment plan furthered the state's policy of preserving *561 existing political subdivisions, the Mahan Court relied almost exclusively on uncontradicted evidence which indicated that the plan contained the smallest deviation possible consistent with implementation of the state's policy. No such evidence was presented in this litigation. To the contrary, the Commission's own report clearly shows that a substantial portion of the deviation in each house is totally unrelated to the state's policy of preserving the geographic unity of the four basic island units. Instead, this portion of the deviation in both houses results from the state's apparent unwillingness to minimize the population deviations among the legislative districts within the basic island unit of Oahu.
Approximately three-fourths of the state's residents live on the island of Oahu. Under the method of equal proportions, the island still retains the lion's share of state representatives, nineteen of the twenty-five senators and thirty-seven of the fifty-one representatives. In light of these relatively large numbers, it would seem that Oahu's legislative districts could have easily been drawn with only minimal population variations. The 1981 Report supports this suspicion. According to the Commission figures, the average number of registered voters per senator on Oahu deviates from the statewide norm by only 2.81%; in the house of representatives the deviation is even less at 1.82%.[16]
Despite these relatively low average deviations, the districts drawn on the island cover a substantial range of deviations. The maximum deviation between Oahu's senate seats is 9.18%. The maximum deviation between Oahu's house seats is even greater at 9.54%. Clearly, these intraisland deviations are not the result of adherence to the state's policy of providing each island unit with meaningful representation. The state provides no other reason for these deviations. The lack of a stated justification is by no means accidental. Citing White v. Regester, 412 U.S. 755, 93 S. Ct. 2332, 37 L. Ed. 2d 314 (1973), the Commission contends that the deviations present on Oahu are constitutionally de minimis and thus need no expressed justification.[17] In White and other cases, the Court has stated that maximum deviations of 10% in a reapportionment plan are de minimis and need no state justification since they are prima facie constitutional.[18] This rule of thumb, however, applies to the maximum deviation present in an entire reapportionment scheme. There is no support for the state's proposition that this standard can be used to compare and justify deviations between or within the geographical or political subdivisions of a state. Cf. Wells v. Rockefeller, 394 U.S. 542, 544, 89 S. Ct. 1234, 1236, 22 L. Ed. 2d 535 (1969) (rejecting argument that congressional reapportionment was proper since population variances between seven multi-district regions were minimal when large deviations still existed between individual districts throughout the whole state). As discussed, the total deviations present in the 1981 Plan for both state houses plainly exceed the de minimus standard of White v. Regester. The entire plan is thus suspect and all deviations substantially adding to the maximum deviation must be justified with expressed reasons.
Assuming the state could have drawn districts of equal populations on Oahu and no evidence to the contrary was presented the maximum deviations in both houses would have been substantially reduced. In the senate, the maximum range would be 37.67% not 43.18%. In the House, the maximum deviation would be only 11.1%, not the present 16.02%.
By failing to keep deviations to a minimum on Oahu, the state allowed the maximum deviation in the house to increase by almost fifty percent over the deviation resulting strictly from the use of the method of equal proportions to distribute seats *562 among the islands. Based on this substantial and wholly unjustified increase in total deviation, we find that the state plan, as it relates to the state house of representatives, fails to reasonably further the state's expressed policy and is thus unconstitutional.
The proportionate increase in the total senate deviation related to Oahu's deviations is not nearly as dramatic as in the state house of representatives due to the limited number of senate districts and the already large deviation related directly to the state's policy of using the method of equal proportions to distribute seats. It may well be that even this relatively small shift in deviation means that the 1981 Plan, as it relates to the state senate, fails to reasonably further the state's expressed policy. The court need not address this issue, however, for assuming a valid connection between the state's policy and the reapportionment plan for the state senate, we find that the total deviation present in the redistricting of the senate, 43.18%, is facially violative of the equal protection clause.[19]
Defendants have failed to cite a single post-Mahan case in which a deviation of this magnitude has been upheld. In fact, as far as we can ascertain from independent research, it appears that no court since Mahan has upheld a legislative reapportionment scheme which includes a maximum deviation of 16.5% or more. Apparently most courts have read the Supreme Court's caveat in Mahan as implicitly setting this figure as the outermost limit allowed by the Constitution.[20]
The most illustrative of these cases is the recent Virginia three-judge court decision in Cosner v. Dalton, 522 F. Supp. 350 (1981). Plaintiffs in that action challenged the Virginia legislative reapportionment plan of 1980 on many of the same grounds raised in the instant action. Their chief argument was that the 1980 plan's maximum deviations of 22.12% in one house and 27.12% in the other were facially unconstitutional. In support of these deviations, the State of Virginia relied on the same justification that sustained the deviations present in the Mahan case. The Cosner court carefully reviewed the Mahan decision as well as *563 numerous other Supreme Court decisions dealing with population variance and concluded that the deviations present in the new plan exceeded constitutionally permissible limits and could not be supported by any combination of state urged justifications. We find the reasoning in Cosner persuasive and thus hold that the total deviation present in the senate reapportionment plan exceeds the limitations allowable under the equal protection clause.
Mindful of the implied outer limit set by the Supreme Court in Mahan, the state concedes that "at first glance" the total deviation of 43.18% in the senate appears to exceed constitutional limits. The state, however, urges the court to ignore this deviation and the deviation present in the house of representatives. Instead of analyzing each house separately, the state maintains that the reapportionment of both the senate and the house of representatives should be analyzed together and cite a table from the Commission's report which allegedly indicates that the deviations present in both houses are largely offsetting.[21]
In support of this method of analysis, the state cites the following language from Reynolds v. Sims: "apportionment in one house [of a bicameral legislature] could be arranged so as to balance off minor inequities in the representation of certain areas in the other house." 377 U.S. at 577, 84 S.Ct. at 1389 (emphasis added). In light of the many post-Reynolds decisions which have discussed and refined the concept of minimal population deviations, however, it cannot be seriously contended that the gross deviations presented in the 1981 Plan qualify as "minor inequities."
The state is unable to cite a single persuasive authority for the proposition that deviations of this magnitude can be excused by combining and figuring deviations from both houses.[22] The court finds that the stated argument on this point fails to justify the deviations present in the 1981 Plan.
USE OF REGISTERED VOTERS AS A POPULATION BASE
Prior to Burns v. Richardson, 384 U.S. 73, 86 S. Ct. 1286, 16 L. Ed. 2d 376 (1965), the Supreme Court had cautiously avoided defining the scope of the term "population" as it pertained to reapportionment. In discussing Reynolds v. Sims, the Burns Court conceded that this omission was an intentional one. According to Burns, while "total population figures were in fact the basis of comparison in [Reynolds v. Sims] ... our discussion carefully left open the question what population was being referred to. At several points, we discussed substantial equivalence in terms of voter population or citizen population, making no distinction between the acceptability of such a test and a test based on total population." Id. at 91, 86 S.Ct. at 1296. The Burns decision did not completely resolve this dilemma, but it did address the limited question of whether voters, either actual or registered, are a constitutionally permissible population base for apportionment purposes.
The Court held that use of either an actual or registered voter basis was constitutionally prohibited, in part, because both bases depended "not only upon criteria such as govern state citizenship, but also upon the extent of political activity of those eligible to register and vote." Id. at 92, 86 S.Ct. at 1296. The Court decided that both bases were thus subject to manipulation by those with "political power" so as to perpetuate underrepresentation of certain groups or to perpetuate a "ghost of prior malapportionment." Id. at 93, 86 S.Ct. at 1297 (citing Buckley v. Hoff, 243 F. Supp. 873, 876 (D.C. Vt.1965)). Aside from the possibility of intentional manipulation, the Court also found that the number of actual or registered voters in a state may fluctuate severely over time as a result of purely "fortuitous *564 factors [such] as a peculiarly controversial election issue, a particularly popular candidate, or even weather conditions." Id. at 93, 86 S.Ct. at 1297 (citing Ellis v. Mayor & City Council of Baltimore, 352 F.2d 123, 130 (4th Cir.1965)). The possibility of wide fluctuations are of particular concern, the Court noted, in cases, such as the present one, in which "registration figures derived from a single election are made controlling for as long as 10 years." Id.
Despite these limitations, the Court did not prohibit completely reapportionments based on registered voters. While holding that registered voters could not be the "intended" base of an apportionment, the Court found that such figures could be used to apportion a state legislature if it was shown that the resulting plan "produced a distribution of legislators not substantially different from the use of a permissible population basis." Id.
In determining whether the plan before it met this standard, the Burns Court began by noting that the state felt registered voters reasonably approximated both citizen and total populations in the state. Emphasis was also placed on the fact that a "high portion of the [state's] possible voting population is registered and strong drives to bring out the vote have resulted in" consistently high voter turnouts. Id. at 96, 86 S.Ct. at 1299. The Court concluded that "in these circumstances, we find no demonstrated error in the district court's conclusion that the apportionment achieved by use of a registered voters basis substantially approximated that which would have appeared had state citizen population been a guide." Id. at 96, 86 S.Ct. at 1299.
In upholding the state's plan, the Court made it clear that the validity of registered voter based reapportionments had not "been established for all times or circumstances, in Hawaii or elsewhere." Id. at 96, 86 S.Ct. at 1299. Moreover, several guidelines were "suggested" for increasing the accuracy of such apportionments, including districting more often than every ten years, use of presidential election year figures and use of a permanent system of registration. Finally, the Court emphasized that its decision was based, in large part, on the lack of any evidence in the record before it questioning the relationship between use of a registered voter base and use of a citizen population base. It left open the possibility that "[f]uture litigation may reveal infirmities, temporary or permanent, not established by the present record." Id. at 97, 86 S.Ct. at 1299. The Court concluded that "with a view to its interim use, Hawaii's registered voter basis does not on this record fall short of constitutional standards." Id.
A question raised but not answered in Burns is how specific the comparison with a permissible population must be to prove a "substantial approximation." Intervenors maintain that the Burns decision and its progeny require the state to calculate and compare the two populations on a district by district basis. Alternatively, intervenors insist that the state should, at least, be required to prove that estimating the "permissible" populations for each district is impracticable.
In support of the first proposition, intervenors cite numerous state and federal court decisions which they contend require the state to make district-by-district comparisons.[23] A thorough review of these authorities, however, indicates that all of these cases are either distinguishable or inconclusive on this particular point. The Court in Burns obviously did not require such a comparison, at least not as an absolute prerequisite to validating a registered *565 voter based apportionment. In the absence of any persuasive authority to the contrary, the court declines to hold that a district-by-district comparison is required before a state's use of a registered voter base will be upheld.
Intervenor's second contention deserves closer scrutiny. In Burns, the Court did not address the question since it assumed state citizen figures were unavailable. Considering the Court's cautious approval of a registered voter base, there is some merit to the argument that the state at least show the impracticality of a district-by-district comparison before being permitted to go forward with a registered voter based apportionment. We need not address this issue, however, for it is clear from Burns that, at the very least, the state is obligated to provide some degree of proof that the proposed plan approximates the results of a plan based on an appropriate population base. A review of the full record in this case shows that the state has failed to meet this burden.
Under Burns, the state bears at least the initial burden of coming forth with some evidence that the proposed apportionment substantially duplicates the results of one based on a permissible population base. The state's ultimate burden of proof, however, will vary depending on the amount of contrary evidence submitted. In Burns, there was apparently no challenge to the state's claim that the registered voter apportionment accurately reflected one based on state citizens. Absent such a challenge, the level of evidence submitted in Burns is obviously all that is required of a state. The state's ultimate burden of proof must increase, however, to the degree that a challenger successfully raises doubts about the accuracy of a proposed plan. In Burns, for example, the Court specifically stated that evidence indicating large discrepancies in registration based on income could call into question a plan that appears otherwise valid.[24] If such evidence had been admitted, the state would have been obligated to come forward with more specific evidence of the plan's accuracy or face having the plan declared invalid.
As discussed more fully below, even if we assume the state has met its initial burden of coming forth with sufficient evidence to support its plan's accuracy, plaintiffs and intervenors have successfully rebutted this showing and in turn have made a strong showing that the plan is in fact fatally flawed. The state is unable to overcome this showing and thus we find the state's use of registered voters constitutionally impermissible.
In their memorandum, the state alleges the Commission "made every reasonable effort to make the registered voter base reflective of some other permissible population base, such as state citizen population and eligible voter population." Assuming arguendo that eligible voters constitute a permissible population base,[25] we turn first *566 to deciding whether the state has produced enough evidence to meet at least the minimum burden of proof required by Burns. As support for the accuracy of the registered voter base, the state primarily relies on the findings in Burns v. Richardson and Burns v. Gill that population deviations resulting from the state's use of a registered voter base is most likely a result of the state's heavy non-citizen military population. In addition, the state relies on a Commission study which indicates that use of the intended population base, resident-citizen-eligible voters, would have resulted in substantially the same distribution of legislators among the four basic island units.
The court assumes for the sake of argument that these factors make out a prima facie showing of validity. In rebuttal, plaintiffs and intervenors rely on reports and studies which indicate that (1) rates of registration in the state do vary substantially among different socio-economic groups; (2) the rate of registration in the state as a whole has dropped off since Burns; and (3) the actual maximum deviations on Oahu alone, based on estimates of the "permissible populations" of each of the districts drawn, may exceed twenty percent. While this evidence by itself tends to rebut the state's initial showing of validity, even stronger evidence contrary to the state's position can be gleaned from facts and figures provided in the Commission's report itself. These figures, when properly analyzed, clearly indicate the existence of impermissible deviations between the 1981 Plan and one based on a permissible population.
As noted earlier, the state attempted to justify the use of a registered voter base by making it "reflective of some other permissible population base, such as state citizen population and eligible voter population."[26] The state assumed that potential or eligible voters constitute a permissible base and adopted it as its intended base. The state's eligible voter population was not used for comparative purposes, either on a district, island unit or statewide basis for it concluded that such figures were either not available or difficult to approximate. The state determined, however, that the distribution of its non-military population throughout the state closely approximated the distribution of eligible voters throughout the state. Thus, the Commission concluded, "the distribution of legislators on the basis of civilian population ... should give a reasonable standard by which we can judge whether or not the distribution of legislators on the basis of registered voters substantially approximates the distribution under the apportionment base of resident-citizen-eligible voters."[27]
The Commission was able to determine the civilian population for each of the four basic island units but made no effort to estimate the civilian population for any of the individual districts except, of course, those which encompassed an entire island unit. Using only the island unit figures, the Commission made just two limited calculations. First, it determined how the use of a civilian population base would have altered the distribution of legislators among the island units using the method of equal proportions. The resulting figures show that the distribution of senators among the island units would have been unaffected, while in the house, the basic island unit of Oahu would have gained two representatives, one each from the island units of Maui and Kauai.
After estimating the distribution of legislators among the islands based on a civilian population base, the Commission then determined the average number of civilians per legislator as to each island unit and the percent deviation between island and state-wide averages. The results are as follows:
*567
SENATE
Percentage
Basic No. of Deviation
Island No. of Civilian Civilians from Statewide
Unit Senators Population Per Senator Average
Hawaii 3 91,749 30,583 - 8.97
Maui 2 70,911 35,455 + 5.53
Oahu 19 638,559 33,608 + 0.03
Kauai 1 38,739 38,739 + 15.30
HOUSE
Percentage
Basic No. of Deviation
Island No. of Civilian Civilians from Statewide
Unit Rep's Population Per Representative Averages
Hawaii 6 91,749 15,292 - 7.15
[6] - [15,292] [ - 7.15]
Maui 4 70,911 17,728 + 7.64
[5] - [14,182] [ - 13.89]
Oahu 39 638,559 16,373 - 0.59
[37] - [17,258] [ + 4.79]
Kauai 2 38,739 19,370 + 17.61
[3] - [12,913] [ - 21.60][28]
In the house table, the bracketed numbers on the far left indicate the distribution of representatives resulting from the use of a registered voter based population. The remaining bracketed numbers indicate each island unit's average number of civilians per representative and the percent deviation from the statewide average assuming the initial distribution of legislators was based on registered voters.
The importance of these figures can be seen by comparing them to similar calculations based on the registered voter based apportionment. That analysis results in the following figures:
SENATE
Basic Island Percent
Basic No. of Unit Average Deviation
Island No. of Registered Reg. Voters from Statewide
Unit Senators Voters Per Senator Average
Hawaii 3 46,451 15,484 - 3.90
Maui 2 37,079 18,540 + 15.07
Oahu 19 297,533 15,660 - 2.81
Kauai 1 21,732 21,732 + 34.88
HOUSE
Basic Island Percent
Basic No. of Unit Average Deviation
Island No. of Registered Reg. Voters from Statewide
Unit Rep's Voters Per Representative Average
Hawaii 6 46,451 7,742 - 1.98
Maui 5 37,079 7,416 - 6.10
Oahu 37 297,533 8,041 + 1.82
Kauai 3 21,732 7,244 - 8.28[29]
*568 Comparisons based on island averages are naturally somewhat limited since they tend to moderate the actual deviations which exist between individual districts. This fact in mind, however, a review of these tables still shows broad discrepancies between the forms of apportionment. As to the senate, use of a civilian population would have actually resulted in a smaller maximum deviation between island averages. The registered voter based apportionment resulted in an interisland maximum deviation of 38.78%. Use of a civilian population would have shrunk this figure to 24.27%. In the house, on the other hand, the maximum interisland deviation resulting from using a civilian population base would be more than twice as large as the 11.1% deviation present in the state's registered voter based apportionment. An apportionment based just on the state's civilian population would result in a maximum deviation of 25.25%. If registered voters are used to make the initial distribution of seats among the island units, the figures in brackets, the result is still roughly the same at 26.39%. Aside from these statewide deviations, these tables also show that the average deviation for each island varies substantially depending on which population base is used.
Based on these figures, and the other evidence submitted by intervenors and plaintiffs, the state's initial showing of validity has certainly been rebutted. Moreover, a strong inference has been raised that the state's registered voter based apportionment fails to "substantially approximate" one based on a permissible base. This is not to say that there has been a dispositive showing of invalidity. The state might have rebutted this inference by estimating the actual intended population for each of the districts created. Even less comprehensive evidence of validity may have served to adequately rebut this inference. The state, however, has made no such showing. In fact, its only real response is a limited critique of the methodology of some of the studies commissioned by plaintiffs and intervenors. This is patently insufficient, however, to rebut the strong inference of invalidity raised by plaintiffs and intervenors and by the facts and figures from the Commission's report itself.
Under the reasoning in the Burns decision, use of registered voters as a surrogate base for apportionment based on a permissible population should be approved only under fairly exceptional circumstances. If a state chooses to use such a base, it has an obligation to ensure that it accurately reflects the intended, permissible population base. The Burns decision stated a number of ways a state could increase the accuracy of a registered voter based apportionment, including frequent reapportionments, use of presidential year figures and institution of a permanent system of registration. It is informative to note that the state has failed to adopt any of these proposals. In fact, since Burns, the state has actually lengthened the period of time between reapportionments from eight to ten years. In support of the state's use of registered voters at the time of Burns, the court noted that a high percentage of the state's eligible voters actually registered and voted. Fifteen years later, in the instant case, the evidence indicates a noticeable decrease in voter participation. Finally, and most compelling, the Burns Court made it clear that even if the state is able to make a prima facie showing that the use of registered voters is constitutional, that showing can be rebutted by contrary evidence. The state must then either come forward with more convincing evidence in its favor or face having the reapportionment plan declared unconstitutional. Here, plaintiffs and intervenors have raised, through the evidence submitted and the arguments made, a clear inference that the state's use of registered voters is constitutionally impermissible. Nothing in the Commission's report, the state's evidence or the argument of counsel overcomes this showing. The court therefore finds that the state has failed to meet its burden of showing that the use of a registered *569 voter base substantially approximates the results of using a constitutional population base.
REAPPORTIONMENT OF THE STATE'S CONGRESSIONAL SEATS
Finally, we consider intervenor's allegation that the reapportionment of the state's two congressional districts, contained in the 1981 Plan, violates article I, § 2 of the United States Constitution. Since 1970, the State of Hawaii has had two single-member congressional districts. State law required that the Reapportionment Commission construct congressional districts with, as near as practicable, equal numbers of registered voters. The results are as follows:
Percent
Deviation
Number of Reg. Voter from mean
District Representatives Per Rep. of 201,398
First 1 201,567 + 0.1
Second 1 201,228 - 0.1[30]
Intervenors raise two separate challenges to the state's 1981 congressional redistricting. First, they maintain that "constitutional history, logic and equity" require that congressional reapportionments be based solely on total federal census figures. Alternatively, they argue that if the state is permitted to use an alternative population base, then it must demonstrate that its use of a registered voter base produces an apportionment substantially similar to one under this base. We take each argument in turn.
While similar in many ways to the case law concerning state and local apportionments, there is a separate and distinct line of authorities concerning congressional reapportionments. The Court, in Wesberry v. Sanders, 376 U.S. 1, 84 S. Ct. 526, 11 L. Ed. 2d 481 (1964), found that the principle of "one person, one vote" applies to congressional redistricting within each state. In so holding, however, the Court did not rely on the equal protection clause, as it had in the prior cases involving state and local governments. Instead, it invoked article I, § 2 of the Constitution which provides, in relevant part:
Representatives shall be apportioned among the several states according to their respective numbers, counting the whole number of persons in each State excluding Indians not taxed. Article I, § 2, Clause 3.
The Wesberry Court decided that "construed in its historical context, the command of Art. I, § 2, that Representatives be chosen `by the People of the Several States' means that as nearly as is practicable, one man's vote in a congressional election is to be worth as much as another's." Id. at 8-9, 84 S.Ct. at 530. In conclusion, the Court stated:
While it may not be possible to draw congressional districts with mathematical precision, that is no excuse for ignoring our Constitution's plain objective of making equal representation for equal numbers of people the fundamental goal for the House of Representatives. That is the high standard of justice and common sense which the Founders set for us. Id. at 18, 84 S.Ct. at 535.
Since Wesberry, the Court has repeatedly stated more stringent standards are to be applied to congressional reapportionments than are applied to state and local ones. For example, the Court has made it clear that even minor deviations in a congressional apportionment may subject it to challenge requiring states to show that despite a good faith effort, the resulting deviations were unavoidable. In Kirkpatrick v. Priesler, 394 U.S. 526, 530, 89 S. Ct. 1225, 1228, 22 L. Ed. 2d 519 (1969), the Court stated that under article I, § 2 no "fixed numerical or percentage population variance [is] small enough to be considered de minimis and to satisfy without question the `as nearly as practicable' standard." The Court emphasized that "since `equal representation for equal numbers of people [is] the fundamental *570 goal of the House of Representatives,' Wesberry v. Sanders, supra, at 18 [84 S.Ct. at 535], the `as nearly as practicable' standard requires that the State make a good-faith effort to achieve precise mathematical equality." Id. (emphasis added). The plan struck down in Kirkpatrick had a maximum deviation of 5.97%. Kirkpatrick's strict rule was reaffirmed in White v. Wessler, 412 U.S. 783, 93 S. Ct. 2348, 37 L. Ed. 2d 335 (1973), wherein the Court struck down a plan containing a maximum deviation of 4.13%. The decision in White contrasts sharply with Gaffney v. Cummings, 412 U.S. 735, 93 S. Ct. 2321, 37 L. Ed. 2d 298 (1973), decided the same day, in which the Court held that a 7.83% deviation in a legislature reapportionment was prima facie constitutional.
Intervenors contend that the standards for congressional reapportionments differ from the standards for state and local districts in another fundamental manner. They maintain that article I, § 2 requires states to use total federal census figures to apportion congressional districts, just as the federal government is required to use these figures in apportioning congressional seats among the several states. To date, however, the Supreme Court has not faced or decided a Burns-like case relating to congressional districts. The issue was present in Kirkpatrick since the state in that case contended that population variances in its congressional districts resulted from several districts containing large numbers of military personnel and students who were not eligible to vote. While the Court questioned seriously "whether distribution of congressional seats except according to total population can ever be permissible under Article I, § 2," Kirkpatrick, 394 U.S. at 534, 89 S.Ct. at 1230, it chose to refrain from addressing this issue. Instead, the Court held that even if it was assumed that eligible voter based apportionments were constitutional, the state's plan would be unacceptable since the state had made "no attempt to ascertain the number of eligible voters in each district and to apportion accordingly." Id. at 534-35, 89 S.Ct. at 1230. Significantly, perhaps, the Kirkpatrick decision did not cite Burns or imply that any figures other than total census ones could be used in congressional apportionments.
While the Supreme Court has yet to address this issue, it has arisen in a small number of lower court cases. In Young v. Klutznick, the district court declared that: "It is clear that the framers of the Constitution could not have intended that the census provide the standard for apportionment among the several states while simultaneously intending that a different and possibly conflicting assessment of state population govern apportionment within the state." 497 F. Supp. 1318, 1324 (E.D.Mich. 1981), sub nom. Young v. Baldridge, petition for cert. denied, 455 U.S. 939, 102 S. Ct. 1430, 71 L. Ed. 2d 650 (1982). The court concluded that it is "clear that the Constitution commands that the data taken from the decennial census govern the apportionment within the states." Id. at 1325.
On remand, the three-judge court in Kirkpatrick discussed, but did not decide, this same question in a well-reasoned and comprehensive appendix. Preisler v. Secretary of State of Missouri, 279 F. Supp. 952 (W.D.Mo.1970). The court began by stating that "the constitutional history of Art. I, § 2 would seem to make it apparent that the founders included the decennial census in that section as a central instrument designed to control and adjust the future required apportionments of the House of Representatives. It would seem historically incongruous not to require the use of the congressional decennial census in the establishment of congressional districts within the State." Id. at 1002. The court based this conclusion on a thorough review of the debates and other historical documents from the Constitutional Convention of 1787. For example, the Court cited Edmund Randolph's original proposal that a periodic census be held to ensure "`fair representation of the people,' an idea endorsed by Mason as assuring that `numbers of inhabitants' should always be the measure of representation in the House of Representatives.'" Id. at 998 (quoting Wesberry v. Sanders, 376 U.S. at 8, 84 S.Ct. at 530).
*571 There is apparently only one reported instance of a federal district court approving the exclusion of specific groups from a state's congressional apportionment base. In Meeks v. Avery, 251 F. Supp. 245 (D.Kan. 1966), decided two years after Wesberry but prior to either Burns or Kirkpatrick, a three-judge court approved the state's use of a 1964 state enumeration of inhabitants and specifically rejected the argument that article I, § 2 required the state to use the 1960 federal census figures. The state census counted only those persons in each county who "had established residence in the county." Id. at 249. The count therefore excluded unmarried college students, military personnel living on base, persons in institutions and convicts. The Meeks court held that the decision to use the 1964 enumeration was merely "the exercise of judgment in the legislative process. We find no constitutional fault with the choice made." Id. As a final point, the court stated that the reference in article I, § 2 to the enumeration of the country's population has "to do with the apportionment of representatives among the states, not within them." Id.
The three-judge court in Preisler discussed Meeks and, based on its conclusions as to the historical underpinnings of article I, § 2, wrote, in part, "to indicate our disagreement with [the opinion's] rationale." Preisler v. Secretary of State of Missouri, 279 F.Supp. at 1003. While voicing its disagreement with the Meeks' court, the Preisler court did not reach the exact question of "whether any figures other than the federal decennial census may be used in support of a congressional plan," id. at 1003, since that issue was not squarely before the court. We find, however, that its reasoning on this aspect of the law is both complete and persuasive. And, while the Supreme Court has never directly addressed this particular issue, we note that starting with Wesberry it has repeatedly stressed that "equal representation for equal numbers of people [is] the fundamental goal of the House of Representatives." Wesberry v. Sanders, 376 U.S. at 18, 84 S.Ct. at 535. For these reasons, we hold that pursuant to article I, § 2 of the Constitution states must depend on total federal census figures to apportion congressional districts within their boundaries.
We therefore find unpersuasive the state's argument that its high military population means that use of total population for congressional redistricting would be inappropriate and unfair to the citizens of the state. We note additionally that the presence of this large military population certainly aided the state in achieving its two congressional seats. Equity alone argues that it therefore should be included in the base used to draw the congressional districts within the state. See Wilkins v. Davis, 205 Va. 803, 805, 808, 139 S.E.2d 849 (1965).
Assuming arguendo that the holding in Burns v. Richardson applies to both legislative and congressional redistricting, we find that the state's congressional reapportionment plan is still fatally flawed.
As stated earlier, under Burns use of a registered voter base is permissible only if the resulting apportionment is shown to be substantially equivalent to one using a permissible population base. While the Commission did not attempt to calculate any alternative populations for the two congressional districts, the state produced at trial a table which gave the total populations for each district. According to the state's figures, each district varies from the ideal population by 1.5% for a total deviation of 3.0%. This fact alone, however, does not establish substantial equivalency. Had the state used total population to begin with, it would still have had to show that even with a good faith effort on its part, this relatively small deviation was unavoidable.
Absent such a showing, the plan would be invalid. Apparently, the only reason for the presence of this deviation in the apportionment of the Commission's is its use of registered voters as its population base. Use of registered voters cannot, however, in itself serve to justify a significant deviation from a proper plan based on a permissible population base. There is no evidence that *572 the state could not have used total census figures to draw districts with near mathematical precision. Accordingly, we find that the state's plan fails to approximate one based on total population.
It may be that while the congressional plan fails to reflect a total population-based apportionment, it approximates one based on state citizens or some other permissible population base. We find, however, that the burden of proving this fact rests with the state, not the challengers since the Plan's failure to replicate the results of a total population-based apportionment creates at least a prima facie showing of invalidity. Calderon v. City of Los Angeles, 4 Cal. 3d 251, 93 Cal. Rptr. 361, 368, 481 P.2d 489 (1971). On the record now before the court, the state has failed to rebut this showing.
For these reasons, we find that the state's congressional apportionment, as embodied in the 1981 Plan, fails to meet the requirements of article I, § 2.
APPENDIX A
SENATE
Percent Percent
Deviation Deviation
from Basic from Statewide
Island Unit Average
Basic No. of Reg. Av. No. of No. of Reg.
Island Sen. No. of Registered Voters Reg. Voters Voters
Unit District Sens. Voters Per Sen. Per Sen. Per Sen.
Hawaii 1 3 46,451 15,484 0 - 3.90
Maui 2 2 37,079 18,540 0 +15.07
Oahu 3 3 48,848 16,283 +3.98 + 1.06
4 4 65,059 16,265 +3.86 + 0.95
5 4 65,016 16,254 +3.79 + 0.88
6 4 59,101 14,775 -5.65 - 8.30
7 4 59,509 14,877 -5.00 - 7.67
Kauai 8 1 21,732 21,732 0 +34.88
HOUSE
Percent Percent
Deviation Deviation
from Basic from Statewide
Island Unit Average
Basic No. of Reg. Av. No. of No. of Reg.
Island Rep. No. of Registered Voters Reg. Voters Voters
Unit District Reps. Voters Per Rep. Per Rep. Per Rep.
Hawaii 1 1 7,506 7,506 -3.05 -4.96
2 2 15,718 7,859 +1.51 -0.49
3 1 7,353 7,353 -5.02 -6.90
4 2 15,874 7,937 +2.52 +0.49
Maui 5 2 14,826 7,413 -0.04 -6.14
6 2 14,846 7,423 +0.09 -6.01
7 1 7,407 7,407 -0.12 -6.22
Oahu 8 2 16,248 8,124 +1.03 +2.86
9 1 8,177 8,177 +1.69 +3.53
10 2 16,081 8,041 0 +1.81
11 2 15,570 7,785 -3.18 -1.43
12 2 15,738 7,869 -2.14 -0.37
13 2 15,703 7,852 -2.35 -0.58
14 2 15,582 7,791 -3.11 -1.35
15 2 15,511 7,756 -3.54 -1.80
*573
Percent Percent
Deviation Deviation
from Basic from State-wide
Island Unit Average
Basic No. of Reg. Av. No. of No. of Reg.
Island Sen. No. of Registered Voters Reg. Voters Voters
Unit District Sens. Voters Per Sen. Per Sen. Per Sen.
16 2 15,926 7,963 -0.97 +0.82
17 2 16,171 8,086 +0.56 +2.38
18 2 16,059 8,030 -0.14 +1.67
19 2 15,636 7,818 -2.77 -1.01
20 2 16,635 8,318 +3.44 +5.32
21 2 16,499 8,250 +2.60 +4.46
22 2 16,482 8,241 +2.49 +4.34
23 2 17,018 8,509 +5.82 +7.74
24 1 8,309 8,309 +3.32 +5.19
25 2 15,892 7,946 -1.18 +0.61
26 2 16,005 8,003 -0.47 +1.33
27 1 8,291 8,291 +3.11 +4.98
Kauai 28 3 21,732 7,244 0 -8.28
NOTES
[1] Baker v. Carr, 369 U.S. 186, 82 S. Ct. 691, 7 L. Ed. 2d 663 (1962).
[2] Holt v. Richardson, 238 F. Supp. 468 (D.Haw. 1965) and 240 F. Supp. 724 (1965), and same case sub nom. Burns v. Richardson, 384 U.S. 73, 86 S. Ct. 1286, 16 L. Ed. 2d 376 (1966) (challenging the 1959 state legislative reapportionment plan); Burns v. Gill, 316 F. Supp. 1285 (D.Haw.1970) (challenging the 1968 state legislative reapportionment plan); Boshard v. 1973 Legislative Reapportionment Commission, 55 Haw. 89 (1973) (challenging the state's 1973 reapportionment plan); Leopold v. State of Hawaii, Civ. No. 72-3582 (D.Haw.1974) (challenging the apportionment of local school board seats); and Hirabara v. Doi, Civ. No. 76-2045 (D.Haw. 1976) (challenging the 1970 congressional redistricting).
[3] The state primary election is scheduled for September 18, 1982. The general election is scheduled for November 2, 1982. According to the state, May 1, 1982 was the last date by which the chief election officer of the state had to have an approved reapportionment plan. If received after this date, the state felt that the scheduled elections would have to be postponed. The Masters appointed by the court to aid in the formulation of a remedy in this case (see order of appointment, April 7, 1982) agreed with the state that May 2, 1982 was the deadline.
[4] Specifically, the interlocutory order stated:
1. As it applies to the State Senate and House of Representatives, the 1981 Reapportionment Plan's deviation in the number of registered voters per elected official between the districts violates the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution.
2. As it applies to the State Senate and House of Representatives, the 1981 Reapportionment Plan fails to properly define and calculate a permissible population basis as required by the Equal Protection Clause of the Fourteenth Amendment and Burns v. Richardson, 384 U.S. 73, 86 S. Ct. 1286, 16 L. Ed. 2d 376 (1966).
3. The defendants have not met their burden of showing that "the distribution of registered voters approximates distribution of state citizens or another permissible population base." Burns v. Richardson, 384 U.S. 73, 95, 86 S. Ct. 1286, 1298, 16 L. Ed. 2d 376 (1966).
4. As it applies to the State Congressional districts, the 1981 Reapportionment Plan violates both Article I, Section 2 of the United States Constitution and the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution.
To the extent this opinion enlarges on or modifies the interlocutory order that order is hereby deemed amended. Since we found that the state's plan violated these Federal Constitutional standards, we found it unnecessary to address the other challenges raised, including the numerous challenges based on applicable state law.
[5] See note 1 infra.
[6] Report and Reapportionment Plan of the 1981 Reapportionment Commission 8 (hereinafter "Report").
[7] The court notes that the basic island unit of Maui actually includes four separate islands, Maui, Molokai, Lanai, and Kahoolawe, and the basic island unit of Kauai includes both Kauai and Niihau. Thus, the basic island units do not represent four distinct contiguous land masses.
[8] Hawaii State Constitution, Article IV, § 4.
[9] Section 25-2(b) of the Hawaii Revised Statutes. See Report at 33-35. In addition to requiring equal numbers of registered voters in each district, Section 25-2(b) also states the following as criteria to guide the Commission in establishing congressional lines:
(1) No district shall be drawn so as to unduly favor a person or political faction.
(2) Except in the case of districts encompassing more than one island, districts shall be contiguous.
(3) Insofar as practicable, districts shall be compact.
(4) Where possible, districts lines shall follow permanent and easily recognized features such as streets, streams and clear geographical features, and when practicable, shall coincide with census tract boundaries.
(5) Where practicable, state legislative districts shall be wholly included within congressional districts.
(6) Where practicable, submergence of an area in a larger district wherein substantial different socio-economic interests predominate shall be avoided.
Similar state law standards applied to the legislative reapportionment. See Report at 10.
[10] Report at 16.
[11] Report at 10-11.
[12] Report at 11-15.
[13] Davis v. Mann, 377 U.S. 678, 690, 84 S. Ct. 1441, 1447, 12 L. Ed. 2d 609 (1964).
[14] The Commission calculated the state's civilian population by subtracting all military and military dependents from its total or census population.
[15] For a thorough discussion of the state's policy and its underlying reasoning, see Burns v. Gill, 316 F.Supp. at 1290-93.
[16] Report at 32.
[17] Report at 27.
[18] Connor v. Finch, 431 U.S. 407, 97 S. Ct. 1828, 52 L. Ed. 2d 465 (1970); Gaffney v. Cummings, 412 U.S. 735, 93 S. Ct. 2321, 37 L. Ed. 2d 298 (1973); Chapman v. Meir, 420 U.S. 1, 95 S. Ct. 751, 42 L. Ed. 2d 766 (1975).
[19] Since we have determined that the deviations present in the house plan are not substantially related to the state policy of providing each basic island unit with meaningful representation, we do not address whether, assuming such a relationship, the 16.02% deviation in the house exceeds permissible constitutional standards.
A related issue raised by intervenors should be at least briefly noted, however. Throughout this section we have assumed that population deviations can be calculated and compared on the basis of the number of registered voters per district. Intervenors contend that deviations must be calculated and compared only on the basis of total population or some other permissible population base. Based on our reading of Burns, however, we decline to impose such a requirement on the state. Nonetheless, it does not follow from this conclusion that a court should ignore the fact that deviations challenged as impermissible are based on registered voters rather than an appropriate base. Since Reynolds, the Court has made it clear that population is the standard by which maximum deviations are to be examined. District populations based on registered voters, however, can only approximate permissible populations. As approximations, there will always be an unavoidable margin of error.
This margin of error, of course, will only be important if the deviations in question approach the outer limits beyond which a deviation is de facto unconstitutional. For example, as discussed, the Court has stated that deviations of less than 10% will be considered prima facie constitutional. It may be that, considering the margin of error present in a registered voter based apportionment, a maximum deviation approaching but not exceeding 10% in such a plan should nevertheless be supported by an expressed state rationale. Likewise, assuming 16.5% is the maximum deviation permitted by the Constitution regardless of any proffered state justification, a deviation of 16.02% in such a plan, may be considered excessive if the plan is based on registered voters.
Therefore, while the court declines from requiring that comparisons of districts always be on a permissible population basis, we find that comparisons based on registered voters should be subjected to a higher degree of scrutiny, at least when the deviations present begin to approach constitutional limits.
[20] For a review of post-Mahan cases, see Guido, Deviations and Justifications: Standards and Remedies in Challenges to Reapportionment Plans, 14 Urban Lawyer 57, 64 71 (1981).
[21] Report at 28.
[22] The state cites Burns v. Gill 316 F. Supp. 1285 (D.Haw.1970), for support since the court in that case approved a plan including deviations of 29.6% and 31.3%. This opinion, however, predates the Supreme Court's decision in Mahan. It is therefore of little precedential value as to this issue. Moreover, the deviation present in the senate plan substantially exceeds the deviations approved in Burns v. Gill.
[23] Marshall v. Edwards, 582 F.2d 927 (5th Cir. 1978); Zimmer v. McKeithen, 485 F.2d 1297, at 1302-03, fn. 11 (5th Cir.1973); Kapral v. Jensen, 271 F. Supp. 74 (D.Conn.1967); Cohen v. Maloney, 410 F. Supp. 1147, 1153, fn. 9 (D.Del. 1976); Priesler v. Mayor of City of St. Louis, 303 F. Supp. 1071 (E.D.Mo.1969); Calderon v. City of Los Angeles, 4 Cal. 3d 251, 93 Cal. Rptr. 361, 481 P.2d 489 (1971); D'Adamo v. Cobb, 27 Cal. App. 3d 448, 103 Cal. Rptr. 813 (1972); Hartman v. Denver, 165 Colo. 565, 440 P.2d 778 (Colo.S.Ct.1967); Warren v. North Tonawanda, 60 Misc. 2d 593, 303 N.Y.S.2d 945 (Sup.Ct., Niagara County, N.Y.1969); In re Township of Penn Hills, County of Allegheny, 216 Pa.Super. 327, 264 A.2d 429 (1970).
[24] Burns v. Richardson, 384 U.S. at 97 n. 25, 86 S.Ct. at 1299 n. 25.
[25] Since we have struck down the state's plan on alternative grounds, we do not pass on the validity of the state's intended population baseeligible voters. We note, however, that since Reynolds courts at all levels have held that use of voter blind populations, either total or state citizen populations, adequately serves the requirement of "one person, one vote." On the other hand, in Burns, the Court expressed clear misgivings about voter-based populations, at least ones based on registered or actual voters. Whether these same misgivings apply to eligible voters as well has never been ruled on by the Supreme Court. At least one commentator, however, has stated that an eligible voter based apportionment would violate the holding and reasoning of Reynolds v. Sims:
If the Supreme Court ever affirms a standard of apportionment based on voters or those who may be eligible to vote, it will necessarily represent a determination that the use of total inhabitants as a base, as was demanded in Reynolds, is unconstitutional since, for example, if a district contains a university or mental institution which has people who are not eligible to vote, those eligible to vote in that district will necessarily be unconstitutionally overrepresented. Note, Reapportionment on the Sub-State Level of Government: Equal Representation or Equal Vote? 50 B.U.L.R. 231, 245 n. 71.
[26] Report at 16.
[27] Report at 15.
[28] Report at 16.
[29] Report at 27.
[30] Report at 30.
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421 S.W.2d 26 (1967)
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a corporation, Plaintiff,
v.
Lillian Mae GIBSON, Defendant-Appellant,
Venator GIBSON, Defendant-Respondent.
No. 32593.
St. Louis Court of Appeals, Missouri.
September 19, 1967.
Motion for Rehearing or to Transfer Denied October 17, 1967.
Application to Transfer Denied December 11, 1967.
*28 Ernest L. Keathley, Vernon C. Oetting, St. Louis, for defendant-appellant.
Walter H. Pollmann, Morris B. Kessler, St. Louis, for defendant-respondent.
Motion for Rehearing or to Transfer to Supreme Court Denied October 17, 1967.
TOWNSEND, Commissioner.
Interpleader suit in which plaintiff life insurance company has paid into the registry of the court the contractual amount of its policy and has been discharged.
The adverse parties are the divorced first wife of the deceased insured, Arico Gibson, and his second wife. This appeal is taken from a decree in favor of the first wife. The principal issues are: 1. Whether insured and the first wife, Venator, entered into a contract at the time of divorce that insured would maintain in full force the policy in question with the first wife as beneficiary and 2. if such a contract was entered into, whether it is binding upon the second wife, Lillian, in whose favor the insured effected a change of beneficiary two years before his death. Problems of material alteration and of contract interpretation arise along the way.
At the death of Arico Gibson, two certificates of life insurance under two group policies were in full force, one issued by Prudential Insurance Company and one by Metropolitan Life Insurance Company. The Prudential policy was issued in accordance with the collective bargaining agreement between Brown Shoe Company and Arico Gibson's local union. All premiums were paid up to the time of Arico's death, which the pleadings indicate occurred on or about December 25, 1964. The circumstances of the issuance of the Metropolitan group policy and certificate are not shown.
In negotiations between the insured and the first wife prior to and in anticipation of divorce the insured signed and acknowledged a stipulation prepared by Mr. Kessler, the attorney for the first wife, hereinafter referred to as respondent, which reads in part as follows:
"5. Defendant [Arico] is to maintain in full force and effect with the plaintiff [Venator] as beneficiary policy of insurance upon his life, issued to him as an employee of Brown Shoe Company by either the Teamster's Local Welfare Fund or Metropolitan Life Insurance Company group policy."[1]
This stipulation was executed in the office of the insured husband's attorney, Mr. Litz, and was by him forwarded to Mr. Kessler. Thereafter when respondent Venator executed this document in Mr. Kessler's office there had been added by her attorney at the end of the above paragraph 5 the words, "or Prudential Life insurance or any other insurance company."
The stipulation, in the altered form, is found in the file of the divorce proceeding, but is of course not embodied in the decree.
Mr. Kessler testified as to the circumstances of the alteration: "A Originally, Mr. Litz represented to me that there was one policy of insurance and that was The Metropolitan policy of insurance. Mrs. Gibson, when she came in to sign this stipulation, advised me and informed me that there were two policies. I contacted Mr. Litz and he was not sure and he couldn't tell me. He knew about The Metropolitan policy. I informed Mr. Litz that the agreement *29 was that all policies would be carried under this stipulation and he agreed that if he was in error about there being only the one policy, that it should be changed and it was changed and I made the change before Mrs. Gibson signed this. * * * The amended stipulation was mailed out to Mr. Litz immediately after Mrs. Venator Gibson signed it, in accordance with our `phone conversation and that was my letter to Mr. Litz. Q Which has already been offered in evidence here? A Yes, sir."
The letter referred to in Mr. Kessler's testimony was previously offered by appellant; it was dated on the same day that respondent signed the altered stipulation and read as follows: "Re: Gibson v. Gibson. Dear Mr. Litz: Enclosed find copy of Stipulation. Please note that I have made the insertion in paragraph 5 in accordance with our telephone conversation of this date. I have notified my client of the setting of April 5th, 1961."
Mr. Litz, attorney for Arico Gibson in the divorce suit, testified as follows: "Q Had you discussed the terms of this stipulation with your client, Arico Gibson, now deceased, before he signed that paper? A We had many discussions about it. * * * Q (By Mr. Pollmann) I will ask you, again, you did discuss the terms of this stipulation and settlement agreement with your client before he signed it, is that correct? A Yes, sir. * * * Q Your client knew about the language, all the language in that agreement when the divorce was granted, is that correct? A Yes, sir. Q No question about that? A No, sir. * * * Q Did you talk about the Prudential policy to your client, Mr. Arico Gibson? A We spoke about two policies and we didn't refer to them, generally, by the names of the companies from which the policies were issued, but rather, the places from where he got the policies. As I recall, he worked at Brown Shoe Company. He had one policy there and one from The Teamsters Union, and exactly which was which, I don't recall, but these were the ones that we referred to and later, in discussions with Mr. Kessler, I found out that Prudential and Metropolitan were involved. Q That was before the divorce was granted, right? A Oh, yes. Q And you talked about this with your client and with Mr. Kessler, is that correct? A On several occasions, yes, sir. Q It was one of the aspects in agreeing to the stipulation? A It was one. Q Mr. Litz, did you ever discuss with your client, Arico Gibson, at any time, the question of whether or not he could change the beneficiary on either of these policies? Do you remember ever talking to your client about that? A Yes, we spoke several times about the entire matter. Q Well, what did you tell him, Mr. Litz? A I don't ever recall looking at the policies, but this was one of the demands or requests that the plaintiff wanted in order to wind this divorce matter up and he was willing to do anything he could, give her anything. Q In order to wind the matter up to the mutual satisfaction of both people? A That's right. * * * Q What did he tell you and what did you tell him with respect to this matter of changing beneficiaries, just as a matter of fact? * * A As I recall, one of the stipulations or items in the stipulation that Mr. Gibson agreed to was that he would give up the change of beneficiary of one or more policies that he had to his wife in consideration of the divorce, and to maintain these policies for her benefit. This was part of our alimony. * * * Q Well, specifically, did it includedid your discussions with your client, as a matter of fact, Mr. Litz, include the Prudential policy? A It included, as I said before, a policy from Brown Shoe Company and one from The Teamsters, whichever that one went along with; that was included in the discussion. Q Whether it was from Brown Shoe Company or Teamsters 688 * * * Yes, sir." Upon further cross-examination Mr. Litz was asked: "Q Mr. Litz, after this change was made, did you tell your client that the change was, in fact, made? A Certainly. I wouldn't permit Mr. Kessler to make it before I checked with Gibson. Q So, on April the 5th, 1961, when according to the *30 records of this court, this divorce was granted, which is now a final judgment, your client knew what was on this paper, Exhibit A, did he not? A Yes, and he * * * Q He did, did he not? A Yes."
Subsequent to the divorce Mr. Kessler evidently notified the Metropolitan Life Insurance Company of a stipulation between Arico and Venator, for on May 26, 1961, he advised Mr. Litz that he was "receiving a little static" from Metropolitan and enclosed a waiver of right to change beneficiary form whose execution he requested Mr. Litz to procure from Arico. No mention of Prudential was made in this letter. This form was executed as requested. Upon Arico's death the principal amount of the Metropolitan policy was paid to respondent Venator by Metropolitan. On December 28, 1964, Mr. Kessler advised Prudential that respondent Venator claimed the proceeds due under the Prudential certificate and that she intended to contest the validity of any change of beneficiary made by Arico after March 16, 1961. Accompanying this letter was a copy of the stipulation as originally drawn, i. e., without the alteration previously mentioned.
Although the alteration of the stipulation after it had been signed and delivered was irregular, the testimony of Mr. Litz establishes that Arico, being fully advised, acquiesced in the alteration of the stipulation; there was therefore a ratification by him of the change before any move was made to utilize the stipulation in any way. In addition the stipulation so altered was subsequently filed in the divorce proceeding with full knowledge by Arico of its content. Nothing in the record suggests even a hint of any sharp practice being perpetrated upon Arico. Consequently any legal strictures relating to material alteration are inapposite. It must therefore be held that the stipulation with the added words "or Prudential Life insurance or any other insurance company" constituted the contract between Arico and Venator.
There remains the problem of determining the intentions of the parties from the stipulation so amended.
Appellant's most vigorous contention is that the stipulation filed in the divorce proceeding imposed a restriction as to a change of beneficiary on only one of the policies referred to therein. Looking to the precise wording of the stipulation we find that it refers to "policy of insurance * * * issued * * * by either the Teamster's Local Welfare Fund or Metropolitan * * *." The argument of appellant rests upon the dictionary definition of "either" which appellant finds always to be given in terms of alternatives, thus, a disjunctive conjunction which implies a choice of alternatives or a disjunctive correlative indicating that what immediately follows is the first of two or more alternatives. Similarly, appellant finds that "or" is a coordinating conjunction introducing the second of two choices when the first is introduced by "either"; she also finds that "or" is "a coordinating particle that marks an alternative, as you may read or writethat is, you may do one of the things at your pleasure, but not both." And she finds support in the statement from Black's Law Dictionary (4th ed) that "where the word `or' is preceded by the word `either', it is never given a conjunctive meaning."
Implicit in this argument is the assumption that the stipulation gave respondent Venator the election to determine the policy of which she was to remain the beneficiary. The argument then articulates the proposition that respondent made such an election by requiring that the insured execute a waiver of his right to change the beneficiary of the Metropolitan policy. Appellant continues: "No such waiver was executed by Respondent (sic) with respect to Prudential, again clearly showing that she had made her choice by selecting Metropolitan as the one of two policies mentioned in the agreement. She gave no indication of being interested in the Prudential policy during Gibson's lifetime after the divorce."
*31 To simplify the presentation: Appellant maintains that by the use of "eitheror" the parties intended to require Arico to maintain one policy or anotherbut only one in full force with Venator as beneficiary and that Venator should have (and did make) an election between such alternatives.
We are referred to a large number of cases dealing with the interpretation of "either . . . or" and with the interpretation of "or" standing alone, in statutes, documents and contracts. Any controversy about the meaning of such words poses the question of whether they are used in the disjunctive or in the conjunctive. The dictionary definitions of "or" which have been furnished are quite in accord with prime grammatical principles; but such definitions, stated in terms of alternatives or mutually exclusive choices, are not necessarily conclusive. In Northern Commercial Company v. United States, 9 Cir., 217 F. 33, 36, the court was furnished a disquisition relating to the grammatical construction of "or"; the court denominated the discourse "interesting and academically instructive, but where the language is ambiguous, or its meaning involved, such construction must give way to the settled rules of legal construction * * * the words `or' and `and' are sometimes convertible, as the sense may require." Thus, in Ex parte Lockhart, 350 Mo. 1220, 171 S.W.2d 660, a series of propositions connected by the word "or" was held to be cumulative in effect, that is, "or" meant "and", and it was held that all the stated propositions must be present in order to give the petitioner the privilege which an ordinance provided. The court specifically rejected the idea that alternatives were stated.[2] In contrast, Hanley v. Carlo Motor Service Co., Mo. App., 130 S.W.2d 187, presented a situation where `or' was clearly used for the purpose of stating conditions in the alternative (although not mutually exclusive alternatives).
In Ex parte Lockhart, supra, the matter was thus put by the Supreme Court, at p. 666 of 171 S.W.2d: "The word "or" in statutes or documents is frequently interpreted to mean "and," and this interpretation is given to it whenever required to carry out the plain purpose of the act or contract and when to adopt the literal meaning would defeat the purpose or lead to an absurd result.'"
Regarding the terms of the stipulation as creating an ambiguity, it is necessary to turn to the setting in which the words were used in our effort to ascertain their meaning. In interpreting an ordinance this court has spoken in terms equally applicable in principle to the interpretation of a contract:
"There can be no question as to the canons of construction in a case of this character. The primary rule to be observed is to ascertain the intention of the lawmakers, and, where the meaning of the statute is doubtful, any word rendering it so may be enlarged, restricted, or even stricken out in order to make the ordinance or statute conform to the true intent of the lawmakers." City of St. Louis v. Consolidated Products Co., Mo. App., 185 S.W.2d 344, 346.
It is elementary that where the words of a contract create an ambiguity then, in order to ascertain the intentions of the parties, resort must be had to the circumstances surrounding the formulation and execution of the contract, the relationship of the parties, the purpose to be served, the course of negotiations if any.
Appellant's contention that the contract, by the use of "either . . . or" in the stated context, set up a system of mutually exclusive alternatives cannot be accepted.
*32 (1) It is clear that, when the stipulation in its original form was framed and dealt with by the attorneys of the two parties, the document embodied no concept of alternatives because the evidence shows that they acted upon the assumption that there was only one policy covering on the life of Arico and that it was a Metropolitan group policy. Since the Metropolitan policy was a group policy Mr. Kessler was uninformed as to the exact process by which some document giving coverage on the life of Arico had been issued, whether through the Teamsters Local or otherwise. Therefore paragraph 5 was so drawn as to relate to that exact one-policy coverage whether the documentation was furnished by the Teamsters Welfare Fund or otherwise. Obviously at this stage paragraph 5 was intended to relate to only one policy. In such a setting the words "either . . . or" simply indicated that that policy was to be maintained in respondent's favor whether it was issued directly by Metropolitan or through the instrumentality of the Teamsters Welfare Fund. Such words therefore could not have presented a set of alternativesthey did not offer alternative courses of conduct. They did not delineate choices or elections because under the circumstances a choice was impossibleone cannot choose between a single thing! "Either. . . or" then had no relation to alternatives; the expression's reference was only to the source or origin of the presumed single policy covering on Arico's life. This use of the expression removes it entirely from the area in which the dictionary definition in terms of alternatives would operate and so renders such definition irrelevant. We see in such expression only the meaning of "whether".
(2) After the original form of the stipulation, signed by Arico Gibson, had been returned to Mr. Kessler, he was informed by his client, the respondent, that there was more than one policy giving coverage on Arico's life. Therefore the amendment was made in the endeavor to have paragraph 5 relate to more than one policy. That effort was evidenced by the expedient of simply adding "or Prudential Life insurance or any other insurance company".
Mr. Litz testified that one of the demands made by Venator for settling the divorce matter was the inclusion of the Prudential policy in the stipulation and that Arico was willing to give her "anything" in order to wind up the divorce proceeding and that he was to "maintain these policies for her benefit". He added, significantly, "this was part of our alimony".
In this setting it would be difficult to interpret the amended recitation of policies as requiring Arico to maintain only one in favor of Venator. There is clearly evidenced an intention to have the stipulation cover any policy issued to Arico as an employee of Brown Shoe Company ("or any other insurance company") and we do not believe that the ambiguous "either . . . or" as first used in the original form of the stipulation can be allowed to limit the duty of Arico to maintain life insurance for Venator's benefit. Considering the whole of the amended stipulation in the setting in which we find it, we reach the conclusion that the contract meant that Arico was to maintain in her favor any policy of insurance issued to him as an employee of Brown Shoe Company whether issued "by Teamster's Local Welfare Fund or Metropolitan Life Insurance Company or Prudential Life Insurance or any other insurance company."
Finding that the contract obligated Arico to maintain for Venator's benefit any policy issued to him as an employee of Brown Shoe Company, we proceed to consider the legal position of Venator relative to the policy in question. Where the insured upon taking out a policy of insurance has by its terms reserved the right to change the beneficiary, it is the conventional thing to say that the named beneficiary has only a contingent interest in the policy, an interest which can be extinguished by the exercise of the insured's reserved power to change *33 the beneficiary. We find a limited amount of authority relating to the changed situation here presented, namely, a contract made with a beneficiary obligating the insured to maintain a present policy in full force and effect for the benefit of that presently named beneficiary. In California it has been clearly held that by such a contract the contingent interest of the beneficiary is converted into a vested equitable interest in the policy. Mutual Life Insurance Co. of New York v. Franck, 9 Cal. App. 2d 528, 50 P.2d 480. Reaching the same result, another case explained that the quality of the beneficiary's interest was changed by such a contract. Shoudy v. Shoudy, 55 Cal. App. 344, 203 P. 433.[3] The precise nature of a "vested equitable interest" is not delineated by these cases; full analysis of the legal position of the beneficiary is not indulged. These cases state that the vested equitable interest may not be subsequently defeated by an effort to change the beneficiary without the consent of the contracting first beneficiary.[4] Considering the results which are deemed to flow from the finding of "vested equitable interest", it is plain that the holdings in these cases proceed upon the basis of a property concept and not simply upon breach of contract, that is, that the contracting first beneficiary, as between herself and the insured or a volunteer, acquires some kind of property interest in the res itself, namely, in the contractual promise made by the insurance company to pay so many dollars upon the death of the insured.[5] The Supreme Court of Pennsylvania has followed the property concept and has analogized the first beneficiary's position to that of an equitable assignee; in explaining the law of that state, the court said:
"The law appertaining to the equitable assignment of the benefits of an insurance policy is well settled in this state. There is no doubt that a beneficiary named pursuant to a definite agreement that he shall be so named, by virtue of a valuable consideration moving from him, acquires a right to the policy or the proceeds thereof that will be protected against subsequently named beneficiaries who have no superior equity." Visnik v. Mance, 326 Pa. 399, 191 A. 127, 129.
Subsequently in a case whose facts precisely parallel those of our present case, the Pennsylvania court said: "Our cases have uniformly recognized that a contract not to change the beneficiary, entered into by an insured and his designated beneficiary for a valuable consideration, is binding as between the insured, or his volunteer, and the contractually determined beneficiary and will be enforced in equity." Hundertmark v. Hundertmark, 372 Pa. 138, 93 A.2d 856, 858.
In Campbell v. Prudential Insurance Co., Ohio App., 137 N.E.2d 515, 73 Ohio Law. Abs. 262, the Ohio Court of Appeals took the estoppel route to invalidate the insured's attempt to make his second wife the beneficiary.[6] His violation of contract was held *34 to be utterly without effect unless an innocent party was misled or damaged by some action of the first beneficiaries.
It is our considered opinion that the contracting first beneficiary, as between herself and the insured (or a volunteer), acquires a property interest in the subject policy which is superior to that of the insured or the volunteer. For the purpose of decision in this case it is not necessary to classify that property interest in one of the conventional categories. If the obligation to maintain the policy in favor of the contracting first beneficiary is to be treated as analogous to a contract to assign the policy that interest must be labeled an equitable one as has been done in the cited California cases.[7] As an equitable interest in a particular res it is subject to being divested (although denominated a vested equitable interest) by the intervention of a superior equity in accordance with the accepted principles of equity jurisprudence. In the present case there is no competing equity of a superior kind.
In this litigation the respondent has pursued her asserted interest in a specific res. She does not sue for breach of contract. In our opinion she has established that her property interest in that res came into existence years ago. The combined interests of the two litigants here would completely exhaust the specific res. In this proceeding the first wife endeavors to reduce to possession that which is clearly hers. Under such circumstances there was no occasion for her to join as a party the personal representative of the deceased insured.
The judgment is affirmed.
PER CURIAM.
The foregoing opinion by TOWNSEND, C., is adopted as the opinion of this Court. Accordingly, judgment is affirmed.
ANDERSON, P. J., and RUDDY and WOLFE, JJ., concur.
NOTES
[1] The stipulation provided for alimony and in addition constituted a property settlement agreement, in which, inter alia, the parties disposed of items of household goods.
[2] Similarly in Spillman v. Succession of Spillman, 147 La. 47, 85 So. 489, a series of conditions connected by the word `or' was held to be cumulative in effect, that is, that "or" meant "and", and it was there held that all such conditions must be present in order to invoke the benefit of a statute.
[3] The stated principle has of course no application where the contract provides merely for the maintenance of a specified amount of insurance without description of a particular policy. Jacoby v. Jacoby, 69 S.D. 432, 11 N.W.2d 135.
[4] It should be noted that in these cases the subsequently named beneficiary was not a bona fide purchaser for value and was not possessed of any other equity of a superior nature, a matter adverted to hereinafter.
[5] Thomson v. Thomson, 156 F.2d 581, 585 (8th Cir.) states that "as against the insured or his estate she [the contracting beneficiary] acquired a vested right notwithstanding the fact that the policy by its terms reserved to the insured the right to change the beneficiary."
[6] In this separation and property agreement the insured husband contracted with the first wife to maintain his insurance for the benefit of their children; the agreement was incorporated in the divorce decree, but no emphasis was placed upon that fact. In Ehrlich v. Cohn, 1 A.D.2d 1004, 151 N.Y.S.2d 802 (affirmed 2 N.Y.2d 886, 161 N.Y.S.2d 143, 141 N.E.2d 627), on similar facts it was held that the children acquired an equitable interest in the policy superior to that of the second wife.
[7] Cf. Locomotive Engineers Mutual Life and Accident Assn. v. Locke, 251 A.D. 146, 295 N.Y.S. 689, affirmed 277 N.Y. 584, 13 N.E.2d 781.
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267 Pa. Super. 10 (1979)
405 A.2d 1277
COMMONWEALTH of Pennsylvania
v.
John Wesley BANKS, Appellant.
Superior Court of Pennsylvania.
Submitted May 7, 1979.
Decided June 13, 1979.
Petition for Allowance of Appeal Denied October 2, 1979.
*12 John H. Corbett, Jr., Assistant Public Defender, Pittsburgh, for appellant.
Robert L. Eberhardt, Deputy District Attorney, Pittsburgh, for Commonwealth, appellee.
Before VAN der VOORT, LARSEN and LAVELLE, JJ.[*]
VAN der VOORT, Judge:
At approximately 4:30 P.M. on August 16, 1976, Robert Quinn was shot to death in front of the 630 Bar on Herron Avenue, Pittsburgh. A warrant was signed the next day for the arrest of appellant John Wesley Banks, and appellant was arrested two months later. Trial was held on February 16-18, 1977, and a jury found appellant guilty of third degree murder. The case is before us on direct appeal.
Appellant first argues that the lower court erred in acceding to the jury's request and permitting the court reporter to read in open court a portion of the testimony of a Commonwealth witness, Fred Quinn, after the jury had entered upon its deliberations. "[Where a jury . . . requests a reading of a portion of the testimony actually *13 given at the trial, it is a matter within the discretion of the trial court whether to grant such requests. If the trial court does grant the request, the review of testimony must be conducted in open court in the presence of parties and their counsel and, if the resultant review does not place undue emphasis on one witness' testimony, no reversible error is committed." Commonwealth v. Peterman, 430 Pa. 627, 244 A.2d 723 (1968). Appellant urges that, in the case before us, the reading did place undue emphasis on the testimony of that particular witness. Having examined the notes of testimony of the trial, we disagree. The lower court properly exercised its discretion when it permitted the court reporter to read back the portion of testimony requested by the jury.
Appellant next argues that his trial counsel was ineffective, 1) for failing to call a certain witness (appellant's brother) to corroborate appellant's version of the shooting, 2) for bringing out during cross-examination of a Commonwealth witness, police officer Orlando Diggs, the fact that appellant had a police record, and 3) for failing to object when the lower court permitted the court reporter to read to the jury the testimony of witness Fred Quinn. In order for us to determine that appellant was denied effective representation of counsel, we must determine that the course chosen by appellant's trial counsel was without a reasonable basis designed to effectuate appellant's interests, Commonwealth ex rel. Washington v. Maroney, 427 Pa. 599, 235 A.2d 349 (1967), keeping in mind that the burden is upon appellant to demonstrate counsel's incompetence, Commonwealth v. Murray, 452 Pa. 282, 305 A.2d 33 (1973).
The lower court in the case before us, after listening to trial counsel's testimony at the PCHA hearing, determined that counsel's decision not to have the brother testify was "legitimate trial strategy", because of the brother's "obvious bias" and because of the brother's criminal record. "The law does not require trial counsel to call to the witness stand every witness mentioned by a criminal defendant when there is a reasonable basis for the attorney to believe *14 that such witnesses would not be helpful in the defense of the client." Commonwealth v. Robinson, 232 Pa.Super. 328, 332, 334 A.2d 687 (1975). Appellant's trial counsel was not ineffective for deciding, as a matter of trial strategy, not to call appellant's brother as a witness.
Furthermore, our review of the notes of testimony of the trial reveals counsel's strategy in questioning Officer Diggs concerning appellant's "police record." Officer Diggs testified on direct examination that a warrant was issued for appellant's arrest the day after the shooting, but that appellant was not apprehended until two months later. In light of appellant's own testimony later in the trial, it is apparent that defense strategy was to admit appellant's presence at the scene of the shooting, admit that appellant ran away, but convince the jury that appellant ran, not because of guilt, but to avoid being shot himself or otherwise involved in the incident. Such strategy would require convincing the jury that appellant had not been hiding for two months, but rather had been in full view in Pittsburgh during the time the police were allegedly trying to apprehend him. Planning on having appellant take the stand, counsel would legitimately have preferred having appellant's record mentioned early in the trial to show that the police had appellant's address and could have arrested appellant at any time, rather than having the prosecution later impeach appellant's testimony by showing prior convictions in the nature of crimen falsi. See Commonwealth v. Bighum, 452 Pa. 554, 307 A.2d 255 (1973). Not all references to prior criminal activity warrant reversal. See, e.g., Commonwealth v. Irwin, 475 Pa. 616, 381 A.2d 444 (1977); Commonwealth v. McFadden, 464 Pa. 265, 346 A.2d 550 (1975); Commonwealth v. Sharpe, 449 Pa. 35, 296 A.2d 519 (1972).
Under the circumstances, we cannot say that trial counsel's actions had no reasonable basis.[1] Judgment of sentence is affirmed.
NOTES
[*] Justice Rolf Larsen of the Supreme Court of Pennsylvania, and Judge John E. Lavelle of the Court of Common Pleas of Schuylkill County, Pennsylvania, are sitting by designation.
[1] Since we have found no merit to appellant's argument that the court reporter should not have been permitted to read certain testimony to the jury, we can hardly say that appellant's counsel was ineffective for failing to object to such procedures.
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43 Md. App. 337 (1979)
405 A.2d 326
ALLENTOWN PLAZA ASSOCIATES ET AL.
v.
SUBURBAN PROPANE GAS CORPORATION ET AL.
No. 1274, September Term, 1978.
Court of Special Appeals of Maryland.
Decided September 10, 1979.
*338 The cause was argued before GILBERT, C.J., and MORTON and MOORE, JJ.
Jerome P. Friedlander, II and David S. Bruce, with whom were Friedlander, Friedlander & Brooks, P.C. and Lancaster, Bland, Eisele & Herring on the brief, for appellants.
L. Palmer Foret, with whom were Carr, Jordan, Coyne & Savits on the brief, for appellee Suburban Propane Gas Corporation. Martin L. Goozman, with whom were Frank J. Ragione and Silber, Wilson & Goozman and Interdonato & Ragione on the brief, for appellee Joseph J. Palmer, Jr. Submitted on brief by Peter E. Derry and McChesney & Pyne, Chartered for appellee K-Lo Plumbing, Inc. Submitted on brief by Robert B. Myers for other appellees.
MOORE, J., delivered the opinion of the Court.
In the proceedings below, the Circuit Court for Prince George's County (Levin, J.) granted summary judgment motions filed by the defendants, four in number, based upon the general three-year statute of limitations contained in Md. [Cts. & Jud. Proc.] Code Ann. § 5-101 (1974).[1] The court rejected the contentions of the plaintiffs, appellants here, that their causes of action in assumpsit and tort, arising out of the construction of a shopping mall, were saved by the provisions of sections 5-108 of the same Article,[2] under which no claim *339 for damages accrues "from the defective and unsafe condition of an improvement to real property" occurring more than 20 years after the completion of the improvement. We shall affirm.
I
The appellant, Allentown Plaza Associates, is a Maryland limited partnership, which entered into a prime construction contract in March 1972 with appellant, Rand Industries, Inc., as general contractor, for the construction of a shopping center, known as Allentown Mall, located in Camp Springs, Prince George's County, Maryland. Rand later became a partner in Allentown Plaza Associates.
Because of the unavailability of natural gas from the Washington Gas Light Company, appellants installed an underground pipeline system to provide liquid propane gas for its tenants. In March 1972, Allentown Plaza entered into a contract with the appellee, Suburban Propane Gas Corporation (Suburban), to supply the propane, to provide a propane gas storage tank, and to install 23 meters for measuring and controlling pressures for the base usage on each rental until in the Mall. These meters were to be temporary and were to be removed when natural gas became available. The first paragraph of the contract provided in part:
"All Suburban's equipment shall remain personalty, regardless of how attached to the realty, *340 and shall remain the sole property of Suburban, and Suburban shall have access thereto at all times for purposes of removal, repair, alteration, replacement and service, including the equipment of the individual tenants, except as otherwise provided for in this agreement .... (Emphasis added.)
Pursuant to the contract, Suburban supplied the gas meters to the site but, for reasons not disclosed in the record, did not install them. Appellants were aware on November 30, 1972 of this breach of the propane contract, but took no legal action at that time. Rather, they employed two plumbing contractors, the appellees, Joseph J. Palmer, Jr. and K-Lo Plumbing, Inc., to make the installations. By October 1973, all the meters had been installed. Service to the stores with liquid propane gas commenced. A gas leak was discovered in the underground pipeline system in February 1975, and some corrective action was taken by the appellants. In September 1975, however, additional leaks were detected and the entire underground system was abandoned and replaced by pipelines above ground. Replacement costs were approximately $30,500.
On January 1, 1977, over 3 years after the last meter and coupling had been installed, appellants filed a declaration against the aforementioned appellees and against the firm of Freidin and Arey Associates, the mechanical and electrical engineers for the project. They alleged that the leaks were caused by corrosion of the pipes and that the corrosion was due to appellees' failure to install insulating fittings, known in the trade as "dielectric couplings," where the gas lines connected to the gas meters.[3]
More specifically, the claim against Suburban was in assumpsit for failure to install the meters as required under the agreement, and in tort for failing to provide dielectric *341 couplings with the meters and to warn the appellants of the need for such couplings. The plumbing contractors who made the installations were alleged to be negligent in failing to use and to install dielectric couplings. The cause of action against Freidin and Arey was based upon negligence in failing to provide specifications or warnings concerning the need for such couplings or insulating fittings and otherwise failing to protect the pipes from corrosion.
Following discovery, each of the appellees, filed a motion for summary judgment on various grounds, including, in each instance, a claim that the declaration was barred by the three-year statute of limitations governing civil actions. Md. [Cts. & Jud. Proc.] Code Ann. § 5-101 (1974).[4] In a concise memorandum opinion and accompanying order, the motions were granted.
With respect to the count in assumpsit against Suburban, the court found that a breach of the Allentown-Suburban contract occurred prior to January 1, 1974, "a time computed most favorably for Allentown." Because the declaration was not filed until January 11, 1977, more than three years had elapsed and the assumpsit claim was barred by section 5-101. The court rejected the contention that the statute did not commence to run until February 1975 when the defects in the pipe system were discovered, instead holding that the three-year period began to run from the date of the breach of the agreement and not from the time the breach was discovered. Mayor & Council of Federalsburg v. Allied Contractors, Inc., 275 Md. 151, 338 A.2d 275, cert. denied, 423 U.S. 1017 (1975). See also Leonhart v. Atkinson, 265 Md. 219, 289 A.2d 1 (1972). With respect to the negligence counts, the court also found that section 5-101 was applicable, again rejecting a contention by the appellants that the period of limitations should begin to run from the date the wrong was discovered (February, 1975) and not the date when it occurred (December, 1973).[5]Watson v. Dorsey, 265 Md. 509, 290 A.2d *342 530 (1972). With respect to appellants' reliance upon section 5-108,[6] the court held as follows:
"We do not believe that the gas pipe and meter system involved in this instance is an `improvement to real property' within the meaning of § 5-108. The law in this state regarding what constitutes an improvement for purposes of § 5-108 treatment is very unclear. As a matter of fact, we have been unable to find any recorded case on this subject. However, Bankers' & Merchants' Credit Company v. Harlem Park Building & Loan Association, 160 Md. 230 (1930) points to a distinction between a fixture and an improvement to realty. This Court is of the opinion that the entire underground pipe and meter system was a fixture attaching to an improvement, the improvement being the above ground structure known as Allentown Mall Shopping Center."
II
Appellants' sole contention on this appeal is that the court erred in its failure to apply section 5-108. Succinctly stated, appellants contend that section 5-108 changes established law as to when an action, involving an improvement to real property, accrues. Appellants concede that, prior to the adoption of the section, the applicable time for accrual was when the wrong occurred. Watson v. Dorsey, 265 Md. 509. They argue, however, that the enactment of section 5-108(c) which provides that a cause of action under the section "accrues when the injury or damage occurs" changed prior law. In accordance with the change, they claim, the normal three-year statute of limitations begins to run when damage or injury caused by a defective and unsafe condition of an *343 improvement to real estate is discovered, except, of course, that after the lapse of 20 years all rights to file an action are lost. Applying section 5-108 to the instant case, it is appellants' position that their damage and injury occurred not when the inadequate couplings were installed but when the underground pipe leaked in 1975. They state: "This was their damage and injury and it occurred [in February 1975] within three years before the Declaration was filed [on January 11, 1977] and before 20 years had passed."
As the Revisor's Note to section 5-108 indicates, the section derived from former Md. Ann. Code art. 57, § 20, repealed by 1973 Md. Laws, 1st Spec. Sess., ch. 2, § 2, effective January 1, 1974. The Note goes on to state:
"It is believed that this is an attempt to relieve builders, contractors, landlords, and realtors of the risk of latent defects in design, construction, or maintenance of an improvement to realty manifesting themselves more than 20 years after the improvement is put in use. The section is drafted in the form of a statute of limitations, but, in reality, it grants immunity from suit in certain instances. Literally construed, it would compel a plaintiff injured on the 364th day of the 19th year after completion to file his suit within one day after the injury occurred, a perverse result to say the least, which possibly violates equal protection. Alternatively, the section might allow wrongful death suits to be commenced 18 years after they would be barred by the regular statute of limitations.
The section if conceived of as a grant of immunity, avoids these anomalies. The normal statute of limitations will apply if an actionable injury occurs." (Emphasis added.)
In our judgment, there is substantial merit to the suggestion in the Revisor's Note, that the section be conceived "as a grant of immunity." At all events, there is a serious question as to whether the section could be applied *344 retrospectively, as the facts in this case would require.[7] Furthermore, there is a question as to whether, in the event of retrospective application, the language of subsection (c) constitutes an adoption by the Legislature of the "discovery rule" in the absence of specific language to that effect. Pacific Indemnity Co. v. Thompson-Yaeger, Inc., 258 N.W.2d 762 (1977). These and related issues must yield, however, to the threshold question whether the instant appeal does involve an "improvement to real property." The court below held it did not; and while, in our judgment, the stated reasons for its conclusion were lacking in clarity,[8] we deem the conclusion itself to be correct. This conclusion obviates the necessity for determination of the other questions of interpretation of section 5-108 strongly urged upon us by appellants.
III
With respect to the pivotal question of this appeal, it is the appellants' position "the meters and their couplings, especially the couplings, were an improvement to real property" within the meaning of section 5-108. We disagree for two fundamental reasons, either of which is sufficient to support an affirmance of the lower court's determination. First, as the law of this and other jurisdictions discloses, the gas meters and their couplings were not an improvement to real property within established definitions of the term. And second, the contract between Suburban and the appellant specifically provided that the meters were to remain personalty and the sole property of Suburban.
In determining what constitutes an "improvement to real property" courts have employed two basic approaches. One *345 applies common law fixture analysis.[9]Smith v. Allen-Bradley Co., 371 F. Supp. 698 (W.D. Va. 1974). The other most frequently used avoids "the vagaries of fixture law" and adopts a "commonsense" interpretation of the phrase. See Pacific Indemnity Co. v. Thompson-Yaeger, Inc., 260 N.W.2d 548 (Minn. 1977). The commonsense approach commences with an examination of the "common usage of language." Kallas Millwork Corp. v. Square D. Co., 225 N.W.2d 454 (Wisc. 1975). It has been stated that an improvement "includes everything that permanently enhances the value of premises for general uses."[10] (Emphasis added.) 41 Am.Jur.2d, Improvements § 1 (1968). See also id. §§ 22, 23. The Washington court in Seigloch v. Iroquois Mining Co. defined an improvement as follows:
*346 "The term must mean improvements of the realty; that is to say, such things as are placed thereon by the way of betterments which are of a permanent nature and which add to the value of the property as real property. This would include buildings and structures of every kind, and also such machinery as was placed thereon of a permanent nature and which tended to increase the value of the property for the purposes for which it was used...."
181 P. 51, 53 (Wash. 1919).
In such an analysis, one looks to the nature of the improvement, its relationship to the land and its occupants, and its permanence. For example, in Pacific Indemnity Co. v. Thompson-Yaeger, 260 N.W.2d 548, the court held that a furnace which was attached to a building with a complex system of pipes and ducts was an improvement to real property, reversing a lower court determination which applied the law of fixtures to conclude that the furnace was not an improvement. Similarly, the New Jersey court in Brown v. Jersey Central Power & Light Co., 394 A.2d 397 (Super. Ct. App. Div. 1978) held that a transfer switch assembly, a component of a missile system, which was housed in an anchored metal cabinet, located in a cinderblock building, was an improvement to real property. It was an integral part of the system, crucial to its operation.[11]
In the instant case, it is clear that the gas meters and their couplings were not improvements to real property. These *347 meters, rented from Suburban by appellants, were meant to be temporary, not permanent. They were to be removed when natural gas became available. Furthermore, Suburban, as owner of the meters, affixed them to the above-ground pipeline for the limited purpose of measuring how much propane each tenant used.[12] It is inconceivable that either appellant or Suburban contemplated making an improvement to real property when the meters were attached. Nor can it be contended that the meters enhanced the value of the property.[13] Their only function was to measure the tenants' usage of propane. They did not pass with the land but were on the property temporarily pursuant to appellants' contract with Suburban.[14]
There remains an additional reason for our conclusion in this case. That is, the contract provision between appellants and Suburban Propane which expressly provided that the gas meters were rented and were to remain personalty and the sole property of Suburban. It has been recognized frequently that contract provisions that a fixture or an improvement are to remain the personal property of the builder or the annexer are valid and controlling.[15] 1 Thompson on Real Property § 80 (1964); 41 Am.Jur.2d, Improvements § 3 (1968). Consequently, in such situations, the ordinary tests and criteria for determining when an object becomes a fixture are not pertinent. 35 Am.Jur.2d, Fixtures, § 16 (1967). This freedom of contract to designate chattels to remain personalty, however, "is limited to chattels which are *348 attached to the realty in such a manner that they may be detached without being destroyed or materially injured, or without destroying or materially injuring the realty to which they are attached." 1 Thompson on Real Property § 80, at 381 (1964). Here, all parties intended that the gas meters would be used only until natural gas was available at which time they would be removed. The meter was attached simply to the pipe above ground. Upon removal, no damage would occur to the meter or the property to which it was attached. The contract between the parties permissibly provided that the gas meter would remain personalty. Since the gas meter was to remain personalty, and the sole property of Suburban, it could not become an improvement to real property. Accordingly, section 5-108 which applies to improvements to real property could not be applicable.
Judgments affirmed; costs to be paid by appellants.
NOTES
[1] Section 5-101 provides:
"A civil action at law shall be filed within three years from the date it accrues unless another provision of the Code provides a different period of time within which an action shall be commenced." (Emphasis added.)
[2] Although framed as a statute of limitations, § 5-108 has been classified in the Revisor's Note as a grant of immunity to builders, contractors, realtors, and landlords after 20 years from the date the improvement is completed. It provides in part:
"(a) Injury resulting from improvement to realty. Except as provided by this section, no cause of action for damages accrues and a person may not seek contribution or indemnity for damages incurred when wrongful death, personal injury, or injury to real or personal property resulting from the defective and unsafe condition of an improvement to real property occurs more than 20 years after the date the entire improvement first becomes available for its intended use.
* * *
(c) When action accrues. A cause of action for an injury described in this section accrues when the injury or damage occurs."
[3] We are told that a dielectric coupling would have afforded protection to the underground pipeline and that such a coupling differs from the metal couplings actually used only in that it has a plastic-like sleeve which prevents the passage of current between the meter and the underground pipeline; and that the cost differential between the metal and dielectric couplings was about § 1.00 each.
[4] See note 1, supra.
[5] The court recognized that the discovery rule is applicable, however, where professional malpractice is concerned. See Harig v. Johns-Manville Products, 284 Md. 70, 394 A.2d 299 (1978) (applies to discovery of latent disease); Watson v. Dorsey, 265 Md. 509, 290 A.2d 530 (1972) (attorney); Leonhart v. Atkinson, 265 Md. 219, 289 A.2d 1 (1972) (accountant); Feldman v. Granger, 255 Md. 288, 257 A.2d 421 (1969) (accountant); Mattingly v. Hopkins, 254 Md. 88, 253 A.2d 904 (1969) (civil engineer); Jones v. Sugar, 18 Md. App. 99, 305 A.2d 219 (1973) (physicians). For a recent case concerning the time of accrual of a cause of action for past, present, and prospective damages for permanent nuisance involving ongoing activities, see Goldstein v. Potomac Electric Power Co., 285 Md. 673 (1979).
[6] See note 2, supra.
[7] Installation of the meters was complete by the end of 1973 but the law was not effective until January 1, 1974. The Court of Appeals, after reviewing a long line of Maryland cases, held in Slate v. Zitomer, that an amendment to a statute of limitations provision, as with changes to all substantive law, would not be applied retroactively unless the legislature clearly expressed such an intention. 275 Md. 534, 538-45, 341 A.2d 789, 793-95 (1975), cert. denied, 423 U.S. 1076 (1976).
[8] As previously disclosed, the trial judge was "of the opinion that the entire underground pipe and meter system was a fixture attaching to an improvement, the improvement being the above ground structure known as Allentown Mall Shopping Center."
[9] "[A] fixture is a former chattel which, while retaining its separate physical identity, is so connected with the realty that a disinterested observer would consider it a part thereof." 5 American Law of Property § 19.2, at 3-4 (A.J. Casner ed. 1952). "The term implies something having possible existence apart from realty, but which may by annexation be assimilated into realty. Things of a personal nature or buildings or other structures upon the land, which have been so fixed to land as to become a part thereof, are termed `fixtures', and pass with the land in any transfer of ownership...." 1 Thompson on Real Property § 55, at 171 (1964). Once it is determined that personalty has become a fixture, it is usually held that it has become a part of the property to which it is affixed and cannot be removed from it, unless it falls within the trade fixture exception. Id. at § 77.
Whether a chattel has become a fixture is a mixed question of law and fact. To make this determination the following factors are examined: the intent of the parties; the character of the chattel; the degree and mode of annexation; the relationship of the chattel to the realty to which it is attached; the relationship of the parties; and any injury to the chattel or freehold upon removal. Anderson v. Perpetual Bldg. & Loan Assoc., 172 Md. 94, 97-101, 190 A. 747, 748-50 (1937); Bankers' & Merchants' Credit Co. v. Harlem Park Bldg. & Loan Assoc., 160 Md. 230, 234-36, 153 A. 64, 66-68 (1931); Dudley & Carpenter v. Hurst, Miller & Co., 67 Md. 44, 47-48, 8 A. 901, 902-04 (1887). See also 1 Thompson on Real Property §§ 55-62 (1964); Smith v. Allen-Bradley Co., 371 F. Supp. 698 (W.D. Va. 1974); Bankers' & Merchants' Credit Co. v. Harlem Park Bldg. & Loan Assoc., 160 Md. 230; Willcox Boiler Co. v. Messier, 1 N.W.2d 130 (Minn. 1941).
If, after undergoing this analysis, a chattel is deemed to be a fixture, it then becomes, by its very nature, an improvement to the real property to which it is affixed. However, as was recognized in Pinneo v. Stevens Pass, Inc., all improvements to real property are not necessarily fixtures. 545 P.2d 1207, 1209 (Wash. Ct. App. 1976). Cf. Yellowstone Pipe Line Co. v. State Board of Equalization, 358 P.2d 55 (Mont. 1960) (for tax assessment purposes, an oil pipeline was a fixture and therefore could not be considered an improvement to real property).
[10] Black's Law Dictionary (4th ed. 1968) defines an improvement as "[a] valuable addition made to property (usually real estate) or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adapt it for new or further purposes." Id. at 890.
[11] See also Rosenberg v. Town of North Bergen, 293 A.2d 662 (N.J. 1972) (road was improvement to real property); Yakima Fruit & Cold Storage Co. v. Central Heating and Plumbing Co., 503 P.2d 108 (Wash. 1972) (refrigeration system of cold storage warehouse was an improvement to real property); Kallas Millwork Corp. v. Square D. Co., 225 N.W.2d 454 (Wisc. 1975) (high pressure water system designed for fire protection was an improvement to real property). Compare Ciancio v. Serafini, 574 P.2d 876 (Colo. Ct. App. 1977) (boundary survey not part of building or improvement project is not an improvement to real property); Turner v. Marable-Pirkle, Inc., 233 S.E.2d 773 (Ga. 1977), appeal dismissed, 434 U.S. 808 (1978) (improvements to electrical utility pole did not constitute an improvement to real property); Ilich v. John E. Smith Sons Co., Inc., 367 A.2d 1216 (N.J. Super Ct. Law Div. 1976) (rewiring of machine, which, under New Jersey's institutional doctrine, was not a fixture, also was not an improvement to real property within the intendment of the statute).
[12] Compare Yakima Fruit & Cold Storage Co. v. Central Heating & Plumbing Co., 503 P.2d 108 (Wash. 1972) (refrigerator system was an improvement to real property; its purpose was to maintain the warehouse as a cold storage facility).
[13] See Pinneo v. Stevens Pass, Inc., 545 P.2d 1207 (Wash. Ct. App. 1976) (ski lift added value to the property and was an improvement to real property).
[14] Cf. Edwards v. S & R Gas Co., 73 So. 2d 590 (La. Ct. App. 1954) (sale of property did not include butane tank rented by former owner; former owner had no title in leased tank and, therefore, could pass none).
[15] Cf. Pelton Water Wheel Co. v. Oregon Iron & Steel Co., 170 P. 317 (Ore. 1918) (contract could have great weight); Foreman v. Columbia Theater Co., 148 P.2d 951 (Wash. 1944) (agreement between landlord and tenant with respect to ownership of chattels will govern regardless of common law rights). Compare Oakland Bank of Savings v. California Pressed Brick Co., 191 P. 524 (Cal. 1920) (agreement between buyer and seller that machine would remain personalty until payments completed was valid unless bona fide purchaser bought beforehand).
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552 F. Supp. 685 (1982)
Mark HEMPHILL, Plaintiff,
v.
Gale SAYERS, et al., Defendants.
Civ. No. 81-4418.
United States District Court, S.D. Illinois, Benton Division.
December 2, 1982.
*686 Christopher J. Holthaus, O'Fallon, Ill., Kenneth R. Singer, St. Louis, Mo., for plaintiff.
Walker & Williams, Belleville, Ill., James B. Bleyer, Marion, Ill., Shari Rhode, John Feirich, Carbondale, Ill., for defendants.
*687 MEMORANDUM AND ORDER
FOREMAN, Chief Judge:
Before the Court are motions to dismiss filed by each defendant. They argue that plaintiff's complaint should be dismissed for failure to state claims upon which relief can be granted.[1] Fed.R.Civ.P. 12(b)(6).
From what the Court can make of plaintiff's second amended complaint, plaintiff alleges the following: Count I is against defendants Sayers, Dempsey, and Schulz for negligence; that count alleges that they failed to warn plaintiff of the dangers of the helmet, and negligently trained, coached, contracted for services, hired and supervised employees. Counts II and III are apparently against defendants Riddell Sporting Goods, Inc. (Riddell) and Bleyer Sport Mart, Inc. (Bleyer) for breach of implied warranties. Ill.Rev.Stat., Ch. 26, Sections 2-314 and 2-315. Count IV alleges that defendants Sayers, Dempsey, Schulz, and Riddell are strictly liable in tort because they "manufactured, sold, furnished, to plaintiff" an unreasonably dangerous football helmet. Count V again sounds in negligence, alleging specific acts. Count V simply states that "defendants" were negligent, without reference to whom. There are six defendants in this lawsuit; it is unclear as to whom Count V is directed. Without discussing Count V as to each defendant, the Court believes that it should be dismissed with leave to refile. For plaintiff's convenience, the Court reiterates its statement in the April 21, 1982 Report of Status Conference: "[I]t has been determined by the Court that it is in the best interest of this litigation that the attorneys for the plaintiff refile a second amended complaint stating further with particularity and in a short concise manner as provided in Rule 8 of the Federal Rules the theories upon which claims for relief are sought, along with stating against which specific defendants are charged." (emphasis added). Count V should be dismissed with leave to refile.
To add to the confusion, it appears from the briefing that plaintiff intends to include defendants Sayers, Dempsey, and Schulz in Counts II and III, which allege warranty theories. It appears to the Court that Counts II and III are directed only to defendants Riddell and Bleyer. However, since the Court believes plaintiff has no warranty action against defendants Sayers, Dempsey, and Schulz, their Motion to Dismiss will be considered as to Counts II and III as well. Each Motion to Dismiss will be considered separately.
I. Defendant Sayers, Dempsey, and Schulz' Motion to Dismiss
These defendants, sued in their individual capacities, argue that they are immune from suit under the Eleventh Amendment. In the alternative, they argue that plaintiff's warranty and strict liability claims should be dismissed as to them.
A. Eleventh Amendment
Defendants Sayers, Dempsey, and Schulz argue that at all relevant times, they were agents of the State of Illinois, and that Chapter V, Section D.11, Indemnification Policy of the Policies of the Board of Trustees, Southern Illinois University is applicable. That section provides that each employee:
shall be indemnified by the Board of Trustees of Southern Illinois University against all costs and expenses reasonably incurred by or imposed upon him ... in connection with or resulting from an action, suit, proceeding, claim, or investigation, civil or criminal, to which he ... shall or may be made a party ... by reason, directly, or indirectly, of his action or omission to act in the scope of his appointment as a Trustee, officer, or employee of the University ....
On the basis of this provision, defendants Sayers, Dempsey, and Schulz argue that any judgment against them will be paid out of the state treasury, and thus this suit is *688 barred by the Eleventh Amendment. It is submitted that any tort claim against them must be filed in the Illinois Court of Claims pursuant to Ill.Rev.Stat., ch. 37, Section 439.8. The Court disagrees.
It is undisputed that suits against Southern Illinois University must be brought in the Illinois Court of Claims. Ill.Rev.Stat., ch. 37, Section 439.8(d). At issue is whether defendants Sayers, Dempsey, and Schulz, who are being sued in their individual capacities for their alleged acts of negligence committed as employees of Southern Illinois University, must be brought in the Court of Claims. The Court in Watson v. St. Ann Hospital, 68 Ill.App.3d 1048, 25 Ill. Dec. 411, 386 N.E.2d 885 (1st Dist.1979) considered a similar issue and held that Illinois employees are not exempt from liability for their own negligence simply because they were acting in their official capacities. Such a liability suit need not be in the Court of Claims. The Court reasoned that the remedy of damages would not operate to control the action of the State or subject it to liability. Citing Madden v. Kuehn, 56 Ill. App. 3d 997, 14 Ill. Dec. 852, 372 N.E.2d 1131 (2d Dist.1978), the Court found that when the negligent acts of state employees are nongovernmental in nature, as opposed to obligations incurred solely by virtue of holding a public office, the damage remedy involved would not control the actions of the state.
Any liability of these defendants would not control the actions of the State. As made clear by plaintiff, these defendants are being sued in their individual capacities. Further, the alleged negligent acts of each defendant are not "obligations incurred solely by virtue of holding a public office." Madden, supra, 14 Ill.Dec. at 855, 372 N.E.2d at 1134. Instead, any liability would flow from negligence in maintaining a football team.
That the Eleventh Amendment does not bar this suit is underscored by the Court's decision in Rutledge v. Arizona Board of Regents, 660 F.2d 1345 (9th Cir.1981). In Rutledge the Court considered a similar Eleventh Amendment argument. The plaintiff was asserting a negligence claim against a state university's athletic director and football coach sued in their individual capacities. The Court found that the Eleventh Amendment was not a bar:
The district court extended the Eleventh Amendment bar to these appellees on the ground that "the alleged acts were committed in the interest of the Arizona State University football program" and that nothing suggests that "the alleged conduct falls outside the scope of Kush's or Maskill's scope of employment." This is not sufficient ground to invoke the Amendment's bar. That bar is not automatically applicable to a suit brought against a state official in his individual capacity alleging the commission by him of a common law tort in the course of his employment. Johnson v. Lankford, 245 U.S. 541, 38 S. Ct. 203, 62 L. Ed. 460 (1918).
Rutledge, supra, 660 F.2d at 1350.
Further, defendants Sayers, Dempsey and Schulz' reliance on Southern Illinois University's indemnity agreement is misplaced. The Supreme Court in Edelman v. Jordan, 415 U.S. 651, 653, 94 S. Ct. 1347, 1351, 39 L. Ed. 2d 662 (1974) stated that "the rule has evolved that a suit by private parties seeking to impose a liability which must be paid from public funds in the state treasury is barred by the Eleventh Amendment...." The Court in Rutledge recognized the significance of any provision requiring state indemnification for employee negligence: "Neither the district court nor Miller have pointed to any law of the State of Arizona that would require that any damages, for which Miller would be liable for failure to supervise Kush and Manskill properly, be paid from state funds." Id. at 1350. Here, however, it is altogether unclear whether any judgment would be paid by the State of Illinois. Southern Illinois University agreed to indemnify their employees provided that "the cost or expense is not reasonably recoverable from any other source." As pointed out by plaintiff, alternative sources potentially exist, which would avoid application of the indemnity agreement. Since indemnification is contingent *689 at best, dismissal of defendants Sayers, Dempsey, and Schulz at the pleading stage would be wholly inappropriate.
B. Warranty Theories
As noted, Counts II and III allege breach of warranties. Ill.Rev.Stat., Ch. 26, Sections 2-314, 2-315. Although it is doubtful whether these counts are directed to defendants Sayers, Dempsey, and Schulz, it is clear that plaintiff has no warranty action against them.
Count II is governed by Section 2-315. At issue is whether these defendants can be liable under this section. The complaint alleges that Sayers was the university's athletic director and Dempsey was and is the football coach, and Schulz was the athletic trainer. These parties cannot be held liable under Section 2-315. The Court in Carroll v. Grabavoy, 77 Ill.App.3d 895, 33 Ill. Dec. 309, 396 N.E.2d 836 (3rd Dist.1979) held that the implied warranty of fitness for a particular purpose applies only to warranties made by a seller to a buyer. Specifically, the Court held that the Section 2-315 warranty did not apply when a dentist furnished dentures to a patient. In rejecting an argument identical to the one made by plaintiff here, that Court stated:
Plaintiffs base their contention on the theory that the implied warranty rule now encompasses anyone who selects or furnishes goods when such a person knows the particular purpose for which the goods are required and the buyer is relying on the skill or judgment of that person. An examination of Section 2-315 of the Code (Ill.Rev.Stat.1975, ch. 26, par. 2-315) reveals the provision to apply if "the buyer is relying on the seller's skill or judgment to select or furnish suitable goods * * *" (emphasis added) [sic]. Thus plaintiffs' contention is without merit.
Carroll, supra, 33 Ill.Dec. at 313, 396 N.E.2d at 840. (emphasis added). Simply stated, since these defendants are not sellers, Section 2-315 does not apply to them.
For the same reason, plaintiff's Section 2-314 theory in Count III fails against these defendants. Section 2-314 creates liability only for "the seller [who] is a merchant with respect to goods of that kind." As was made clear by the Court in Sieman v. Alden, 34 Ill.App.3d 961, 341 N.E.2d 713, 715 (2d Dist.1975), "the definition of merchant within 2-314 is a narrow one and that the warranty of merchantability is applicable only to a person who, in a professional status, sells the particular kind of goods giving rise to the warranty." Defendants Sayers, Dempsey, and Schulz do not qualify as merchants.
It is clear that plaintiff's warranty theories do not apply to these defendants, and that Counts II and III should be dismissed as to them.
C. Strict Liability in Tort
Count IV alleges that defendants Sayers, Dempsey, and Schulz are strictly liable in tort to plaintiff. This Count must also fail as to these defendants. These defendants are not part of the original producing and marketing chain. Liability will not be imposed upon a defendant who is not a part of the original producing and marketing chain. See Peterson v. Lou Bachrodt Chevrolet Co., 61 Ill. 2d 17, 329 N.E.2d 785 (1975); Keene v. Dominick's Finer Foods, Inc., 49 Ill.App.3d 480, 7 Ill. Dec. 341, 343, 364 N.E.2d 502, 504 (1st Dist. 1977). The rationale for that qualification was explained in Keene:
[I]t becomes apparent that the cornerstone of liability rests upon the defendant's active participation in placing the product into commerce for use and consumption by others. One of the underlying reasons for imposing strict liability is to ensure that losses are borne and subsequently reaped the profit of marketing the allegedly defective product.
7 Ill.Dec. at 343, 364 N.E.2d at 504. See also Templeton v. Blaw-Knox Co., 49 Ill. App. 3d 1057, 7 Ill. Dec. 950, 365 N.E.2d 235 (3rd Dist.1977). This rationale underscores why defendants Sayers, Dempsey, and Schulz cannot be held strictly liable in tort for the allegedly defective football helmet. *690 They did not create the risk and reap the profits. Accordingly, Count IV must be dismissed as to these defendants.
II. Defendant Riddell's Motion to Dismiss
Defendant Riddell argues that plaintiff's warranty theories under Ill.Rev.Stat., ch. 26, Sections 2-314 and 2-315 should be dismissed because no privity exists. As for plaintiff's strict liability theory, defendant Riddell submits that critical elements are missing from plaintiff's pleading. These arguments will be considered separately.
A. Warranty Theories
Defendant Riddell argues that because it lacks contractual privity with plaintiff, it cannot be held liable for breaching the implied warranty of merchantability, Section 2-314, or the implied warranty of fitness for a particular purpose, Section 2-315. Although direct contractual privity is not always necessary for an implied warranty theory, the Court agrees with defendant Riddell that plaintiff cannot succeed under either Sections 2-314 and 2-315, and Counts II and III should be dismissed.
The Court in Slate Printing Company v. Metro Envelope Co., 532 F. Supp. 431 (N.D. Ill.1982), analyzing state law, found that a plaintiff must satisfy at least one of three possibilities before bringing a warranty action: (1) there must be privity of contract between the plaintiff and the defendant, Suvada v. White Motor Co., 32 Ill. 2d 612, 616-18, 210 N.E.2d 182, 184-85 (1965); In re Johns-Manville Asbestosis Cases, 511 F. Supp. 1235, 1239 (N.D.Ill.1981); (2) the plaintiff must be in a position equivalent to that of a third-party beneficiary of the defendant's sales contract, Frank's Maintenance & Engineering, Inc. v. C.A. Roberts Co., 86 Ill.App.3d 980, 992-93, 42 Ill. Dec. 25, 34, 408 N.E.2d 403, 412 (1st Dist.1980); Rhodes Pharmacal Co. v. Continental Can Co., 72 Ill.App.2d 362, 368, 219 N.E.2d 726, 730 (1st Dist.1966); or (3) the plaintiff must otherwise be able to sustain a tort action against the defendant, Berry v. G.D. Searle & Co., 56 Ill. 2d 548, 558, 309 N.E.2d 550, 556 (1974). Slate Printing Company, supra, 532 F.Supp. at 434. At issue is whether plaintiff falls into any of these categories. In the Court's opinion, he does not.
Analysis must begin with Section 2-318. That section defines the scope of the statutory warranties:
A seller's warranty whether express or implied extends to any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this Section.
Ill.Rev.Stat., Ch. 26, Section 2-318. This language defines the classes of persons who may benefit from implied warranties who stand in "horizontal" non-privity to the last buyer in the distributive chain. A horizontal non-privity plaintiff has been defined as not a buyer in the distributive chain but one who uses or is otherwise affected by the product. Knox v. North American Car Corp., 80 Ill.App.3d 683, 35 Ill. Dec. 827, 831, 399 N.E.2d 1355, 1359 (1st Dist.1980); White & Summers, Uniform Commercial Code Section 11-2 at 399 (2d ed. 1980). In contrast, a "vertical" non-privity plaintiff is a buyer in the distributive chain who did not purchase from the defendant. Knox, supra; Wright & Summers, supra. Subsection 3 of the Official Comment to Section 2-318 indicates that the class of vertical non-privity plaintiffs entitled to warranty protection may be expanded by judicial fiat:
This section expressly includes as beneficiaries within its provisions the family, household, and any guests of the purchaser. Beyond this, the section is neutral and is not intended to enlarge or restrict the developing case law on whether the seller's warranties, given to his buyer who resells, extend to other persons in the distributive chain.
The text of Section 2-318 and its Official Comment 3 have been interpreted to mean that although the class of vertical non-privity buyers entitled to warranty protection *691 may be judicially expanded and contracted, the class of horizontal non-privity plaintiffs entitled to such protection has been statutorily limited to "natural persons" in the "family or household of the buyer and to his guests" where it is "reasonable to expect that such persons may use, consume or be affected by the goods." Knox, supra, 35 Ill.Dec. at 831-32, 399 N.E.2d at 1359-60. A horizontal non-privity plaintiff not within the language of Section 2-318 is not entitled to warranty protection. As the Knox Court stated: "We cannot disregard or enlarge the express limitations of Section 2-318." 399 N.E.2d at 1359, 35 Ill.Dec. at 831.
This conclusion is buttressed by considering alternative versions of section 2-318 which the General Assembly rejected:
Alternative B. A seller's warranty whether express or implied extends to natural person who may reasonably be expected to use, consume or be affected by the goods and who is injured in person by breach of the warranty. A seller may not exclude or limit the operation of this section.
Alternative C. A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section with respect to injury to the person of an individual to whom the warranty extends.
These alternatives obviously contemplate a much more expansive class of horizontal non-privity plaintiffs entitled to warranty protection. The Court agrees that "the legislature consciously chose to limit a seller's liability for breach of warranty to the specific classes enumerated therein." Knox, supra, 399 N.E.2d at 1360, 35 Ill.Dec. at 832. If this Court chose to exceed the express limitations of Section 2-318, the judgment of the legislature would be substituted.
The recognized exceptions to the privity requirement in warranty actions have developed in Illinois according to Official Comment 3, which contemplates that the class of vertical non-privity plaintiffs may be determined judicially. Those exceptions include: (1) a plaintiff standing in a third-party beneficiary relationship to the seller's sales contract; and (2) a plaintiff who may otherwise sustain a tort action against the seller. Slate Printing Co., supra, 532 F.Supp. at 434. Illinois case law reflects that these two departures from the privity requirement were developed as an expansion of the class of vertical non-privity plaintiffs, as contemplated by Official Comment 3.
In Rhodes Pharmacal Company v. Continental Can Company, 72 Ill.App.2d 362, 219 N.E.2d 726, 732 (1st Dist.1966), the Court enunciated the test for the third-party beneficiary exception to the privity requirement:
[T]he implied warranty of fitness imposed by law on a manufacturer may be enforced directly against the manufacturer by a third-party user, where, as alleged in the instant case, the manufacturer (1) was aware of the purpose for which the product was to be put, and (2) knew of the third-party user's reliance that the product would be fit for the purpose intended.
Although couched in broad language, this test was declared in the context of deciding the rights of a vertical non-privity plaintiff. Rhodes Pharmacal Co. involved a plaintiff who purchased defective aerosol cans and consequently was in the distributive chain linked to the defendant manufacturer. That Court was not limited to the narrow class of horizontal non-privity plaintiffs defined in Section 2-318.
Other Illinois cases applying the third-party beneficiary exception involve plaintiffs in the distributive chain. In Lango v. Division Paint & Garden Supply Co., 75 Ill.App.2d 384, 221 N.E.2d 47 (1st Dist.1966), the plaintiff was a buyer and therefore was in the distributive chain. Likewise, the Court in Frank's Maintenance & Engineering, Inc. v. C.A. Roberts, Inc., 86 Ill.App.3d 980, 42 Ill. Dec. 25, 408 N.E.2d 403 (1st Dist. 1980) considered the rights of a buyer who ordered from one defendant goods which were manufactured and delivered by another *692 defendant. Again, these courts were not limited to the express class defined in Section 2-318, but were able to expand the class of vertical non-privity plaintiffs as contemplated by Official Comment 3.
The second exception to the privity requirement was enunciated in Berry v. G.D. Searle & Co., 56 Ill. 2d 548, 309 N.E.2d 550 (1974). In Berry, the plaintiff sued the manufacturer of a birth control pill prescribed and sold to her by a codefendant. 309 N.E.2d at 552. The Court decided that since no privity is required in a tort action, privity should not be required under warranty. The Court held that plaintiff could maintain a warranty action against the manufacturer:
[W]e are of the opinion that privity is of no consequence when a buyer who purportedly has sustained personal injuries predicates recovery against a remote manufacturer for breach of an implied warranty under the Code.
Id. at 556. The Court so held after recognizing that Official Comment 3 authorized judicial expansion of warranty protection "to other persons in the distributive chain." Id. at 556 quoting Official Comment 3 to Section 2-318. As noted, that comment allows expansion only to vertical non-privity plaintiffs.
Cases involving horizontal non-privity plaintiffs have adhered to the express limitations of Section 2-318. As noted, that provision "was meant to act as a limitation only upon a seller's liability for breach of warranty to those who stand in horizontal [non-]privity...." Knox, supra, 35 Ill. Dec. 831, 339 N.E.2d at 1359. In Knox, a plaintiff, an employee of the cosignee of a leased boxcar, brought a warranty action against the boxcar's lessor. Being outside the distributive chain, the plaintiff was found unentitled to warranty protection. The Court recognized that since the horizontal non-privity plaintiff did not qualify under Section 2-318 and the Court was statutorily precluded from extending warranty protection to plaintiff pursuant to Official Comment 3, plaintiff's warranty theory must fail.
Likewise, in In re Johns-Manville Asbestosis Cases, 511 F. Supp. 1235 (N.D.Ill.1981), the Court considered the warranty rights of plaintiffs outside the distributive chain. The plaintiffs were past and present employees of Johns-Manville. They sought recovery from defendants who supplied their employer with raw asbestos, which caused respiratory diseases. The Court held that the horizontal non-privity plaintiffs could not sue for breach of warranty:
[T]he General Assembly has dealt in express terms with the extended scope of the sellers' warranties. It would be impermissible judicial legislation to ignore the strong negative implications from the statute's non-coverage of plaintiffs' status. Certainly the Illinois courts have not interpreted Section 2-318 as providing the basis for a warranty action by a plaintiff who is not a buyer or a member of a buyer's household, and this Court will not rewrite the statute either.
Id. at 1239-40. The rationale for dismissing the plaintiffs' warranty claims was that those outside the distributive chain who do not qualify under Section 2-318 are statutorily unentitled to warranty protection.
Plaintiff is a user outside the distributive chain. He was supplied the football helmet by Southern Illinois University, the last buyer in the distributive chain. As discussed, it would be inappropriate for the Court to afford him warranty protection pursuant to Official Comment 3. That comment concerns vertical non-privity. At issue is whether plaintiff falls within the express language of Section 2-318. In the Court's opinion, he does not.
As noted, Section 2-318 extends warranty protection to "any natural person who is in the family or household of his buyer or who is a guest in his home if it is reasonable to expect that such person may use, consume or be affected by the goods and who is injured in person by breach of the warranty." Section 2-318. Plaintiff is neither a household member or a guest. In Knox, the Court suggested that employees of the last purchaser may qualify under Section 2-318. The rationale is that the employeremployee *693 relationship is functionally equivalent to the relationship between a buyer and his family member or guest. See McNally v. Nicholson Manufacturing Co., 313 A.2d 913 (Me.1973). If this reasoning is valid, an argument could be made that a university's football player would also fall under Section 2-318. However, the Court declines to follow the speculation in Knox.
First, the Knox Court's statement that a buyer's employees may be entitled to warranty protection is dictum. In no way was the statement viewed as the applicable law in Illinois. Second, it has been subsequently determined that a buyer's employees are not entitled to warranty protection under Section 2-318. In re Johns-Manville Asbestosis Cases, supra. Plaintiff argues that those employees were denied recovery solely because the warranties did not cover the type of damage suffered. The Court disagrees. The Court in Asbestosis Cases clearly denied warranty coverage to the employees on the basis of their status. Third, the Court believes that by including a buyer's employee, or football player, within Section 2-318, that section would be judicially rewritten. Had the legislature intended that these plaintiffs be included in Section 2-318, it would not have adopted the most narrowly worded alternative. The Court declines to amend Section 2-318 to extend warranty protection to family members, guests, "or their functional equivalents."
Accordingly, Counts II and III should be dismissed as to defendant Riddell.
B. Strict Liability in Tort Theory
Defendant Riddell argues that Count IV fails to allege: (1) the nature, character or description of the product's condition making it unreasonably dangerous; and (2) that the product's allegedly dangerous condition existed at the time it left the manufacturer. Defendant Riddell suggests Count IV should be dismissed with leave to refile. The Court agrees.
In Illinois, products liability plaintiffs must "prove that their injury or damage resulted from a condition of the product, that the condition was an unreasonably dangerous one and that the condition existed at the time it left the manufacturer's control." Suvada v. White Motor Co., 32 Ill. 2d 612, 210 N.E.2d 182, 188 (1965). The dangerous condition may be a result of a defect in design as well as one of manufacture. Wyant v. J.I. Case Company, Inc., 633 F.2d 1254, 1256 (7th Cir.1980); Kerns v. Engelke, 76 Ill. 2d 154, 28 Ill. Dec. 500, 390 N.E.2d 859, 862 (1979).
Plaintiff has not properly alleged his product liability claim. Even given the liberal notice pleading standard, plaintiff's allegation of the condition of the helmet is insufficient. Presumably, paragraph 4 of plaintiff's Count IV contains why the helmet was unreasonably dangerous: "That the said helmet was defective and in an unreasonable dangerous condition for use as protective headwear for football games in that it suddenly and unexpectedly failed to protect plaintiff's cervical spine when put to the use intended...." This language explains what the helmet allegedly did without describing the condition rendering it unreasonably dangerous. It is impossible to infer what type of defect is alleged. Further, plaintiff alleges that "said defective and unreasonably dangerous helmet was in substantially the same condition at the time of Mark Hemphill's injury as it had been when sold, furnished, manufactured, placed in commerce or supplied by defendants to plaintiff." The Court agrees with defendant Riddell that this language is not the same as alleging that the unreasonably dangerous condition existed at the time the product left the manufacturer's control.
Count IV should be dismissed with leave to refile a third amended complaint which cures these defects.
III. Defendant Bleyer's Motion to Dismiss
Defendant Bleyer argues that plaintiff's warranty theories, in Counts II and III, should be dismissed because privity is lacking. Count V should be dismissed, it is argued, because it is unintelligible. The Court has already decided that Count V should be dismissed with leave to refile.
*694 As to plaintiff's warranty theories, the reasoning applicable to defendant Riddell applies with full force to defendant Bleyer. Plaintiff remains in horizontal non-privity and does not qualify as a family member or guest under Section 2-318. The implied warranties of Sections 2-314 and 2-315 do not benefit plaintiff.
To avoid confusion, the Court states that it believes that plaintiff does not and could not assert his strict liability in tort theory against defendant Bleyer. Defendant Bleyer has stipulated that defendant Riddell is the helmet's manufacturer. By operation of Ill.Rev.Stat., ch. 110, Section 801 et seq., the certifying defendant cannot be held strictly liable in tort.
Accordingly, Counts II and II should be dismissed; Count V, if it purports to state a claim against defendant Bleyer, should be dismissed with leave to refile.
IV. Conclusion
The Court finds as follows:
1. Defendants Sayers, Dempsey and Schulz' Motion to Dismiss is hereby GRANTED in part and DENIED in part.
2. Defendant Riddell's Motion to Dismiss is hereby GRANTED.
3. Defendant Bleyer's Motion to Dismiss is hereby GRANTED.
4. Counts II and III are hereby DISMISSED as to all defendants.
5. Count IV is hereby DISMISSED as to defendants Sayers, Dempsey, Schulz and Bleyer.
6. Count IV is hereby DISMISSED as to defendant Riddell, with leave to refile a third amended Count IV only against defendant Riddell, within ten (10) days of this order. Said amended complaint shall cure the defects discussed in this order.
7. Count V is hereby DISMISSED with leave to refile. Plaintiff is GRANTED leave to file a third amended Count V, which indicates which defendants are charged, and corresponds enumerated acts with the respective defendant, within ten (10) days of this order.
IT IS SO ORDERED.
NOTES
[1] The Court understands through the news media that Plaintiff is now deceased, but since the Memorandum and Order was already drafted it is being entered as possible guidance for future amendments to the pleadings.
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421 S.W.2d 162 (1967)
Raymond LETCHER, Appellant,
v.
Louise E. LETCHER, Appellee.
No. 14605.
Court of Civil Appeals of Texas, San Antonio.
October 11, 1967.
*163 Reid, Taylor & Murray, Jeff Davis, San Antonio, Sam Darden, Bandera, for appellant.
Pat Maloney, San Antonio, for appellee.
KLINGEMAN, Justice.
Action by Raymond Letcher, the appellant herein, against his wife, Louise E. Letcher, appellee herein, for divorce, partition and division of community property, and for an adjudication by the court that appellant is the owner of an undivided one-half interest in a certain 1451-acre tract of land, and that appellee is holding such one-half interest in trust for appellant. Appellee contested the suit for divorce, but asked the court to adjudge said 1451 acres to be her sole and separate property. The trial court held, as a matter of law, that said 1451-acre tract was the sole and separate property of appellee. Trial of the divorce matter was to a jury, who found that the appellee had not been guilty of excesses, cruel treatment, or outrages toward appellant of such a nature as to render their living together insupportable. Judgment was entered thereon denying the divorce and decreeing said 1451 acres to be the sole and separate property of appellee in fee simple absolute.
Appellant asserts: (a) that there is no evidence to support the jury's finding; (b) that there is insufficient evidence; (c) that the judgment rendered by the court based on the finding of the jury is contrary to the overwhelming preponderance of the evidence and is manifestly wrong and *164 unjust; and (d) that the judgment of the court based upon the finding of the jury is not substantiated by any evidence and is contrary to law and equity.
In order to justify the granting of a divorce in this State the evidence must be full and satisfactory. Art. 4632, Vernon's Ann.Civ.St.; Gentry v. Gentry, 394 S.W.2d 544 (Tex.Civ.App.Corpus Christi 1965, no writ); Resendez v. Resendez, 282 S.W.2d 318 (Tex.Civ.App.San Antonio 1955, no writ); Howell v. Howell, 206 S.W.2d 616 (Tex.Civ.App.Galveston 1947), certified question answered, 147 Tex. 14, 210 S.W.2d 978 (1948); Kreiter v. Kreiter, 137 S.W.2d 184 (Tex.Civ.App.Galveston 1940, no writ); Hickman v. Hickman, 20 S.W.2d 1073 (Tex.Civ.App.Waco 1929, no writ).
We have carefully examined all of the testimony in the record. Both appellant and appellee are over seventy years old and had been married for more than forty years at the time suit for divorce was instituted. Appellant testified that appellee constantly nagged and fussed at him, and this made him nervous and affected his health; that appellee did not properly feed him or take care of his clothes; that she made him sleep in a small bedroom by himself; that for many years she had refused sexual relations with him; and he contended that his wife's refusal to reconvey to him an undivided one-half interest in the 1451-acre tract of land constituted cruelty. Appellee's testimony directly contradicted appellant's testimony. She testified that she did not nag or fuss at her husband; that she always provided him with food and took care of his clothes; that his staying in the single bedroom was by his own choice; and that she never refused him to her bed. Appellant's complaints as to some alleged acts of cruelty are supported by disinterested witnesses, but appellee's testimony is also corroborated by a number of disinterested witnesses.
The jury and the trial court had the opportunity to observe the manner, demeanor and deportment of the witnesses at the trial, and it was their function, and not ours, to determine the credibility of the witnesses and the weight to be given their testimony. Mortensen v. Mortensen, 186 S.W.2d 297 (Tex.Civ.App.San Antonio 1945, no writ); 3 Speer, Law of Marital Rights in Texas § 908, pp. 363-364; 20 Tex. Jur.2d, Divorce and Separation, § 189 (1960).
Where a divorce has been refused by a trial court, the judgment should not be reversed unless it clearly appears from all of the testimony in the record that the trial court plainly erred in refusing the divorce. Hunter v. Hunter, 321 S.W.2d 92 (Tex.Civ.App.El Paso 1959, no writ); Winters v. Winters, 282 S.W.2d 749 (Tex. Civ.App.Amarillo 1955, no writ); Caldwell v. Caldwell, 176 S.W.2d 758 (Tex.Civ. App.Amarillo 1943, no writ); Kreiter v. Kreiter, supra; Buckner v. Buckner, 27 S.W.2d 311 (Tex.Civ.App.Beaumont 1930, no writ); 20 Tex.Jur.2d, Divorce and Separation, § 188 (1960); Speer, Marital Rights in Texas § 908, p. 363, (4th ed. 1961).
The findings of the jury and the court's judgment thereon denying the divorce are sufficiently supported by the evidence. Appellant's points of error Nos. 24, 25, 26 and 27 are overruled.
Appellant complains of the trial court's action: in failing to acknowledge the jury's communication that they could not arrive at a verdict; in instructing the jury to refer to the charge of the court in answer to their question, when said charge in itself did not have anything within it which would answer the jury's question; in failing to instruct the jury in accordance with Rules 286 and 287, Texas Rules of Civil Procedure, as requested by appellant; in withholding certain exhibits from the jury when they retired to consider their verdict, and from supplying such exhibits to *165 the jury when such fact was called to the court's attention.
It appears from the record that, after the jury retired to consider its verdict, the jury returned into court a note as follows: "Dates when Raymond Letcher asked for divorce, and also date when Raymond Letcher asked Louise Letcher for deed to be transferred back to him." The trial court answered such note with a written note to this effect: "You will be guided by the charge as given to you by the court." Appellant thereafter moved the court for additional instructions under Rules 286 and 287, to the effect that if the jury disagrees as to the statement of any witness, the jury may, upon applying to the court, have read to them from the court reporter's notes that part of such witness' testimony in dispute. The trial court did not deny such request, but signed a note giving such instructions as requested by appellant, and called the jury back in and told them that he understood they had been unable to reach a verdict, whereupon the foreman answered that they had reached a verdict, which said verdict was received by the court and the jury dismissed. It does not appear from the record that appellant made any objection to the receiving of the verdict.
Appellant asserts that some of the exhibits were not sent to the jury at the time the jury retired, and that appellant requested that all such exhibits be given to the jury, which was refused by the court. The exhibits complained of are stated to be portions of appellee's exhibits, although there is nothing in the record with regard to the exclusion of such exhibits, except in a motion made by appellant after the jury was dismissed. The record does not disclose that appellant made any request with regard to such exhibits prior to the time the jury's verdict was received, that the jury requested such exhibits, or that the court refused to send such exhibits to the jury.
We do not believe the record before us shows any error of the trial court with regard to the requested instructions or the exhibits. Appellant has failed to establish that the matter complained of actually resulted in his prejudice or constituted reversible error. Texas Employers' Insurance Ass'n v. Dennis, 372 S.W.2d 559, 563 (Tex.Civ.App.Fort Worth 1963, writ ref'd n. r. e.); Greeson v. Texas & Pacific Ry. Co., 310 S.W.2d 615, 619 (Tex. Civ.App.El Paso 1958, writ ref. n. r. e.); J. H. Robinson Truck Lines v. Ragan, 204 S.W.2d 662 (Tex.Civ.App.-Galveston 1947, writ ref'd n. r. e.). The error, if any, complained of by appellant did not amount to such a denial of the rights of appellant as was reasonably calculated to cause, and probably did cause, the rendition of an improper judgment in the case. The error, if any, was harmless. Rules 434 and 503, T.R.C.P.; City of Galveston v. Hill, 151 Tex. 139, 246 S.W.2d 860 (1952); Fairchild, Harmless Error, Appellate Procedure in Texas, § 17.6.
Appellant also asserts that the trial court erred: in depriving him of the right of trial by jury; in directing the course of the trial, and in proceeding in such a manner as to lead the jury into thinking there was no legal or moral merit in appellant's cause of action; in submitting an issue of condonation as a result of appellee's trial amendment, the filing of which was objected to by appellant; in failing to set and hear appellant's amended motion for new trial; in refusing to submit his "Requested Issue No. 6," thereby failing to grant appellant any compensation or interest in the 1451 acres of land as a result of improvements made by him and his separate property expended to improve the property; in entering a judgment allowing a person to profit as a result of fraud and bad faith practiced by one upon another; and in allowing reference to be made to the jury that title to the property was not an issue in the case. We do not find any merit in these points of error and they are overruled.
*166 Appellant's point of error No. 23 is: "The trial court erred in determining title to real property in a divorce action when the divorce was denied by the jury." In this connection, see Speer, Marital Rights in Texas, § 835, p. 175, and 20 Tex.Jur.2d, Divorce and Separation, § 203, wherein it is stated that the power of a court to determine the property rights of the parties is contingent upon the granting of a divorce. A careful study of the cases cited in support of this statement[1] reveals most of such cases were suits for divorce and for partition of community property in connection therewith, and the court held that when the divorce was denied, the court was without power to adjudicate the community property rights of the parties. The other cited cases are not analogous to the case on appeal. In the case before us, both appellant and appellee asked for an adjudication of the title status of the 1451 acres. Appellant in his pleading, in addition to seeking a divorce asks for an adjudication that he is the owner of an undivided one-half interest in the property, and also alleges that under the deeds wherein appellant and appellee were conveyed the 1451-acre tract each acquired an undivided one-half interest therein as their separate property, and asked the court to find that appellant is the owner of an undivided one-half interest in such property, and that appellee is holding such one-half interest in trust for appellant. Appellee, while contesting the divorce, alleged that the 1451 acres is her separate property and asked the court for an adjudication to that effect. In addition, appellee filed a counterclaim and cross-action in such suit for determination of her rights, status, or other legal relation under the deed dated October 10, 1927, from Raymond Letcher, conveying the 1451-acre tract to Louise E. Letcher, and asked that the property be decreed and declared to be her sole and separate property. Appellant, in his answer to such cross-action, says that he should be awarded a judgment declaring he has an undivided one-half interest in such property as his sole and separate property and estate.
When it is necessary for the protection of property rights, either spouse may sue the other. Trimble v. Farmer, 157 Tex. 533, 305 S.W.2d 157 (1957); Pride v. Pride, 318 S.W.2d 715, 722 (Tex.Civ.App.Dallas 1958, no writ); Bettis v. Bettis, 83 S.W.2d 1076 (Tex.Civ.App.El Paso 1935, no writ); 30 Tex.Jur.2d, Husband and Wife, § 168 (1962).
We feel that the cases cited under Footnote 1 are not controlling in the case before us, but rather that the holding in Borton v. Borton, 190 S.W. 192 (Tex.Civ.App.Galveston 1916, writ ref'd), is applicable. This case is similar to the case before us. Borton was a suit by a wife for divorce, partition of community property, and for the quieting of title in the wife of three tracts of land alleged to be her separate property. The husband contested such suit by general denial, and specially denied that the three tracts of land were the separate property of his wife. He alleged that such property was acquired with community earnings and was the community property of husband and wife; that plaintiff (wife) was claiming the land under a certain deed from defendant (husband) to plaintiff conveying to her said land, but that in fact said instrument was signed when he was threatened with a fictitious and unfounded litigation, which was never instituted; that he executed said deed without the knowledge of plaintiff for his own protection *167 against said threatened suit; that there was never any delivery of the deed and it was without consideration and void. The jury found that none of the causes alleged by plaintiff for divorce existed, but that the defendant did make manual delivery to the plaintiff of the deed in question. Upon such findings of the jury, the trial court entered judgment denying the divorce and partition of the community property, but rendered judgment in favor of plaintiff adjudging her to be the owner of the land in question as her separate property. On appeal, the husband contended that the court was without authority and jurisdiction to determine the rights of the wife in the land claimed by her as her separate property after the jury found that no grounds existed which entitled the wife to a divorce. The appellate court overruled such contention and affirmed the judgment of the trial court.
Appellant's Point of Error No. 23 is overruled. Appellant's other points pertain to the court's holdings and judgment in connection with the title to the 1451-acre tract.
It is the opinion of this Court that, under the authorities hereinafter discussed, the judgment of the trial court adjudging said 1451 acres to be the sole and separate property of appellee is correct and should be affirmed.
The deed from Raymond Letcher to Louise Letcher, dated October 10, 1927, recites a consideration of $10.00 and other valuable consideration to Raymond Letcher paid by Louise Letcher "out of her own property and estate," and conveys unto the said Louise Letcher "to her sole and separate use and benefit," all of his "undivided right, title and interest" in and to the 1451-acre tract in question. It appears from the record that in the year 1924 Raymond Letcher was sued by a man named Williams in connection with an accident, and in connection therewith an answer was filed on behalf of Raymond Letcher. Said suit was ultimately dismissed in the year 1933 for want of prosecution. Appellant in some of his pleadings alleges he made the conveyance in an effort to defeat any creditor which might arise in the event a judgment was taken against him, and for the purpose of attempting to hide his separate property, and in his last amended petition appellant alleged said conveyance was made "for the purpose and with the intention of defeating any possible judgment creditors which might arise against RAYMOND LETCHER." Appellant testified that he conveyed the property to his wife because he had been sued, that he did it because he thought that Williams might get a judgment against him, and that he was afraid that Williams might take the land from him. Appellant contends that he and his wife had an agreement and understanding that she would later reconvey to him his interest in the property, and that in the year 1965, approximately 38 years later, he asked his wife to divide such property equally between them, but that she refused. The testimony shows that appellant had the 1927 deed prepared, and that his wife did not accompany him in connection with the preparation of such deed.
The judgment of the trial court is sustainable on two separate and independent grounds:
(1) As a matter of law, the appellant is precluded from showing any agreement, understanding, or intention contrary to the unequivocal language in the deed.
The Supreme Court has had before it a number of cases involving conveyances by a husband to his wife wherein property was conveyed to the wife as her sole and separate property. One of the most frequently cited cases is the early case of Kahn v. Kahn, 94 Tex. 114, 58 S.W. 825 (1900), where the Court held that where a husband conveyed property to his wife by a deed which recited that the consideration was *168 paid out of her separate property and for her sole use and benefit, such recitals showed a clear intention on his part to convey the land therein described to her as her separate property, and parol evidence was not admissible to show that such was not his intention. The Court stated that such recitals were contractual recitals, the legal effect being to show the character of the right created by the deed, and that the parties thereto are estopped from denying it, and that the husband could not defeat the deed as a conveyance of the property to his wife as her separate property by denying such recital, since the effect of such denial would be to render the deed wholly ineffective.
In McKivett v. McKivett, 123 Tex. 298, 70 S.W.2d 694 (1934), community realty was conveyed by husband to wife as separate property by deeds which recited a contractual consideration. After the death of the husband his heirs sought to recover an undivided one-half interest in such property upon the theory that the deeds were executed pursuant to a prior agreement between the husband and wife that she would hold the title in trust for the community. The Court stated: "The evidence offered in this case is of such character as to render the deed ineffective. It would prove that the beneficial title did not rest in the wife for her separate use, as the deed declared, but that it remained in the community. Such evidence would contradict the very statements in the deeds which the court held in Kahn v. Kahn to belong to that class of particular and contractual recitals which the parties may not deny. The deeds in express terms declare the particular purpose or use for which the property is conveyed; that is, that it shall belong separately to the wife. Parol evidence should not be admitted to prove that it was conveyed for a different purpose or use."
See also 34 Texas L.Rev., Parol Evidence and Texas Deeds, at pages 363-364, and the cases of Kidd v. Young, 144 Tex. 322, 190 S.W.2d 65 (1945); Lindsay v. Clayman, 151 Tex. 593, 254 S.W.2d 777 (1952); Loeb v. Wilhite, 224 S.W.2d 343 (Tex.Civ.App.Dallas 1949, writ ref'd n. r.e.); Small v. Brooks, 163 S.W.2d 236, 238-239 (Tex.Civ.App.Austin 1942, writ ref'd w.o.m.). A good discussion of these types of cases is found in Jackson v. Hernandez, 155 Tex. 249, 285 S.W.2d 184 (1955), wherein the Supreme Court said of the Kahn case: "It is apparent that the decision rests, not upon a recital of contractual consideration, but upon the fact that the instrument stipulated, in effect, that the beneficial ownership of the property was conveyed to the wife for her separate use."
There is no proof of fraud, accident or mistake in regard to the recitals in such deed. Appellant plead that such deed was executed for the purpose and intention of defeating any possible judgment creditor which might arise against him, and testified that the reason he conveyed such property to his wife was because he had been sued, and that he was afraid that the person suing him might get a judgment against him and take his land from him. Such testimony and pleading establish the absence of any mistake or accident and do not show any fraud on the part of appellee but rather with regard to the rights of a possible judgment creditor at the time that a suit was pending against appellant.
(2) Appellant is precluded from recovery because, under the evidence and the pleadings, such conveyance was made for the purpose and with the intention of defeating any possible judgment creditors which might arise against appellant.
Sound public policy should require that a fraudulent grantor who conveyed his property before contracting debts for the purpose of shielding it from liability to future creditors, when the purpose of such deed, as between the parties was not *169 to divest the grantor of beneficial interest, should not receive the aid of the courts against his grantee. Lott v. Kaiser, 61 Tex. 665 (1884). As between the parties to a fraudulent transaction, the transfer designed to defraud creditors passes title to the property, and the grantor may thereafter assert no right, title or interest in the property. Relief will be denied a grantor who seeks to set aside a deed on the grounds it was executed to defraud his creditors, for courts leave parties to a fraudulent transaction in the position they have placed themselves. 26 Tex.Jur.2d § 101 (1961). Where a person conveys land by a deed absolute on its face and without consideration, in fraud of his creditors, though with an understanding that the land is only to be held in trust, neither he nor his heirs can enforce the trust against the grantee or a purchaser from the grantee. Scarborough v. Blount, 154 S.W. 312 (Tex.Civ.App.Galveston 1913, no writ). See also Messer v. Ziegler, 282 S.W. 620 (Tex.Civ.App.Fort Worth 1926, no writ).
This Court in Dellerman v. Mangold, Tex.Civ.App., 271 S.W.2d 720, (1954, writ ref'd), stated: "For Dellerman to set aside his deed to Mrs. Mangold he must prove that it was executed and recorded to defraud his creditors, but when he does that he loses his case under the law. The Supreme Court has closed the door to grantors who shield their property from the just claims of creditors and later seek to recover from their grantee in whom was placed the apparent title. Lott v. Kaiser, 61 Tex. 665, 670. If everything happened that Dellerman claims, he has no enforceable right. `This is so for reasons of public policy, to discourage fraudulent transactions. The courts leave the parties in the position in which they have placed themselves. Davis v. Sittig, 65 Tex. 497.'"
All of appellant's points of error are overruled. The judgment of the trial court is affirmed.
NOTES
[1] Carter v. Carter, Tex.Civ.App., 336 S.W.2d 466, no writ: Pelham v. Sanders, Tex.Civ.App., 290 S.W.2d 684, no writ; Christie v. Tipps, Tex.Civ.App., 279 S.W.2d 142, no writ; Brown v. Brown, Tex.Civ.App., 191 S.W.2d 814, no writ; Russell v. Russell, Tex.Civ.App., 79 S.W.2d 639, writ dism.; Harkness v. Harkness, Tex.Civ.App., 1 S.W.2d 399, no writ; Kelly v. Gross, Tex.Civ.App., 293 S.W. 325, no writ; Ledbetter v. Ledbetter, Tex.Civ.App., 229 S.W. 576, no writ; Givens v. Givens, Tex.Civ.App., 195 S.W. 877, no writ; Burns v. Burns, 59 Tex. Civ.App. 549, 126 S.W. 333, no writ.
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421 S.W.2d 284 (1967)
Mildred HOUSMAN, Respondent,
v.
Benjamin FIDDYMENT, Appellant.
No. 52185.
Supreme Court of Missouri, En Banc.
November 13, 1967.
*285 Farrington & Curtis, Thomas Strong, Richard K. Wilson, Springfield, for plaintiff-respondent, Mildren Housman.
William H. Sanders, Dean F. Arnold, Kansas City, W. Ray Daniel, B. H. Clampett, Springfield, for defendant-appellant, Caldwell, Blackwell, Sanders & Matheny, Kansas City, Daniel, Clampett, Ellis, Rittershouse & Dalton, Springfield, of counsel.
HOUSER, Commissioner.
Mildred Housman brought an action for $50,000 damages for personal injuries against Benjamin Fiddyment, who filed a counterclaim for $27,500 for personal injuries and property damages, all arising out of a head-on collision of their automobiles on Highway U, an 18-foot blacktop road in Christian County. There was a jury verdict for plaintiff for $16,000 on the petition and for plaintiff on the counterclaim. Defendant has appealed from the ensuing judgment.
*286 The only question of liability tried and submitted was the question as to which of the two vehicles was across the center and traveling on the wrong side of the roadway. Each party contended that he was in the right and that the other was in the wrong in this respect.
Plaintiff's evidence on liability consisted of the testimony of plaintiff; an expert witness named J. Stannard Baker; a traffic officer; a photographer and eighteen photographs, many of which were taken at the scene of the collision before the vehicles were moved.
Plaintiff testified that she was driving her 1951 Chevrolet sedan west at a speed of 25 m. p. h. or less "on the side of the road it belonged on," on "her" side of the road all of the time; that at no time did she let any part of her car get across the center of the road; that she was as close as she could get to the right-hand side of the road. Just before the collision she "had a bare glance" of an approaching vehicle coming "far too fast" down the hill in her lane right in front of her, coming straight at her on her side of the road. Almost instantaneously after she saw the oncoming car and before she could "think one thought" the collision occurred and her car was knocked "back down the hill and off the road." She did not remember whether she applied her brakes.
Defendant's evidence on liability consisted of his own testimony, a photographer, a passerby who testified as to some skid marks he saw at the scene, a photograph of plaintiff's vehicle and twenty-one photographs taken at the scene of the accident 12 or 13 days after the event. Defendant testified that he was driving his 1959 Chevrolet station wagon east at a speed of 52 or 53 m. p. h.; that he came down one hill and over another that turned slightly to his right; that he was going slightly downgrade when the collision occurred; that at all times his station wagon was on its own side of the road, with its right side "possibly two and a half, three foot from (his right-hand) side of the road" and its left side within a foot or two of the center of the road. Asked on cross-examination whether he could have drifted over and across the center of the road as he came around the curve and down the hill with the wagon loaded with 1000-1200 pounds of equipment, defendant stated "I don't know whether I did for sure." Asked if just before the impact he was cutting his vehicle back to the right, he answered "That's right." He first saw the other car when the vehicles were two or three car lengths apart. The other car was then "possibly eighteen, twenty inches over the center," coming at a speed of 50 m. p. h. He did not know whether he had time to apply the brakes. He was rendered unconscious.
The only issue on this appeal is whether the court erred in admitting the opinion testimony of plaintiff's expert accidentologist or reconstructionist, Mr. Baker, "as to how, where and when the collision occurred."
J. Stannard Baker is Director of Research and Development at the Traffic Institute of Northwestern University. A traffic engineer, he directs the major part of the research and development work at the institute. Educated as an electrical engineer, he was on the staff of the National Safety Council 1928-1945 and director of safety for the transit lines in Detroit one year. He has been associated at times with the institute since its founding in 1936. For 30 years he has observed, supervised and studied crashes of motor vehicles under controlled conditions. He teaches traffic reconstruction. He has written texts, manuals, guides, articles and books by the hundreds in this field. He invented devices to calculate speed of vehicles from skid marks. He has testified approximately 200 times in court as an expert. He received various awards for distinguished service and research in highway safety. He is proficient in the science of photogrammetry (making maps from *287 photographs) and wrote a manual on the subject under a government grant.
His qualifications as an expert in the field of accident reconstruction are not challenged. On the contrary, defendant's counsel conceded in argument that he has a position of importance in the field of reconstructing accidents and referred to him as undoubtedly highly qualified. Nor are his conclusion and opinions challenged as far as accuracy and truth are concerned. The question is one of admissibility of expert testimony.
Mr. Baker was informed of the makes and models of the two vehicles involved and was given the directions and speeds of the vehicles testified to by their drivers. He examined all of the photographs taken by both parties, and made a visual inspection of the scene of the accident approximately ten months after the event. Based upon the foregoing and drawing upon his experience in the field of accident reconstruction, he was permitted to testify as follows: From the photographic evidence of damage, showing how the vehicles collapsed, he gave his opinion as to the relative positions of the two vehicles at the moment of initial impact and at the moment of maximum engagement and illustrated their positions with scale drawings, as follows:
Mr. Baker testified as to the direction of the forces exerted against the vehicles at maximum engagement. The forces against plaintiff's automobile were from the front and obliquely toward the left from the right. This caused her automobile to spin or rotate during the collision and until it came to rest. The forces against the station wagon were from the front but also from the left, back toward the center of the wagon. He placed arrows in the illustration, above left, to indicate the direction of the forces exerted on plaintiff's automobile. Knowing that plaintiff's automobile *288 rotated, and that defendant's station wagon did not rotate, and knowing the direction of the forces exerted against the vehicles, he could say approximately what relative positions the vehicles were in at their first contact.
Based upon the positions of the vehicles after they came to rest, and the principle of dynamics that the vehicle with the greater momentum will reverse the direction of movement of the vehicle with the lesser momentum and move it backwards in the direction from which it came, he concluded that the station wagon had considerably greater momentum and greater velocity or speed than plaintiff's automobile at the time of collision.
He explained how the rear ends of automobiles colliding tend to raise up, taking most of the weight off the rear wheels and greatly increasing the weight on the front wheels; that physical signs are often left on the surface of the road to indicate the area where the impact occurred and that typical signs are scrub marks of tires, made as a result of the unusual downward force on the front wheels during maximum engagement. He described a scrub mark in a bituminous road as a smearing of the bituminous material as a result of the application of heat, weight and friction; stated that a scrub mark is irregular in size, rather broad and dark, getting lighter as the car moves, with a bulge at one end. It tapers off as the force on the road diminishes and usually is not straight but slightly curved, varies in width and is generally oblique or diagonal to the road. Of the several black marks shown in the photographs he identified one of them as a scrub mark made during maximum impact of the vehicles and pointed out its characteristic qualities. It was his opinion that the scrub mark was made by the left front wheel of the station wagon, and not by any other wheel of the station wagon or by any wheel of plaintiff's automobile.
He explained why the debris was east of the point of maximum engagement, stating that debris, rust, road tar and mud, broken loose by shock, is moving and will continue to move in the direction in which the car is moving until it falls to the ground, in a trajectory; that when the forward movement of plaintiff's automobile was stopped by the superior force of the station wagon striking it, the debris in that split second did not have a chance to reach the ground before the automobile, then traveling backwards at a probable speed of 25 m. p. h., overtook the debris and batted it back. He explained that this phenomenon occurs in experimental crashes.
He expressed the opinion that during engagement plaintiff's automobile was traveling west nearly parallel with the road and that the station wagon was moving at an angle of 5 or 6° in a southeasterly direction. By photogrammetry he prepared an overlay to show the width of the road and its division into one-foot segments. Laid over the photograph depicting the portion of the road where the scrub mark appeared, the overlay demonstrated the center of the road (which did not have a painted center line). He testified that the overlay showed that the scrub mark started a foot and a half north of the center of the road; that the initial touching of the vehicles would be north of the scrub mark, and that the point of maximum engagement of the automobiles was approximately a foot and a half north of the center of the roadway. Plaintiff then sought to have the expert reconstruct to scale the position of the two vehicles with respect to the road at the time they came together, but the court refused to allow this on the ground that it would amount to asking him for "the ultimate conclusion in this case." He also identified another mark (which went to the side of the road on the right) as that made by the right rear wheel of the station wagon. He accounted for other tire marks appearing in the photographs, giving his reasons why they were not made by the vehicles involved. He found no physical evidence of braking on the part of either of the automobiles, and accounted mathematically *289 for their failure to apply brakes on the basis of the testimony that the vehicles were three car lengths apart when defendant first saw plaintiff's automobile, taken in connection with the testimony of the parties as to their respective speeds; that there was not sufficient time before collision to activate the brakes. Shown defendant's photographs taken 12 or 13 days after the accident, Mr. Baker excluded skid marks thereon as not having been made by plaintiff's automobile, for reasons explained by him, based upon the physical appearance and characteristics of the marks, their failure to connect up to the mark leading to the wheel of plaintiff's automobile, and for other reasons. The court refused to permit plaintiff to exhibit to the jury a scale map or plat prepared by the expert graphically showing the relative positions of the vehicles in various positions and the courses and directions they took at different stages from the moment of first contact until they came to a stop, for the assigned reason that this portrayal would usurp the function of the jury.
When jurors, for want of experience or knowledge of the subject under inquiry, are incapable of reaching an intelligent opinion without outside aid the courts out of necessity admit the testimony of experts in the field. Allowing an expert to give an opinion upon a subject of inquiry, instead of requiring that the witness give only facts, is an exception to the general rule that witnesses must state facts. "The exception is allowed from necessity." Central & Southern Truck Lines, Inc. v. Westfall GMC Truck, Mo.App., 317 S.W.2d 841, 851; Stephens v. Kansas City Gas Co., 354 Mo. 835, 191 S.W.2d 601, 606; Cole v. Uhlmann Grain Co., 340 Mo. 277, 100 S.W.2d 311, 322; Cole v. Empire District Electric Co., 331 Mo. 824, 55 S.W.2d 434, 438. The classic statement of the rule applied in determining whether expert testimony should be admitted in evidence (quoted in the above decisions) is that expressed in Benjamin v. Metropolitan St. Ry. Co., 133 Mo. 274, 34 S.W. 590, 593, more than 70 years ago: "It is the province of the jurors to draw all inference and conclusions from the evidence before them. The witnesses, as a general rule, must state facts, from which the jurors are to form their opinion. But when the facts are all stated, upon a subject of inquiry, if an intelligent opinion cannot be drawn therefrom by inexperienced persons, such as constitute the ordinary jury, an exception is made to the general rule, and persons who, by experience, observation, or knowledge, are peculiarly qualified to draw conclusions from such facts, are, for the purpose of aiding the jury, permitted to give their opinion. The exception is allowed from necessity. An expert witness, in a manner, discharges the functions of a juror; and his evidence should never be admitted unless it is clear that the jurors themselves are not capable, for want of experience or knowledge of the subject, to draw correct conclusions from the facts proved."
In Homan v. Missouri Pac. R. Co., Mo. Sup., 334 Mo. 61, 64 S.W.2d 617, citing the Benjamin case, among others, this Court quoted with approval the following from 22 C.J. 639, § 733: "The necessity for such testimony arises where the subject matter of an inquiry is so far removed from the realm of common experience that the ordinary jury, even when the facts are fully placed before them, cannot fairly be expected to draw a correct inference therefrom, and at the same time no person competent to draw such an inference has personal knowledge of the facts."
The determination of the question of necessity rests in the first instance in the sound discretion of the trial judge and his discretion in this respect will not be set aside in the absence of a showing of an abuse of discretion. Yocum v. Kansas City Public Service Co., Mo.Sup., 349 S.W.2d 860, 864, and authorities cited.
The expert testified through 143 pages of the transcript on a wide variety of subjects. Applying the rule of Benjamin and Homan to these various subjects we are driven to *290 the conclusion that the trial court fell into error and must be found to have abused its discretion in its rulings as hereinafter discussed.
Particularly prejudicial was the expert's testimony that the point of maximum engagement was a foot and a half to the north of the center of the road, and that the left front wheel of the station wagon made the scrub mark, which was definitely located at a point a foot and a half to defendant's left of the center of the road. This was clearly the expression of an opinion as to the position of the station wagon immediately prior to the collision and as to the place of the point of impact. As such it was incompetent and inadmissible under the uniform rulings of the courts of of this state. Homan v. Missouri Pac. R. Co., 334 Mo. 61, 64 S.W.2d 617, cert. den. 291 U.S. 683, 54 S. Ct. 561, 78 L. Ed. 1070; Homan v. Missouri Pac. R. Co., 335 Mo. 30, 70 S.W.2d 869; Cornwell v. Highway Motor Freight Line, 348 Mo. 19, 152 S.W.2d 10; Hamre v. Conger, 357 Mo. 497, 209 S.W.2d 242; Pulse v. Jones, Mo.Sup., 218 S.W.2d 553; Cox v. Wrinkle, Mo.Sup., 267 S.W.2d 648; Welch v. McNeely, Mo.Sup., 269 S.W.2d 871; Ryan v. Campbell "66" Express, Inc., Mo.Sup., 304 S.W.2d 825; Chester v. Shockley, Mo.Sup., 304 S.W.2d 831; Duncan v. Pinkston, Mo.Sup., 340 S.W.2d 753 [8]; Williams v. Cavender, Mo.Sup., 378 S.W.2d 537 [1]; Schneider v. Prentzler, Mo.Sup., 391 S.W.2d 307; Kratzer v. King, Mo.Sup., 401 S.W.2d 405 [7].
In Hamre this Court said, 209 S.W.2d, l.c. 249: "Whatever value the location of the debris or the center of the debris falling from two motor vehicles upon impact may have upon determining the point of impact is not, in our opinion, a proper subject for expert or opinion evidence. In this age of motor vehicles, knowledge upon such subject is not something not possessed by the ordinary person, hence the opinion evidence of Patrolman Harrison was incompetent, since it invaded the province of the jury." The error was held to be one of several justifying the order granting a new trial. In Chester, 304 S.W.2d, l.c., 834, we said: "We think it clear that the trial court erred in overruling the objections heretofore noted and in permitting the officer, who was not an eyewitness, to give his opinion or conclusion, from the facts learned in his investigation, as to the point of impact. In the case of Hamre v. Conger, 357 Mo. 497, 209 S.W.2d 242, a highway patrolman who investigated the accident was permitted by the trial court, over objection, to state his opinion, based upon the location of debris that had fallen from the vehicles involved, as to the point of impact. Upon appeal this court held that such was not a proper subject for expert or opinion evidence, and hence the ruling which permitted the witness to give the challenged opinion was error. This court has adhered to that view since the adoption of the Hamre opinion. [Citing cases.]" In Pulse this Court agreed that if objection had been properly made to a diagram which indicated by arrows the line of movement and path of a car as having crossed the center line and having been on the wrong side at the time of the collision, and fixed the point of impact, and to the testimony of a highway patrolman that from his investigation the diagram showed where the cars were before the accident occurred, "its admission would have been reversible error." 218 S.W.2d, l.c. 556. In Cox this Court held that permitting a highway patrolman to state his opinion that the debris was at the probable point of impact or collision was "erroneous." In Welch it was ruled that an objection should have been sustained to a question asked a highway patrolman whether he was able to form an opinion as to "where the collision occurred." 269 S.W. 2d, l.c. 879 [24]. In Ryan we held that any conclusions or opinions contained in a highway patrol report made by an investigating officer "as to the point of impact would not have been admissible." 304 S.W.2d, l.c. 828 [3]. In Duncan we said: "A member of the Missouri Highway Patrol, not an eyewitness to the collision, was permitted to state his opinion based on the location *291 of debris that the point of impact was west of the center line of the highway in the southbound lane of travel. Such evidence has been held to be improper as not being a proper subject of expert or opinion evidence and as invading the province of the jury." 340 S.W.2d, l.c. 758 [8]. In Schneider it was said that the testimony of an investigating officer that it was his opinion that an area circled in red on a plat was the point of impact "would be an improper conclusion under Hamre v. Conger, * * *." 391 S.W.2d, l.c. 310[4]. In Kratzer we ruled the exclusion of the testimony of a highway patrolman that when the two cars collided they left debris at the point of collision not error as against an objection that "this is a subject of expert testimony," citing Hamre v. Conger for the rule that this is not a proper subject for expert or opinion evidence. 401 S.W.2d, l.c. 409 [7].
In Cornwell, Pulse, Cox and Williams the admission of the testimony did not effect a reversal for the reason that under the peculiar surrounding circumstances the improper testimony was not prejudicial, or because no proper objection was made, or for other technical reasons, but as indicated the principle was recognized. Williams specifically disclaimed any impairment of the views expressed in Hamre v. Conger and Duncan v. Pinkston.
Objections to the expert's testimony on this phase of the inquiry were properly and timely made. We are not persuaded that its improper admission was cumulative merely, or that it constituted harmless error, having in mind the impressive qualifications, nationwide recognition and prestige of Mr. Baker in his field, and the effective and convincing manner in which he explained his testimony. Although the jurors had the right to disregard the expert's conclusions, a juror would have needed strong convictions indeed to pit his own opinions against those of this renowned and articulate expert. We think the error affected the verdict in this case.
Notwithstanding the foregoing cases[1] clearly indicate that opinion evidence as to the point of impact or collision is inadmissible in this state, respondent contends that they do not decide the questions presented on this appeal because these cases were "concerned with rather simple physical facts from which a jury could easily draw its own conclusions," whereas in the case at bar there are contradictory marks of various kinds and debris "which would, without expert assistance, leave the average juror in a state of complete confusion." Respondent leans heavily on Yocum v. Kansas City Public Service Co., Mo.Sup., 349 S.W.2d 860, and Central & Southern Truck Lines, Inc. v. Westfall GMC Truck, Mo. App., 317 S.W.2d 841.[2]Hamre and Chester are distinguished in Yocum on the basis that the facts in those cases "were such that a jury possessed of the knowledge of the ordinary man of that time could as well determine the `point of impact' as any other person, however expert he might be." 349 S.W.2d, l.c. 864. Chester and its predecessors are distinguished in Central on the ground that the case there reviewed "involved technical mechanical knowledge" not possessed by ordinary jurors. In our judgment the rulings in Yocum and Central do not, under the facts of the case under review, open the way for the admission of Mr. Baker's testimony that the wagon was traveling on the north side of the roadway immediately prior to the collision, and fixing the point of impact north of the center of the roadway. These subjects do not involve an application of the principles *292 of physics, engineering, mechanics or other technical fields of science requiring specialized information. These questions could be determined by jurors possessed of the knowledge of ordinary men of the time. Automobile collision cases involving these subjects of inquiry are routinely decided by Missouri juries without the aid of expert witnesses.
For the same reasons the court erred in admitting Mr. Baker's opinions on the following subjects: the positions of the vehicles with relation to each other and with relation to the roadway and the center thereof, at the time of collision; that there was no evidence of braking by either vehicle, and the expert's accounting for or exclusion of other marks on the roadway as unrelated to this collision. In this case the jury had the benefit of the testimony of the drivers of both vehicles, who testified at length. Numerous photographs clearly revealed the terrain, roadway and surroundings. Many of these were taken shortly after the collision while the vehicles were still in their respective positions at which they came to rest, the highway patrolman was still investigating and the station wagon was still burning. The photographs of the two vehicles were made from several different angles. They graphically illustrated the damage done to the vehicles, the overlap between the two cars and how the force of the impact was applied and how it affected the vehicles. Marks on the surface of the roadway and the debris were plainly visible.
There was no necessity of resorting to the specialized knowledge and experience possessed by an expert in order for the jury to have reached a reasonably accurate conclusion on the single issue presented in this case. In these modern days nearly all jurors are experienced motorists. Marks and debris on highways at the scenes of collisions, examples of the damage done when automobiles collide and the results of the interaction of vehicles colliding are matters of common observation. As a result the modern-day juror in the average case is "just as capable of reasoning backward from the evidence and making a correct analysis of what happened as is the expert." Carmody v. Aho, 251 Minn. 19, 86 N.W.2d 692. The marks, with the possible exception of the scrub mark, and the debris, were as susceptible to interpretation by the jury as by the expert. The raw physical facts were sufficiently self explanatory and related to the oral testimony that the average juror, on the basis of ordinary knowledge, common sense and practical experience gained in the common experiences of life, could reasonably be expected to draw correct inferences therefrom and determine with reasonable accuracy which vehicle was traveling on the wrong side of the road at time of impact. A comprehension of the above-mentioned subjects, under the circumstances of this submission, was within the competence of the average juror.
The ultimate issue for decision (which vehicle was traveling on the wrong side of the center of the roadway when the impact occurred) was a matter which, under the facts and circumstances in evidence, was within the ken and competence of the average juror and it was prejudicial error to admit the opinion of the expert, over the objection of the defendant, as to the point of impact; the positions of the vehicles with reference to the center of the roadway; that there was no evidence of braking and as to unrelated marks.
The judgment is reversed and the cause remanded for further proceedings consistent with this opinion.
HOLMAN, C. J., and HENLEY, EAGER, DONNELLY and STORCKMAN, JJ., concur.
SEILER, J., dissents and adopts as his dissenting opinion the Memorandum of WELBORN, C.
FINCH, J., dissents and concurs in dissenting opinion of SEILER, J.
*293 MEMORANDUM OF DISSENT
WELBORN, Commissioner (dissenting).
I must respectfully disagree with the opinion of HOUSER, C.
"The question of the qualification of a witness as an expert in the field concerning which his testimony is sought and the necessity for admission of expert testimony in a given situation rests in the first instance in the sound discretion of the trial court, and its decision in those respects is not to be set aside in the absence of showing of an abuse of discretion." (emphasis supplied) Yocum v. Kansas City Public Service Company, Mo. Sup., 349 S.W.2d 860, 864 [1]. See also Jones v. Smith, Mo.Sup., 372 S.W.2d 71, 78 [11, 12]; Dillenschneider v. Campbell, Mo. App., 350 S.W.2d 260, 266 [10-12]; Edwards v. Rudowicz, Mo.App., 368 S.W.2d 503, 506-507 [4-7].
These cases recognize the necessity for flexibility in determining the admissibility of expert testimony. A wide range of discretion must be granted the trial judge in admitting or excluding such testimony. Appellant's counsel, at the trial, so acknowledged, stating: "Whether or not [the witness] testifies is solely up to Your Honor; it's purely discretionary as to whether his opinion would be beneficial to this jury; and if it is a situation where the jury needs the benefit of expert advice." Determination of whether or not the trial court has abused its discretion necessarily requires that the circumstances of the particular case be considered, as well as the qualification of the particular witness and the subject of his testimony. In this case, the proper determination requires consideration of more than the bare outline of the testimony of the plaintiff and of the defendant, followed, by a consideration, in a vacuum, as it were, of the expert's testimony. At the time that the expert testimony was offered, plaintiff had testified that he was on the right side of the road at the time of the collision. Plaintiff's counsel had read from defendant's deposition the defendant's statement that he was on his right side of the road at all times. Obviously, the crux of the case was to be, as it turned out to be, just which vehicle was where at the time of collision. Before the expert witness was offered, numerous photographs, offered by both parties, had been introduced into evidence. Some were taken at the scene of the collision shortly after it occurred, clearly showing the position of the cars as they had stopped following the collision. Other photographs introduced had been taken subsequently. The photographs revealed numerous tire marks on the pavement. Plaintiff was obviously more interested in certain of the marks. Defendant, on the other hand, tended to emphasize other markings appearing in the photographs. Clearly, just which of the markings appearing in the photographs were actually related to the collision would have a larger bearing upon the outcome of the case.
The situation was further complicated by the fact that the center of the roadway was unmarked. Each party may have honestly believed that he was on the proper side of the road. Obviously, at least one of them was mistaken. Furthermore, the opportunity of each driver to observe the other vehicle before the collision was extremely limited.
Such was the situation which the trial court had before it when Baker was offered as a witness. After the witness had been interrogated about his qualifications, there was no objection based upon the inadequacy of the witness's credentials to testify as an expert in the field of accident reconstruction. Appellant's general objection to his testimony was stated as follows: "I'm objecting to his testifying in the capacity as a reconstructionist and the direct basis for my objection is that the factual evidence, the demonstrable evidence in photographs, and the availability of * * * lay witnesses is sufficiently clear, and there is no need for expert testimony to assist this jury in analyzing any aspect of this factual situation, and that by so permitting this man to testify we are invading the province of the jury *294 in deciding the ultimate fact as to the position of these vehicles at the time of impact." This objection, overruled by the trial court, was obviously without merit for at least two reasons. In the first place, the sweeping exclusionary rule for which appellant contended was clearly contrary to numerous decisions of appellate courts in this state recognizing that there are certain well-recognized areas for expert testimony regarding the facts of an automobile collision. See Yocum v. Kansas City Public Service Company, Mo.Sup., 349 S.W.2d 860; Jones v. Smith, Mo.Sup., 372 S.W.2d 71; O'Neill v. Claypool, Mo.Sup., 341 S.W.2d 129; Central & Southern Truck Lines, Inc. v. Westfall GMC Truck, Mo.App., 317 S.W.2d 841. In the second place, the objection that the testimony would invade the province of the jury was not a valid objection. Numerous cases have so held. See State v. Paglino, Mo. Sup., 319 S.W.2d 613, 624 [13]; Mann v. Grim-Smith Hospital and Clinic, 347 Mo. 348, 147 S.W.2d 606, 608; Central & Southern Truck Lines, Inc. v. Westfall GMC Truck, Mo.App., 317 S.W.2d 841, 851.
Turning then to the specific matters which the opinion holds should have been excluded, the first is the position of the vehicles with relation to each other at the time of initial contact and at maximum engagement, the matters illustrated by the diagrams in the opinion. The witness first stated his opinion as to the relative location of the vehicles upon original contact. However, before the witness was permitted to express such an opinion, the trial court required him to state the basis for his opinion. The witness proceeded at length to state the matters which he had considered. They will not here be detailed, but, upon hearing them, the trial court was quite clearly warranted in concluding that the witness could properly express an opinion on the matter. In any event, the prejudice to appellant from the answer does not appear, inasmuch as defendant's statement from his deposition, previously read into evidence, was that he was swerving to his right at the time of the collision, which is what the witness concluded.
The next matter relates to the position of the two vehicles at the time of maximum impact. Again, the witness explained at length the factors upon which his opinion was based, which included fundamental laws of dynamics and detailed examination of the damage incurred as revealed by photographic evidence. The trial court was not required to reject the opinion finally given because it was based upon photographic evidence available to the jury and upon generally known principles of dynamics. The witness, by virtue of his training and experience, was in a position to relate the evidence of damage and the fundamental principles of dynamics, and thereby help the jury to understand what had occurred.
As for the testimony of the witness as to the position of the vehicles in relation to the roadway at the time of collision, the testimony to which appellant points as objectionable related to the direction of travel of the vehicles "while they were still engaged with each other, touching each other before they separated." The witness's testimony was that the plaintiff's sedan was traveling nearly parallel to the road in a westerly direction and the defendant's station wagon at an angle of five or six degrees in an easterly direction. No objection was made as to the adequacy of the basis for this conclusion. Appellant here does not attempt to demonstrate the prejudicial effect of this particular item of testimony, and, finally, it is, at least as to the direction of defendant's travel, consistent with defendant's statement that he was swerving to the right at the time of the collision. Insofar as the witness's statement in this regard is concerned, it was, at the most, merely cumulative.
The testimony that neither driver applied his brakes and that there was no evidence at the scene of braking by either vehicle is, likewise, merely cumulative and corroborative of the testimony of the drivers, neither of whom testified that the brakes were applied.
As for the testimony about the markings on the pavement, it is clear that not all could *295 have been connected with the collision. However, the photographic evidence was not so clear that the assistance of an expert in eliminating the marks not connected with the collision could not be said to have been helpful.
The opinion finds "particularly prejudicial" testimony as to the location of the point of maximum impact, and the testimony that the left front wheel of defendant's vehicle made the "scrub" mark, which was clearly in the plaintiff's lane of traffic. The opinion concludes that this testimony amounted to testimony as to the point of impact.
However, the opinion finds no fault with the witness's testimony concerning the cause, nature and characteristics of scrub marks, including the witness's conclusion that a scrub mark is the product of the maximum engagement of the vehicles. The witness's identification of a mark in the exhibits as a scrub mark is not questioned, nor is the witness's testimony on the location of the various marks, including the scrub mark as one and one-half feet on plaintiff's side of the road. This evidence, for all practical purposes, amounts to testimony by the witness as to the point of impact.
In any event, a rigid "no opinion testimony as to the point of impact" rule should not be applied. That rule had its origin in dictum in Hamre v. Conger, 209 S.W.2d 242. In that case, the court pointed out that there was no preliminary inquiry to determine the experience of the patrolman "to qualify him as an expert to determine the point of impact from the location of the debris." 209 S.W.2d 247. That was sufficient reason for the error in admitting his testimony. The remainder of the court's discussion of opinion evidence upon the point of impact was wholly dictum. However, the dictum by frequent repetition has now assumed the status of a rigid exclusionary rule quite inconsistent with the generally accepted principle that the admission of expert testimony is primarily a discretionary matter in the particular case. It is also to be noted that the court ultimately concluded in Hamre that the opinion evidence was inadmissible "since it invaded the province of the jury." 209 S.W.2d 249. If, as the cases above cited hold, that is an unsound ground of objection to the admission of opinion evidence, it is an equally unsound basis for a judicial opinion.
To my mind, the trial court, in the circumstances of this case, properly concluded that the evidence which the opinion of Judge Houser holds was erroneously admitted was necessary to permit the jury to arrive at the facts upon which their ultimate judgment must rest. Automobile accidents may be matters of common occurrence these days, but that does not mean that ordinary jurors are so familiar with their characteristics and consequences that trained experts, applying laws of physics or dynamics, cannot point out a wide variety of factors which the untrained observer does not see or consider. Given a properly trained expert who is able to exhibit a sound basis for his opinions, a trial court, in a given case, should not be precluded from exercising its judgment and discretion in allowing the jury the benefit of such assistance.
There is a wide range of respectable authority which would support the admission of the evidence here. See: Miller v. Pillsbury Company, 33 Ill. 2d 514, 211 N.E.2d 733; Dudek v. Popp, 373 Mich. 300, 129 N.W.2d 393; Frank's Plastering Company v. Koenig, 8th Cir., 341 F.2d 257; Moss v. Associated Transport, Inc., D.C., Tenn., 33 F.R.D. 335; Annotation, "Admissibility of opinion or evidence as to point of impact or collision in motor vehicle accident case," 66 A.L.R. 2d 1048.
In my opinion, the trial court did not err and the judgment should be affirmed.
NOTES
[1] Many of which are cited in the annotation "Opinion EvidencePoint of Collision," 66 A.L.R. 2d 1048.
[2] Respondent also cites O'Neill v. Claypool, Mo.Sup., 341 S.W.2d 129, in which an expert witness testified to a wide range of subjects. O'Neill is not authority for respondent's position, for no point was made in that case that the court erred in admitting the expert's testimony, and the court did not pass upon its admissibility.
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552 F. Supp. 117 (1982)
UNITED STATES of America
v.
Robert S. HAWKER.
Crim. No. 82-3.
United States District Court, D. Massachusetts.
August 5, 1982.
*118 Dennis J. Kelly, U.S. Atty., Boston, Mass., for United States.
James B. Krasnoo, William A. Brown, Brown & Prince, Boston, Mass., for Robert S. Hawker.
Memorandum and Order
KEETON, District Judge:
On July 14, 1982, defendant moved to dismiss Count I, the only remaining count of the indictment in this case, on the ground that he has been deprived of his statutory right to a speedy trial, 18 U.S.C. § 3161 et seq., and his rights under Final Plan for Prompt Disposition of Criminal Justice within the District of Massachusetts, effective July 1, 1980 ("the Plan"; page citations are to the blue-covered edition). By amendment he seeks dismissal also under Fed.R.Crim.P. 48(b), in the exercise of discretion.
*119 I.
The chronology of developments in this case includes the following events:
1/7/82 Arraignment on one-count indictment
1/26/82 Defendant filed numerous motions
2/1/82 Magistrate's written decision on certain motions; order that other motions be reserved for trial judge (including motions to dismiss one-count indictment for duplicity and vagueness and for pre-indictment delay)
2/3/82-2/5/82 Government filed responses to motions reserved for trial court
2/16/82 Superseding indictment, restating original count as Count I and adding a new Count II
2/19/82 Call for hearing on all pending motions; rescheduled for 3/8/82
2/19/82 Defendant arraigned on Count I; advised of trial date, 3/8/82
2/26/82 Defendant filed motions relating to Count II; two motionsthe Motion to Sever Counts and Motion to Elect also related to Count I
3/2/82 Magistrate ruled on certain motions filed on 2/26/82
3/5/82 Government filed responses to motions filed 2/26/82
3/8/82 Chief Judge Caffrey heard motions, announcing decisions on some, taking others under advisement
3/8/82 Trial set for 3/11/82
3/10/82 Chief Judge Caffrey allowed Government's Motion for continuance, continuing trial date from 3/11/82 to 3/15/82
3/12/82 Chief Judge Caffrey entered memorandum recording decisions announced 3/8/82, deciding some motions reserved on 3/8/82, and reserving ruling on one motion (a motion to dismiss) until time of trial; Motion to Sever Counts allowed, election of count to be tried first left to government
3/12/82 Judge McNaught allowed defendant's oral motion for continuance "due to medical condition of defendant and there being no opposition by the government," continuing trial to 3/29/82
3/19/82 Government elected to try Count II first
3/24/82 Motion to Dismiss Count II filed
3/26/82 Pretrial conference before Judge Nelson; case continued at defendant's request until 4/1 & 4/2 for jury selection and 4/5 to commence evidence
3/30/82 Motion for exculpatory evidence filed
3/31/82 Magistrate decided motion for exculpatory evidence [see also 4/9/82]
4/1/82 Motion in Limine III filed
4/5/82 Judge Nelson denied Motion to Dismiss Count II
4/5/82 Jury selection for trial on Count II commenced
4/6/82 Jury panel discharged before jury sworn, with consent of parties, because of blizzard and closing of courthouse
4/9/82 Defendant's Motion for Reconsideration of Magistrate's order (referred to as order of 4/9/82) regarding exculpatory evidence
4/14/82 Government's Response to Defendant's Motion for Reconsideration of Magistrate's order
4/19/82 Trial on Count II commenced
5/21/82 Verdict of guilty on Count II
5/25/82 Post-verdict motions relating to Count II filed (motions for arrest of judgment, acquittal, and in the alternative for new trial)
5/27/82 Motion of Counsel to Withdraw (for nonpayment of fees) filed
6/2/82 Motion of Counsel to Withdraw allowed
6/4/82 Period of fourteen days following verdict expired
7/5/82 Period of 45 days following verdict expired
7/14/82 Defendant's post-verdict motions denied; sentencing on Count II
7/14/82 Defendant filed the present motion to dismiss Count I
*120 7/16/82 Government's Motion for Specifically Assigned Trial Date
7/22/82 The clerk having notified defendant to appear for hearing, and defendant having made a request to clerk by telephone for continuance, Judge Keeton allowed defendant's request for continuance of hearing from 7/23/82 to 7/26/82
7/26/82 Judge Keeton allowed defendant's oral request for continuance to obtain new counsel, to 8/2/82; allowed motion that previous counsel be permitted to appear solely on present motion to dismiss Count I; commenced hearing on motion to dismiss and, after second session on 7/26/82, recessed hearing to 7/30/82
7/30/82 Hearing on motion to dismiss Count I completed; motion taken under advisement
8/2/82 Judge Keeton allowed defendant's motion for further continuance of one week to obtain counsel
The following orders for excludable delay have been entered. Those marked by a single asterisk are not challenged (except that defendant contends, with good reason, that any overlapping days should not be counted twice). Those marked by two asterisks are challenged. It is not clear whether others are or will be challenged. Defendant has not explicitly challenged the order entered 7/26/82 for excludable delay because of the continuance to allow defendant to seek new counsel; I understand this order to be unchallenged at least as to the period from 7/26/82 through 8/2/82 (when the order was entered, upon findings that the interests of justice in allowing defendant to seek new counsel outweigh the interests of the public and the defendant in a speedy trial), but defendant's written submission of 7/30/82 observes that this order was not entered on 7/23/82 and thus may be read as challenging the excludability of the period from 7/23/82 to 7/26/82.
2/3/82 * Magistrate Cohen 1/26-1/29 Filing date to hearing
1/30-2/1 Under advisement
3/5/82 * Magistrate Cohen 2/26-3/2 Filing date to hearing
4/12/82 ** Judge Nelson 3/30-4/5 Filing date to hearing
4/12/82 ** Judge Nelson 3/24-4/5 Filing date to hearing
4/21/82 ** Judge McNaught 1/26-3/12 Filing date to hearing
6/8/82 ** Judge Nelson 3/12-3/29 Exam or Hearing for
mental or physical capacity
[3/30-4/18] No order previously entered
6/30/82 Judge Nelson 4/19-5/21 Trial on other charges
[5/22-5/26] No order previously entered
5/27-6/2 Filing date to hearing
[6/3-7/22] No order previously entered
7/26/82 Judge Keeton 7/23-8/2 Interest of justice
continuance
8/2/82 Judge Keeton 8/2-8/9 Interest of justice
continuance
II.
The parties have argued many more issues than are dispositive of this motion, or even potentially dispositive. At the cost of extending the length of this memorandum, I have noted the arguments, and the issues to which they relate, even when determining that I need not decide those issues in view of rulings made here. To facilitate identification of the issues that I have concluded to be dispositive, and additional issues that might be dispositive either because my rulings may be challenged or because of later developments in this case, I first set forth in chronological order the effect of my rulings.
*121
Period Reason(s) for Exclusion Determined Disputable: Determined
to be not now to be not
Excludable decided Excludable
1/7-1/25 19
1/26-2/26 Pre-trial motions on Count I filed and not yet 32
heard
2/27-3/8 Pre-trial motions filed 2/26, affecting both 10
counts, not yet heard
3/9-3/12 Motions under advisement 4
3/13-3/23 Election on counts not made until 3/19; 11
continuance at defendant's request due to
defendant's medical condition; motions pending
on Count II
3/24-4/4 Motion to dismiss Count II (filed 3/24), not yet 12
heard; continuance for time to prepare,
3/26-4/1; motion for exculpatory evidence,
3/30-3/31 and further order 4/9/82
4/5-4/6 Jury Selection 2
4/7-4/18 Continuance caused by blizzard; within 14 12
days following aborted trial; motion of 4/9 for
reconsideration of Magistrate's order regarding
exculpatory evidence pending, not yet
heard
4/19-5/21 Jury Selection through verdict 33
5/22-6/4 Period of 14 days following verdict; post-verdict 14
motions filed and not heard; motion of
counsel to withdraw filed 5/27, heard and
decided 6/2
6/5-7/13 Post-verdict motions not yet heard; sentencing 39
hearing on Count II not yet held
7/14-8/2 Motion to dismiss Count I filed 7/14, hearing 20
completed 7/30, under advisement to date of
this decision; continuance in interests of
justice to allow defendant to seek new counsel
7/23/82
8/2-8/3 Continuance in interests of justice 1
and beyond
___ __ __
Days calculated as of 8/3/82 151 39 19
III.
Defendant contends that the total of nonoverlapping time excluded by orders made before July 26, 1982 by judges and magistrates of this court is 115 days, that 201 days elapsed between 1/7/82 and 7/26/82, that the remaining number of 86 days exceeds the 70-day limit, and that the motion to dismiss should therefore be allowed, even without regard for defendant's challenges to the validity of some of the excludabletime orders. The government responds that the court may now determine whether additional periods of time were excludable, and that in fact only 19 days of non-excludable time have run from 1/7/82 through 1/25/82.
I conclude that the government's contention that the court may determine excludability has merit at least as to all periods with respect to which the relevant facts are disclosed of record in the files of this court. Cf. United States v. Jodoin, 672 F.2d 232, 238 (1st Cir.1982) (failure of trial judge and speedy trial clerk to pass on whether time was excludable does not preclude exclusion based on facts not in dispute; appellate court must affirm judgment of district *122 court if it is correct as a matter of law, even if for reasons other than those cited by the district court). A more debatable issue is presented by the contention that the court should now (or at a later time, should the issue become decisive) determine that the interests of justice in allowing one or more of the continuances outweigh the interests of the public and the defendant in speedy trial, § 5(b)(8) of the Plan, p. 21, the judge who allowed the continuance having made no such determination at that time. In view of other rulings made in this memorandum and order, I need not decide that question.
Defendant asserts that his objections now made to excludable-time orders are timely, despite the provisions, including those for waiver, stated in § 5(f)(6) of the Plan, pp. 28-29, because copies of the excludable-time orders were not mailed to counsel by the clerk when the orders were entered and were not received before 7/23/82. The absence of service of copies on government and defense counsel appears to be undisputed. I hold that objections to excludable-time orders are timely.
IV.
Defendant has called attention to delays during trial, thus at least implicitly contesting the excludability, under § 5(b)(1)(D), of some days between commencement and conclusion of "trial" when delays occurred. The Plan, however, provides for excluding "[d]elay resulting from trial of the defendant on other charges in any state or federal court, including this court." According to the Plan,
(i) The excludable period shall commence on the date that such other trial begins and shall conclude fourteen days after termination of that trial.
(ii) As used in this subparagraph, "trial" shall be deemed to include the impanelling of the jury, a hearing on any motion which has been deferred for hearing to the trial date and any time during which the trial is suspended.
The Plan, § 5(b)(1)(D), p. 13 (emphasis added). I conclude that, at least as the Plan applies to the circumstances of this case, all time between commencement and conclusion of "trial" is excludable.
In view of my rulings regarding excludable time for pending motions, see parts V-B and V-C infra, I need not determine whether the time between the impanelling on April 4 and the impanelling on April 19 (after the blizzard of April 5 had caused the first impanelling to be aborted before the jury was sworn) was excludable either as a "time during which the trial is suspended" or as a time within a fourteen day period following a "trial" commenced on April 4 and aborted on April 5.
The definition of "trial" does not include any period based on pending "pretrial" motions, though it does include time in "hearing on any motion which has been deferred for hearing to the trial date." Thus, if any time is excludable because of pretrial motions relating to Count II only, the basis must be found elsewhere than in § 5(b)(1)(D) of the Plan. See part V-B infra.
V.
Acknowledging that the periods 1/26-2/1 and 2/26-3/2 are excludable, defendant challenges the excludability of all or at least most of the remainder of the period 1/26-4/4 and 4/7-4/18, despite the fact that on each day throughout this time at least one pending motion had not yet been heard. Defendant argues each of the several grounds considered here.
A. What Motions Qualify as "Pretrial" Motions?
Defendant contends that not all motions pending during periods of time asserted to be excludable under § 5(b)(1)(F) of the Plan were "pretrial motions" in the relevant sense.
An argument for a narrow definition of "pretrial motion," similar to the argument defendant advances here, was rejected in United States v. Brim, 630 F.2d 1307, 1312 (8th Cir.1980), cert. denied, 452 U.S. 966, 101 S. Ct. 3121, 69 L. Ed. 2d 980 (1981) (rejecting argument that "ordinary pretrial motions *123 for discovery, disclosure of alibi witnesses, and the like do not give rise to excludable periods unless delay of the trial actually is caused by the filing of the motions," and sustaining government's contention "that the statute provides for automatic exclusion of the time when such motions are pending").
Some of the motions filed in the present case, however, are distinguishable from those before the court in Brim. I conclude that defendant's contention has merit as to a motion to sequester and as to a motion in limine on which hearing was deferred until a time on or immediately preceding the date set for trial. This was done, no doubt, to provide for a ruling by the trial judge, whose identity might not be ascertainable earlier under the court's panel system for trial of criminal cases. In light of other rulings, I need not determine whether a few days of delay for motions in limine might be excludable. I therefore disregard entirely motions in limine (or to sequester) in determining excludable time in this case.
Defendant's contention that a motion to dismiss is not a "pretrial motion" lacks merit. Orderly procedure requires that it be considered before trial, and no valid reason appears for not treating it as a "pretrial motion" in the sense relevant to § 5(b)(1)(F) of the Plan.
Defendant contends also that the motion to sever was not a "pretrial motion." I conclude, however, that it was a "pretrial motion" in the sense that term is used in § 5(b)(1)(F) of the Plan. Cf. Brim, supra.
I conclude also that a motion for continuance is a "pretrial motion" in the sense relevant to § 5(b)(1)(F) of the Plan. Defendant argues that applying this rule will favor defendants who wait until the last minute to file a motion for continuance, to avoid excludable time. This argument fails to give due weight to the high risk that would be involved in using such a tactic the risk that the motion would be denied because of failure to make it promptly after the grounds asserted had become known. The parties should be encouraged to file motions promptly, and the period between the filing of the motion and the time when the motion and any opposition can be heard, consistently with the court's reasonably prompt attention to it, is properly excludable. This is, however, in any event only an alternative ground of decision in the present case, since at all times when a motion for continuance was pending, some other pretrial motion was also pending.
B. May Motions related only to Count II be the basis for excludable time?
Defendant argues that no motion relating only to Count II can be a basis for excludable time as to Count I, because no subdivision of 18 U.S.C. § 3161(h)(1) or of § 5(b)(1) of the Plan so provides. The government responds that the many subdivisions of 18 U.S.C. § 3161(h)(1) and the Plan, § 5(b)(1), are illustrative, not exhaustive, as declared by the introductory statement appearing both in the statute and in the Plan:
(1) Any period of delay resulting from other proceedings concerning the defendant, including, but not limited to ....
18 U.S.C. § 3161(h)(1); Plan, § 5(b)(1).
The point that the language of the Act and the Plan cover more than the examples given is supported by the decision in Jodoin, supra, 672 F.2d at 238.
The phrase "other proceedings" plainly extends not only to a trial (which is listed as one of the items under paragraph (1)), but also to other kinds of proceedings. Thus, in the present case it may extend to some proceedings other than the trial on Count II. No reason appears for reading "other proceedings" so restrictively as necessarily to preclude pretrial proceedings regarding Count II. Has delay that is relevant to the statutory objective of speedy trial on Count I resulted from proceedings on motions directed only to Count II? I conclude that the answer is yes, at least in the distinctive circumstances of this case in which defendant's motion to sever was allowed, subject to an election by the government as to the count to be tried first. Necessarily implicit in the severance was an understanding that trials on the two separate counts would not *124 proceed simultaneously. It is reasonable, moreover, to interpret the motion and the order as based on an implicit premise that active attention of the court and the parties to Count I would be deferred at least when the trial on Count II was set to commence at an early date. It would be unreasonable to impose on the parties a responsibility for dividing their attention during this period between preparation for the trial that was about to commence and a second trial that was expected to occur later, on Count I. Also, it would be unreasonable and inconsistent with the purposes of the Speedy Trial Act and the Plan to construe them as declaring non-excludable the plainly reasonable period of time intervening in this case, between the election to proceed first on Count II and the trial of Count II, during which pretrial motions related to Count II were pending.
I conclude, also, that the fact that motions relating directly to Count II were pending at times when motions related to Count I were also pending is a relevant circumstance with respect to whether reasonably prompt hearings were provided on Count I motions. That is, I conclude that it is appropriate to take into account, as part of the circumstances bearing on whether hearings were held consistently with the objective of prompt disposition (see part V-C infra), the fact that motions relating to Count II were also pending.
C. Time Between Filing and Hearing Motions
Defendant contends that, by reason of the terms of the statute, no time between filing and hearing of a motion other than such as is consistent with "prompt disposition," 18 U.S.C. § 3161(h)(1)(F), is excludable.
The Plan declares excludable:
(1) Any period of delay resulting from other proceedings concerning the defendant, including, but not limited to:
* * * * * *
(F) Delay resulting from the hearing and disposition of a pretrial motion.
(i) The excludable period shall commence on the date on which a pretrial motion is filed.
(ii) The excludable period shall conclude on the date on which the Court has received all forthcoming briefs from the parties and any necessary hearing on the motion has been concluded.
* * * * * *
(J) Delay resulting from proceedings concerning the defendant being under advisement.
(i) The excludable period shall commence on the date on which any proceeding concerning the defendant is actually taken under advisement.
(ii) The excludable period shall conclude on the date on which an order or ruling on the matter is entered, but in no event shall the excludable period exceed thirty days.
The Plan, § 5(b)(1), pp. 11, 14, 16-17.
If applied literally, § 5(b)(1)(F) would exclude all time between filing and conclusion of hearing on any pretrial motion, without regard for how long the period might be and even if hearing had been intentionally deferred to avoid pressures of the speedy trial requirement. Such an interpretation of the Plan would cause it to be in noncompliance both with the manifest objective of the Speedy Trial Act and with the text of 18 U.S.C. § 3161(h)(1)(F), referring to "prompt disposition."[1] I conclude that § 5(b)(1)(F) of the Plan is subject to a qualification, not stated explicitly anywhere in the text but plainly implicit in the sense of the entire Plan, that the period of excludable delay under this provision shall not *125 be longer than is consistent with a reasonably prompt hearing. Section 5(b)(1)(J)(ii) places a fixed limitation of 30 days upon the period of excludable time for matters under advisement. It would be inappropriate to apply that fixed limitation in this context, neither the statute nor the Plan having so provided. Instead, a judge applying the limitation that the hearing must be reasonably prompt must consider all the circumstances bearing upon the determination, and may conclude that either a shorter or a longer period than 30 days is appropriate in the particular circumstances of the case under consideration.
In the present case, the period between 1/26 (when the first motion was filed) and 4/19 (when the second trial started, apparently with a pending motion for reconsideration of the magistrate's order regarding exculpatory evidence still unresolved) was 83 days. During that period, however, the court was giving active attention to the case in numerous ways. The longest period of time within which no court action is reflected in docket entries and orders was the period of eighteen days between 2/1/82 and 2/19/82, and within that period other significant developments occurred, including the filing of the government's responses to motions and the superseding indictment.
The earliest time as of which it might be argued that no pending motions were "pretrial" motions (as construed in part V-A supra) relating to Count I is 3/12/82, when Chief Judge Caffrey ruled on the motion to dismiss. At that time, however, he ordered an election by the government, and the fact that this order would have the effect of delaying the trial of Count I did not become known until the government's election of 3/19/82. The first (aborted) jury selection for the trial on Count II commenced on April 5, just seventeen days later, and during that interval several motions relating to Count II were pending. They included a motion to dismiss Count II, filed 3/24 and denied on 4/5; defendant's motion to continue to 4/1, allowed on 3/26; and motion for exculpatory evidence, filed 3/30; a later motion for reconsideration of magistrate's order was filed 4/9 and apparently was not heard and decided before the second jury impanelling started on 4/19.
The pattern of activity of the case reflected in the chronology set forth in part I of this memorandum discloses continuing, reasonably prompt attention of the court to the case. It also shows delays resulting from the reasonable actions of counsel for the government and counsel for the defendant in advancing their respective contentions. New defense motions were filed on 2/26/82 (responses filed 3/5/82), 3/24/82, 3/30/82, and 4/9/82, and defendant presented an oral motion for continuance due to his medical condition on 3/12/82. Rather than a pattern of needless delay or inattention, this record discloses a pattern of repeated efforts to proceed promptly with trial despite delays caused by weather, by health of the defendant and of one of the government's attorneys, by the motions, orders, and election concerned with the relationship between Count I and Count II, and by the quite proper advocacy of both counsel in relation to numerous motions filed on behalf of the defendant. In these circumstances I find that at no time between 1/26/82 and 4/19/82 was the delay for hearing of motions long enough to invoke the implied limitation that excludable time shall not extend to a point at which a hearing would no longer be reasonably prompt. I therefore hold that all the time between 1/26 and 4/19 is excludable under § 5(b)(1)(F) of the Plan. Excludable time orders have previously been entered as to all this period except 3/30/82 through 4/18/82. During each day from 3/30/82 through 4/18/82 one or more of the following motions was pending: motion to dismiss Count II; motions regarding exculpatory evidence, and for reconsideration of magistrate's ruling on exculpatory evidence. I now direct the entry of an excludable-time order for this period under § 5(b)(1)(F).
VI.
As stated in part IV, supra, the period from impanelling on 4/19 through verdict in the Count II trial on 5/21/82 is excludable under § 5(b)(1)(D) of the Plan.
*126 The period from the date of the verdict, 5/21/82, through the date of sentencing, 7/14/82, presents several issues.
I conclude that at least the fourteen days following verdict are excludable under § 5(b)(1)(D)(i), declaring that the excludable period "shall conclude fourteen days after the termination of that trial." Were it not for this provision, a longer period might have been shown in particular circumstances to be a "delay resulting from other proceedings concerning the defendant," § 5(b)(1), p. 11 of the Plan, since that provision declares that such delays "includ[e], but [are] not limited to" those specified on pp. 11-17 of the Plan. Defendant argues that the Plan provision for this fourteen-day exclusion is invalid because it varies from the statute. I find, however, that in the circumstances of this case an excludable period of fourteen days is entirely consistent with the statutory objective of reasonably prompt hearing (see part V-C, supra). I need not determine whether the Plan provision fixing a precise period of fourteen days could validly be applied in all cases.
No excludable-time order has previously been entered with respect to a part of this 14-day period (5/22-5/26), and the excludable-time order on another part (5/27-6/2) is grounded on the pending motion of counsel to withdraw, which provides a second reason for exclusion of that part of the fourteen days. I now direct entry of an excludable-time order covering the period 5/22 through 6/4/82, under § 5(b)(1)(D).
An additional reason may be advanced for excluding this fourteen-day period, as well as additional time after verdict and for at least fourteen days beyond sentencing on 7/14/82. It might be argued that "trial," as defined in § 5(b)(1)(D)(ii) is not concluded until all post-verdict motions have been decided, sentencing has occurred,[2] and judgment has been entered. In view of other rulings made, however, I need not determine this question. For this reason, in part II of this memorandum I have designated the period from 6/5/82 through 7/13/82: "Disputable, not now decided." The issues presented regarding excludability of this period may be addressed at a later time if the need should arise because of additional non-excludable time between the present date and the date of trial on Count I.
It might also be argued that by reason of the aborted commencement of impanelling on 4/5-4/6/82, and the court's excusing the panel before the jury was sworn, with the consent of the parties, § 4(a)(2) of the Plan, pp. 4-5 is invoked.
(A) If a defendant is to be tried again following the declaration by a trial judge of a mistrial or following the order of a trial judge for a new trial, the trial shall commence within seventy days after the date the declaration or order becomes final, subject to the periods of excludable delay enumerated in subsection 5(B).
Id. at p. 5. Even if this provision applies to extend the trial time on Count II, however, it may be argued that it does not do so for Count I. In view of other rulings, I need not decide this question to decide the present motion.
VII.
The period from 7/14/82 (when the present motion to dismiss Count I was filed) through the present date is excludable because this motion was filed on 7/14/82 and hearing was not completed until 7/30/82, after which time it was under advisement through today. Additional reasons exist for excluding parts of this period the interest-of-justice continuances allowed as to the periods 7/23/82 through 8/2/82 and 8/2/82 through 8/9/82.
VIII.
After the oral hearing on this motion, I was advised by the Speedy Trial Clerk that an entry was made in the Clerk's computerized records that, under 18 U.S.C. *127 § 3161(h)(8)(B)(iv),[3] a period of excludable time commenced running on 6/2/82, when the motion of defendant's counsel to withdraw was allowed. Were it necessary for me to determine the effect, if any, of this entry, I would reopen the hearing to provide counsel an opportunity to present either oral or written argument, since it appears that they were not aware, at the time of oral hearing, of this entry on the clerk's computerized records. It seems clear that arguments made by defense counsel against excludability of other periods of continuance would apply here as well. His arguments are (1) that periods of continuance are not excludable unless interest-of-justice findings, in accordance with § 5(b)(8)(B), pp. 21-22 of the Plan, are made and "set forth on the record" at the time the continuance is allowed, and (2) that, even if the excludable time order and supporting findings may be made later, they must be made by the judge who allowed the continuance and cannot be made by another judge before whom the motion to dismiss for failure to provide a speedy trial is pending. In view of other rulings stated in this memorandum, I need not decide these questions.
Nor do I need to determine whether defendant is correct in arguing that the excludable period because of allowance of a motion for continuance, though it is filed and allowed well in advance of the date set for the trial or hearing that is continued, cannot commence to run before the date previously set for the trial or hearing.
IX.
Finally, defendant argues that the court should dismiss under Fed.R.Crim.P. 48(b) because the Plan, the statute, or both are unconstitutional as applied to this case and because, even if the statute and Plan are constitutional as applied to this case, the Plan is consistent with the statute as applied to this case, and non-excludable time has not exceeded 70 days, nevertheless this court should exercise discretion to dismiss the indictment under Fed.R.Crim.P. 48(b) on the ground that the defendant has sufficiently shown a want of prosecution on the part of the government. I find instead that the government's actions have manifested neither lack of attention and interest in the prosecution of Count I nor failure to seek a reasonably prompt disposition of Count I. The chronology set forth in part I of this memorandum discloses that the government was seeking to advance the disposition of the entire case, though without pressing to require that the defendant be put to trial on Count I while Count II was in trial and subject to post-verdict motions relating to Count II. Taking into account the special circumstances of this case, in which a motion of counsel to withdraw was filed shortly after verdict and allowed a few days later, and defendant has been without counsel since that time except for the limited appearance of counsel, with leave of court, solely to represent the defendant on this motion to dismiss, I cannot find justification, in the exercise of discretion, for dismissing under Rule 48(b).
As to defendant's contention that the government's motive was to delay trial of Count I so the final judgment of conviction could be introduced for impeachment if defendant *128 testifies at the trial on Count I, I do not find the suggestion supported in fact. In any event, a dismissal would be an inappropriately excessive remedy. The defendant will be free to argue before the court in the trial on Count I that such use of the conviction on Count I should be precluded, on this or any other ground. I do not determine the admissibility of the conviction. My ruling at this time is merely that I reject defendant's argument that the court should exercise discretion under Rule 48(b) to dismiss. The possibility that the conviction on Count II will be received in evidence at the trial on Count I is at this time speculative, and the court at trial may consider whether it should preclude such use of the conviction.
Orders are to be entered forthwith in conformity with the rulings stated in this memorandum.
NOTES
[1] The following periods of delay shall be excluded ...:
(1) Any period of delay resulting from other proceedings concerning the defendant, including, but not limited to
* * * * * *
(F) delay resulting from any pretrial motion, from the filing of the motion through the conclusion of the hearing on, or other prompt disposition of, such motion; ....
18 U.S.C. § 3161(h).
[2] Defendant also argues that in no event should more than 45 days, see Plan, § 6, p. 29, be excludable between verdict and sentencing. In view of other rulings, I need not decide this question.
[3] "(h) The following periods of delay shall be excluded ...
(8)(A) Any period of delay resulting from a continuance granted by any judge ... if the judge granted such continuance on the basis of his findings that the ends of justice served by taking such action outweigh the best interests of the public and the defendant in a speedy trial. No such period of delay resulting from a continuance granted by the court in accordance with this paragraph shall be excludable under this subsection unless the court sets forth, in the record of the case, either orally or in writing, its reasons for finding that the ends of justice served by the granting of such continuance outweigh the best interests of the public and the defendant in a speedy trial.
(B) The factors, among others, which a judge shall consider in determining whether to grant a continuance under subparagraph (A) of this paragraph in any case are as follows:
* * * * * *
(iv) Whether the failure to grant such a continuance ... would deny the defendant reasonable time to obtain counsel ....
18 U.S.C. § 3161. See also § 5(b)(8) of the Plan, at pp. 21-22.
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680 F. Supp. 281 (1987)
Alan V. KEISTER, Plaintiff,
v.
DELCO PRODUCTS, Defendant.
No. C-3-85-926.
United States District Court, S.D. Ohio, W.D.
April 20, 1987.
*282 Michael L. Tucker, Dayton, Ohio, for plaintiff.
Joseph P. Buchanan, Dayton, Ohio, for defendant.
ADVISORY OPINION ON VIABILITY OF PLAINTIFF'S PENDENT STATE LAW CLAIM; DEFENDANT TO FILE MOTION TO DISMISS PENDENT STATE LAW CLAIM WITHIN STATED PERIOD OF TIME FOR REASON OF COURT'S LACK OF SUBJECT MATTER JURISDICTION
RICE, District Judge.
This case is before the Court on memoranda of the Plaintiff and Defendant regarding the viability of Plaintiff's state law claim under O.R.C. § 4101.17(B). Specifically, the issue presented by these memoranda is whether Plaintiff's claim for relief under O.R.C. § 4101.17(B) is precluded by his having filed a complaint with the Ohio Civil Rights Commission (OCRC) prior to his having filed a Complaint in this Court.
Procedurally, this case began with the filing by the Plaintiff of an age discrimination charge with the Equal Employment Opportunity Commission (EEOC) and the OCRC on about August 28, 1985. On September 18, 1985, Plaintiff notified the EEOC of his intent, after the passage of at least 60 days from that date, to file an age discrimination claim in federal court. On December 12, 1985, Plaintiff filed this suit, setting forth both federal and state age discrimination claims. Defendant argues that Plaintiff's claim under O.R.C. § 4101.17(B) is barred by his having filed charges with the OCRC under O.R.C. § 4112.05. Plaintiff argues that it would be unjust to construe § 4112.08 to bar a civil action under the state statute when a prerequisite to federal jurisdiction under the Age Discrimination in Employment Act (ADEA) is the filing of a complaint in the state administrative forum, particularly when he filed his complaint with the OCRC only in order to meet the ADEA's jurisdictional prerequisites.
Protection against age discrimination is provided under Ohio law by three statutory sections: (1) O.R.C. § 4101.17(B), which permits a civil action for violation of subsection (A) of that section; (2) O.R.C. § 4112.02(N), which permits a civil action to be brought against those who violate the other subsections of that section; and (3) O.R.C. § 4112.05, which permits a complaint to be brought with the Ohio Civil Rights Commission for violations of §§ 4112.02 and 4112.021. Each of these statutory remedies is exclusive the choice of one remedy precludes recourse to other remedies. See O.R.C. §§ 4101.17(B), 4112.02(N) and 4112.08. This exclusivity of remedies, however, causes a conflict in the context of the joinder of an Ohio age discrimination suit with one brought under the ADEA. The ADEA requires, in states with administrative procedures for resolution of age discrimination claims, that proceedings under those state procedures be brought at least 60 days before the filing of a claim under federal law. See 29 U.S. C. § 633. Thus, in order to fulfill the prerequisite to a suit under the federal law in Ohio, a plaintiff must file a complaint with the OCRC pursuant to O.R.C. § 4112.05, and thus, by the terms of that section, waive his or her right to bring a civil action under either O.R.C. § 4101.17(B) or § 4112.02(N).
However, simply because Ohio's age discrimination law has the effect of requiring a litigant to choose between his or her state and federal remedies does not invalidate that law or require the Court to construe the terms of that law inconsistently with its plain meaning. See Ackman v. Ohio Knife Co., 589 F. Supp. 768, 770 (S.D. Ohio 1984) ("[B]ecause of the peculiar nature of the Ohio statutory scheme, these three plaintiffs elected to proceed administratively and thereby are prevented by state law from proceeding with their state judicial remedy."); Merkel v. Scovill, Inc., 570 F. Supp. 133, 137-38 (S.D. Ohio 1983) (Failing to bar a plaintiff's § 4101.17 claim when he filed a charge with the OCRC *283 prior to commencing suit "would ignore the clear intent of the Ohio legislature that aggrieved individuals must elect their remedy."). This Court must accept the plain intent of the Ohio legislature in its enactment of its age discrimination statutes it cannot substitute its judgment for the policy decisions of the Ohio Legislature. Plaintiff's claim under O.R.C. § 4101.17(B) is therefore barred by O.R.C. § 4112.08, since Plaintiff filed charges with the OCRC under O.R.C. § 4112.05.
Plaintiff, however, argues that he filed his complaint with the OCRC only in order to comply with the ADEA and did not intend to pursue a state administrative remedy. While this argument points out the inconsistency between the state statutory scheme and the federal statute, it does not keep Plaintiff from being barred under O.R.C. § 4112.08 from bringing a claim under O.R.C. § 4101.17(B). O.R.C. § 4112.08 provides in relevant part: "Any person filing a charge under § 4112.05 of the Revised Code is, with respect to the practices complained of, thereby barred from instituting a civil action under § 4101.17 or division N of § 4112.02 of the Revised Code." No exception is made for plaintiffs who file with the OCRC prior to the filing of a civil action merely to comply with the ADEA's requirements. Indeed, if a plaintiff wishes to file both an ADEA claim and a claim under either O.R.C. § 4101.17 or O.R.C. § 4112.02 and in doing so to avoid being barred by the ADEA state administrative exhaustion requirement, he or she must proceed by filing a complaint in federal court containing the state claim, and then by asking the district court to hold that case in abeyance while an administrative claim with the OCRC is processed. That administrative claim would then have to be dismissed by the OCRC under either O.R.C. § 4101.17(B) ("any person instituting a civil action under this section is, with respect to the practices complained of, thereby barred ... from filing a charge with the Ohio Civil Rights Commission under Section 4112.05 of the Revised Code") or O.R.C. § 4112.02(N) ("[a] person who files a civil action under this division is, with respect to the practices complained of, thereby barred ... from filing a charge with the Ohio Civil Rights Commission under Section 4112.05 of the Revised Code") for lack of jurisdiction.
Noting that the issues raised by these memoranda are legal rather than factual and so are best disposed of prior to trial of this matter, the Court hereby orders that Defendant within 14 days of receipt of this decision file a motion to dismiss under Rule 12(b)(1) incorporating by reference the reasoning and citation of authority set forth in its memoranda (Doc. # 8). Plaintiff will have 20 days from the filing of said motion to file a response, which may incorporate the reasoning and citation of authority set forth in its memorandum (Doc. # 9) and any other materials Plaintiff believes appropriate.
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421 S.W.2d 296 (1967)
Virgil Millard POLLARD, Plaintiff-Appellant,
v.
Thomas A. DAVID, Director, Department of Revenue, Dale Belsche, and Carl Kistler, Defendants-Respondents.
No. 52612.
Supreme Court of Missouri, Division No. 2.
December 11, 1967.
James J. Wheeler, Keytesville, for plaintiff-appellant.
Norman H. Anderson, Atty. Gen., John H. Denman, Asst. Atty. Gen., Jefferson City, for respondent.
BARRETT, Commissioner.
On September 3, 1966, the appellant Pollard refused to take a "chemical test of his breath" (RSMo Supp.1959, § 564.441, V.A.M.S.) and, effective October 9, 1966, the Department of Revenue, pursuant to § 564.444, RSMo Supp.1959, V.A.M.S., revoked his driver's license for the period of one year. Five days after the revocation Pollard instituted this action in two counts for "hearing on revocation of driver's license and for restraining order" also as provided by § 564.444. In his two-count petition Pollard alleged that the officers involved had no lawful right or cause to arrest him and so in the first count he prayed that the court determine the lawfulness of his arrest and "order his driver's license be restored." In the second count he stated that he operated a general store at Indian Grove, that it was necessary to his business that he operate a motor vehicle and so he prayed an order restraining the Department of Revenue from revoking his license. The court found all issues for the defendants, (the plaintiff joined the arresting officers as parties) and Pollard has appealed. "Thomas A. David, Director, Department of Revenue" is a defendant-respondent and was represented in the trial of the cause, it is claimed, inferentially if not directly, that appellant's state constitutional rights have been violated and therefore initial appellate jurisdiction is appropriately in this court. Const.Mo. Art. 5, Sec. 3, V.A.M.S. and compare Wilson v. Morris, Mo., 369 S.W.2d 402; Puckett v. Morris, Mo., 388 S.W.2d 787 and Shepherd v. Department of Revenue, Mo., 370 S.W.2d 381.
Nevertheless, upon this record another fundamental jurisdictional problem presents itself and may not be ignored. Fugel v. Becker, Mo., 2 S.W.2d 743, 746. Mr. Pollard's driver's or operator's license was revoked for the period of one year, effective October 9, 1966,"the director shall revoke the license of the person refusing to take the test for a period of not more than one year." RSMo Supp.1959, § 564.444, V.A.M.S. The cause was submitted to this court on September 21, 1967, and thus during the pendency of the appeal the one-year suspension of Mr. Pollard's license by its own terms expired on October *297 9, 1967, and the problem is whether by mere lapse of time the cause has become moot and, therefore, in the court's discretion should be dismissed, here "because the situation has so changed that the relief sought cannot be granted" (State ex rel. Myers v. Shinnick, Mo., 19 S.W.2d 676, 678), or "wherein no practical relief can follow a judicial determination of the controversy." Joplin Waterworks Co. v. Jasper County, 327 Mo. 964, 38 S.W.2d 1068, 1075. And in further explanation of "moot case" see State ex rel. Donnell v. Searcy, 347 Mo. 1052, 152 S.W.2d 8 and Koch v. Board of Regents, Mo.App., 265 S.W.2d 421. As to the prayer for injunctive relief, one of the purposes of an injunction is to prevent future mischief, not "to restrain acts that have already occurred, or that are impossible of future occurrence because of the passage of time." Hurtgen v. Gasche, Mo.App., 227 S.W.2d 494, 498.
Several of the above cited cases are illustrative of the fundamental principle involved but precisely analogous are Personal Finance Company v. Day, 349 Mo. 1139, 164 S.W.2d 273, and Euclid Terrace Corp. v. Golterman Enterprises, Mo.App., 327 S.W.2d 542. In the Day case the appellant was enjoined from entering into a competing employment for the period of one year following the termination of a contract. While the cause was pending on appeal "the injunction decree expired by its own terms," as a consequence "no controverted issue remained in the case" and therefore the case was dismissed as moot. In the Euclid Terrace case the appellants attempted to redeem certain real estate from foreclosure, they failed, however, to comply with the statute and tender or pay the sums prerequisite to redemption within one year which "expired while this appeal was pending." The court reviewed a number of cases and ended by dismissing the cause as moot because any judgment rendered "could not have any practical effect upon any then existing controversy." (327 S.W.2d loc. cit. 544-545). For the reasons indicated, this cause became moot while under submission and for that reason the appeal is dismissed.
STOCKARD and PRITCHARD, CC., concur.
PER CURIAM:
The foregoing opinion by BARRETT, C., is adopted as the opinion of the court.
FINCH, P. J., DONNELLY, J., and ADAMS, Special Judge, concur.
EAGER, J., not sitting.
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680 F. Supp. 587 (1988)
GRANITEVILLE COMPANY, Petitioner,
v.
STAR KNITS OF CALIFORNIA, INC., Respondent.
No. 87 Civ. 7843 (RWS).
United States District Court, S.D. New York.
January 29, 1988.
OPINION
SWEET, District Judge.
Petitioner Graniteville Company ("Graniteville") has filed a petition under the Federal Arbitration Act, 9 U.S.C. § 4, to compel arbitration with respondent Star Knits of California, Inc. ("Star Knits"). Upon the affidavits and memoranda submitted by both parties and oral argument held November 20, 1987, the petition to compel arbitration is granted.
Facts
Graniteville is a textile mill with a principal place of business in New York. Star Knits is a garment manufacturer in California. Ehrlich, Gress & Co., Inc. ("EGC") is an independent textile broker in New York.
Sometime prior to May 21, 1987 Star Knits contacted EGC to obtain 255,000 yards of sheeting in three shipments for September, October and November and confirmed this request by a memorandum stating credit terms of net 10 days to 60. On May 21, 1987 EGC issued its salesnote ("Salesnote 8643A") to Graniteville as seller and Star Knits as buyer. Salesnote 8643A stated credit terms of net 10 days and contained an arbitration clause. Graniteville then confirmed the broker's contract by mailing to Star Knits its own standard form contract ("Contract 00912") dated 6/9/87 which also stated credit terms of net 10 days and contained an arbitration clause.
There was no further communication between the parties until October 13, 1987 when Star Knits notified EGC and Graniteville by letter that it was cancelling Salesnote 8643A. On October 20, 1987, Graniteville mailed Star Knits a "Shipment Notice" that indicated that the shipment purchased through EGC's Salesnote 8643A was en *588 route from an overseas supplier. By letter dated October 23, 1987, Graniteville acknowledged receipt of Star Knits' cancellation letter of October 13, 1987 and informed Star Knits that it rejected the latter's unilateral cancellation of Salesnote 8643A. The goods were never delivered to Star Knits.
The Federal Arbitration Act
The sole question for decision is whether the parties to this action entered into a valid agreement to arbitrate.[1] The Federal Arbitration Act, 9 U.S.C. §§ 1-14 (1976) (the "Act"), makes an agreement to arbitrate enforceable and provides that a party may petition a district court for an order directing that arbitration go forward in the manner provided in such agreement. 9 U.S.C. § 4 (1976). Since the Act requires the district court to be "satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue," 9 U.S.C. § 4, a federal court can adjudicate "issues relating to the making and performance of the agreement to arbitrate," Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404, 87 S. Ct. 1801, 1806, 18 L. Ed. 2d 1270 (1967), and can declare any such agreement invalid "upon such grounds as exist at law or in equity for the revocation of any contract." 9 U.S.C. § 2 (1976); see Shearson/American Express, Inc. v. McMahon, ___ U.S. ___, 107 S. Ct. 2332, 2337, 96 L. Ed. 2d 185 (1987).
Although the Act permits federal courts to develop federal substantive law on the interpretation, enforceability and scope of arbitration agreements, Guinness-Harp Corp. v. Joseph Schlitz Brewing Co., 613 F.2d 468, 472 (2d Cir.1980); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406-08 (2d Cir.1959), the Act does not displace state law on the general principles of contract formation. See Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. at 404 n. 12, 87 S.Ct. at 1806 n. 12; Supak & Sons Mfg. Co. v. Pervel Indus., Inc., 593 F.2d 135, 137 (4th Cir.1979); Trafalgar Shipping Co. v. International Milling Co., 401 F.2d 568, 573 (2d Cir.1968); Duplan Corp., Etc. v. W.B. Davis Hosiery Mills, 442 F. Supp. 86, 87-88 (S.D.N.Y. 1977). As the Court stated in Duplan Corp., 442 F.Supp. at 88, "[t]he question whether a valid arbitration clause exists involves general contract principles; state law governs the disposition of that issue." See also Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673, 676 (2d Cir.1972); V'Soske v. Barwick, 404 F.2d 495, 499-500 (2d Cir. 1968) (relying on New York decisions for general principles of contract law); Fairfield-Noble Corp. v. Pressman-Gutman Co., 475 F. Supp. 899, 902 n. 2 (S.D.N.Y. 1979).
Existence of an Agreement to Arbitrate
As its defense to the petition to compel arbitration, Star Knits contends that it never entered into an agreement to arbitrate with Graniteville. Star Knits argues that Salesnote 8643A and Contract 00912 contained additional provisions, such as the arbitration clause and a different credit provision, that materially altered the terms of Star Knits' initial offer. Under New York's Uniform Commercial Code ("N.Y.U. C.C.") § 2-207(2)(b), Star Knits contends, these additional terms did not become part of a contract between it and Graniteville. See Matter of Marlene Indus. Corp. & Carnac Textiles, Inc., 45 N.Y.2d 327, 408 N.Y.S.2d 410, 380 N.E.2d 239 (1978). Rather, Star Knits contends that they constituted counter-offers which it never accepted in writing or by any other acts that could be deemed to constitute acceptance. Consequently it concludes that it is not bound by the arbitration provisions contained in Salesnote 8643A and Contract 00912.
Star Knits' argument mischaracterizes the nature of the agreement between the parties. As Graniteville correctly points out in its brief, several recent decisions *589 by the New York Court of Appeals hold that when a sale of goods is negotiated by a broker who sends salesnotes containing an arbitration clause to both parties, the broker is deemed to act for both parties. Although the parties do not expressly agree to arbitration and do not sign the broker's notes, the "buyer and seller nonetheless are bound to arbitrate in accordance with those documents when they merely retain them and proceed with the transaction." Itoman (U.S.A.), Inc. v. Daewoo Corp., 68 N.Y.2d 925, 510 N.Y.S.2d 74, 76, 502 N.E.2d 989, 991 (1986); see Just In-Materials Designs v. I.T.A.D. Assoc., Inc., 61 N.Y.2d 882, 474 N.Y.S.2d 470, 471, 462 N.E.2d 1188, 1189 (1984). Thus, unlike Marlene Indus. Corp., 408 N.Y.S.2d at 411, 380 N.E.2d at 240, this case does not present a "battle of the forms" in which both buyer and seller have exchanged documents with contradictory provisions.[2] Rather, whether an agreement to arbitrate exists turns on the parties' actions with respect to Salesnote 8643A.
Here, Star Knits acted only through EGC, the broker, as did Graniteville. If there was a contract between the parties, it was negotiated by EGC on behalf of both parties and its terms set forth in a single document, Salesnote 8643A.[3] As the Court of Appeals has recently held, a broker's salesnote becomes binding on both parties if they "merely retain them and proceed with the transaction." Itoman (U.S.A.) Inc., 510 N.Y.S.2d at 76, 502 N.E.2d at 991. Whether a party who receives a broker's salesnote can be said to have "proceeded with the transaction" and thereby have ratified the contents of the salesnote turns on the acts of the party following receipt of the note. In Just In-Materials Designs, 474 N.Y.S.2d at 471, 462 N.E.2d at 1189, the Court of Appeals stated, "[r]etention by the buyer of the sale note and the seller's contract form and the subsequent delivery of and payment for goods as contemplated by the sale note constituted ratification of the agreement between the parties made on their behalf by the broker, including the provision therein for arbitration, even though the latter provision had never been expressly discussed with either party...." Similarly, in Itoman (U.S.A.), Inc., 510 N.Y.S.2d at 75, 502 N.E.2d at 990, the party seeking to avoid arbitration had taken delivery of the goods. See also Ernest J. Michel & Co. v. Anabasis Trade, Inc., 50 N.Y.2d 951, 431 N.Y.S.2d 459, 460, 409 N.E.2d 933, 933 (1980) (agreement to arbitrate manifested by buyer's signing of seller's confirmation form containing arbitration agreement).
Graniteville contends that Star Knits' explicit reference to Salesnote 8643A in its October 13 cancellation letter constitutes an acknowledgement and ratification of its terms. The cases upon which Graniteville relies, however, do not support the proposition that a party's written refutation of a document can alone bind that party to the terms of the document. In National Agricultural Commodities, Inc. v. International Commodities Export Co., 108 A.D.2d 735, 484 N.Y.S.2d 902 (2nd Dep't 1985), the party attempting to circumvent an arbitration clause had already filed a complaint alleging breach of the contract that contained the arbitration clause. The Court held that by the party's own judicial admission it had adopted the document containing the arbitration clause as a binding contract. Similarly, as already discussed, in Just In-Materials Designs, 474 N.Y.S.2d 470, 462 N.E.2d 1188, the Court found that the receipt and payment for goods by the *590 party seeking to avoid the arbitration clause constituted ratification of the salesnote containing that clause.
On the other hand, having engaged a broker to act on its behalf in obtaining a contract for the purchase of goods, Star Knits had an obligation to object to the terms of Salesnote 8643A within a reasonable time. Matter of Huxley, 294 N.Y. 146, 150, 61 N.E.2d 419 (1945); J.K. Knitting Mills, Inc. v. Dorgin, 273 A.D. 591, 78 N.Y.S.2d 488 (1st Dep't 1948). Here, Star Knits received Salesnote 8643A in late May and Graniteville's confirmation of that contract in the middle of June. Star Knits then waited more than three months, until October 13, to cancel a shipment of goods scheduled to be delivered in early November. As the Court stated in J.K. Knitting Mills, 78 N.Y.S.2d at 490, when a broker acts for both parties to a transaction,
... especial and usually controlling importance attaches, in the practical conduct of commercial transactions, to whether the buyer and seller retain the broker's memoranda without objection for a reasonable period of time. Ratification is there equivalent to prior authorization. (citations omitted). Failure to object promptly thus furnishes a useful, objective test of whether the broker was authorized to make the deal expressed in the memoranda.
Here, by failing to object to the terms of Salesnote 8643A within a reasonable time, particularly after it had received Graniteville's confirmation notice, Star Knits ratified the terms of Salesnote 8643A. Thus, it is bound to arbitrate the dispute that has now arisen as a result of its cancellation of that contract.
For the reasons set forth above, Graniteville's petition for an order compelling arbitration is granted. The parties are directed to arbitrate their dispute under the rules of the General Arbitration Council of the Textile Industry.
IT IS SO ORDERED.
NOTES
[1] Although the Act provides that a jury trial may be held on the issue of whether the parties entered into an agreement to arbitrate, 9 U.S.C. § 4; Interocean Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673, 677 (2d Cir.1972), the submissions of the parties do not raise any genuine issues of fact. Accordingly, the legal issue presented by Graniteville's petition will be determined on the undisputed facts set forth by the parties.
[2] Because arbitration clauses are commonly used in the textile trade, Helen Whiting, Inc. v. Trojan Textile Corp., 307 N.Y. 360, 368, 121 N.E.2d 367 (1954), however, even in cases involving a "battle of the forms" New York courts have held that "a textile buyer's failure to object to an arbitration clause upon receipt of both the sales agreement signed by the seller and the initial shipment of goods binds the buyer to the arbitration clause." Imptex Int'l Corp. v. Lorprint, Inc., 625 F. Supp. 1572 (S.D.N.Y.1986); see Lehigh Valley Indus., Inc. v. Armtex, Inc., 53 A.D.2d 582, 384 N.Y.S.2d 837, 838 (1st Dep't 1976); Gaynor-Stafford Indus., Inc. v. Mafco Textured Fibers, 52 A.D.2d 481, 384 N.Y.S.2d 788, 791 (1st Dep't 1976).
[3] Thus, the resolution of whether Salesnote 8643A was binding as between the parties does not require an analysis of N.Y.U.C.C. § 2-207, "Additional Terms in Acceptance or Confirmation."
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421 S.W.2d 44 (1967)
Lenora B. MELTON, Administratrix of the Estate of Leonel Elmo Melton, Deceased, Plaintiff-Respondent,
v.
Oba ENSLEY, Defendant-Appellant, and
Joplin Federal Savings & Loan Association, a corporation, and Security National Bank of Joplin, Missouri, Defendants.
No. 8681.
Springfield Court of Appeals, Missouri.
October 10, 1967.
Motion for Rehearing or to Transfer Denied November 2, 1967.
Application to Transfer Denied December 11, 1967.
*46 Warten, Wells & Burden, Henry Warten, Joplin, for defendant-appellant.
Dean S. Johnston, Joplin, for defendant-appellant.
Roberts & Fleischaker, Loyd Roberts, Joplin, for defendant, Joplin Federal Savings & Loan Assn.
Charles Tudor, Joplin, for defendant, Security National Bank of Joplin, Missouri.
Motion for Rehearing or to Transfer to Supreme Court Denied November 2, 1967.
TITUS, Judge.
L. Elmo Melton died July 20, 1966, and his sister, Lenora B. Melton, as administratrix of the estate, instituted this declaratory judgment suit in the Circuit *47 Court of Jasper County seeking to have the estate declared owner of a checking account, two certificates of deposit and two savings accounts. Each certificate and account was payable to decedent and Oba T. Ensley in the particular fashion we shall see anon. For brevity we frequently hereafter refer to Mr. Melton and Mrs. Ensley as Elmo and Oba. Answering the petition, Oba asseverated she and Elmo were joint owners with incident of survivorship of each account and certificate and that she became the sole owner of each upon his death. Defendants Joplin Federal Savings and Loan Association and Security National Bank, both of Joplin, Missouri, disavowed individual interest in the accounts and certificates and answered willingness to pay their obligations as determined by the court. One savings account in dispute was with the Miami Savings and Loan Association, Miami, Oklahoma, which did not appear and was not subject to the jurisdiction of the Missouri court. Following trial without jury aid, the circuit court adjudged the estate to be the owner of the certificates and accounts, and ordered each institution, including the Oklahoma association, to pay its account or certificate to the estate. When her after-trial motions were denied, Oba appealed. The aggregate value of the certificates and accounts is the amount in dispute on appeal. This is less than $15,000 and we have appellate jurisdiction. V.A.M. S.Const. art. V, §§ 3 and 13; V.A.M.S. § 477.040. In this instance we review the case on both the law and the evidence and reach our own judgment without regard to the rulings or reasoning of the trial court. V.A.M.R. 73.01(d); V.A.M.S. § 510.310, subd. 4; Edwards v. Durham, Mo., 346 S.W.2d 90, 100(7); Masterson v. Plummer, Mo.App., 343 S.W.2d 352, 354(1); Giraldin Bros. Real Estate Company v. Stiansen, Mo.App., 315 S.W.2d 636, 640(1).
Elmo was fifty-three years of age when he died and had remained unmarried following a 1947 divorce. His twenty year old adopted son, parents and two sisters reside in Joplin. In 1947 Elmo was a partner in the Wagoner Mattress Factory located near the Royal Drug Store in Joplin. Exactly when we do not know, Elmo became estranged from his parents and sisters, sold his interest in the factory to his sister, Lenora, and moved to near Neosho, Missouri, some sixteen or eighteen miles south of Joplin. He there established another mattress factory and lived alone in the building that also served as his place of business. The son resided with the grandparents. Lenora and Elmo had not been on speaking terms for six years prior to his death. While Elmo conversed with his parents, it generally was by telephone regarding untoward conduct of his son. If the matter required personal attention, Elmo went to his parents' home but "stayed outside" the house during these meetings. There was no ill feeling between Elmo and his son. Excluding the disputed accounts and certificates, the inventory filed with the probate court showed Elmo at the time of his death, to be possessed of personal property valued at $17,426.45 and real estate appraised at $6,000, all of which would descend absolutely to his son. V.A.M.S. § 474.010(2) (a).
When Oba's marriage terminated by divorce in 1949, she was employed as a saleslady by the Royal Drug Store and is still so engaged. Oba, who was from July to December older than Elmo, resides in Joplin with her mother and father, respectively seventy-five and seventy-six years of age at time of trial. The Meltons became acquainted with Oba when they frequented the drug store as customers and about 1955 or 1956 Elmo and Oba started "dating" occasionally. The "dates" increased in frequency as time passed and for several years before Elmo died their association had become almost a daily occurrence. At one time the couple discussed becoming engaged to marry, "but we had both been divorced and so we decided to stay friends." Oba was a member and regularly attended church twice on Sundays and each Wednesday night. Elmo accompanied Oba to church, "enjoyed it very much," and became *48 a member in 1958 or 1959. For sometime before his death, Elmo was teacher of a "teenage" Sunday school class. In late 1964 and early 1965 while being treated for pneumonia, Elmo was advised concerning a heart condition of which he never complained. He was instructed to lose weight and "watch his cholesterol count * * * For the last two years most of the time" Elmo ate meals at Oba's home prepared by her mother "because * * * he couldn't go out and eat and get the food that the doctor told him to eat." Elmo gave Oba gifts, but none in cash, and at one time was the principal contributor, along with Oba, in the purchase of a dishwasher for Oba's mother.
Elmo and his father, with Elmo paying the assessments, belonged to the "Masonic Widow's Fund" until 1958 when Elmo asked both he and his father be suspended. In August 1964 Elmo requested reinstatement for himself but not for his father. The secretary of the fund testified that in the process of reinstating Elmo, "I asked him who he would have as his beneficiary and he said `Mrs. Oba Ensley' * * * and he said `No relation, just a friend' * * * and he stood there for a little bit and he says `I don't want them to have anything I have.'"
Any incompetency of Oba to testify in this cause because of "the deadman's statute," V.A.M.S. § 491.010, was waived when the plaintiff administratrix took her deposition. Edwards v. Durham, supra, 346 S.W.2d at 97; Ashley v. Williams, 365 Mo. 286, 281 S.W.2d 875, 880(7).
TRANSACTIONS AT THE SECURITY NATIONAL BANK
A twelve-month time certificate of deposit in the sum of $1,000 was issued November 16, 1964, by the bank payable to "L. Elmo Melton or Oba T. Ensley." The certificate, bearing four per cent interest, was automatically renewable. Elmo gave Oba the money for the certificate and asked her to take it to the bank. Oba delivered the funds to a bank employee, Sally Harrington, who prepared the certificate in the manner she had been instructed in a telephone conversation with Elmo. Sally answered "yes, sir" to the inquiry if she had been "instructed to issue the same as a joint account in those names with right of survivorship." Fifty-one dollars accrued interest on the certificate was subsequently paid to Elmo in cash. The certificate was exchanged for a $1,000 certificate bearing 5½ per cent interest dated June 24, 1966, and made payable to "L. Elmo Melton or Oba T. Ensley."
A savings account in the name of "L. Elmo Melton or Oba T. Ensley" was opened at the bank May 4, 1965, and closed by a $1,023.49 withdrawal authorization dated February 14, 1966, signed by Elmo. The vice-president and cashier of the bank, James R. Sanders, said this withdrawal "was applied to a C.D. [certificate of deposit] with additional money." The certificate, dated February 16, 1966, was in the sum of $2,074.79 and payable to "L. Elmo Melton or Oba T. Ensley." (Dehors the record, we note the amount of the certificate equals the sum withdrawn from the savings account, the $51 interest paid Elmo on the first certificate, and $1,000.) Mr. Sanders testified Elmo "specifically asked that we make it out in his name or Mrs. Ensley," and the form used by the bank when requested to establish joint tenancies with right of survivorship in certificates of deposits, in savings accounts and checking accounts was "just with the word `or' placed between the names." Prior to the times in question, the cashier related, "some of our girls" were putting "and/or between the signature and we did tell them to cut out the `and' and the `slash bar' and just put the word `or' in, which gives the same meaning * * *"
Both of the certificates in force when Elmo died had been given to Oba by Elmo with the explanation they were "a joint account" and were in her possession at all times. Elmo had instructed the cashier at the bank "that any mail or any matter that *49 would be mailed out, go to Mrs. Ensley on the C.D.'s." After Elmo's death, the certificates were cancelled and replaced by two others in the respective amounts of $1,000 and $2,121.17 payable to "Oba T. Ensley or Donald C. Ensley," the latter being a son of Oba. Mrs. Ensley recounted she was assured by bank officials that in having the certificates issued "in the form shown, `Oba T. Ensley or Donald C. Ensley' [she was] establishing and having issued * * a time certificate of deposit in joint tenancy with right of survivorship."
The bank checking account was established May 5, 1965, in the names of "L. Elmo Melton or Oba T. Ensley," and had a $329.50 balance on the day Elmo died. Oba testified: "Elmo asked me to go down and open the account and he gave me the money to open it with. It was to be set up as a house fund account" so Elmo's tenants could deposit the rent payment in it. "It was easier" for the tenants to pay the rent into the account than to deliver it personally to Elmo. The rental property was located in Joplin and Elmo made the house mortgage payments from the account. When the account was opened Oba was given some checks and a customer identification card bearing the bank's number, the account number, and the names "L. Elmo Melton or Oba T. Ensley." Oba said, "I didn't want any of those [checks. The identification card] was enough for me to carry and I carried it in my purse."
No deposit contract or agreement was signed by Elmo or Oba relative to any account or certificate at the bank. The signature cards they did sign bore Elmo's address and social security number.
SAVINGS ACCOUNT AT JOPLIN FEDERAL SAVINGS AND LOAN ASSOCIATION
The savings account consisted of a $4,000 deposit made June 1, 1965, a $1,000 deposit added June 10, 1965, and accumulated dividends which rendered the balance at $5,239.64 on June 30, 1966. Elmo appeared alone at the association's offices to initiate the account and the assistant secretary, Robert Moyer, handled the transaction and prepared the "Savings Account Book" and the "Joint Savings Account Signature Card." The association, Moyer testified, had "in the neighborhood" of eight types of application forms and contracts for savings accounts. "If a person comes in and asks to have two names included on an account" the joint savings account card was "not necessarily" used because it would depend upon the "withdrawal rights" desired by the depositor. Oba's name was put on the account at Elmo's direction and Moyer further said it was the practice to explain to new customers "the meaning and intendment" of the contract relating to a joint account and that he made such an explanation to Mr. Melton. Elmo secured Oba's signature to the card and contract and returned it to Joplin Federal Savings and Loan Association. The signature card, described by Moyer as being "the actual contract," was dated June 1, 1965, and prepared in the names of:
"(1) Melton, L. Elmo
(2) Ensley, Oba T."
and, in part, provided: "The undersigned hereby apply for a savings account * * * in the joint names of the undersigned as joint tenants, with the right of survivorship, and not as tenants in common * * * it being understood and agreed that anyone of the undersigned who shall first act shall have power to act in all matters related to the membership and any account in said association held by the undersigned, whether the other person or persons named in the account be living or not." The savings account book was prepared in the names of "L. Elmo Melton or Oba T. Ensley," followed with the words, "Joint owners, payable to the order of either of said joint owners, or the survivor in case of death of either of said joint owners." Elmo's address appeared on the contract and savings ledger. His social security number was also noted on the ledger.
*50 SAVINGS ACCOUNT AT MIAMI SAVINGS AND LOAN ASSOCIATION
The signature card and contract signed by Elmo and Oba was dated August 19, 1965, and prepared in the names of:
"A. Melton, L. Elmo
or
and
B. Ensley, Oba T.
as joint tenants with right of survivorship and not as tenants in common, and not as tenants by the entirety." The contract, inter alia, included the provision: "It is agreed by the signatory parties with each other and by the parties with [the association] that any funds placed in or added to the account by any one of the parties are and shall be conclusively intended to be a gift and delivery at that time of such funds to the other signatory party or parties to the extent of his or their pro rata interest in the account." (Emphasis is as it appears in the contract).
Elmo inaugurated this account by going alone to Miami. He obtained Oba's signature to the contract and returned it to the association. The account, as of June 30, 1966, including dividends, showed a balance of $3,105.84.
Corroborated by her mother, Oba testified that shortly after each of the two savings accounts were established with the Joplin association and the Miami association, Elmo brought the savings account books to her home, "gave them to me and [said he] wanted me to have these." Oba retained possession of the two books "until shortly before Elmo passed away." The church to which Oba and Elmo belonged was contemplating a building program to be financed by loans from the congregation. Elmo and Oba discussed making such a loan and Elmo took the books with him one day "to figure out a loan for the church." The loan was not completed before Elmo died and the next Oba saw of the books was at Elmo's home on the date of his death. To the contrary, Elmo's mother asserted she and her husband had gone to visit Elmo shortly before he died and at that time Elmo had given her a sealed "business type envelope" and said "just to keep it, was all." Elmo did not say what was in the envelope and his mother was unaware of its contents until following Elmo's death. The envelope, Elmo's mother stated, contained the two savings account books and a copy of the by-laws of the Eastern Star, of which she was a member.
Admittedly Elmo's parents, sisters and son were wholly unaware of the existence of the disputed accounts and certificates until after he expired. The funds represented by the accounts and certificates were furnished by Elmo and he alone made income tax reports on the interest and dividends paid or accumulated thereon. Oba had not written any checks on the checking account and neither she nor Elmo had made any withdrawals or changes in the other accounts or certificates except as above noted.
There is no claim or proof of the existence of any fraud, duress, mistake, mental incapacity, undue influence or a confidential relationship. Consequently we are not concerned with the effect any one or more of such elements would have upon a contract or a gift effected in establishing a joint deposit or account. We need neither ponder what effect any such element would have upon the presumptions we recognize and note, infra. Therefore, our concern here rests primarily with (1) deposits made within the purview of the joint deposit statutes, (2) joint accounts created by the execution of joint tenancy deposit contracts, and (3) deposits made neither within the words and purview of the statutes nor accompanied by a joint tenancy contract.
Missouri joint deposit statutes are found in V.A.M.S. §§ 362.470 (banks), 363.740 (trust companies), and 369.150 (savings and loan associations). In substance these statutes provide a deposit (together with all interest thereon and any additional *51 deposits by either party) made in the name of the depositor and another and in form to be paid to either or the survivor, shall become the property of such persons as joint tenants and may be paid to either during the lifetime of both, or to the survivor after the death of one of them. Deposits made and accounts created within the purview of these statutes presumptively become the property of the persons named as joint tenants and, absent competent evidence to the contrary, actually fix the ownership of the funds in the persons named as joint tenants with the attendant right of survivorship. Whether the tenants' names be connected with "and" or "or" or "and/or" appears not to matter if the deposits have, in fact, been made within the statute's purview. The presumption is rebuttable and may be overcome by competent parol or other evidence showing a different intent.[1]
If establishment of the joint account be accompanied and commemorated by an integrated, unambiguous joint tenancy deposit contract of the parties, such an agreement (sans elements rendering the contract void or voidable) constitutes the single and final memorial of the intention of the parties which may not be varied or changed by parol evidence.[2] The parol evidence rule is one of substantive law and not a rule of evidence. Ergo, parol evidence cannot alter a valid contract or establish another in its stead even though injected into the cause without objection.[3] The joint tenancy deposit contract rule was first recognized in this state by Commerce Trust Company v. Watts, supra, 231 S.W.2d 817. It has been written that Jenkins v. Meyer, supra, 380 S.W.2d 315, casts doubt on Watts,[4] but with equal vehemency it is penned *52 this just isn't so.[5] Jenkins did not involve a deposit contract and did not cite nor overrule Watts. We find Watts cited in a score of Supreme Court and appellate court opinions without criticism. The Supreme Court, having given birth to Watts, is the only court with authority to chastise it if, indeed, the need should ever arise. V.A.M. S.Const. art. V, § 2; Bruno v. Murdock, Mo.App., 406 S.W.2d 294, 297(2). Unaware of any reason for affording a valid deposit contract less dignity and respect than that given other solemn agreements, we dutifully accept Watts as part of the vital case law of this state and acknowledge inability to observe incompatibility between Watts and Jenkins.
Financial institutions and depositors frequently and indiscriminately append "joint account" to accounts held by tenants in common, joint tenants with right of survivorship, tenants by the entirety, and to accounts on which an agent has authority to draw. Leuzinger v. Merrill, Lynch, Pierce, Fenner and Smith, supra, 396 S.W.2d at 579; Harrellson v. Barks, Mo.App., 326 S.W.2d 351, 360. Much of the depositing public and personnel responsible for enrolling accounts erroneously believe legal magic accompanies the use of "and" or "or" or "and/or" in joining two names on a deposit and each is endowed with a different misconception that the use of one word or the other or a combination of both, with nothing additional, will create a joint tenancy with the attendant right of survivorship. Few are cognizant of the cases treating "and" and "or" with the strictness of a grammarian or lexicographer. Many are ignorant of tribunal trouncings give the phrase "and/or," and many would stand agape to learn all distinction is disregarded in other opinions. Where the deposit is neither made within the words or purview of the joint deposit statutes nor accompanied by a joint tenancy deposit agreement, no presumption of joint tenancy with the attendant right of survivorship arises and the burden is cast upon the survivor to show by a preponderance of the evidence the deposit was made with the intention of creating a joint tenancy. It is the intention of the depositor which controls,[6] and where there is no deposit contract or presumption of joint tenancy, the simple use of "and" or "or" or "and/or" to join names to an account does not, per se, indicate an intention to create a joint tenancy with the incident of survivorship. Where the instrument is silent or ambiguous as to the nature of the interest created it will not, as a rule, be construed to create a joint tenancy. Nevertheless, the controlling element is the intention of the parties and not the mere form in which the deposit is made. The interpretation afforded "and" or "or" or "and/or" standing alone, depends upon the particular circumstances under which they are used and should be construed to express the true intention of the parties.[7]
The contract Elmo and Oba executed to establish the Joplin Federal Savings and Loan Association savings account denominated them "as joint tenants, with the right of survivorship, and not as tenants in common." There is no contention this instrument was not "the actual contract," *53 that it was ambiguous, or that any circumstance existed to vitiate the agreement. Application of the authorities cited in notes 2 and 3, supra, requires a ruling the contract constituted the single and final memorial of the intention of the parties which may not be varied or changed by parol evidence. As no qualifications or exceptions are urged, we feel this conclusion wholly consistent with the additional rules that all persons are presumed to know the law and the legal meaning of terms employed in establishing legal relations (31A C.J.S. Evidence § 132[1]; 29 Am. Jur.2d, Evidence § 222, p. 272-275) and a person signing a contract is conclusively presumed to know its contents and cannot be heard to say its provisions are contrary to his intentions or understanding. Burch v. Schmelig, Mo.App., 300 S.W.2d 838, 843(1); 17 C.J.S. Contracts § 137b, pp. 875-876.
But even were we to consider the signature card as lacking in the requisites of an integrated, unambiguous joint tenancy deposit contract of the parties, the savings account (as evidenced by both the contract and the savings account book) was in form to comply with and within the purview of V.A.M.S. § 369.150, thereby giving rise to the statutory presumption which, standing alone, was evidence of an intent to presently create a joint tenancy with the attendant right of survivorship. Jenkins v. Meyer, supra, 380 S.W.2d at 323. We detect no evidence which rebuts the presumption. It is true Elmo's mother (contrary to Oba's testimony) claimed that a considerable time after the savings accounts were established she received from Elmo a sealed envelope with the admonition "just to keep it, was all." Ignorant of its contents and the existence of any account Elmo had with Oba, it was not until after Elmo died his mother learned the envelope contained the two savings account books. Perchance this testimony was thought to be evidence of Elmo's change of attitude toward his parents and the accounts, but "[i]f, in a case such as this, it becomes necessary to go beyond the written evidence of such grant or contract creating the account to establish the intention of the grantor, the inquiry should be confined to the time the contract was entered into, without reference to subsequent events or circumstances, since it is only the intention of the grantor at the time of the creation of such account that is material." Simonich v. Wilt, supra, 417 P.2d at 145(7). The testimony of Elmo's mother, even if accepted, does not rebut the presumption as to the intentions of Elmo at the time the account was established. Whether we apply the so-called joint tenancy deposit contract rule or rely upon the presumption arising because the savings account was within the purview of the statute, we necessarily conclude the trial court erred in not declaring Oba to be the owner of the account and by not ordering the Joplin Federal Savings and Loan Association to pay the account to her.
What we have said regarding the savings account with Joplin Federal Savings and Loan Association, applies with equal force apropos the Miami Savings and Loan Association savings account, provided the Missouri law is applicable. It seems generally agreed, however, the determination of the title to and the rights in a deposit standing in the name of the depositor and another is governed by the law of the state where the deposit has been made and the account has been kept. 10 Am.Jur. 2d, Banks § 376, pp. 339-340. The pleadings strongly suggested Oklahoma law might properly be applied to the issues on the Miami account (V.A.M.R. 55.23[b]), but the trial court and the parties disdained all effort to resolve the problem or to broach or belabor the question by brief. Fortunately we need not rule this point in conflict of laws for we believe Oba to be the owner of the Miami savings account irrespective of whether the law of Missouri or that of Oklahoma is applied.
60 Okl.St.Ann. § 74 provides "A joint interest is one owned by several persons *54 in either real or personal property in equal shares, being a joint title created by a single instrument * * * when expressly declared in the instrument * * * to be a joint tenancy, * * * such joint tenancy * * * may be created by transfer to persons as joint tenants * * * from an owner * * * to himself and one or more persons * * *" The term "joint tenancy" had a well-defined meaning at common law which included the attendant right of survivorship and this statute used the term in its "technical common law sense." Draughon v. Wright, Adm'x, 200 Okl. 198, 191 P.2d 921, 923(1). 6 Okl.St. Ann. § 901 (banks) and 18 Okl.St.Ann. § 212b (savings and loan associations) are similar to our §§ 362.470 and 369.150, supra. The last cited Oklahoma statute permits savings and loan associations to "issue shares or membership certificates in the joint names of two or more persons or their survivor, in which event any of such persons who shall first act, shall have power to act in all matters * * * whether the other person or persons named * * be living or not. * * *" The Miami Savings and Loan Association savings account contract signed by Oba and Elmo expressly described them as "joint tenants with right of survivorship and not as tenants in common, and not as tenants by the entirety." The agreement, with its own emphasis, displayed an understanding that the funds placed in or added to the account by any of the parties "are and shall be conclusively intended to be a gift and delivery at that time of such funds to the other party * * * to the extent of his * * * pro rata interest in the account." It is difficult to conceive how an intention to make a present gift and establish a joint tenancy could be more clearly and cogently stated. "Where donor and donee by a writing signed by them as shown by the record contains words expressing a clear and unequivocal intent on the part of the donor to make donee a joint owner and containing a survivorship clause; upon donor's death the donee is entitled to the accounts and proceeds thereof * * *" Flesher v. Flesher, Okl., 258 P.2d 899, 900, syllabus 3 of the Court.
The savings and loan association certificates involved in Flesher, supra, certified "Mrs. Carrie E. Cook or Abbie P. Flesher as joint owners and not as owners in common, on the death of one the survivor to become the absolute owner." The money for the certificates was provided by Mrs. Cook who thereafter gave them to Mrs. Flesher. The Oklahoma Supreme Court said (l. c. 902): "This transaction standing alone and solely upon the writings evidencing the establishment of the joint accounts leads to but one conclusion and, that is, that Carrie E. Cook intended that the association stock * * * [was] jointly owned by herself and Abbie P. Flesher, with the right of survivorship." In Barton v. Hooker, Okl., 283 P.2d 514, 517, Miss Barton "was the owner of the funds placed in these accounts, but transferred them to herself and [her nephew] as joint tenants by a written instrument signed by both herself and [her nephew]. We do not see what more she could have done to create the joint tenancy." (Our emphasis). Also see, City National Bank & Trust Co. v. Conrad, Okl., 416 P.2d 942; Hadwiger v. Melkus, Okl., 365 P.2d 726.
Admittedly the circuit court, and hence this court, never acquired jurisdiction of the Miami Savings and Loan Association. That portion of the trial court's judgment ordering the Miami association to deliver the savings account to the estate was erroneous because it had no authority to do so and also because, as we hold, the account actually belongs to Oba T. Ensley as the surviving joint tenant of the savings account. Generally, a court may grant such relief in a declaratory judgment action as equity dictates and the proof requires (26 C.J.S. Declaratory Judgments § 160, pp. 372-374) and jurisdiction of the actual contestants herein (the estate and Mrs. Ensley) gives the court jurisdiction to render an appropriate decree binding on the parties no matter where the subject *55 matter may be situate. McDougal v. McDougal, Mo.App., 279 S.W.2d 731, 739(24); St. Louis Smelting & Refining Co. v. Hoban, 357 Mo. 436, 209 S.W.2d 119, 122(2).
The certificates of deposit issued by Security National Bank to the order of "L. Elmo Melton or Oba T. Ensley" were not within the purview of V.A.M.S. § 362.470 nor accompanied by a contract expressing the intention of the parties. Therefore, we have no presumption of joint tenancy with the incident of survivorship and the burden was cast upon Oba to show by a preponderance of the evidence the deposits creating the certificates were made with the intention of creating a joint tenancy. See cases in notes 6 and 7, supra.
Missouri opinions generally hold the establishment of a joint account with right of survivorship constitutes a gift on the part of the joint depositor who contributed the money to the other depositor. "The transfer of money to or the creation of a joint account is not necessarily a gift of the entire account or all of the money there on deposit, but it is a present donation of a partial interest in the form of a right to withdraw and the right of survivorship." In Re Patterson's Estate, supra, 348 S.W.2d at 10(3, 4). Of course, if it was an absolute gift of all the money and dominion over the account no joint tenancy would remain and the many statements indicating a requirement the donor must divest himself completely of all beneficial interest and control over the account seem incongruous to the theory of joint ownership.
The $1,000 certificate of deposit was prepared by an employee of Security National Bank who testified Elmo had instructed her to issue it as a joint account with right of survivorship. Although obviously misinformed as to legal technicalities, the bank's cashier asserted the bank employees were told the form to use when a depositor requested a joint account with right of survivorship was "just with the word `or' placed between the names." The $2,074.49 certificate was issued by the cashier to the order of "L. Elmo Melton or Oba T. Ensley" as Elmo had "specifically asked." Mistaken notions of Elmo and bank personnel as to the particular form necessary to presumptively establish a joint tenancy with attendant right of survivorship, would not dilute actual evidence of Elmo's intention to create joint ownership of the certificates with Oba. Neither do we believe the fact the bank gave $51 interest to Elmo to be potently persuasive for the estate, for if the certificates were, in fact, held in joint tenancy, the bank was privileged to pay the interest "to either during the lifetime of both." V.A.M.S. § 362.470. We are mindful that before the second certificate was issued and the first was replaced by another to take advantage of "the better [interest] rate," Elmo had received an explanation of "the meaning and intendment" of a joint account and had executed two joint account contracts which set forth the elements of joint ownership. We cannot assume Elmo was ignorant of the significance of the term at the times he gave the certificates to Oba and "said it was a joint account * * * so we could both have them." That this was Elmo's intention as understood by the bank is evidenced by its conduct in cancelling the certificates after Elmo died and giving Oba new ones payable to herself and her son with the assurance the certificates payable to "Oba T. Ensley or Donald C. Ensley" constituted a joint tenancy with right of survivorship.
It was said in Napier v. Eigel, 350 Mo. 111, 164 S.W.2d 908, 911(2), "* * * that proof of intention alone, even to grant a present interest, would [not] suffice without proof of conduct showing the carrying out or fulfillment of that intention." This simply alludes to the general rule the validity of a gift is dependent upon an actual, constructive or symbolical delivery of the property to the donee. 38 C.J.S. Gifts § 18, pp. 794-797, and § 50, pp. 833-836. Here there was actual delivery by Elmo to Oba of both certificates which she accepted and *56 retained until after his death. Not only does this show delivery, but also constitutes additional evidence shedding light on the intention of the parties and is to be taken into consideration in determining an intent to create joint ownership in a deposit. Michie on Banks and Banking, Vol. 5A, Ch. 9, § 46, at 119. The actual physical delivery to Oba of the certificates of deposit in question, coupled with Elmo's instruction to the bank "that any mail or any matter that would be mailed out, go to Mrs. Ensley on the C.D.'s," evidenced an intention on the part of Elmo to relinquish the sole and exclusive control and ownership of the certificates and to cause the certificates to be jointly owned with the attendant right of survivorship.
The claim of the administratrix is based upon a matter of form. The claim of Oba is based upon a matter of true intent and substance. We are of the opinion Oba sustained her burden of proving the certificates of deposit were intended to be, and were in truth deposits in joint tenancy with the attendant right of survivorship. Except for the form employed, the evidence indicates Elmo intended there be joint ownership of the certificates. We hold the trial court erred in not declaring Oba to be the owner of the two bank certificates of deposit.
Our last consideration is with the checking account in Security National Bank standing in the names of "L. Elmo Melton or Oba T. Ensley." No presumption of joint tenancy accompanies this account and employment of the word "or" to join the names does not, of itself, give us a clue to what intention was involved when the account was established. The cashier did say joint accounts, including those subject to check, were put in form by the bank with "the word `or' placed between the names." However, the record is silent as to any instructions given by Elmo that this be a joint account with right of survivorship. All we know is that Elmo gave Oba the money for the purpose of opening the account. The account was established for the convenience of Elmo's tenants and he alone used it to make his house mortgage payments. Oba said she didn't want the checks which were given her by the bank. There is no evidence Elmo ever told Oba, or anyone, she was to have any interest in the account either during his lifetime or after his death. The simple truth of the matter is there exists a total void as to what Elmo's intentions were as regards the bank checking account, except it was established for the convenience of his tenants. In such circumstances Oba did not sustain the burden cast upon her and the trial court was correct in declaring the estate to be the sole owner of the checking account.
Although counsel approved the transcript on appeal as correct, we note errors in the judgment as reported by the transcript as to the amount of the deposit with the Miami Savings and Loan Association. We assume these to be typographical errors that will be corrected upon remand. No objection is made to the attorney fees allowed defendant Security National Bank and defendant Joplin Federal Savings and Loan Association, so that portion of the judgment relating thereto stands.
The judgment of the trial court is affirmed as regards its allowance of attorney fees to defendants Security National Bank and Joplin Federal Savings and Loan Association and as to its declaration that plaintiff is the owner of and is entitled to the said checking account in Security National Bank of Joplin. Otherwise the judgment of the trial court is reversed, and the cause remanded with directions that the trial court enter judgment in accord with the views here expressed, and costs are to be assessed in obedience to the requirements of V.A.M.R. 77.16.
STONE, P. J., and HOGAN, J., concur.
NOTES
[1] Ison v. Ison, Mo., 410 S.W.2d 65, 69-70(7); Leuzinger v. Merrill, Lynch, Pierce, Fenner and Smith, Mo. (Banc), 396 S.W.2d 570, 578-579(10); Jackson Savings and Loan Association v. Seabaugh, Mo.App., 395 S.W.2d 260, 263(2); Jenkins v. Meyer, Mo., 380 S.W.2d 315, 320(4); In Re Baker's Estate, Mo.App., 359 S.W.2d 238, 244(10); In Re Patterson's Estate, Mo., 348 S.W.2d 6, 7-8 (1); Dalton v. American National Bank, Mo., 309 S.W.2d 571, 579; Clay County State Bank v. Simrall, Mo.App., 259 S.W.2d 422, 424-425(3); In Re Kaimann's Estate, 360 Mo. 544, 229 S.W.2d 527, 529(2-3); Weber v. Jones, 240 Mo.App. 914, 222 S.W.2d 957, 959(1); Gordon v. Erickson, 356 Mo. 272, 201 S.W.2d 404-405(1); In Re Geel's Estate, Mo.App., 143 S.W.2d 327, 329-330(1); Melinik v. Meier, Mo.App., 124 S.W.2d 594, 597(3); Murphy v. Wolfe, 329 Mo. 545, 45 S.W.2d 1079, 1081(1); Schnur v. Dunker, Mo.App., 38 S.W.2d 282, 284(1-2); Mississippi Valley Trust Co. v. Smith, 320 Mo. 989, 9 S.W.2d 58, 63(1, 2); Ball v. Mercantile Trust Co., 220 Mo. App. 1165, 297 S.W. 415, 418(2, 3).
[2] Krummenacher v. Easton-Taylor Trust Co., Mo.App., 306 S.W.2d 593, 599(1, 2); Connor v. Temm, Mo.App., 270 S.W.2d 541, 546(2); Commerce Trust Co. v. Watts, 360 Mo. 971, 231 S.W.2d 817, 820 (6); Harvey's Estate v. Huffer (Banc), 125 Ind.App. 478, 126 N.E.2d 784, 785; Burns v. Nemo, 252 Iowa 306, 105 N.W.2d 217, 223(7); Perkins v. City National Bank of Clinton, 253 Iowa 922, 114 N.W.2d 45, 50; In Re Estate of Smith, 199 Kan. 89, 427 P.2d 443, 446-448(3-8); Simonich v. Wilt, 197 Kan. 417, 417 P.2d 139, 145(9, 10).
[3] Hardin v. Ray, Mo.App., 404 S.W.2d 764, 767(2-4); Thies v. St. Louis County, Mo., 402 S.W.2d 376, 379; Robson v. United Pacific Insurance Co., Mo., 391 S.W.2d 855, 860(3); Frimel v. Blake, Mo.App., 360 S.W.2d 258, 261(2); Davison v. Rodes, Mo.App., 299 S.W.2d 591, 593(2); Dickinson v. Bankers Life and Casualty Co., Mo.App., 283 S.W.2d 658, 663(5); Fisher v. Miceli, Mo., 291 S.W.2d 845, 848(3); Fischer v. Morris Plan Co., Mo.App., 275 S.W.2d 393, 395(4); Connor v. Temm, supra, 270 S.W.2d at 546-547(3, 4); Commerce Trust Co. v. Watts, supra, 231 S.W.2d at 820(7); Sol Abrahams & Son Const. Co. v. Osterholm, Mo.App., 136 S.W.2d 86, 92(1, 2); Drake & Beemont Mut. Aid Society Against F. & L. v. United States, 8 Cir., 330 F.2d 548, 552(3); National Surety Corp. v. Curators of University of Mo., 8 Cir., 268 F.2d 525, 528(2), 529-530(5).
[4] "Joint Savings AccountBeware!" P. Pierre Dominique, 21 Journal of The Missouri Bar, p. 202.
[5] "Another View of Joint Bank Accounts," Charles B. Blackmar, 21 Journal of The Missouri Bar, p. 394.
[6] Ison v. Ison, supra, 410 S.W.2d at 70 (8, 9); Jenkins v. Meyer, supra, 380 S.W.2d at 320(3), 320-321(5, 6); Newcombe v. Farmer, Mo.App., 360 S.W.2d 272, 276(3); Cranford v. Langston, Mo. App., 356 S.W.2d 581, 584; Princeton State Bank v. Wayman, Mo.App., 271 S.W.2d 600, 603(1), 603-604(2); Murphy v. Wolfe, supra, 45 S.W.2d at 1081(2, 3); 10 Am.Jur.2d, Banks, § 369, pp. 330-333; 48 C.J.S. Joint Tenancy § 3d, pp. 917-919.
[7] Knox College v. Jones Store Co., Mo., 406 S.W.2d 675, 685; Longacre v. Knowles, Mo., 333 S.W.2d 67, 70-71(5, 6); The Law of Banks and Banking, by Carl Zollmann, Vol. 5, § 3223, pp. 242-244; Michie on Banks and Banking, Vol. 5A, § 46, pp. 113-118.
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Fourth Court of Appeals
San Antonio, Texas
MEMORANDUM OPINION
Nos. 04-14-00452-CV, 04-14-00568-CV & 04-14-00597-CV
Mark HART and Angelica Hart, Julian Calderas, Jr. and Erica Calderas, and
Thomas H. Veitch and Anne Veitch,
Appellants
v.
FLAGSHIP HOMES, LTD. d/b/a Prestige Homes,
Appellee
From the 288th Judicial District Court, Bexar County, Texas
Trial Court Nos. 2014-CI-04333, 2014-CI-04330 & 2014-CI-04337
Honorable Martha B. Tanner, Judge Presiding
Opinion by: Catherine Stone, Chief Justice
Sitting: Catherine Stone, Chief Justice
Sandee Bryan Marion, Justice
Luz Elena D. Chapa, Justice
Delivered and Filed: December 10, 2014
REVERSED AND REMANDED
Mark Hart and Angelica Hart, Julian Calderas, Jr. and Erica Calderas, and Thomas H.
Veitch and Anne Veitch appeal the trial court’s orders entered in each of the underlying causes
denying their petitions to confirm arbitration awards. Although the trial court’s orders deny the
petitions to confirm the arbitration awards, the orders do not vacate the arbitration awards.
Because the trial court was required to enter orders that either confirmed the awards or vacated,
modified, or corrected the awards, the trial court erred in entering orders that only denied the
04-14-00452-CV, 04-14-00568-CV & 04-14-00597-CV
petitions to confirm. Accordingly, we reverse the trial court’s orders and remand the causes to the
trial court for further proceedings.
BACKGROUND
The appellants purchased homes from the appellee, Flagship Homes, Ltd. d/b/a Prestige
Homes, and subsequently made claims alleging that Prestige Homes fraudulently induced them
into purchasing the homes based on various misrepresentations. Pursuant to the Sales Agreements
signed by the appellants, the claims were submitted to arbitration, and the arbitrator entered awards
in favor of the appellants. The appellants then filed petitions to confirm the arbitration awards,
and Prestige Homes filed objections to the confirmation. After a hearing, the trial court entered
orders denying the petitions to confirm.
DISCUSSION
All parties agree that the Federal Arbitration Act is applicable to the underlying causes
because the transaction involved interstate commerce. 1 Nafta Traders, Inc. v. Quinn, 339 S.W.3d
84, 97 n. 64 (Tex. 2011) (noting FAA applies to transactions involving interstate commerce).
Section 9 of the FAA permits a party to an arbitration to apply to a trial court for an order
confirming the arbitration award. 9 U.S.C. § 9. Upon such an application, the trial court “must
grant” an order confirming the award “unless the award is vacated, modified, or corrected.” Id.
As the United States Supreme Court has stated, “There is nothing malleable about ‘must grant’
which unequivocally tells courts to grant confirmation in all cases, except when one of the
‘prescribed’ exceptions applies.” Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 587
1
Prestige Homes actually contends both the FAA and the Texas Arbitration Act are applicable. See Nafta Traders,
Inc. v. Quinn, 339 S.W.3d 84, 97 & n. 64 (Tex. 2011) (noting TAA and FAA may both be applicable). Because
Prestige Homes agrees the FAA is applicable, we do not need to resolve whether the TAA also is applicable for
purposes of this opinion. See TEX. R. APP. P. 47.1 (providing that appellate court opinions should be “as brief as
practicable” while “addressing every issue raised and necessary to final disposition of the appeal”).
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04-14-00452-CV, 04-14-00568-CV & 04-14-00597-CV
(2008); see also Hamstein Cumberland Music Group v. Williams, 532 Fed. Appx. 538, 543 (5th
Cir. 2013) (quoting Hall Street and noting trial court is required to grant an order of confirmation
“absent recourse to one of the seven, narrow grounds for modification or vacatur”).
In their brief, the appellants acknowledge that the trial court failed to take either of the two
available courses of action. Prestige Homes responds that the appellants waived any complaint
that the trial court erred in not expressly vacating the award and argues, “By declining to confirm
the award, the trial court impliedly vacated it.” Both parties then brief the legal arguments
applicable on appeal when a trial court either confirms or vacates an arbitration award. This court,
however, has jurisdiction to consider only the orders the trial court actually entered.
In Murchison Capital Partners, L.P. v. Nuance Communications, Inc., 760 F.3d 418 (5th
Cir. 2014), the Fifth Circuit addressed whether an order that neither confirmed nor vacated an
arbitration award was an appealable order. First, the Fifth Circuit noted:
It is well established that an order confirming an arbitration award is a final
appealable order. It is also well established that an order vacating an award and
remanding the case back to arbitration for a rehearing is a final appealable order.
760 F.3d at 420-21 (internal citations omitted). The Fifth Circuit then noted, however, that “the
district court neither vacated nor confirmed the arbitration award but instead remanded the award
back to the arbitration panel for further consideration of [the claimant’s] out-of-pocket damages.”
Id. at 421. The Fifth Circuit held that it lacked jurisdiction to consider an appeal of the order
because “the district court neither confirmed nor vacated the arbitration award.” Id. at 423.
Similarly, in In re Deepwater Horizon, 579 Fed. Appx. 256, 258 (5th Cir., 2014), the Fifth
Circuit considered an appeal of a district court’s order that denied the appellants’ motions to
confirm arbitration award. In response to the appellees’ motions to dismiss for lack of jurisdiction,
the appellants asserted that orders “denying confirmation of an award” are appealable under the
FAA. Id. at 259; 9 U.S.C. § 16(a)(1)(D). In rejecting this argument, the Fifth Circuit cited the
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04-14-00452-CV, 04-14-00568-CV & 04-14-00597-CV
United States Supreme Court’s holding in Hall Street that section 9 of the FAA requires the trial
court to confirm an award unless the award is vacated, corrected, or modified. Id. The Fifth Circuit
then concluded that an order “does not constitute an appealable order ‘denying confirmation’ …
unless the order vacates, modifies, or corrects the arbitral award.” Id.
Although Murchison and Deepwater Horizon provide authority for this court to dismiss
these appeals for lack of jurisdiction, the Texas Supreme Court’s decision in East Tex. Salt Water
Disposal Co. v. Werline holds that an order denying confirmation of an arbitration award is
appealable, citing the provision in the TAA stating that a party may appeal an award “confirming
or denying confirmation of an award.” 307 S.W.3d 267, 270 (Tex. 2010); TEX. CIV. PRAC. & REM.
CODE ANN. § 171.098(a)(3) (West 2011). Similarly, the FAA also contains a provision stating
that a party may appeal an order “confirming or denying confirmation of an award or partial
award.” 9 U.S.C. § 16(a)(1)(D). Although we recognize the Fifth Circuit’s holding to the contrary
in Deepwater Horizon, we read the plain statutory language as permitting an appeal of an order
denying confirmation. See Penrod Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993)
(noting Texas appellate courts are “obligated to follow only higher Texas courts and the United
States Supreme Court”). Therefore, we conclude that we have jurisdiction to consider these
appeals, but we hold that the trial court erred in entering orders that neither confirmed the
arbitration awards nor vacated, modified, or corrected the awards as required by section 9 of the
FAA. See Hall Street Assocs., L.L.C., 552 U.S. at 587; Hamstein Cumberland Music Group, 532
Fed. Appx. at 543; 9 U.S.C. § 9. Because the trial court has not entered orders vacating the
arbitration awards, we do not have jurisdiction to consider the merits of the arguments relating to
whether the trial court would err in vacating the arbitration awards. See Rusk State Hosp. v. Black,
392 S.W.3d 88, 95 (Tex. 2012) (noting “the Texas Constitution does not afford courts jurisdiction
to make advisory decisions or issue advisory opinions”).
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04-14-00452-CV, 04-14-00568-CV & 04-14-00597-CV
CONCLUSION
The trial court’s orders are reversed, and the causes are remanded to the trial court for
further proceedings.
Catherine Stone, Chief Justice
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660 So. 2d 1278 (1995)
NORTHERN ELECTRIC COMPANY and Toby Minter
v.
Bertis PHILLIPS.
No. 91-CA-00470-SCT.
Supreme Court of Mississippi.
August 3, 1995.
Rehearing Denied September 28, 1996.
Eve Gable, Bryan Nelson Randolph & Weathers, Hattiesburg, Michael K. Randolph, Bryan Nelson Firm, Hattiesburg, for appellant.
Michael B. McMahan, McMahan McMahan & Brinkley, Hattiesburg, for appellee.
Rebecca Lee Wiggs, Kenneth E. Milam, Watkins & Eager, Jackson, for amicus curiae.
En Banc.
*1279 BANKS, Justice, for the Court:
In the present appeal, we are asked to determine whether employees covered for workers' compensation by the temporary employment agency are barred by the exclusive remedy provisions of the workers' compensation act from recovery against the entity for which the services are actually performed. We answer the question in the affirmative, reverse the judgment and render.
I.
In March of 1989, Kelly Services in Hattiesburg, Mississippi, employed Phillips to work with Northern Electric Company (NECO) temporarily as a maintenance helper and to perform other assigned tasks. Six weeks later, on April 20, 1989, Phillips sustained severe injuries when Minter, a coemployee, drove a forklift into the table and caused a roller bar to fall from the table and onto Phillips' foot. Phillips filed and received workers' compensation benefits from Transportation Insurance Company, a CNA member company (CNA) through Kelly. Legal proceedings began on July 5, 1990, when Phillips filed a complaint in the Forrest County Circuit Court alleging that NECO's and Minter's negligence resulted in his injuries.
On March 14, 1991, NECO filed its motion for summary judgment asserting, inter alia, that there is no genuine issue of material fact and NECO is entitled to a judgment as a matter of law. NECO alleged that at the time of the accident, the plaintiff was its "loaned" or "borrowed servant," or "special employee." On March 14, 1991, Phillips filed his first motion in limine to restrain NECO from mentioning, referring to or commenting on, inter alia, 1) any suggestion or reference that any of the medical bills were paid by workers' compensation or any other insurance; and 2) any suggestion or reference that workers' compensation paid weekly disability benefits to plaintiff or paid any type of workers' compensation settlement to plaintiff. Phillips also filed his second motion in limine on March 14, 1991, and requested that the court order NECO and its agents to give any and all testimony concerning insurance contracts outside the presence of the jury.
On March 15, 1991, Phillips filed his motion to strike defendant's motion for summary judgment since the 1) case was set for trial on Monday, March 18, 1991, pursuant to an agreed order that was entered on October 16, 1990; 2) defendant's motion for summary judgment was filed on March 14, 1991; and 3) MRCP Rule 56(c) required that motions for summary judgment be served at least 10 days before the time fixed for the hearing. Phillips additionally asserted that since defendants' Motion for Summary Judgment has been filed only four days prior to trial, and in violation of MRCP Rule 56(c), it should be denied.
Phillips also filed a motion to strike NECO's second and fourth defenses which showed that Phillips' exclusive remedy for the injury was workers' compensation benefits pursuant to the Mississippi Workers' Compensation Act. In this motion, Phillips asserted that NECO and Kelly entered into a contract which evidenced the agreement of the parties and the responsibilities to be borne by each. Phillips stated that by the specific, clear, and concise language of the contract, NECO agreed to be fully responsible for all bodily injury claims of Kelly's employees. Additionally, Phillips asserted that "[b]y agreement between the parties, Kelly assumed and fulfilled all legal obligations for workers' compensation. Therefore, NECO had no legal liability for workers' compensation to Kelly employees."
On March 18, 1991, NECO responded to Phillips' first motion in limine by asserting that NECO 1) "should be entitled to introduce evidence of and to reference medical bills paid by workers' compensation to the plaintiff, as such evidence is material to its second and fourth defenses"; and 2) defendants were entitled to show that they secured such payment of weekly disability benefits to the plaintiff as required by the Workers' Compensation Act. On March 18, 1991, NECO also responded to Phillips' second motion in limine by asserting that NECO would show that "there are certain insurance contracts material to the presentation of defendants' proof of these defenses, including, but not limited to defendant's entitlement to show that ... [NECO] did in fact "secure *1280 payment of compensation" as required by the Workers' Compensation Act for and on behalf of Phillips."
During the pre-trial hearing on March 18, 1991, the trial court, finding that the case was controlled by the contract agreement between NECO and Kelly, overruled NECO's motion for summary judgment as untimely and sustained Phillips' motions to strike and his motions in limine.
II.
Phillips claimed that on the morning of April 20, 1989, he sustained severe and permanent injuries to his foot, which caused him to spend money for medical treatment, hospitalization, prescription drugs, and related medical expenses. He averred that as a proximate result of the defendants' negligence, he sustained a loss of wage-earning capacity. Additionally, he averred that his injuries were the direct and proximate result of NECO's and Minter's acts, and sought damages in the aggregate amount of $500,000. NECO answered that Phillips' sole and exclusive remedy for the injury claimed is workers' compensation benefits since Phillips was a "loaned or borrowed servant" at the time of the injury, and/or engaged in the "dual employment" of Kelly and NECO at the time of the accident which granted NECO immunity at law.
On the day of the trial, March 18, 1991, NECO proffered witnesses in response to the court's consideration of Phillips' motion in limine to exclude reference to the borrowed servant or loaned servant evidence and the workers' compensation. NECO began by calling Bertis Phillips, who testified that when he went to work with Kelly Temporary Services he knew that it was temporary services agency. He testified that Kelly sent him to the maintenance department and that he was working in other capacities, other than as a maintenance helper, including painting and cleaning offices, stripping floors and painting the machines. In addition, Phillips stated that he received his orders and work assignment from the assistant supervisor for the maintenance department.
The manager of Kelly Services, Judy Platt, testified that Kelly charges the customer a bill rate that is greater than the wages paid to the Kelly person. "It includes the wage that we pay the workers, workers' compensation premiums, unemployment compensation taxes, social security taxes, withholding taxes for state and federal income, things like that." In addition, Platt stated that the service agreement on the back of the invoice states that the employees are sent by Kelly out to the customer, and are to be at the customer's direction and control.
On re-direct, Platt answered that "7.5 percent is for FICA; 1.6 percent for state unemployment; .8 percent federal unemployment; 7.7 percent workers' compensation; 1.5 percent benefit; 20.4 per cent is overhead, and that included branch level of spending, such as rent, electricity, full-time staff, 8.0 general and administrative, including corporate expenses like the time card processing, the pay check, accounts receivable, the whole process; and 2.5 per cent profit." Platt also stated that "the 1.5 benefit package is for vacation time, holiday pay, anything like that we offer to our employees."
David McCoy, Director of Human Resources at NECO, answered in the affirmative when questioned on whether the persons that NECO hires from Kelly are placed in the same departments as its other regularly employed people, do basically the same jobs, and are supervised by NECO's personnel. He answered "no" when asked whether Kelly supervisors were on the premises, and when questioned whether Kelly workers performed independent services. He also answered in the affirmative when asked "Was it your understanding that what you paid Kelly, in essence, paid [the workers' compensation] premium?"
At the end of the proffer of all witnesses and cross-examination by the plaintiff, the judge stated that:
The court would at least be consistent in its ruling, would stand by the same ruling as enunciated in chambers. That being, this court is of the opinion that the contract would rule in this particular matter, and that being the case, I am going to sustain the motion in limine. And I presume also strike the defenses. The way *1281 these things are formed, it's kind of hard to do because you've got some of it in the Motion for Summary, which I might enunciate into the record, it was filed but was not timely filed. It was brought over here two days before trial. So that will be the ruling of the court.
At the conclusion of Phillips' evidence, the court denied NECO's motion for a directed verdict. After hearing the evidence relative to the negligence claim, the jury returned a verdict in favor of the plaintiff. NECO filed a motion for a Judgment Notwithstanding the Verdict, or in the Alternative for a New Trial. After these post-trial motions were denied, this appeal followed.
III.
We review de novo the record on appeal from a grant of a motion for summary judgment. Short v. Columbus Rubber and Gasket Co., 535 So. 2d 61, 63 (Miss. 1988). In Brown v. Credit Center, Inc., 444 So.2d 358, 362 (Miss. 1983), we interpreted Rule 56 and the standards that the trial courts should use in considering a motion for summary judgment. We explained that
The trial court must review carefully all of the evidentiary matters before it admissions in pleadings, answers to interrogatories, depositions, affidavits, etc. The evidence must be viewed in the light most favorable to the party against whom the motion has been made. If in this view the moving party is entitled to judgment as a matter of law, summary judgment should forthwith be entered in his favor. Otherwise the motion should be denied.
Brown, 444 So.2d at 363. See also Lovett v. Anderson, 573 So. 2d 758, 760 (Miss. 1990); Pearl River Cty. Bd. v. South East Collections, 459 So. 2d 783, 785 (Miss. 1984).
We also conduct a de novo review of a motion for directed verdict. If we find that the evidence favorable to the non-moving party and the reasonable inferences drawn therefrom present a question for the jury, the motion should not be granted. Pittman v. Home Indem. Co., 411 So. 2d 87, 89 (Miss. 1982) (citing Paymaster Oil Mill Co. v. Mitchell, 319 So. 2d 652 (Miss. 1975)).
NECO asks that we address whether the trial court erred when it denied its motion for summary judgment and later its motion for a directed verdict or in the alternative, judgment notwithstanding the verdict. NECO argues that Phillips was a loaned or borrowed servant of NECO at the time of his injuries and that therefore, Phillips' exclusive remedy is pursuant to the Mississippi Workers' Compensation Act. Section 71-3-9 of the Mississippi Code of 1972, provides that "the liability of an employer to pay compensation shall be exclusive and in place of all other liability of such employer to the employee, his legal representative... ." Miss. Code Ann. 1972 § 71-3-9. Accordingly, if Phillips is a loaned or borrowed employee, or if a dual employment existed between NECO and Kelly, the only available remedy against either NECO or Kelly is workers' compensation and Phillips would be barred from bringing a common-law negligence action against NECO and/or Minter.
Our earliest relevant pronouncement in thus area is found in Runnels v. Burdine, 234 Miss. 272, 276, 106 So. 2d 49 (1958). There, we delineated the standard employed in such cases. "Indeed, as a general proposition, if one person lends his servant to another for a particular employment, the servant, for anything done in that employment, is dealt with as the servant of the one to whom he had been lent, although he remains the general servant of the person who lent him." Runnels, 234 Miss. at 276, 106 So. 2d at 51. "The fact that a person is the general servant of one employer does not, as a matter of law, prevent him from becoming the particular servant of another, who may be held liable for his acts." Id. We noted that "it is well settled in other states that a person in the employ of one person or company whose services are loaned by his employer to another company or person becomes, for the purpose of the work assigned to him, the servant of the latter company, that is to say, the company for whom the work is performed." Id. at 276-77, 106 So. 2d at 51. We have reaffirmed our position in Ray v. Babcock and Wilcox Company, Inc., 388 So. 2d 166 (Miss. 1980); Biggart v. Texas Eastern Transmission Corp., 235 So. 2d 443 (Miss. *1282 1970); See also, Lott v. Moss Point Marine Inc., 785 F. Supp. 600 (S.D.Miss. 1991).
In the instant case, as in Runnels, even though Phillips was not NECO's "actual" employee, Phillips was on loan on a temporary basis and was subject to its control. Phillips received supervision and work assignments from NECO supervisors; although Phillips maintains that he was Kelly's employee, he admitted that he did not work at the Kelly's office.
Other state courts have addressed the application of the exclusivity provision of workers' compensation coverage to the employee of a temporary employer by virtue of an implied contract. See Denison v. Haeber Roofing, Co., 767 S.W.2d 862, 864 (Tex App. 1989) (Summary judgment is appropriate under the "borrowed servant" doctrine even though the injured temporary services worker received workers' compensation benefits from the temporary employment agency rather than through appellee, who also carried workers' compensation insurance); Stephens v. Oates, 189 Ga. App. 6, 374 S.E.2d 821, 822 (1988) (same); Virginia Polytechnic and State University, and Charter Oak Fire Ins. v. Frye t/a Home Improvement, et al., 6 Va. App. 589, 371 S.E.2d 34, 37-38 (1988) (Where an employer is a "special" employer, it is liable under the Workers' Compensation Act); Ivey v. Merchant, 502 So. 2d 93 (Fla. 1987) citing Booher v. Pepperidge Farm, Inc., 468 So. 2d 985 (Fla. 1985) ("Where a general employer in the business of providing temporary help provides compensation coverage to an employee while he is on assignment working for another employer, then that employee is barred from suing his special employer for on-the-job injuries"); Whitehead v. Safway Steel Products, Inc., 304 Md. 67, 497 A.2d 803 (1985) (Whether a person who is employed by a temporary services agency is also an employee of the company to which the worker is provisionally assigned is a question of law for the trial court to decide).
IV.
Summary judgment is appropriate where a temporary employment agency assigns an employee to another employer and the employee performs the normal work of the second employer and is controlled and supervised by that employer. In Mississippi, one may be employed by more than one employer and both employers gain immunity from common-law negligence actions. Here pursuant to the Mississippi Workers' Compensation Act, Phillips' exclusive remedy was workers' compensation benefits. Although the court correctly denied the summary judgment as untimely filed, it erred in granting Phillip's motion to strike defenses because it was also untimely and because it was meritless. The court should have granted the directed verdict or a judgment notwithstanding the verdict in favor of NECO.
We therefore reverse the judgment of the circuit court and render judgment in favor of NECO.
REVERSED AND RENDERED.
HAWKINS, C.J., DAN M. LEE and PRATHER, P.JJ., and PITTMAN, JAMES L. ROBERTS Jr. and SMITH, JJ., concur.
McRAE, J., dissents with separate written opinion joined by SULLIVAN, J.
McRAE, Justice, dissenting:
The majority's reversal of Bertis Phillips' common law tort award against Northern Electric Company and Toby Minter (hereinafter collectively referred to as "NECO") effectively insulates NECO from any liability and precludes Kelly Services from asserting its statutory subrogation rights against NECO for its negligence, and as a result, obviously will cause an increase in Kelly Services' workers' compensation premiums. Further, until this case, there has been no Mississippi Supreme Court authority finding "dual employment" by a labor service broker and its customer for workers' compensation purposes. As a result, Kelly Services pays the bill for a potentially higher premium and gives up its right to subrogation while NECO enjoys a new found freedom from liability without paying a dime! Accordingly, I dissent.
Miss. Code Ann. § 71-3-71 (1972) allows an employee and his employer to commence an action against any other party for such injuries *1283 as the employee might receive, specifically providing:
The acceptance of compensation benefits from or the making of a claim for compensation against an employer or insurer for the injury or death of an employee shall not affect the right of the employee or his dependents to sue any other party at law for such injury or death, but the employer or his insurer shall be entitled to reasonable notice and opportunity to join in any such action or may intervene therein. If such employer or insurer join in such action, they shall be entitled to repayment of the amount paid by them as compensation and medical expenses from the net proceeds of such action (after deducting the reasonable costs of collection) as hereinafter provided.
Miss. Code Ann. § 71-3-71 (1972). Kelly Services remains responsible for all of Phillips' medical and compensation expenses, regardless of whether Phillips brings an action against NECO. However, according to our subrogation statute, if Phillips did recover against NECO for its negligence, Kelly Services could join the action and be reimbursed for the amount it already paid Phillips. Under the majority's opinion, Kelly is now precluded from pursuing any action for reimbursement of workers' compensation benefits paid. I question whether the majority would have held as it did if Kelly Services had brought the suit against NECO for repayment. Kelly is entitled under § 71-3-71 to collect from NECO for its negligence, and it is unjust for the majority to deny the remedies provided at law for this exact situation, in contravention of the statute.
NECO appealed to this Court, asking that we allow it to avoid liability while escaping all of the normal obligations and duties of the employer-employee relationship. The majority neglects to mention some of the more salient facts of this case: NECO was not responsible for payment of Phillips' wages, nor did it pay unemployment taxes, social security benefits or workers' compensation insurance premiums for Phillips. NECO did not provide medical insurance, vacation leave, funeral leave pay or jury duty pay to Kelly employees such as Phillips although it did provide these benefits to its own employees. Essentially, NECO received all of the benefits from the work of Kelly Services employees without assuming any of the obligations an employer is usually required to undertake.
NECO does not deny its negligence in causing the accident and Phillips' resulting injuries. However, NECO does argue that it is simply not liable for its negligent actions since Phillips' exclusive remedy was compensation payment, Miss. Code Ann. § 71-3-9 (1972), which Kelly had already paid. Contrary to the majority opinion, Phillips was not a "loaned" or "borrowed" or "special" servant; rather Phillips was an employee of an independent subcontractor since NECO never had ultimate control over Phillips.
For all practical purposes and without even mentioning the case, the majority overrules our decision in Nash v. Damson Oil Corp., 480 So. 2d 1095 (Miss. 1985). In what appears to be little more than a resultsoriented opinion, the majority presents us with no real basis for its position. We are merely directed to our "earliest relevant pronouncement" in Runnels v. Burdine, 234 Miss. 272, 276, 106 So. 2d 49 (1968), with no explanation of its relevance, as well as to a sampling of distinguishable cases from other jurisdictions. With this slim thread, we tie both the hands and the pocketbooks of Kelly Services and other temporary services providers and weave a curtain of immunity around NECO and others who utilize the services of temporary employees.
In Nash, we held that the employee of an independent subcontractor was not precluded from bringing a common law tort action against the contractor even though he had collected workers' compensation benefits from an independent subcontractor. Nash, 480 So.2d at 1098. Damson Oil Corporation would have prevailed had it shown it was a "contractor" who was an "employer" within the meaning of Miss. Code Ann. §§ 71-3-7 and 71-3-9 (1972). Id. This case was predicated upon § 71-3-9, which provides:
The liability of an employer to pay compensation shall be exclusive and in place of all other liability of such employer to the employee ...
*1284 Trigger Contractors, Inc., Gary Allen Nash's employer, contracted with Damson Oil to service and repair its oil and gas wells. Id. at 1097. Nash therefore was not directly employed by Damson Oil. He was paid by Trigger, and it was Trigger who provided workers' compensation insurance as well as all other required benefits. Id. at 1098. Damson Oil attempted to use Trigger's employer status based on the following language from § 71-3-7:
In the case of an employer who is a subcontractor, the contractor shall be liable for and shall secure the payment of such compensation to employees of the subcontractor, unless the subcontractor has secured such payment.
This Court concluded that Damson Oil was not the sort of "contractor" anticipated by the pertinent statutes and thus not a statutory employer; therefore, Nash was able to proceed to trial. We held:
Without question Damson is a contractor in a generic sense. Damson had a contractual relationship with the owners of the land imposing various duties and obligations upon each. Damson is also a contractor in the sense that it has a contract with Trigger imposing obligations and duties upon each. The operative point is that Damson's interest, use and activities with respect to the premises are wholly different in nature from those of one ordinarily considered a general or prime contractor ... Therefore, Damson is not the sort of "contractor" within the meaning and contemplation of Section 71-3-7.
Nash, 480 So.2d at 1100. See Falls v. Mississippi Power & Light Co., 477 So. 2d 254 (Miss. 1985). Because the pertinent statutes did not impose any duty upon Damson to secure workers' compensation insurance, we concluded that Damson should not be entitled to enjoy any of the benefits of the Act. Nash, 480 So.2d at 1100. The same can be said for the case at hand. True, NECO contracted with Kelly Services with each having obligations and duties. However, NECO's interests are very much different from the ordinary prime contractor. NECO and Kelly's conditions and circumstances are more akin to that of Trigger and Damson Oil as both dealt with service agreements. NECO is not the type of contractor the Act contemplated, and because NECO had no duty to secure workers' compensation insurance, it should not be able to reap the benefits of the Act.
In Rowell Equipment Co. v. McMullan, 241 Miss. 845, 133 So. 2d 631 (1961), the Supreme Court of Mississippi entertained the question of whether the claimant in question was a "loaned" servant at the time of the accident or rather an employee of an independent contractor. The claimant was employed by Rowell Equipment Company who contracted with Gulf Oil Corporation to perform general repair on its machinery. The injury in question occurred while claimant was working on a Gulf oil well. Rowell, 241 Miss. at 851, 133 So. 2d at 633. It was not disputed that Gulf supervised claimant and gave orders as to which machinery needed repair. Rowell, on the other hand, hired claimant, paid him wages, had the sole authority to discharge him, paid social security taxes and withheld claimant's income taxes. As in the case sub judice, Gulf Oil could only request that the claimant no longer work on its machinery if it were not satisfied with his work. Likewise, the claimant was considered an employee of Rowell when figuring the premium for workers' compensation insurance. Id. In holding that the claimant was an employee of an independent contractor rather than a "loaned" servant, we stated:
Such control as Gulf had over claimant was immediate control in directing claimant the place where the work was to be performed and what machinery was to be repaired, but Rowell had the ultimate right to control him. Rowell had the supreme choice, control and direction of claimant both as to ultimate results and all its details. The information and directions given claimant by Gulf did not make him its employee.
Rowell, 241 Miss. at 853, 133 So. 2d at 634.
The same is true for Bertis Phillips. Kelly Services remained Phillips' employer. In fact, the service agreement provided that if NECO was not satisfied with the assigned Kelly employee, Kelly would furnish a replacement as soon as possible. NECO never *1285 possessed the ultimate power to hire or fire a Kelly employee; it only had the immediate control and supervision to make sure the Kelly employee performed the services ordered.
In Clark v. Luther McGill, Inc., 240 Miss. 509, 127 So. 2d 858 (1961), this Court, in discussing the issue of a "loaned" servant, provided:
The right to control the employee has been one of the dominant factors in all the cases, but the ultimate right to control should not be confused with immediate control, for it is the reserved right of control rather than its actual exercise that furnished the true test of relationship; and he is master who has the supreme choice, control and direction of the servant and whose will the servant represents in the ultimate results and in all its details, and the fact that the borrower gives information and directions to the servant as to the details of the work or the manner of doing it does not make the general servant of the employer the servant of the borrower.
Clark, 240 Miss. at 519, 127 So. 2d at 862 (emphasis added).
Until today, no Mississippi case has held that just because someone exercises control over another, he, as a matter of law, is the employer. The majority's position is illogical. The majority states that NECO possessed all control over Phillips in the performance of his job. If this is so, Kelly could not have exercised control in this respect. Therefore, Phillips, as a matter of law, could not have been Kelly's employee; yet, the majority states that Phillips, at all times, was Kelly's employee.
The majority opinion erroneously allows NECO to reap the benefits of the work of Kelly employees although NECO is not required to provide workers' compensation, while at the same time obstructing Kelly Services from asserting its lawful subrogation rights against NECO. Further, it allows NECO to claim immunity despite its liability insurance coverage. In sovereign immunity cases, we have found that immunity is waived to the extent of the liability coverage carried. See Churchill v. Pearl River Basin Development District, 619 So. 2d 900, 905-06 (Miss. 1993). Why then should the insurance carrier which has contracted to cover third party claims against a private entity be protected? Accordingly, I dissent.
SULLIVAN, J., joins this opinion.
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106 B.R. 201 (1989)
In re Michael F. McCARTHY, Debtor.
In re AMERICAN RESOURCES LIMITED, Debtor.
Bankruptcy Nos. 87-00852, 85-00325.
United States Bankruptcy Court, D. Hawaii.
September 15, 1989.
Harold Chu, Michael McCarthy, Honolulu, Hawaii, pro se.
Ronald K.K. Sakimura, Honolulu, Hawaii, for respondent.
MEMORANDUM DECISION AND ORDER RE: MOTION TO ENFORCE SETTLEMENT AGREEMENT
JON J. CHINEN, Bankruptcy Judge.
On August 4, 1989, Harold Chu, Trustee of the Estate of American Resources Limited "American Resources" and Michael F. McCarthy, Debtor-in-Possession, ("collectively Movants") filed a Motion to Enforce Settlement and Release Agreement, seeking to enforce the Order Granting Trustee's Motion to Approve Settlement and Release Agreement, In re American Resources Limited, Bk. No. 85-00325, filed herein on March 31, 1989 and the Order Granting Debtor's Motion to Approve Settlement and Release Agreement in In re McCarthy, Bk. No. 87-00852 (hereafter "Orders").
The Settlement Agreement provides for the payment to American Resources or its assignee, upon the occurrence of certain events, specifically upon the settlement becoming final and nonappealable.
This Court's Order of March 31, 1989 and April 19, 1989 required that the Movants obtain the approval of the bankruptcy court administering the bankruptcies of In re Eagle River Development Company, Bk. No. 3x-84-00289 (Bkrtcy.Alaska), and In re Carl Bernhardt, Bk. No. 3-87-00909 (Bkrtcy.Alaska). That condition was satisfied on June 28, 1989.
However, on April 14, 1989, in In re American Resources Limited, and on May 3, 1989, in In re McCarthy, Evanston Insurance Company, ("Evanston") filed Motions for reconsideration of this Court's Orders of March 31, 1989 and April 19, 1989. Those Motions have not been acted upon and are to be withdrawn by Evanston.
The Settlement and Release Agreement provides that Ticor Title Insurance Company of California ("Ticor") will pay various sums for Pacific Loan to Thrift Guaranty Corporation and Barney Shiotani on the Effective Date, which is defined in the Settlement and Release Agreement as "the date five (5) business days after the date that the order of the last Bankruptcy Court having jurisdiction of any of the Bankruptcies, authorizing the execution of this Agreement . . . has become final and nonappealable." (Settlement and Release Agreement, paragraph 1.9).
The Movants contend that the proceeds from the Settlement and Release Agreement are now due and owing because all applicable appeal periods will have expired *202 when Evanston withdraws its outstanding Motions to Reconsider the Order of March 31, 1989 and April 19, 1989, or alternatively 10 days thereafter, as provided by Bankruptcy Rule 8002 unless a party within the 10-day period files a notice of appeal.
Ticor has interpreted paragraph 1.9 of the Settlement and Release Agreement, the "effective date" or payment date as (1) 10 business days after Evanston Insurance withdraws its Motion to Reconsider, (2) 20 calendar days after the expiration of the 10-day appeal period, plus (3) the 5 business days provided for in paragraph 1.9 of the Settlement and Release Agreement.
Ticor Title contends that to be a final and nonappealable Order, Movants must wait not only the 10 business days required by Rule 8002(c), but the full 20 days after the expiration of the 10 business days in order to make sure that no party could file an appeal based on "excusable neglect".
Bankruptcy Rule 8002(a) provides that a notice of appeal must be filed within ten days from the entry of the challenged judgment, order or decree. However, Bankruptcy Rule 8002(b) expressly states:
(b) Effect of Motion on Time for Appeal. If a timely motion is filed by any party: (1) for judgment notwithstanding the verdict under rule 9015; (2) under Rule 7052(b) to amend or make additional findings of fact, whether or not an alteration of the judgment would be required if the motion is granted; (3) under Rule 9023 to alter or amend the judgment; or (4) under Rule 9023 for a new trial, the time for appeal for all parties shall run from the entry of the order denying a new trial or granting or denying any other such motion. A notice of appeal filed before the disposition of any of the above motions shall have no effect; a new notice of appeal must be filed. No additional fees shall be required for such filing. (emphasis added.)
Based upon the express language of B.R. 8002(b), it is clear that one party's filing of a tolling motion will suspend the filing deadline for all parties, which in the context of approving a settlement agreement, includes all creditors and other parties-in-interest entitled to notice.
Neither Bankruptcy Rule 8002 nor Federal Rules of Appellate Procedure 4(a)(4) expressly address a situation of a voluntary withdrawal of a tolling motion, and there does not appear to be any case involving the disposition of a tolling motion by means other than a court order.
The Court, however, finds the reasoning of the Fifth Circuit, in Tideland Welding Service v. Sawyer, 881 F.2d 157 (5th Cir. 1989) to be persuasive. Like Bankruptcy Rule 8002(b), the regulations in question in that case provided that the timely filing of a motion for reconsideration suspended the time for filing of a notice of appeal. A timely motion for reconsideration had been filed, but later withdrawn. As noted by the court,
[t]he issue before this court is the effect of the respondents' withdrawal of their motion for reconsideration on the timeliness of Liberty Mutual's notice of appeal.
The Board provided two interpretations of the regulations when discussing the timeliness of the respondents' notice of appeal. First, the Board held that when a party files and subsequently withdraws a motion for reconsideration, the notice of appeal must be filed within 30 days of the original judgment from which the party seeks an appeal. Second, the Board held that even if the respondents' motion for reconsideration tolled the filing time for a notice of appeal, the respondents filed their notice of appeal before the ALJ ruled on their motion to withdraw and the notice of appeal was, therefore, premature.
We find no support for the Board's statement that a perfected motion for reconsideration that is later withdrawn fails to toll the period for filing a notice of appeal. 20 C.F.R. § 802.205A(e) (1987) explicitly states that "any appeal to the Board, whether filed prior to or subsequent to the filing of a timely motion for reconsideration, shall be dismissed as premature." The regulation makes no exception for motions for reconsideration *203 that are later withdrawn. Furthermore, the Board's interpretation could render substantial injustice to the party opposing a motion for reconsideration. For example, if a party filed a motion for reconsideration, the opposing party would read the regulation stating that any notice of appeal filed before resolution of the motion for reconsideration would be premature, and would then wait until the ALJ ruled on the motion for reconsideration before filing a notice of appeal.
If the party moving for reconsideration later moved to withdraw the motion more than thirty days after the original judgment, under the Board's interpretation, the opposing party would lose the right to appeal.
The Board relies on Niswander v. Director, Office of Workers' Compensation Programs, 7 BLR 1-88 (1984), where the Board held that an unperfected motion for reconsideration cannot toll the time for filing a notice of appeal. Niswander is distinguishable from the instant case. In Niswander, the party moving for reconsideration did not file a perfected motion. In the instant case, the plaintiffs filed a perfected motion detailing several grounds of alleged error. The plaintiffs' motion was not frivolous or lacking in substance.
We find more credibility in the Board's alternative interpretation that the time for filing a notice of appeal is measured from the date that the ALJ ruled on the motion to withdraw the motion for reconsideration. The regulations governing the Board state that a notice of appeal filed before or after a motion for reconsideration is premature. The regulations further provide that "(f)ollowing final action by the administrative law judge or deputy commissioner (dismissing or granting the motion for reconsideration), a new notice of appeal shall be filed with the Clerk of the Board by any party who wishes to appeal." Although the regulation does not address the result when a legitimate motion for reconsideration is withdrawn, as compared to a motion granted or dismissed by the ALJ, we find the distinction between a withdrawn and a dismissed motion inapposite in this situation.
In this case, Evanston's Motion to Reconsider was timely filed, raised some meritorious claims for relief, and there is no indication that it was facially defective or filed in bad faith. Consequently, it appears that other creditors could reasonably assume that the Motions to Reconsider tolled the time for appeal.
Moreover, it is important to note that courts have liberally construed motions filed within 10 days after entry of judgment so as not to deprive parties of the right to appeal. See Juanarena v. Nicholson, 779 F.2d 514 (9th Cir.1985), Miller v. Leavenworth-Jefferson Elec. Co-op, 653 F.2d 1378 (10th Cir.1981).
Although there was no court action on Evanston's Motion to Reconsider (it being voluntary withdrawn), the Court finds no reason to distinguish a voluntary withdrawal from a withdrawal after a court hearing, or a dismissal of the motion by the Court.
Bankruptcy Rule 8002(c) permits the extension of the 10-business day appeal period upon motion, filed not later than 20 days after the expiration of the original appeal period, and upon a showing of excusable neglect. P.S. Berger v. Rodman, 425 F. Supp. 565 (S.D.N.Y.1976), aff'd without opinion, 559 F.2d 1202 (2d Cir.1977).
The standard for finding "excusable neglect" is the same under both Bankruptcy Rule 8002 and F.R.C.P. 4(a). See Matter of Estate of Butler's Tire & Battery, 592 F.2d 1028 (9th Cir.1979). Some courts have upheld a grant of extension even where the failure to file a timely appeal was caused by a possible misconstruction of the rules. See, e.g., Feeder Line Towing Service, Inc. v. Toledo P & W Co., 539 F.2d 1107, 1109 (7th Cir.1976).
Based on the above, the Court concludes that the effective date of the Settlement Agreement should be construed as 10 days following the withdrawal of Evanston's Motion to Reconsider, plus the 20-day period provided for by Bankruptcy Rule 8002(c), and the five-day period added by *204 paragraph 1.9 of the Settlement and Release Agreement.
IT IS SO ORDERED.
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421 S.W.2d 523 (1967)
J. A. FULKERSON, Plaintiff-Respondent,
v.
J. H. LAIRD and Betty Laird, Defendants,
W. E. Foster, Garnishee-Appellant.
No. 8643.
Springfield Court of Appeals, Missouri.
November 18, 1967.
*524 Richard D. Moore, Newton C. Brill, West Plains, for garnishee-appellant.
Friend B. Greene, Eminence, for plaintiff-respondent.
STONE, Presiding Judge.
This is an appeal by garnishee W. E. Foster from a judgment in the sum of $613.34 entered in favor of plaintiff J. A. Fulkerson and against garnishee on September 23, 1966. In the case out of which the garnishment proceeding arose, a default judgment in the same aggregate amount had been entered in the Circuit Court of Howell County in favor of plaintiff and against defendants J. H. Laird and Betty L. Laird on November 6, 1963. On December 27, 1963, a general execution was issued upon that judgment, directed to the Sheriff of Shannon County [Rule 76.06; § 513.040],[1] an adjoining county in which defendants then resided, and made returnable "on the 20th day of January 1964," twenty-four days after the date of issuance. (All emphasis herein is ours.) This, no doubt, because January 20, 1964, was the third Monday in that month and thus the first day of the next statutory term of the Circuit Court of Howell County [§ 478.300], but nevertheless in plain violation of the mandate of Rule 76.04 that "[e]very execution issued from any court of record shall be made returnable in not less than 30 days, nor more than 90 days, at the option of the judgment creditor, from the date of issuance."
Attached to the execution in the transcript on appeal is a "Summons to Garnishee" (hereinafter referred to as the summons) prepared on a printed form. The summons identified itself as "Garnishment under an (sic) General ExecutionTo W. E. Foster Clerk Garnishee." (The words "General Execution" were typewritten, the italicized portion was handwritten, and the remainder was printed.) The summons, dated March 27, 1964, and signed by the Sheriff of Shannon County [Rule 90.02; § 525.020], directed garnishee Foster to be and appear before the Circuit Court of Howell County "on the 20th day of April 1964," the first day of the next statutory *525 term of that court [§ 478.300], to answer interrogatories.
The "Sheriff's Return" in the space provided for that purpose on the reverse side of the execution was:
"Executed the within Writ in the County of Shannon, State of Missouri, on the 7 day of Nov 1963, by serving same and failed to collect
"And, on the 27th day of March, 1964 summoned W. E. Foster, as Garnishee, copy of the summons being attached hereto and made a part of this return, all in Shannon County, Missouri."
The italized portion of the first paragraph of the return was handwritten, the remainder of that paragraph was printed, and the second paragraph was typewritten. Obviously, the first paragraph referred to the execution while the second paragraph referred to the summons. The record before us affords no explanation concerning the date inserted in the first paragraph, to wit, November 7, 1963, which was fifty days prior to December 27, 1963, when the execution was issued, and discloses no information (a) as to whether the execution actually was returned into court on or before January 20, 1964, the date specified therein, (b) if so, as to how and when the execution again came into the hands of the Sheriff of Shannon County, or (c) as to what entries pertaining to the execution were made in the "well-bound [execution] book" required to be kept by the Circuit Clerk of Howell County [Rule 76.07; § 513.045], who issued the execution.
The transcript does inform us that garnishee made no answer to the interrogatories exhibited to him [Rules 90.12 and 90.13; §§ 525.130 and 525.140]; that thereafter, to wit, on September 3, 1964, an interlocutory order was made by and in the Circuit Court of Howell County directing garnishee to pay $613.34 into court within ten days thereafter to discharge himself from further liability [Rules 90.06, 90.07 and 90.19; §§ 525.070, 525.080 and 525.200; Chenoweth v. LaMaster, Mo.App., 342 S.W.2d 500, 501(1)]; and that, garnishee having failed so to discharge himself, plaintiff filed on October 9, 1964, his "Motion for Judgment Against Garnishee" and garnishee filed on November 12, 1964, his "Motion to Quash Execution, Summons to Garnishee and Service of Sheriff's Return Thereto."
When these motions finally were heard on September 23, 1966, the Sheriff of Shannon County and garnishee Foster offered testimonial accounts, in some respects contradictory and conflicting, as to what had occurred on March 27, 1964, when the sheriff allegedly undertook to summon garnishee Foster while the latter was acting as clerk of a farm sale advertised as a public auction of property "jointly owned" by defendant J. H. Laird and one Bebee. However, we need not prolong this opinion by digesting or dwelling upon the testimony. For, if the sheriff's narrative be accepted in its entirety by us, as it was by the trial court, nevertheless as a matter of law the judgment for plaintiff cannot stand for reasons to which we now turn.
The primary thrust of garnishee's trial complaint, and likewise of his appellate attack, has been addressed to the alleged insufficiency of the sheriff's return (as hereinbefore quoted in its entirety), because the return did not affirmatively show that the sheriff declared to the garnishee "that he [attached] in his hands all debts due from him to the defendant . . .." Rule 85.21(e); § 521.170(5). There is indeed substance to this point. Notice of garnishment [see Rule 90.03; § 525.040] is the means by which the jurisdiction of the court is established over the res, i.e., over the property or credits garnished, and thus is an indispensable prerequisite to such jurisdiction. Blackburn Motor Co. v. Benjamin Motor Co., Mo.App., 340 S.W.2d 155, 159; C. Rallo Contracting Co. v. Blong, Mo.App., 313 S.W.2d 734, 737(1). Since the purpose of the summons, as distinguished from the notice, is to bring the garnishee personally into court, he may, by appearing *526 generally and answering interrogatories, waive any defect as to service of summons and confer jurisdiction over his person [C. Rallo Contracting Co., supra, 313 S.W.2d at 737(2), and cases there cited]; but jurisdiction over the res can be conferred neither by waiver nor by consent. Blackburn Motor Co., supra, 340 S.W.2d at 159; Federal Truck Co. of St Louis v. Mayer, 216 Mo.App. 443, 270 S.W. 407, 409(1). Garnishment is purely a statutory proceeding in derogation of the common law [Flynn v. Janssen, Mo., 284 S.W.2d 421, 422(2); Trinidad Asphalt Mfg. Co. v. Standard Oil Co., 214 Mo.App. 115, 258 S.W. 64, 66; 6 Am.Jur.2d Attachment and Garnishment § 9, p. 567; 38 C.J.S. Garnishment § 1(b), p. 201], and strict compliance with all requirements formerly imposed only by statutes but now enjoined also by our civil rules is indubitably essential to confer and support jurisdiction over the res in a garnishment proceeding. Blackburn Motor Co., supra, 340 S.W.2d at 159; C. Rallo Contracting Co., supra, 313 S.W.2d at 737; Milliken v. Armour & Co., 231 Mo.App. 662, 104 S.W.2d 1027, 1028(3); State ex rel. Shaw State Bank v. Pfeffle, 220 Mo.App. 676, 293 S.W. 512, 516(12); Federal Truck Co. of St. Louis, supra, 216 Mo.App. at 450, 270 S.W. at 409(2).
So, it has been held in several Missouri cases that, to confer jurisdiction over the res in a garnishment proceeding, the officer's return upon the execution must affirmatively show substantial compliance with essential requirements including the injunction that (if "goods and chattels, money or evidences of debt" are being attached but are "not accessible") the officer "shall declare to the person in possession thereof that he attaches the same in his hands" [Rule 85.21(d); § 521.170(4)] or (if "credits" are being attached) the officer "shall declare to the debtor of the defendant that he attaches in his hands all debts due from him to the defendant. . .." Rule 85.21(e); § 521.170(5). Howell v. Sherwood, 213 Mo. 565, 576, 112 S.W. 50, 52-53(1); Kurre v. American Indemnity Co. of Galveston, Tex., 223 Mo. App. 406, 413, 17 S.W.2d 685, 687(2); State ex rel. Shaw State Bank, supra, 220 Mo.App. at 686, 293 S.W. at 517(15); Hopkins v. Henson, 205 Mo.App. 384, 387-389, 224 S.W. 119(1); Kansas & T. Coal Co. v. Adams, 99 Mo.App. 474, 480, 74 S.W. 158, 160. Certainly the sheriff's return in the instant case reflected "no constructive seizure" of the res, "no declaration of sequestration," as is contemplated and required by law. Hopkins, supra, 205 Mo.App. at 387, 224 S.W. at 119; Kansas & T. Coal Co., supra, 99 Mo.App. at 479-480, 74 S.W. at 160. In fact, the return did not even show that a copy of the summons to garnishee was delivered to or left with garnishee Foster; and there has been no request for leave to amend the return at any stage of the litigation. Contrast Kurre, supra, 223 Mo.App. at 413-414, 17 S.W.2d at 687(6, 7). The return was insufficient to confer jurisdiction over the res, and the judgment against garnishee was void. Howell, supra, 213 Mo. at 576, 112 S.W. at 53(2); Federal Truck Co. of St. Louis, supra, 216 Mo.App. at 450, 451, 270 S.W. at 409.
The judgment cannot stand for another reason not suggested by counsel but patent on the record and so basic that it should not be passed without mention. Garnishment is in aid of an execution and is merely "an ancillary remedy to obtain payment of the judgment." Harrison v. Harrison, Mo.App., 339 S.W.2d 509, 517 (10). See Ivy v. LaRue, Mo.App., 158 S.W.2d 232, 233(1). A valid judgment and a valid execution are indispensable prerequisites to a valid garnishment. Flynn, supra, 284 S.W.2d at 422; Harrison, supra, 339 S.W.2d at 517; Barnes v. Hilton, Mo. App., 323 S.W.2d 831, 835(6); Gilbert v. Malan, 231 Mo.App. 469, 483(9), 100 S.W.2d 606, 615(12). And Rule 90.02 specifically requires that "[t]he return date of the summons to garnishee shall be the return date of the execution."
*527 As we have seen, the execution in the instant case was issued on December 27, 1963, and was returnable on January 20, 1964. Assuming arguendo the validity of the execution from the date of issuance to and including the date of return notwithstanding the fact that it was made returnable in less than thirty days contrary to the plain mandate of Rule 76.04, it undoubtedly became functus officio after January 20, 1964, the return date specified therein. It then had spent its force, and all subsequent proceedings under it were null and void. Bank of Missouri v. Bray, 37 Mo. 194, 195(1); City of Jefferson v. Curry, 71 Mo. 85(1); McDonald v. Gronefeld, 45 Mo. 28; Chasnoff v. Porto, 140 Conn. 267, 99 A.2d 189, 192(1); Hicks v. Bailey, Ky., 272 S.W.2d 32(1); Claude Neon, Inc. v. Birrell, D.C.N.Y., 177 F. Supp. 706, 711-712(5); Ludtke v. Bankers' Trust Co., Tex. Civ.App., 251 S.W. 600, 603(5); Preissman v. Crockett, 194 Md. 51, 69 A.2d 797, 800 (4); Fredd v. Darnell, 107 N.J.Eq. 249, 152 A. 236, 237(2); 33 C.J.S. Executions § 93, l.c. 238.
Yet the "Summons to Garnishee," subcaptioned as "Garnishment under an (sic) General Execution," was issued on March 27, 1964, and was made returnable on April 20, 1964. Obviously, this summons could not have been issued "under" or in aid of the execution which had become functus officio after January 20, 1964, its return date. The garnishment proceeding was without legal foundation or authority, and the judgment entered therein was void.
Plaintiff-respondent has filed nothing in this court other than an unverified "Motion to Dismiss or Affirm" on the sole ground that garnishee-appellant did not deliver a copy of his brief to plaintiff forty-five days before the date of hearing. Rule 83.06(a). The verified answer of garnishee's counsel, captioned as a "Motion in Opposition . . .," was that a typewritten copy of their brief had been mailed to plaintiff's counsel, who resides in an adjoining county, on the forty-sixth day before the date of hearing and should have been delivered to him on the forty-fifth day, and that, as confirmed by the printer's proof of service filed in this court, copies of the printed brief were mailed to plaintiff's counsel on the forty-second day before the date of hearing. Plaintiff's counsel made no reply to this verified answer and sought no extension of time within which to file a brief. In the stated circumstances, "the interests of justice . . require" [Rule 83.09] that plaintiff's motion to dismiss be overruled and that the appeal be determined on its merits. Willis v. Willis, Mo.App., 274 S.W.2d 621, 624(1).
Accordingly, (a) plaintiff's-respondent's "Motion to Dismiss or Affirm" is overruled, (b) garnishee's-appellant's verified answer, captioned as a motion, is stricken from the motion docket, and (c) the judgment in favor of plaintiff and against garnishee-appellant is reversed.
HOGAN and TITUS, JJ., concur.
NOTES
[1] All references to rules are to the Supreme Court Rules of Civil Procedure, V.A.M.R., and all statutory references are to RSMo 1959, V.A.M.S.
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421 S.W.2d 491 (1967)
LORENA INDEPENDENT SCHOOL DISTRICT NO. 907 et al., Appellants,
v.
ROSENTHAL COMMON SCHOOL DISTRICT NO. 007 et al., Appellees.
No. 4644.
Court of Civil Appeals of Texas, Waco.
September 28, 1967.
Rehearing Denied November 16, 1967.
*492 Beard & Kultgen, David B. Kultgen, Waco, for appellants.
Frank Fitzpatrick, Jr., Waco, for appellees.
OPINION
McDONALD, Chief Justice.
This is an appeal from a judgment of the District Court decreeing an order of the State Board of Education invalid.
Rosenthal Common School District and Lorena Independent School District are contiguous county line districts located in both McLennan and Falls Counties. Certain residents of Rosenthal District petitioned the McLennan County School Trustees to detach a 4 square mile area located in McLennan County from the Rosenthal District and annex same to the Lorena District. Their petition was denied by the McLennan County Trustees. The residents (and Lorena) appealed to the State Commissioner of Education, who by written decision sustained the McLennan County Trustees. The residents and Lorena then appealed to the State Board of Education which "overruled" the decision of the Commissioner of Education, "and the order will be to de-annex the property involved in this appeal."
Rosenthal District (joined by McLennan County School Trustees) thereafter filed suit in the 19th District Court of McLennan County, to have the order of the State *493 Board of Education, detaching territory from Rosenthal and annexing same to Lorena, declared invalid.
The District Court, after trial without a jury, entered judgment finding:
1) That portions of Lorena and Rosenthal Districts are located in both McLennan and Falls Counties;
2) That no application had been presented to the County School Trustees of Falls County for concurrence or other action; and
3) That Falls County Trustees had neither approved or refused the proposed detachment and annexation.
Such judgment then decreed the order of the State Board of Education detaching the property from Rosenthal and annexing same to Lorena District invalid and of no force or effect.
Lorena School District and the Residents appeal, contending the trial court erred in setting aside the order of the State Board.
Where two school districts, as here, are partly in McLennan County and partly in Falls County, an order by the Board of School Trustees of McLennan County transferring territory from one district to the other, is invalid to effectuate the transfer, without the concurrence of the County Trustees of Falls County. Art. 2742f, Vernon's Ann.Tex.Civ.St.; South Taylor Co. Ind. School District v. Winters Ind. School District, 151 Tex. 330, 249 S.W.2d 1010; County Board of School Trustees of Leon County v. Leon Ind. School Dist., Tex.Civ. App. (nwh), 328 S.W.2d 928; County School Trustees of Leon County v. Leon Ind. School Dist., Tex.Civ.App. (nwh), 336 S.W.2d 809.
As noted, this case originated with the McLennan County Board, and was appealed through administrative channels to the State Board. Suit was thereafter filed by Rosenthal and the County Board for review of the State Board's order.
Rosenthal and the County Board assert the substantial evidence rule applicable to the appeal from the County Board to the Commissioner and the State Board, and say since there was substantial evidence before the County Board to sustain its action, that its order must be upheld.
We reject the contention. The substantial evidence rule applies to appeals taken from an administrative agency to the courts, and not to appeals from lower to higher administrative agencies. Thus the district court would determine if there was substantial evidence before the State Board to sustain its order. Brazoria Ind. Sch. Dist. v. Weems, Tex.Civ.App. (nwh), 295 S.W. 268; Whitmarsh v. Buckley, Tex.Civ. App. (nwh), 324 S.W.2d 298; State ex rel. Marrs v. Abshier, Tex.Com.App., 263 S.W. 263; Gerst v. Nixon, Tex., 411 S.W.2d 350.
This brings us to just what was the matter before the State Board. Such matter was whether the order of the Commissioner of Education sustaining the McLennan County Board, should be affirmed or overruled. The McLennan County Board had denied the transfer of the territory.
The Minutes of the State Board reflect that it "overruled" the Commissioner, and "ordered" the transfer of the territory. Thus the State Board's order was substituted for the order of the McLennan County Board. Had the McLennan County Board "ordered" the transfer in the first instance, such order would not have effectuated the transfer until the Board of Falls County concurred. So, when construed in connection with the matters the State Board had under consideration, the meaning of their order is clear. As stated in Gragg v. Hill, Tex.Civ.App., Er. Ref., 58 S.W.2d 150, 152:
"Proceedings before boards of this kind are more or less informal and it is not necessary that the minutes of their proceedings contain all of the essential elements of a judgment in a court of law. It is only necessary that such minutes be *494 sufficiently clear to disclose the intention of the board."
We think the board's order sufficiently clear to disclose the intention of the State Board, and that such was to order the transfer, insofar as the McLennan County Board had the right to so order. This was all that the State Board had under consideration. If the order of the State Board, as reflected in its minutes, is not accurately worded, we think it is still valid to effectuate all action necessary by the McLennan County Board in furtherance of the transfer. The order is obviously invalid to actually effectuate a transfer of the territory without concurrence of the Falls County Board.
The judgment of the trial court is reformed to hold the board's order valid to effectuate all necessary action solely by the McLennan County Board in furtherance of the transfer; and is otherwise affirmed.
Costs of appeal are divided equally between appellants and appellees.
Reformed and affirmed.
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421 S.W.2d 467 (1967)
TEXAS GENERAL INDEMNITY COMPANY, Appellant,
v.
J. C. ELLIS, Jr., Appellee.
No. 309.
Court of Civil Appeals of Texas, Tyler.
November 16, 1967.
*469 Saunders & Caldwell, Gene W. Caldwell, Tyler, for appellant.
Richard W. Fairchild, Nacogdoches, for appellee.
DUNAGAN, Chief Justice.
This is a workmen's compensation suit. The case was tried before a jury. Upon the findings of the jury, the trial court entered a judgment for total and permanent disability for the appellee in the sum of $13,703.39. Appellant duly perfected its appeal from such judgment to this court.
Appellant first contends that: "The trial court erred in failing to grant Appellant's Motion for a Mistrial, made after improper argument of counsel for the Appellee." We overrule this contention.
The argument of which appellant complains, and on which it filed its motion for new trial, was as follows: "And then his wife out there had been sick for two years from childbirtha young woman and 7 little tots, that he loves, just like you love yours, and he has got the same God given right to love themand not have paid Doctors and paid lawyers to come in here and".
At this point, counsel for appellee was interrupted and the sentence was not completed. Counsel for appellant objected on the ground that due to certain stipulations, such argument was improper and requested the court to instruct the jury to disregard it. The court sustained the objection and instructed the jury to "disregard the last argument of Counsel about the financial circumstances of the Plaintiff and his family." Counsel for appellee then pointed out that he had said nothing about the financial circumstances of plaintiff (appellee) and his family, but had said that he had the right to love his family just as the jury loved theirs; and further stated that if he had said anything about finances, he apologized and withdrew it, though he felt he had a right to discuss that under the circumstances of this case, "because that's why he is working."
Counsel for appellant then moved for mistrial for the reason that the argument was so prejudicial that an instruction would not remove it from the jury's mind.
Immediately before the argument objected to and quoted above, counsel for appellee had argued that the defense was that Ellis had been working and therefore was able to work, that he had no income, that the appellant knew it owed him, and if it had paid him, he wouldn't have had to work.
We do not consider the argument complained of to be a reference to the financial circumstances of appellee and his family. Evidence was admitted without objection that Ellis was 28 years old and had a wife who had been sick from childbirth for about two years and that he and his wife had seven children. Under the record in this case, we do not view the argument as being improper.
However, if it should be considered that the argument was a reference to the financial circumstances of appellee and his family, it still was not improper. As counsel for appellee pointed out at the time, the defense was that because Ellis had done some work since his injury, he was therefore able to work. Ellis had testified without objection that while he did some work after his injury, he was not able to work without suffering, that working or trying to work aggravated his pain. In supporting his wife and children, he had to work. Since appellee had the right to show that he had worked since the injury under the whip of financial necessity, to avoid the inference that he would not have worked if he had not been physically able to do so (Muro v. Houston Fire And Casualty Insurance Co., 310 S.W.2d 420, Tex.Civ.App., San Antonio, 1958, writ ref., n. r. e. and Bituminous Fire & Marine Insurance Co. v. Jones, 398 S.W.2d 577, 580, Tex.Civ.App., Tyler, 1966, writ ref., n. r. e.), his counsel had the right to argue, on the basis of the evidence admitted *470 without objection, that appellee had worked since his injury, not because he was able to do so, but because he had to work to support his wife and seven children, whom he loved.
In any event, in the light of the evidence before the jury without objection, the action of the trial court in promptly instructing the jury not to consider the argument objected to, and counsel for appellee withdrawing any reference to the financial circumstances of appellee, if any were contained therein, the argument was not of such nature as was reasonably calculated to cause, nor did it probably cause, the rendition of an improper verdict and judgment. Consolidated Underwriters v. Whittaker, 413 S.W.2d 709, 717, 718 (Tex.Civ. App., Tyler, 1967, writ ref., n. r. e.); Younger Brothers, Inc. v. Myers, 159 Tex. 585, 324 S.W.2d 546, 550 (1959); and Royal v. Cameron, 382 S.W.2d 335, 343 (Tex. Civ.App., Tyler, 1964, writ ref., n. r. e.).
Next, appellant contends that the court erred in permitting appellee's counsel to question its witness, Dr. Colquitt, about future medical treatment of the appellee and in failing to grant appellant's motion for mistrial pursuant to the court refusing to allow it to go into the beneficial effects of surgery before the jury.
On re-direct examination, testimony of Dr. Colquitt was elicited, without objection, to the effect that in the future appellee would need medical attention, medicines, and treatment. No inquiry was made as to what treatment would be required.
Later in the trial, after the court had refused to allow appellant to offer before the jury evidence as to the possible beneficial effects of surgery, appellant moved the court to instruct the jury to disregard the testimony as to the necessity for future medical attention as it was beyond the scope of the pleadings and not proper to be considered by the jury in arriving at its verdict. Counsel for appellee agreed that such instruction should be given. Appellant then moved for mistrial on the ground that such instruction could not remove the prejudice. The trial court denied the motion for mistrial but instructed the jury to disregard the testimony as to the necessity for future medical expenses.
No issue as to future medical was submitted to the jury, nor was recovery for future medical sought in the pleadings. But, since Dr. Colquitt had testified that appellee's physical condition resulting from the injury had required medical attention to the time of the trial, that it had disabled him to work, that it was permanent, and that it would continue to disable him to work in the future, the testimony as to the continuing need for medical attention in the future was admissible, not as a basis of recovery for expenditures therefor, but as a circumstance tending to show that appellee's physical condition, as it had existed to the time of trial, would remain unchanged in the future.
In any event, however, the action of the trial court in instructing the jury not to consider the testimony relative to the need for future medical attention effectively destroyed any likelihood of injury to the appellant, for the testimony was not of such nature that the likelihood of harm could not be removed by instruction not to consider it. Moreover, it added nothing of substantial significance to the testimony of Dr. Colquitt that appellee had been at the time of trial and would in the future continue to be disabled to work as the result of the physical condition caused by the injury. Appellate Procedure in Texas, Chapter 17, Harmless Error, Sec. 17.12(3).
Under the record before us, we do not think the court committed error in excluding testimony offered by appellant as to the beneficial effects of surgery. No reason appears, and appellant gives none, why the offering of testimony as to the necessity of future medical care should operate as a waiver of the general rule regarding the admissibility of evidence as to the beneficial effects of surgery. The reason *471 for the rule excluding such evidence (Truck Insurance Exchange v. Seelbach, 161 Tex. 250, 339 S.W.2d 521, 524, 525, 1960) continues to exist in the presence of evidence as to the continuing need for medical attention. 63 Tex.Jur.2d 468, and cases cited.
Moreover, if any waiver was effected by the introduction of the evidence pertaining to the necessity for future medical attentions, the waiver no longer existed after the trial court, on motion of appellant, withdrew the evidence and instructed the jury not to consider it. Appellant's contention is overruled.
The appellant also contends that the court erred in overruling appellant's request that certain exhibits be sent into the jury room.
While the jury was deliberating its verdict, appellant requested the court to send into the jury room Defendant's Exhibits Nos. 1 and 2, which the court refused.
Defendant's Exhibits Nos. 1 and 2 are claims for hospital and medical benefits under a group policy of insurance carried by Tyler Pipe & Foundry on its employees. On the face of these instruments appears: "Statement of Insured" and the "Assignment." Each bears the signature "J. C. Ellis, Jr." Defendant's Exhibit No. 1 is dated December 7, 1964. The "Statement of Insured", as reflected in this exhibit, describes the illness as "feverchillssore throat;" Defendant's Exhibit No. 2, which is undated, describes the illness as "tonsillitis".
On the back of each instrument is an "Attending Physician's Statement", which shows to have been signed by E. R. Moser, M. D. Each of these statements reflects the nature of the illness to be acute tonsillitis, not arising out of the patient's (appellee) employment. Each such statement reflects the patient first consulted the doctor for the condition on December 3, 1964.
Dr. E. R. Moser was not called to testify upon the trial of this case nor does the record reflect any attempt to establish that Dr. Moser in fact signed the statement.
Appellee identified the signatures on the face of each exhibit under "Statement of Insured" as being his signatures, but stated that he had not read the instruments.
Appellee testified that Dr. Moser was his family physician and that after his injury he went to Dr. Moser about his back; that Dr. Moser examined his back; that he did not know that he was treated for tonsillitis; that his throat was not hurting him; that he did not know what Dr. Moser treated him for other than for his backthat he went for his back.
Appellee testified further that he hurt his back loading a pipe on or about August 7, 1964, while at his work for Tyler Pipe & Foundry; that he reported his injury promptly to his pusher, Gennie Vickers, who sent him to the foundry dispensary where a nurse put a heat light on his back and gave him some pills and told him to go back to work, which he did; that having meanwhile talked to one of his bosses, Hugh Richardson, Jr., he went back the next day and was given the same treatment and pills; that he went to the dispensary a total of about 8 or 10 times and on each visit was given the same treatment; that on one of such occasions, he saw a company doctor, who did the same thing the nurse had done; that later he was taken in a company car to Dr. P. M. DeCharles, who examined and x-rayed him, gave him a prescription, and told him to lay off work until Monday and then, if he didn't get better, to come back; that he didn't get better and asked Richardson and Vickers for permission to go see Dr. DeCharles but they only sent him back to the dispensary and he had to go where they sent him.
Dr. P. M. DeCharles, a witness for appellant, testified: that he first saw the appellee on August 21, 1964, and Ellis told him he had had some back pain on the 13th or 14th of August, 1964, when he turned to pick up a pipe. He saw the appellee for Tyler Pipe & Foundry. As a *472 result of his examination, he reached the conclusion that Ellis had a mild back strain from some pulled ligaments and muscles in the low back. He further testified that appellee was in pain and there was no question but that he was hurt at that time. He did not see appellee again until he examined him at the request of appellant on October 24, 1966. On this occasion he found nothing wrong with Ellis and his opinion was that he was fully able to work
Dr. L. A. Colquitt, a witness for appellee, testified: that he first saw appellee on March 10, 1965. He had seen him 11 times since then, the last time being on October 24, 1966 (the same day he was last examined by Dr. DeCharles). He also saw him twice a day during the 4 days he hospitalized him for a myelogram.
Appellee gave a history on the first visit that he had had a sharp pain in his back on August 27, 1964, while lifting a pipe. He complained of continuous pain in the low back with some radiation into the thighs and legs, with the pain being aggravated to some extent by activity and to some extent relieved by rest. He prescribed a back brace for Ellis on this first visit.
Dr. Colquitt further testified that each time he has seen appellee, he has found substantially the same things he found at firstcomplaint of pain and muscle spasm in the areas of such complaints. To the present time, appellee has not improved substantially; that appellee's condition is a permanent thing.
He also testified that during the time he had seen appellee, he had not been able to work and make a living free of pain and suffering at any time, nor had he been in such physical condition that he could pass a physical examination for manual labor; that he would not expect appellee to be able to return to hard manual labor in his present condition. He knows of nothing that appellee could do day in and day out to make a living that requires his being on his feet, exerting his body, lifting, climbing, straining, stooping, bending, or squatting, without suffering as a result of it.
Upon recall, appellee testified that he did not tell Vickers or Richardson that he hurt his back working on his car. He said he did not hurt his back working on his car. He says he knows nothing about a car.
While appellee was being interrogated by counsel for appellant, concerning Exhibits 1 and 2, he testified that over his signature on Exhibit 1, it appeared therein that he had gone to the Gladewater Municipal Hospital on December 7, 1964, and had seen Dr. Moser for treatment of fever, chills and sore throat, and that over his signature on Exhibit 2, the date of his illness was shown to be December 3, 1964, and that the exhibit showed his illness was tonsillitis.
Defendant's Exhibits 1 and 2 were offered into evidence in their entirety without any limitation whatsoever. It appears from the record that the court permitted counsel to read to the jury only a part of the exhibits without exhibiting them or passing them to the jury, because they were claims for insurance benefits and the trial court had granted a motion in limine excluding any reference to insurance benefits. Under the state of the record, we cannot say the court committed error in refusing to grant appellant's request to send the said exhibits to the jury room.
Rule 281 of Texas Rules of Civil Procedure provides that where a part only of a document is read in evidence, the jury may not take the entire document with them unless the part so read to them is detached from that which was excluded. This rule applies to instruments attached or affixed to or constituting a part of writings in evidence. Michalak v. Dzierzanowski, 270 S.W.2d 276 (Tex. Civ.App., Austin, 1954, n. w. h.). Since only parts of Defendant's Exhibits 1 and 2 were read in evidence, and appellant's request was to send said exhibits in toto *473 to the jury, the trial court correctly refused it.
It seems to be the settled law of this state that where evidence is offered as a whole, only a part of which is admissible, the court does not commit error in sustaining an objection to such testimony and in such case it is not the duty of the court nor the party objecting to the same to separate the admissible from the inadmissible. Missouri, K. & T. Ry. Co. of Texas v. Washburn, 184 S.W. 580 (Tex.Civ. App., Austin, 1916, writ ref.); Kincaid v. Chicago, R. I. & G. Ry. Co., 119 S.W.2d 1084 (Tex.Civ.App., Dallas, 1938, writ dism.); Texas General Indemnity Co. v. Scott, 246 S.W.2d 228 (Tex.Civ.App., Amarillo, 1951, reversed on other grounds), 152 Tex. 1, 253 S.W.2d 651. We think this rule of law equally applies where a party requests the court to send to the jury room an instrument in its entirety when only a portion thereof was read to the jury, that is, admitted into evidence before the jury for its consideration. Therefore, to put the trial court in default, it was necessary that appellant select the admissible parts of the exhibits (the parts read to the jury and admitted into evidence) and request that such parts only be sent in to the jury. McCormick & Ray, Texas Law of Evidence, Vol. 1, page 20, Sec. 21.
Moreover, if the action of the trial court, in refusing to send the exhibits to the jury, be error, under this record, which we have examined in its entirety, it cannot be said that it amounted to such a denial of the rights of appellant as was reasonably calculated to cause and probably did cause the rendition of an improper judgment. Rule 434, T.R.C.P. The admissible portions of the exhibits (those portions appearing over the signature of appellee) were merely cumulative of undisputed evidence already before the jury, as appellee had admitted to the jury that the exhibits on their faces bore his true signature, that he signed them, and admitted further the material contents of each exhibit. The record does not reflect what portions of these exhibits were read to the jury, however, it may safely be assumed that only the material and admissible portions thereof were read to the jury. Dallas Ry. & Terminal Co. v. Orr, 147 Tex. 383, 215 S.W.2d 862 (1948); Continental Fire & Casualty Ins. Corporation v. Drummond, 220 S.W.2d 922, 928, 929 (Tex. Civ.App., Waco, 1949, writ ref., n. r. e.); Medrano v. City of El Paso, 231 S.W.2d 514 (Tex.Civ.App., El Paso, 1950, n. w. h.); Texas Employers' Ins. Ass'n v. Hale, 242 S.W.2d 796 (Tex.Civ.App., Amarillo, 1951, n. w. h.); Texas Employers' Ins. Ass'n v. Bounds, 218 S.W.2d 496, 499 (Tex.Civ.App., Beaumont, 1949, n. w. h.).
Furthermore, the exhibits do not relate to material issues in this case, for they do not reasonably tend to establish that appellee was not suffering any disability as a result of a back injury. If, as the exhibits reflect, appellee signed a claimant's statement for hospital and medical benefits for tonsillitis under a group policy carried by his employer, such does not have any reasonable tendency to establish that he was not suffering also from an injury to his back, nor that he was not also treated for the back trouble, as he testified he was. That appellee had complained of back trouble (as well as tonsillitis) was established by the testimony of his pusher, Vickers, and his foreman, Richardson, and that he actually had a back injury was confirmed by the testimony of appellant's own witness, Dr. DeCharles. The basic controverted issues were whether appellee's back injury was sustained in the course of his employment, and the extent and duration of incapacity resulting therefromthe exhibits did not bear upon either of these issues. Whether or not the failure of the trial judge to comply with the appellant's motion to send into the jury room the exhibits in question is reversible error is to be tested on the basis of the materiality and the admissibility of such exhibits. Texas Employers Insurance Ass'n v. Applegate, 205 S.W.2d 412, 414 (Tex.Civ.App., 1947, Texarkana, writ ref., n. r. e.). The effect of the exhibits *474 to impeach appellee, if any, was already accomplished by the interrogation of appellee as to the contents thereof and the reading of such parts of the exhibits to the jury. And, finally, such impeachment of appellee, if any, as might result from such exhibits was with reference to a matter which, under this record, was not material, but collateral. McCormick & Ray, Texas Law of Evidence, Vol. 1, page 535.
Appellant finally contends: (1) "There is no evidence to support the finding of the jury that the disability of the appellee is permanent." and (2) "There is insufficient evidence to support the findings of the jury that the disability of the appellee is permanent."
We have considered all the evidence, that which supports as well as that which is contrary to the verdict and judgment. As we view the record, the evidence is ample to support the verdict and judgment. We have considered all of appellant's points of error. They are overruled.
Finding no reversible error, the trial court's judgment is affirmed.
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45 Pa. Commw. 482 (1979)
Appeal of Daniel A. Nardozza From Decision of Zoning Hearing Board of the City of Altoona. City of Altoona, Appellant.
No. 361 C.D. 1978.
Commonwealth Court of Pennsylvania.
Argued May 7, 1979.
September 6, 1979.
Argued May 7, 1979, before Judges CRUMLISH, JR., MENCER and ROGERS, sitting as a panel of three.
*483 R. Bruce Brumbaugh and D. Brooks Smith, with them, Jubelirer, Carothers, Krier & Halpern, for appellant.
No appearance for appellee.
OPINION BY JUDGE CRUMLISH, JR., September 6, 1979:
The City of Altoona appeals an order of the Blair County Common Pleas Court which reversed the City's Zoning Hearing Board's denial of the application by Daniel A. Nardozza for a variance. He wanted to erect a restaurant and illuminated plastic sign on a vacant lot located in a Residential Single Family "B" District.
The proposal fails to conform to the use and yard area requirements of the City's zoning ordinance. The tract is unimproved and roughly triangular in shape and contains a steep, wooded hillside. The Board, in refusing the application, found that the applicant had not established legal hardship and that the use would be contrary to the health, safety, and welfare of the community. The court below held that the Board had erred in refusing to allow this tract as commercial use, that use as a residential dwelling was not possible, and a variance would not adversely affect the health, welfare, or safety of the community.
Our scope of review in zoning appeals where the trial court has considered additional evidence is limited to a determination of whether that court committed an error of law or abused its discretion. Ephross v. Solebury Township Zoning Hearing Board, 25 Pa. Commw. 140, 359 A.2d 182 (1976).
It is well established that an applicant for a variance has the burden of proving that (1) the proposed use is not contrary to the public interest and (2) the property involved is subjected to an unnecessary *484 hardship unique or peculiar to the property itself. We have held that an unnecessary hardship can be established either by (1) a showing that the physical characteristics of the property were such that it could not in any case be used for the permitted purpose or that the physical characteristics were such that it could only be arranged for such purpose at prohibitive expense or (2) by proving that the characteristics of the area were such that the lot has either no value or only a distress value for any purpose permitted by the zoning ordinance. Updegrave v. Philadelphia Zoning Board of Adjustment, 25 Pa. Commw. 451, 360 A.2d 827 (1976).
The application of these principles to the record in this case leads only to one possible conclusion; namely, that Nardozza failed to carry the heavy burden necessary to warrant the grant of a variance. The record reveals that although there are various commercial establishments interspersed within the neighborhood, the subject property is wholly surrounded by residential properties. Nardozza admits that a majority of the neighboring property owners were opposed to the proposed use and a counter-petition filed with the Board revealed that no fewer than 80 people were opposed to granting the variance. An increase in the already heavy flow of traffic in the area will admittedly result from the proposed construction although Nardozza could not project the extent of such increase. This increase in traffic, accompanied by simultaneous increases in the noise, litter and pollution, will have an adverse effect upon the health, safety, and welfare of the community.
Examination of the record also reveals that Nardozza has failed to carry his burden of proving unnecessary hardship. Nardozza's real estate expert testified that costly excavation of the premises would *485 be needed for any kind of construction due to the uneven topography. Nardozza testified that it would not be feasible to erect a residential dwelling on the property "unless the person wanted to spend a lot of money excavating." He opined further that, although construction of his restaurant would likewise require excavation, he expected business revenues to compensate the expenditures. It thus appears to him that while the property could be used for residential purposes, it could be more advantageously used as a restaurant. We are satisfied from the record that the request for a variance is not bottomed on any lack of feasibility of use for residential purposes but rather upon the expectation that the property will be economically productive as a restaurant. It is just this type of "economic hardship" which we have frequently held is legally insufficient to constitute an "unnecessary hardship" sufficient to justify granting of the variance. See First Presbyterian Church of York v. City Council of the City of York, 25 Pa. Commw. 154, 360 A.2d 257 (1976); Township of West Deer v. Bowman, 17 Pa. Commw. 579, 333 A.2d 792 (1975). It is the property which must be subject to the hardship and not the person. Borough of Latrobe v. Sweeney, 17 Pa. Commw. 356, 331 A.2d 925 (1975). This property suffers no hardship since the record fails to demonstrate that the land cannot reasonably be used as presently zoned.
Nardozza has failed to carry the heavy burden necessary to justify the grant of a variance.
Accordingly, we
ORDER
AND NOW, this 6th day of September, 1979, the order of the Court of Common Pleas of Blair County dated February 1, 1978, granting a variance to Daniel A. Nardozza is hereby reversed.
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421 S.W.2d 581 (1967)
COMMONWEALTH of Kentucky, DEPARTMENT OF HIGHWAYS, Appellant,
v.
Howard E. SELLERS, a Widower, Appellee.
Court of Appeals of Kentucky.
December 1, 1967.
*582 Robert Matthews, Atty. Gen., H. C. Smith, Asst. Atty. Gen., Frankfort; Strother Kiser, William O. Gilbreath, Lexington, for appellant.
William P. Curlin, Jr., Louis Cox, Hazelrigg & Cox, Frankfort, for appellee.
STEINFELD, Judge.
For the construction of the Blue Grass Parkway the Commonwealth condemned 26.14 acres of land in fee and 1.61 acres for a drainage easement. The Commonwealth has appealed from a judgment awarding Sellers $45,402.00. It claims that the verdict was "monstrously and shockingly excessive" and that certain testimony should have been stricken. We affirm.
Prior to the taking Sellers owned a highly productive farm shaped something like an equilateral triangle with the base of the triangle fronting on Kentucky Highway 33, which is the main road from Versailles to Harrodsburg. It contained 122.45 acres and was located approximately two miles south of Versailles, Kentucky. The farm which was considered to be one of the better farms in Woodford County had an eight bent tobacco barn with stock pens and a loading chute, a 96 foot never failing deep well operated by a jet pump and two 15 foot concrete stock watering troughs with automatic floats. It carried a 4.2 tobacco base and was principally used to graze cattle with the capacity for 75 cattle throughout the summer. It had an excellent water supply. Prior to the taking there were approximately 4,100 feet of frontage on Highway 33.
After the taking the farm was divided by the non-access Parkway into two smaller triangular tracts. The northern portion contained 56.12 acres and the southern 41.80 acres. The frontage on Highway 33 was so altered that the northern tract had 629 feet and the southern tract 1,071 feet.
The well, jet pump, and concrete watering troughs were within the area taken, leaving the remainder without water. The tobacco barn, stock pens and loading chutes were all located on the northern tract but there were no improvements on the southern tract. The entrances to the two tracts were from Kentucky 33 at the extreme ends of the base of the two triangles and were approximately 4,150 feet apart. To get from one tract to the other it became necessary to travel this distance along the highway.
The commissioners in the county court awarded $34,077.00 for the land taken and $1,000.00 for the easement. Judgment was *583 entered accordingly from which all parties appealed to the circuit court. After all evidence was presented the jury was instructed as directed in Com., Dept. of Highways v. Sherrod, Ky., 367 S.W.2d 844 (1963). It found that the value of the property before the taking was $1,000.00 per acre or a total of $122,450.00 and after the taking that the value was $800.00 per acre, a total of $77,048.00.
The Commonwealth produced three witnesses. One testified that the value before the taking was $83,600.00 and the after value was $60,665.00; that the difference was $22,935.00. Another said that the before value was $84,000.00, the after value $61,009.00 and that the difference was $22,991.00. The third witness was unable to state the value before or after the taking but it was his opinion that the difference in value was $27,000.00.
For the owner four witnesses testified as follows:
BEFORE VALUE AFTER VALUE DIFFERENCE
"M. L. Garrison $117,500 $80,800 $36,700
Clinton Newman 146,000 96,000 50,000
Jim Ed Bond 122,450 77,048 45,402
Howard Sellers, Jr. 122,450 73,460 48,990"
Mr. Jim Ed Bond testified that he had been engaged in the real estate business in Woodford County for 51 years. His qualifications to testify as an expert in this field were obvious. He explained to the jury that he believed that the property was worth a minimum of $1,000.00 an acre on the day it was taken and $800.00 per acre immediately thereafter. He said that he based the values on its location, road frontage, farming capacity, water, tobacco base and the other factors that go with the operation of a farm. Splitting the farm into two different farms ruined it, he explained. This is a proper consideration. Com., Dept. of Highways v. Sea, Ky., 402 S.W.2d 842 (1966); Com., Dept. of Highways v. Cammack, Ky., 408 S.W.2d 615 (1966); Com., Dept. of Highways v. Dennis, Ky., 409 S.W.2d 292 (1966); Com., Dept. of Highways v. Shields, Ky., 411 S.W.2d 476 (1967); Com., Dept. of Highways v. Brown, Ky., 415 S.W.2d 370 (1967). He testified that he had made a study of comparable sales in the county including at least 12 farms which he had sold in the last four or five years. The jury's verdict was that these were the values. After carefully examining the testimony of this witness we find that it alone supports the verdict of the jury, which is within the range of all the testimony. Com., Dept. of Highways v. Reed, Ky., 414 S.W.2d 904 (1967). We are unable to say that at first blush the verdict was rendered under passion or prejudice and that it is excessive. Com., Dept. of Highways v. Muir, Ky., 412 S.W.2d 231 (1967); Com., Dept. of Highways v. Boone, Ky., 412 S.W.2d 236, 237 (1967); Com., Dept. of Highways v. Roberts, Ky., 412 S.W.2d 883 (1967); Com., Dept. of Highways v. Hunt, Ky., 414 S.W.2d 897 (1967).
The Commonwealth contends that the court erred in overruling its timely motion to strike the testimony of Mr. Clinton Newman because his estimates of value were completely without foundation and his testimony was so vague, evasive and unrealistic that it had no probative value whatsoever. The principal ground on which it relies is that Mr. Newman did not base values on comparable sales. For 25 of the 30 years Mr. Newman had worked for the United States Government in the Department of Agriculture, he served as an appraiser of farm real estate, farm dwellings and as an area supervisor. Qualified experts on property values are not required to refer to comparable sales. Com., Dept. of Highways v. Wilder, Ky., 412 S.W.2d 255 *584 (1967). Comparable sales are helpful in determining value but other methods may be used. Com., Dept. of Highways v. Harris, Ky., 413 S.W.2d 78 (1967); Com., Dept. of Highways v. Woolum, Ky., 415 S.W.2d 83 (1967); Com., Dept. of Highways v. Hunt, supra. This witness was qualified to testify to the values which were in issue. Whitesburg Mun. Hou. Com. v. Bates, Ky., 412 S.W.2d 225 (1967). It was proper for the jury to consider his testimony.
The judgment is affirmed.
All concur.
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297 B.R. 478 (2003)
In re Thomas TILTON and Cynthia Tilton, Debtors.
Mark A. Weisbart, Chapter 7 Trustee, Plaintiff,
v.
Sanger Bank and Pilot Point Livestock Auction, Ltd., Defendants.
Pilot Point Livestock Auction, Ltd., Cross Plaintiff/Counter Plaintiff,
v.
Sanger Bank, Cross Defendant.
Bankruptcy No. 01-42206-S, Adversary No. 02-1050.
United States Bankruptcy Court, E.D. Texas, Sherman Division.
June 30, 2003.
*479 *480 Robert R. Coble, Gainesville, TX, for Debtor.
Mark A. Weisbart, Kessler & Collins, PC, Dallas, TX, Chapter 7 Trustee.
Miller Davidge, Hilton & Davidge, PC, Denton, TX, for Sanger Bank.
MEMORANDUM OPINION
DONALD R. SHARP, Chief Judge.
Now before the Court for consideration is the Motion by Mark A. Weisbart, the duly-appointed Chapter 7 Trustee and Plaintiff herein For Summary Judgment against Defendant Sanger Bank. The Court considered the pleadings filed, any attachments and the record in this case. This opinion constitutes the Court's findings of fact and conclusions of law to the extent required by Fed.R.Bankr.Proc. 7052 and disposes of all issues before the Court.
FACTUAL AND PROCEDURAL BACKGROUND
Debtors Thomas J. Tilton and Cynthia H. Tilton (the "Debtors") filed for relief under Chapter 7 of Title 11 of the United States Code on June 7, 2001. Mark A. Weisbart was appointed Chapter 7 Trustee (the "Trustee"). The Debtors listed approximately 36 acres of land located in Pilot Point, Denton County, Texas ("Property") on their Schedule "A" of the Statement of Financial Affairs and Schedules of Assets and Liabilities filed in the underlying bankruptcy case. Sanger Bank, the Defendant in this Adversary Proceeding filed a proof of claim ("Claim No. 5") asserting a secured claim in the amount of $478,100 secured by the Property. Claim No. 5 is supported by copies of the Promissory Note and Deed of Trust described with particularity hereinbelow.
The Trustee filed his Complaint To Avoid Lien and for Declaratory Relief and Objection To Claim against Sanger Bank. Sanger Bank responded and the matter *481 was set for trial. The Trustee amended the Complaint to add claims against Pilot Point Livestock Auction LTD ("Pilot Point"); Pilot Point answered and filed counterclaims (thereafter amended)[1] against the Trustee and a crossaction against Sanger Bank, which in turn filed its own cross and counterclaims. Ultimately, the Trustee filed a Second Amended Complaint and Sanger Bank filed an Answer to same. Shortly after the Second Amended Complaint and Answer were filed, the Trustee filed the instant Motion for Summary Judgment ("Motion") together with supporting affidavits. Sanger Bank responded and filed a cross Motion For Summary Judgment to which the Trustee replied. Sanger Bank's Response to the Trustee's Motion For Summary Judgment adopts the Trustee's Summary Judgment Exhibits including the Debtors' respective individual affidavits and the Affidavit of Charles Feoglio, President of Sanger Bank authenticating the Note, Deed of Trust and Modification and testifying that Sanger Bank never released the lien evidenced by same. The Fenoglio Affidavit recites that the outstanding principal balance is $350,000.00 and the outstanding interest is $174,369.40 as of May 19, 2003, the date of the affidavit (rather than as of the date of the filing of the petition). Both Motions were set for hearing. At the hearing on the Trustee's Motion the Court ruled in favor of the Trustee orally. The following are the Court's findings of fact and conclusions of law underlying the ruling. Sanger Bank's Cross Motion for Summary Judgment is currently pending.
DISCUSSION
Summary Judgment is appropriate in bankruptcy proceedings when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. In re McCafferty, 96 F.3d 192. The burden of establishing the nonexistence of a "genuine issue" is on the party moving for Summary Judgment. Celotex v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). One cannot rest on the mere allegations of the pleadings. In Anderson v. Liberty Lobby, 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), the Court held that (1) only disputes over facts that might legitimately effect the outcome are material under Rule 56; (2) the test for determining whether a genuine issue of material fact exists is whether a reasonable fact finder could find in favor of the non-moving party upon the evidence presented; and (3) in applying the test the court must view the evidence in the light most favorable to the non-movant and assess its sufficiency according to the evidentiary burden imposed by the controlling substantive law. Once the Movant has properly supported the Motion with competent summary judgment evidence Rule 56(e) requires the opposing party to "set forth specific facts" that demonstrate the existence of a genuine issue for trial.
Local Rule of Bankruptcy Procedure 7056 "Summary Judgments" states that Local District Rule CV-56 applies in adversary proceedings. Rule CV-56 provides:
Summary Judgment Procedure.
(a) Any party moving for summary judgment should identify both the legal and factual basis for its motion. The text of the motion or an appendix thereto must include a "Statement of Material Facts." If the movant relies upon evidence to support its motion, the motion should include appropriate citations to proper summary judgment evidence as to which *482 the moving party contends there is no genuine issue of material fact for trial. Proper summary judgment evidence should be attached to the motion in accordance with section (d) of this rule.
(b) Any party opposing the motion should serve and file a response that includes in the text of the response or as an appendix thereto, a "Statement of Genuine Issues." The response should be supported by appropriate citations to proper summary judgment evidence as to which it is contended that a genuine issue of material fact exists. Proper summary judgment evidence should be attached to the response in accordance with the procedure contained in section (d) of this rule.
(c) In resolving the motion for summary judgment, the Court will assume that the facts as claimed and supported by admissible evidence by the moving party are admitted to exist without controversy, except to the extent that such facts are controverted in the "Statement of Genuine Issues" filed in opposition to the motion, as supported by proper summary judgment evidence. The Court will not scour the record in an attempt to determine whether the record contains an undesignated genuine issue of material fact for trial before entering summary judgment.
(d) As used within this rule, "proper summary judgment evidence" means excerpted copies of pleadings, depositions, answers to interrogatories, admissions, affidavits, and other admissible evidence cited in the motion for summary judgment or the response thereto. The phrase "appropriate citations" means that any excerpted evidentiary materials that are attached to the motion or the response should be referred to by page and, if possible, by line. Any attached evidentiary materials should have the cited portions highlighted in the copy provided to the Court, unless the citation encompasses the entire page. The page preceding and following a highlighted page may be submitted if necessary to place the highlighted material in its proper context. Only relevant, cited-to excerpts of evidentiary materials should be attached to the motion or the response.
Local District Rule CV-56.
The Trustee's Second Amended Complaint is extensive. Sanger Bank, in its pleadings of record, admits the following facts:
(i) on or about January 6, 1994, the Debtors signed a promissory note made payable to Sanger Bank in the amount of $350,000 (the "Note") with interest accruing at 8.750% annually and a maturity date of January 6, 1997;
(ii) on or about January 6, 1994, the Debtors executed a Deed of Trust in favor of Sanger Bank to secure the Note; that it pledged 65 acres of Property in Pilot Point and that it was properly recorded in the deed records of Denton County on February 1, 1994; and that
(iii) both Debtors executed a certain Modification and Extension of Note and Lien on December 21, 1994 pertaining to the aforementioned Note and Deed of Trust and recorded same in Deed Records for Denton County on January 6, 1995[2].
*483 Sanger Bank advises that an Addendum to FSA OL Line of Credit Note dated March 23, 1998 was executed by and between Sanger Bank and the Debtors.[3] The Addendum to FSA OL Line of Credit Note dated March 23, 1998 was never recorded in deed records. (Sanger Bank's Response to the Motion For Summary Judgment, ¶ 17 and Sanger Bank's Answer To 2nd Amended Complaint ¶ 15.)
The basis upon which the Trustee seeks summary judgment is that Sanger Bank could not enforce its lien debt evidenced by the Deed of Trust, Note and Modification under applicable Texas law against either a hypothetical holder of a judicial lien or a bona fide purchaser. Consequently, the Trustee believes the Court may declare the lien avoidable under 11 U.S.C. §§ 544(a)(1) and/or 544(a)(3).
The Trustee is correct. The Trustee acquired the power to avoid the lien under § 544(a)(1) of the Bankruptcy Code as a judicial lien creditor and also under sub-section (a)(3) as a bona fide purchaser as of the commencement of the case. The Deed of Trust, as the Trustee opines, became void and ceased to exist by operation of Texas law as of the petition date. Sanger Bank has failed to demonstrate to this Court that it brought suit for recovery or sought to foreclose its lien on the Property within four years of the lien debt's maturity on December 21, 1995 or that it extended its lien in accordance with applicable Texas State Law. December 21, 1995 is the maturity date based upon the recorded modification recorded in Deed Records. The four year statute of limitations arises under Tex. Civ.Prac. & Rem.Code Sections 16.035(a) and 16.035(e) (more specifically where a Note has been modified or extended). The limitations period runs from the maturity date of the Note. Texas Civil Practices and Remedies Code § 16.035(e). See also The Cadle Company v. Butler, 951 S.W.2d 901, 909 (Tex.App.-Corpus Christi, 1997) [where no extension or renewal agreement is recorded and lien debt appears four years past due, such agreement is void against such person].
Sanger Bank takes the position that the Note did not mature on December 21, 1995 as a result of suspension created by the Addendum to FSA OL Line of Credit Guarantee. Sanger Bank opines that as a result of the Addendum, the December 21, 1995 maturity date on the face of the Modification was extended to March 23, 2005. Notwithstanding that Sanger admits it never recorded the Addendum, Sanger believes that the Trustee should be and is bound by it because he had a duty of "reasonable inquiry". Sanger Bank avers that the Debtors' Schedules filed in this case placed the Trustee on "inquiry notice". Sanger Bank relies upon Realty Portfolio, Inc. v. Hamilton (Matter of Hamilton), 125 F.3d 292 (5th Cir.1997) for this proposition.
The Hamilton case is distinguishable on its facts from the instant case. Charles Hamilton, as Chapter 13 Debtor, was attempting to exercise the avoidance powers *484 of the Chapter 13 Trustee under the Bankruptcy Code as to real property acquired by Realty Portfolio at a pre-petition sale properly conducted under state law. After the foreclosure but prior to the recordation of the substitute trustee's deed the debtor filed his voluntary petition in bankruptcy. Thus, the bankruptcy estate acquired the real property under the infirmity of an unrecorded sale. The Fifth Circuit Court in Hamilton explained:
While the Bankruptcy Code creates the status of a hypothetical bona fide purchaser, state law defines that status. Mutual Benefit Life Ins. Co. v. Pinetree, Ltd. (In re Pinetree, Ltd.), 876 F.2d 34, 36 (5th Cir.1989); In re Elam, 194 B.R. at 416. Under Texas law, a "bona fide purchaser is one who acquires (apparent) legal title to property in good faith for a valuable consideration without . . . notice of an infirmity in the title." Williams v. Jennings, 755 S.W.2d 874, 881 (Tex.App.-Houston [14th Dist.] 1988, writ denied); see also Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 347 (1936). A conveyance of an interest in real property, including a deed of trust, is void as to a subsequent purchaser if the interest was not recorded at the time of the subsequent purchase and the purchaser paid valuable consideration without notice of the unrecorded interest. See Tex. Prop.Code Ann. § 13.001(a).
Matter of Hamilton, 125 F.3d 292, 298-299.
Ultimately, the Hamilton Court remanded the matter to the bankruptcy court to determine whether the result would have been different if Hamilton had discharged his duty to make a reasonable inquiry into the status of the recorded deed of trust.
Given the foregoing definition of a bona fide purchaser for value, Sanger Bank relies upon the Hamilton case to argue that the Trustee in bankruptcy, cast by the Bankruptcy Code as a hypothetical bona fide purchaser here, should be charged with implied knowledge of the addendum by inquiry notice thus defeating his status as a bona fide purchaser in good faith. (In both the Hamilton case and in the case at bar-constructive notice was not a factor.) The Trustee argues that a trustee's knowledge is immaterial under the Code. The Hamilton Court acknowledges that Texas law recognizes the doctrine of inquiry notice, triggered by notice of facts that would put a reasonably prudent person on notice that he had a duty of inquiry. Matter of Hamilton, 125 F.3d 292 at 299 citing to Woodward v. Ortiz, 150 Tex. 75, 237 S.W.2d 286, 289 (1951); Prewitt v. United States, 792 F.2d 1353, 1358-59 (5th Cir.1986); Teofan v. Cools (In re Spring Creek Invs.), 71 B.R. 157, 159-60 (Bankr.N.D.Tex.1987); T-Vestco Litt Vada v. Lu Cal One Oil Co., 651 S.W.2d 284 (Tex.App.-Austin 1983, writ ref'd n.r.e.). However, the Hamilton Court suggests that "whether a purchaser may be charged with such knowledge depends on the facts of each case". Ibid at p. 302 citing to Miles v. Martin, 159 Tex. 336, 321 S.W.2d 62, 69 (1959). Thus, the Hamilton ruling does not save Sanger Bank from the result of its failure to record its lien, if any, created through the Addendum or consensually with the Debtors.[4] The distinction between this case and the Hamilton case which mandates a *485 different result is that in Hamilton the recorded instrument showed a deed of trust that had never been released and was not matured. Therefore, any reasonably prudent person would be placed on notice that he should make reasonable inquiry as to the status of the security interest created by that recorded document. In the instant case the recorded document affirmatively showed that it had matured on March 21, 1995. The absence of any document extending that maturity date or the absences of any action to enforce the security interest within the statutory period of four years created by Texas law was not ambiguous. If one could rely on the face of the recorded documents and the statutory limitations provided by Texas law that security interest was at an end. To hold that such a set of circumstances created a duty of further inquiry would create uncertainty as to every recorded document in the public records. Such is not the reason for public recordation laws or statutes of limitation.
In this case, the Court finds that the Trustee acquired the property as of the commencement of the case or June 7, 2001. 11 U.S.C. §§ 541 and 544. The Trustee was appointed June 15, 2001. The Debtor's Schedules were filed July 26, 2001. It is illogical and unreasonable to charge the Trustee with knowledge of a lien as a result of the filing of the Debtors' Schedules. Assuming, arguendo, as Sanger Bank suggests, the Debtors' Schedule D listing the property as secured by Sanger Bank, put the Trustee on notice of the lien, the Schedules of the Debtors merely put the Trustee on notice to investigate the county deed records and determine whether there were properly recorded documents creating an unexpired lien or extending the prior lien. He did so and there were none. The Trustee's investigation revealed that there were not properly recorded documents extending the expired lien of Sanger Bank. Tex.Civ. Prac. & Rem.Code § 16.036(b)(2) and (d). A debtor's Schedules filed pursuant to 11 U.S.C. § 521 cannot create a valid lien under State Law, resurrect an expired lien or correct an improperly perfected one. If "constructive notice of a recorded deed does not trigger a duty to monitor litigation announcements and all other sources potentially containing information about real property to learn of any unrecorded extensions, renewals, releases, or foreclosure sales"[5], neither does the duty of inquiry notice "extend to exhaustive inquiry or investigation of speculation and conjecture." In re Spring Creek Investments of Dallas, N.V., Inc., 71 B.R. 157, 160 citing to Edwards v. Brown, 68 Tex. 329, 4 S.W. 380 (1887). Rather, "A hypothetical purchaser on inquiry notice is chargeable with implied knowledge of facts that would be discovered by a reasonably diligent inquiry." Hamilton, Ibid at 300. Sanger Bank's unique reading of Hamilton simply renders the recording requirements of the Texas Property Code superfluous. Moreover, it renders the statute of limitations meaningless. Accordingly, at best a debtor's schedules might put a trustee on inquiry notice to investigate the County's deed records to determine the status on the date of filing of recorded liens against the real property that had become property of the estate under 11 U.S.C. § 541 upon the commencement of the bankruptcy case. The Debtors' schedules do not shield Sanger Bank from its failure to enforce its pre-petition rights.[6] Schedule *486 "D" containing the Debtors' opinion as to the secured status of the property, an opinion subject to attack, cannot and does not rescue Sanger Bank from its failure to file, perfect or otherwise comply with the requirements of State Law and the Texas Property Code. The Fifth Circuit dealt with the question of whether inquiry notice was applicable to the bankruptcy trustee as the hypothetical purchaser under § 544(a). The Court observed that to find such notice inapplicable to a bankruptcy trustee would place the trustee in a better position than other purchasers under state law. This Court certainly agrees with that principal but it does not support the position of Sanger Bank. The Trustee is correct that pursuant to the Fifth Circuit's reasoning in Hamilton Texas law would not have required him to make an inquiry in light of the conclusiveness afforded the recorded documents under the statutory scheme. It is just that no bonafide purchaser would have had a duty to make any further inquiry when confronted with the recorded document at issue in this case and the absence of any other recorded documents indicating that one could not rely on the maturity date and the Texas statute of limitations.
As an additional basis to seek a summary judgment ruling, the Trustee relied upon a bankruptcy trustee's avoiding powers provided under 11 U.S.C. § 544(a)(1) which grants the trustee the status of a hypothetical creditor holding a judicial lien against the property. Sanger Bank's Response To The Motion For Summary Judgment fails to address or respond to the Section 544(a)(1)issue raised by the Trustee. Local Rule of Bankruptcy Procedure 7056 "Summary Judgments" states that Local District Rule CV-56 applies in adversary proceedings (as set forth herein above), and in particular, in an instance where facts remain un-controverted, the Court may deem them admitted.
Even were Sanger Bank to prevail in its arguments regarding inquiry notice and defeat the Trustee's status as a bona fide purchaser, Sanger Bank's argument and supporting evidence wholly fail to demonstrate to the Court that there is a genuine issue of material fact that might legitimately effect the outcome of this litigation respecting whether the Trustee, holding the power of a judicial lien creditor extending credit to the Debtor as of the commencement of the case, may avoid liens against real property of the Debtors, including an expired lien or an unrecorded and, therefore, improperly perfected extension of a lien. 11 U.S.C. § 544(a)(1). The Court will not scour the record in an attempt to determine whether the record contains an un-designated genuine issue of material fact for trial before entering summary judgment given that the Response overlooks or ignores the issue.
CONCLUSION
The burden of establishing the nonexistence of a "genuine issue" is on the party moving for Summary Judgment. Celotex, 477 U.S. 317, 330, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); that burden has been met. There are no genuine issues of material facts in dispute among the parties sufficient to deny the Motion for Summary Judgment on the issue of the Trustee's power to avoid the lien of Sanger Bank against the subject Property. The Court finds the Note matured on December. 21, 1995. The Court further finds that Sanger Bank's lien under the original loan documents terminated December 21, 1999 the maturity date reflected in the Deed Records of the County-as a result of Sanger Bank's failure to properly record and acknowledge *487 its purported extension of its lien. Insofar as Sanger Bank failed to take any action on its lien debt secured by the Property within the appropriate statutory period, the Trustee is entitled to Declaratory Judgment that the lien asserted by Sanger Bank through its Deed of Trust on the Property is void and of no force and effect against the Trustee as of the date of the commencement of the case.
The issue of the value of the claim of Sanger Bank as an unsecured claim has not been addressed whatsoever. Moreover, the matter will still require trial on the Pilot Point issues, although settlement negotiations between the Trustee and Pilot Point are pending and the matter may be resolved thereby.
An order will be entered accordingly.
NOTES
[1] Trustee successfully moved to dismiss one of Pilot Point's counterclaims.
[2] The Modification, attached as Exhibit C to the Complaint, on its face purports "to extend or rearrange the time or manner of payment of said note and to extend and carry forward the liens on said property" . . . and provides for a different rate of interest. Specifically the Modification sets forth (in pertinent part) that the Debtors "promise[s] to pay to the order of Sanger Bank all amounts owing on said note, including both principal and interest, as follows: The principal amount owing on said indebtedness as of this date is ONE HUNDRED FORTY-SIX THOUSAND SIX HUNDRED FORTY-SIX AND 58/100 ($146,646.58) DOLLARS. The annual interest rate on unpaid principal from this date is 11.5% per annum. Both principal and interest are due and payable on or before December 21, 1995." Then, the Modification language reiterates in the next subsequent paragraph in all capitalized letters a notice to the borrower that "this loan is payable in full on December 21, 1995."
[3] The Addendum was introduced into the Court's record as Exhibit "D" to the Affidavit of Cynthia H. Tilton filed of record May 1, 2003.
[4] Sanger argues under Section 13.001(b) of the Texas Property Code that an unrecorded lien is valid as between the parties and cites to the case of Yates v. Darby, 133 Tex. 593, 131 S.W.2d 95 (Com.App.1939) for the same proposition. While that is certainly a correct principle of law it is not meaningful in this case because the Trustee is not a successor to the Debtor but is a third party to the transaction. The Yates decision recognizes that fact as to third parties in cases where extensions are unrecorded.
[5] Hamilton, supra, at 301.
[6] As the Trustee points out, citing to the Tilton Affidavit uncontroverted by Sanger Bank: "Prior to the petition date, Sanger Bank took no action to enforce the Deed of Trust or Note, nor did it foreclose its lien on the Property."
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297 B.R. 126 (2003)
In the Matter of Paul F. BENDER and Lee E.J. Bender, Debtors.
Lee E.J. Bender, Plaintiff,
v.
Educational Credit Management Corporation, Defendant.
Civ. No. 4:02CV3298, Bankruptcy No. 01-40345, Adversary No. 01-4028.
United States District Court, D. Nebraska.
May 5, 2003.
*127 *128 Patricia M. Dugan, Omaha, NE, U.S. Trustee.
Kathleen A. Laughlin, Omaha, NE, trustee.
Richard B. Register, Fremont, NE, for plaintiff.
Gary L. Young, Keating, O'Gara Law Firm, Lincoln, NE, for defendant.
MEMORANDUM AND ORDER
KOPF, Chief Judge.
This matter is on appeal from an order that was entered by the bankruptcy court on September 13, 2002 (bankruptcy court filing 43),[1] discharging three student loans of one of the debtors, Lee Bender. I conclude that the order should be reversed, and that the appellee's complaint should be dismissed without prejudice, for the reason that any determination of dischargeability of these debts is premature.[2]
I. Background
Lee Bender and her husband, Paul, filed for bankruptcy under Chapter 13 in February 2001. In connection therewith, in June 2001, she initiated an adversary proceeding against the United States Department of Education and UNIPAC Service Corporation to obtain a discharge from indebtedness on three student loans that she took out between September 1984 and February 1987. The appellant, Educational Credit Management Corporation (ECMC), was later substituted for UNIPAC as the real party in interest, and the Department of Education was dismissed from the action. As of September 13, 2002, the date of the bankruptcy court's hearing in the adversary proceeding, the total amount of unpaid principal and accrued interest on the three loans was *129 $11,176.11; ECMC has agreed that the loans can be repaid in monthly installments of $106.80 over a term of 15 years.[3] (Exhibit 1.)
Lee Bender is 53 years old, is unemployed, and, for a variety of reasons, has no reasonable prospect of employment.[4] She testified that she earns approximately $200 (net) per month buying items at garage sales and reselling them through eBay on the internet.
Paul Bender is 45 years old and is employed as a truck driver.[5] At the time of filing for bankruptcy, he reportedly was being paid gross wages of $2,600 per month, and was taking home $2,054. (Exhibit 6.) During the first ten months of 2001, he grossed $30,299.15, and his average monthly take home pay was $2,238. (Exhibits 5, 8.) He subsequently missed four to five weeks of work because of two surgeries, and these absences caused his income to decrease temporarily. There is no evidence that his earning capacity has been permanently impaired as the result the physical conditions which required surgery (torn cartilage resulting from work-related knee injury and ear infection associated with reconstructive surgery performed 12 years earlier). Lee Bender, who manages the household finances, testified that her husband brings home a "base" amount of $1,600 per month, but also stated that his weekly check varies between "three hundred and something" to "right around $600." (Tr. 55-56.) She stated that his most recent paycheck was $602, and that in other weeks recently he had received $357, $545, $487, and $397 "give or take." (Tr. 58.)
In responding to interrogatories in November 2001, Lee Bender itemized the couple's monthly expenses, which totaled $2,264. (Exhibits 5, 11.) She testified at the hearing that their grocery bills had increased by between $200 to $400 per month since February 2002, when they started providing regular day care for her three grandchildren.[6] (Tr. 43, 76-77.) She also testified that a listed expense of *130 $100 per month for cigarettes was $60 less than the couple's actual expenditure. (Tr. 53.)
ECMC argues that the cost of caring for non-custodial grandchildren and also the cost of smoking should be excluded when calculating "the debtor's and her dependent's reasonable necessary living expenses." ECMC also argues that the Benders' monthly housing costs are excessive, and it points to testimony by Lee Bender that it might be possible for the couple to rent a smaller house or an apartment for between $450 and $700 per month, were it not for their need for additional bedrooms for her grandchildren. (Tr. 46, 79-81.) Thus, ECMC pegs the reasonable monthly expenses at $1,953 ($2,264 minus $100 for cigarettes and $371 adjustment for housing expense).[7] Subtracting this figure from a combined monthly income of $2,438 ($2,238 for Paul Bender's take home pay during first ten months of 2001, plus $200 for Lee Bender's internet auction sales), ECMC calculates that there should be a monthly surplus of $485,[8] which would easily accommodate a monthly student loan payment of $106.80.
The Benders have incurred additional debts since filing for bankruptcy. At the time of the hearing, they owed over $1,700 in past-due property taxes and had been unable to make full house payments for the past three months, resulting in an arrearage of around $1,800. (Tr. 35-36.) They had approximately $1,000 in recent medical bills. (Tr. 50.) They also had fallen behind in making utility payments. (Tr. 91.) Judge Mahoney specifically relied on this evidence to find that regardless of what is shown on the schedules for average monthly expenses, the Benders "are not making it," from which he concluded that "[i]t would be an undue hardship to force them to come up with $106 a month now or in the future." (Tr. 104, 107.)
II. Discussion
The Bankruptcy Code exempts certain educational debt from discharge unless it is shown that the exemption "will impose undue hardship on the debtor and the debtor's dependents." 11 U.S.C. § 523(a). In order to discharge student loan debt, the debtor must initiate a separate action to prove undue hardship. In re Rose, 187 F.3d 926, 929 (8th Cir.1999). The debtor has the burden of proving undue hardship by a preponderance of the evidence. Long v. Educational Credit Management Corp. (In re Long), 271 B.R. 322, 328 (8th Cir. BAP 2002), rev'd on other grounds, 322 F.3d 549 (8th Cir.2003).
The bankruptcy court's conclusion that appellee's student loans impose an "undue hardship" is a legal question to be reviewed de novo. In re Long, 322 F.3d at 553 (rejecting clearly erroneous review standard applied by the Eighth Circuit Bankruptcy Appellate Panel). Whether the dischargeability issue is ripe for decision is, of course, also a legal question, and one which may be raised sua sponte at any stage of the proceedings. See *131 Bergstrom v. Bergstrom, 623 F.2d 517, 519 n. 1 (8th Cir.1980). See also Vogel v. Foth and Van Dyke Associates, Inc., 266 F.3d 838, 840 (8th Cir.2001) (the question of ripeness touches a court's jurisdictional powers).
The Eighth Circuit has embraced a "totality-of-the-circumstances" approach to the "undue hardship" inquiry. In re Long, 322 F.3d at 554 (reaffirming test first set forth in Andrews v. South Dakota Student Loan Assistance Corp. (In re Andrews), 661 F.2d 702, 704 (8th Cir.1981), while expressly rejecting more restrictive test articulated in Brunner v. New York State Higher Educ. Serv. Corp., 831 F.2d 395, 396 (2nd Cir.1987)).[9] Thus, in evaluating the totality-of-the-circumstances on review in this case, I am instructed by the Court of Appeals to consider: "(1) the debtor's past, present, and reasonably reliable future financial resources; (2) a calculation of the debtor's and her dependent's reasonable necessary living expenses; and (3) any other relevant facts and circumstances surrounding each particular bankruptcy case." Id. (citing Andrews, 661 F.2d at 704; Andresen v. Nebraska Student Loan Program, Inc. (In re Andresen), 232 B.R. 127, 132 (8th Cir. BAP 1999)).[10]
"Simply put, if the debtor's reasonable future financial resources will sufficiently cover payment of the student loan debt while still allowing for a minimal standard of living then the debt should not be discharged. Certainly, this determination will require a special consideration of the debtor's present employment and financial situation including assets, expenses, and earnings along with the prospect of future changes positive or adverse in the debtor's financial position." Id. at 554-55 (citing In re Andresen, 232 B.R. at 141).
Although Judge Mahoney concluded that "[i]t would be an undue hardship to force [the Benders] to come up with $106 a month now or in the future," it should be recognized that the Benders cannot be forced to make any payments to ECMC at the present time. During the pendency of their bankruptcy, ECMC is prohibited from taking any action to collect on the student loan debts, see 11 U.S.C. § 362(a) (providing automatic stay), and it is limited to receiving pro-rata payments along with other unsecured creditors under the Chapter 13 plan, see Groves v. LaBarge (In re Groves), 39 F.3d 212, 215 (8th Cir.1994) (separate classification of student loan debt in Chapter 13 plan unfairly discriminated against other creditors).
*132 As a matter of law, therefore, the question of dischargeability under § 523(a)(8) should not hinge upon the Benders' current financial condition, but, rather, should be dependent upon their ability to pay off the loans after emerging from bankruptcy protection. Also, even though Judge Mahoney's order states that "[t]he student loans are discharged" (bankruptcy court filing 43), a debt generally is not discharged under Chapter 13 until the debtor completes payments under the plan. See 11 U.S.C. § 1328(a).[11] While a complaint to determine the dischargeability of a debt "may be filed at any time," see Bankruptcy Rule 4007(b), it does not necessarily follow that a determination under § 523(a)(8) can be made at any time during the pendency of a Chapter 13 case. In fact, a number of courts have held that such a determination is premature until at or about the time that a discharge of the student loan debt can be ordered under § 1328(a). See, e.g., Pair v. U.S. Dept. of Education (In re Pair), 269 B.R. 719, 721 (Bankr.N.D.Ala.2001) (dismissing complaint without prejudice to refiling within six months of plan completion date); Soler v. United States (In re Soler), 250 B.R. 694, 695-97 (Bankr.D.Minn.2000) (relief sought was too remote and speculative); Raisor v. Education Loan Servicing Center, Inc. (In re Raisor), 180 B.R. 163, 166 (Bankr.E.D.Tex.1995) (not ripe for decision until after Chapter 13 plan has been successfully completed). Cf. Ekenasi v. Education Resources Institute (In re Ekenasi), 325 F.3d 541, 547-48 (4th Cir.2003) (declining to adopt "a hard and fast rule which would preclude bankruptcy courts from ever entertaining a proceeding to discharge student loan obligations until at or near the time the debtor has completed payments under a confirmed Chapter 13 plan," but emphasizing that "it will be most difficult for a debtor, who has advanced his education at the expense of government-guaranteed loans, to prove with the requisite certainty that the repayment of his student loan obligations will be an `undue hardship' on him during a significant portion of the repayment period of the student loans when the debtor chooses to make that claim far in advance of the expected completion date of his plan."). But see Goranson v. Pennsylvania Higher Education Assistance Agency (In re Goranson), 183 B.R. 52, 53 n. 1 (Bankr.W.D.N.Y.1995) (disagreeing with decision in In re Raisor); United Student Aid Funds, Inc. v. Taylor (In re Taylor), 223 B.R. 747, 750-51 (9th Cir. BAP 1998) (issue of dischargeability of Chapter 13 debtors' student loan debt was ripe for adjudication before completion of plan payments).
"The ripeness doctrine is invoked to determine whether a dispute has yet matured to a point that warrants decision. The determination is rested both on Article III concepts and on discretionary reasons of policy. There are two factors relevant to a ripeness decision: the fitness of the issue for judicial resolution and the hardship to the parties of withholding court consideration." Automotive, Petroleum & Allied Industries Employees Union, Local 618 v. Gelco Corp., 758 F.2d 1272, 1275 (8th Cir.1985) (citations omitted). The first factor of "fitness for judicial resolution" generally "safeguards against judicial review of hypothetical or speculative disagreements." Nebraska Public Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032, 1038 (8th Cir.2000). *133 The second factor of "hardship to the parties" involves a determination that delayed review will result in significant harm, with "harm" including both the traditional concept of damages and also the heightened uncertainty and resulting behavior modification that may result. See id. Neither factor supports an immediate determination as to the dischargeability of the student loan debt this case.
"[T]he bankruptcy court's determination of undue hardship will necessarily involve a certain amount of speculation about the debtor's financial circumstances," In re Andrews, 661 F.2d at 705 n. 5, but a determination that is based on a record made 2 1/2 years before the expected completion date of the Benders' Chapter 13 plan entails unnecessary guesswork and presupposes that the Benders will complete their payments under the plan. Also, while the appellee may have benefitted from an early determination of dischargeability by the bankruptcy court, it has not been shown that she would be harmed if a determination were not made until at or about the time that a discharge order can be entered under § 1328(a).
In summary, I conclude that the issue of "undue hardship" under § 523(a)(8) was not ripe for decision by the bankruptcy court on September 13, 2002, or at the present time on de novo appellate review. I will reverse the bankruptcy court's order and remand the matter for dismissal without prejudice.
Accordingly,
IT IS ORDERED that the bankruptcy court's order of September 13, 2002 (bankruptcy court filing 43), is reversed, and the case is remanded with directions to dismiss the appellee's complaint without prejudice.
NOTES
[1] The Honorable Timothy J. Mahoney, Chief Judge of the United States Bankruptcy Court for the District of Nebraska.
[2] After examining the briefs and record, I find that oral argument is not needed because the facts and legal arguments are adequately presented in the briefs and record and the decisional process would not be significantly aided by oral argument. See Bankruptcy Rule 8012. In a memorandum and order entered on April 8, 2003 (filing 9), I sua sponte raised the issue of ripeness, advised the parties of my tentative conclusion that the dischargeability determination should not have been made by the bankruptcy court, and invited them to submit supplemental briefs on this and other issues. They have now done so (filings 10, 11). The appellant agrees that the matter was not ripe for decision, while the appellee maintains that the bankruptcy court's order should be affirmed.
[3] As also discussed in my previous memorandum and order, it is questionable whether the student loan debt can be restructured in this manner. See, e.g., Hawkins v. Buena Vista College (In re Hawkins), 187 B.R. 294, 300-01 (Bankr.N.D.Iowa 1995) (court did not have authority under either 11 U.S.C. § 523(a)(8) or 11 U.S.C. § 105 to order a revised schedule of student loan payments); Brown v. Union Financial Services, Inc. (In re Brown), 249 B.R. 525, 530-31 (Bankr.W.D.Mo.2000) (same). I make no determination of this issue, however.
[4] ECMC does not argue that Ms. Bender should seek employment outside of the home, or that she has failed to maximize her income.
[5] Although Ms. Bender argues that the student loan debt is solely her obligation, the overwhelming weight of legal authority supports the view that her husband's income must be included when considering her financial resources for purposes of Section 523(a)(8). See White v. United States Dept. of Education (In re White), 243 B.R. 498, 509 & n. 9 (Bankr.N.D.Ala.1999) (collecting cases). See also In re Sweeney, No. 8:02CV238, slip opinion (D.Neb. Dec. 12, 2002) (Shanahan, J.) (finding no contrary authority).
[6] Lee Bender has a 29-year-old daughter from a previous marriage. The daughter is separated from her husband and now resides in Lincoln, Nebraska, where she attends school. Her husband and their three children continue to live in David City, Nebraska, where the Benders reside. Lee Bender watches her grandchildren while their father is at work and they are not in school. She testified that she spends between $100 and $150 per week on groceries when caring for the grandchildren, as opposed to the listed amount of $50 per week ($200 per month) for her and her husband. While ECMC construes her testimony to indicate that it costs an additional $600 per month to feed the grandchildren, I do not have this understanding.
[7] The Benders purchased a three-bedroom house in David City for $90,000, with no down payment. Their monthly mortgage payment is $629, their pro-rated property taxes are $142 per month, and they spend an estimated $50 per month for home repairs and maintenance, for a total of $821. ECMC contends that a $450 rental property would satisfy the couple's housing requirements, for a net savings of $371 per month.
[8] The Benders' Chapter 13 plan requires them to pay $140 per month for a period of 4 years. (Tr. 67.) Although BCMC argues that the monthly surplus would increase to $625 after the Chapter 13 plan payments end, such payments are not included in the Benders' schedule of monthly expenses.
[9] "The Brunner test requires the debtor to make a three-part showing in order to prove undue hardship: (1) that the debtor cannot maintain, based on current income and expenses, a `minimal standard' of living for herself and her dependents if forced to repay the loans; (2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and (3) that the debtor has made good faith efforts to repay the loans. Brunner, 831 F.2d at 396. However, under a Brunner analysis, if the bankruptcy court finds against the debtor on any of the three prongs of the test, the inquiry ends and the student loan is not dischargeable." Id. In re Long, 322 F.3d at 554.
[10] The Eighth Circuit BAP has also held that each loan must be considered separately when applying § 523(a)(8). In re Andresen, 232 B.R. at 137. The record in this case shows that the first loan was executed on August 5, 1984, in the principal amount of $2,352.00, and as of July 2, 2001, had an unpaid balance of $3,597.43; the second loan was executed on January 2, 1986, in the principal amount of $2,424.00, and as of July 2, 2001, had an unpaid balance of $3,707.53; and the third loan was executed on January 15, 1987, in the principal amount of $1,902.00, and as of July 2, 2001, had an unpaid balance of $2,909.23. (Exhibit 1 & Joint Preliminary Pretrial Statement, bankruptcy court filing 25).
[11] Section 1328(a) provides, in part: "As soon as practicable after completion by the debtor of all payments under the plan, . . . the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt . . . (2) of the kind specified in paragraph (5), (8), or (9) of section 523 of this title;. . . ."
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421 S.W.2d 198 (1967)
Orville HANDSHY, Appellant,
v.
NOLTE PETROLEUM COMPANY, a Corporation, Respondent.
No. 52107.
Supreme Court of Missouri, Division No. 2.
November 13, 1967.
Motion for Rehearing or for Transfer Denied December 11, 1967.
*199 William P. Byrne, Whalen, O'Connor & Byrne, St. Louis, for appellant.
Heege & Heege, George F. Heege, III, Clayton, for respondent.
Motion for Rehearing or for Transfer to Court En Banc Denied December 11, 1967.
HOLMAN, Judge.
Action for damages in which plaintiff sought to recover $45,000 for personal injuries. A trial resulted in a verdict for defendant. Plaintiff has appealed.
In a previous trial plaintiff recovered a judgment. Upon appeal that judgment was reversed and the case was remanded for a new trial because of error in an instruction. Handshy v. Nolte Petroleum Co., Mo. App., 387 S.W.2d 161.
On December 5, 1959, plaintiff was engaged in the moving business and maintained an office in a small room in the back part of his residence. On that morning he was in the office shortly after 8 o'clock with an employee, Elvard Izeman. Plaintiff's wife was not at home and his four children were asleep upstairs. At about that time defendant's truck arrived to make a delivery of fuel oil. The oil tank was located in the basement with an intake pipe close to the outside door of plaintiff's office. Defendant's regular employee, Eugene Wood, placed the nozzle in the pipe and started the oil flow. He left the nozzle in charge of Clifford Black while he went to the truck and "revved up" the motor. Black was a new employee and had not received any instruction as to how to shut off the hose. The oil started overflowing and Black could not stop it. Before the hose was shut off about five gallons of oil overflowed onto plaintiff's patio, and there was evidence that some ran *200 under the door and onto the floor of the office.
Plaintiff who, according to Wood, "appeared mad," came out and either he or Wood swept the oil into a drain. At about that time Wood suggested that there might be some spillage in the basement. Plaintiff had an automatic gas water heater in the basement and was apparently afraid that oil may have spilled and might be ignited by the gas water heater. He immediately went through his office and kitchen to the doorway leading to the basement. As he started down the steps his feet "went out from under him" and he fell down the remaining steps to the basement floor and was injured. A short time later he examined his shoes and found that the soles were "full of oil."
It was shown on cross-examination of plaintiff that he had sustained injuries in three accidents occurring subsequent to the one in question.
Mr. Wood testified that the oil being delivered would not ignite until heated to a temperature of 154 F.; that the mat outside the door was only one-third saturated with oil; that he followed plaintiff into the house and wiped his feet on the dry portion of the mat; that he did not see plaintiff wipe his feet.
Plaintiff's case was submitted upon a required finding of negligence in that "the defendant failed to properly instruct its employee how to shut off the hose." Defendant contended that plaintiff was guilty of contributory negligence and the submission thereof required a finding that plaintiff either "walked through the spilled oil, or failed to wipe his shoes off on the door mat * * *."
The first point briefed by plaintiff is that the court erred in overruling his objection to a question asked the jury panel by defendant's counsel on voir dire examination. The question was as follows: "Mr. Heege: If the law and the evidence shows you Mr. Handshy is not entitled to recover, are there any of you who couldn't give a verdict for the defendant?" Plaintiff's attorney made an objection which was overruled and then the following statement was made: "Mr. Heege: I take it by your silence you could do this."
Plaintiff contends that the ruling was erroneous because it permitted interrogation by defendant's attorney which sought to commit the jurors to a verdict prior to hearing the evidence. It is undoubtedly an established rule in this state that an attorney on voir dire examination may not cause the veniremen to pledge or speculate as to their action in certain contingencies which may later occur during the trial.
In State v. Pinkston, 336 Mo. 614, 79 S.W.2d 1046, 1048, we held it was reversible error to permit the prosecuting attorney to ask the following question: "If you were accepted as a juror in this case, if you believe and found from the evidence beyond a reasonable doubt that the defendant was guilty, if you believe from that evidence that the death penalty was proper penalty to follow a finding of guilty, would you vote for it?" It was held to be reversible error in State v. Katz Drug Co., Mo.Sup., 352 S.W.2d 678, 684, to permit the following question on voir dire examination: "Now, if I prove to your satisfaction and beyond a reasonable doubt that February 22, 1959, was a Sunday, and that the Katz Drug Company at their 8th and Washington store sold goods, wares and merchandise which were not medicines or drugs and not items of immediate necessity, and if the Court instructs you that that is a violation of the law, will you convict?" In ruling the contention the court stated that this "was an improper attempt to commit jurors before they had heard evidence, instructions of the court or argument of counsel." In Smith v. Nickels, Mo.App., 390 S.W.2d 578, the court affirmed the action of the trial court in granting a new trial because of error in permitting *201 counsel to ask the following question: "Mr. Cleary: * * * would any of you have any hesitancy in holding my client blameless, finding in his favor, if you felt that he was not responsible for this accident?"
In our consideration of the question presented we should bear in mind the following rules: "`The extent to which parties should be allowed to go in examining jurors as to their qualifications cannot well be governed by any fixed rules. The examination is conducted under the supervision and direction of the trial court, and the nature and extent of the examination and what questions may or may not be answered must necessarily be left largely to the sound discretion of the court, the exercise of which will not be interfered with unless clearly abused.'" State v. Hoffman, 344 Mo. 94, 125 S.W.2d 55, 57.
We think the question in the case at bar may readily be distinguished from the question in the Pinkston, Katz, and Smith cases. This for the reason that the question in those cases definitely sought to commit the jurors to a certain verdict in the event of certain contingencies while the one before us did not. The question before us concluded with "* * * are there any of you who couldn't give a verdict for defendant." If the question had contained the word "wouldn't" it would have been a definite commitment and would likely have been reversible error. However, there is a decided difference between those words. Here the prospective jurors, by their silence, indicated that they could render a verdict for defendant if the law and evidence showed that plaintiff was not entitled to recover. But that was not to say that they would render such a verdict. Apparently defendant, in asking the question, was endeavoring to ascertain whether there were any prospective jurors who had views which would preclude them from returning a defendant's verdict, in a case of this nature, in any event.
We do not approve of the practice of asking veniremen questions such as the one before us because it does, in a sense, involve speculation as to the future action of the jurors in the event of certain contingencies. However, in this case we are unable to conclude that any prejudice to plaintiff resulted therefrom and we accordingly rule that the trial court did not abuse its discretion in overruling the objection.
Plaintiff's next point is that the court erred in overruling an objection to the following portion of the argument of defendant's counsel: "* * * You have seen this man's temper up, seen him smirking over here, seen him looking around with his shifty eyes * * *. Mr. Byrne: I think that is ridiculous. I am going to object to that. I think that is improper argument. The Court: Overruled."
The statement complained of was made while counsel was arguing that plaintiff was guilty of contributory negligence. It was made in connection with the argument that plaintiff was careless because he was "mad" over the fact that the oil had been spilled. The entire statement appears to refer to plaintiff's conduct in the courtroom during the trial. Plaintiff says that the statement was calculated to prejudice the jury against him and that it had that result.
We have often said that argument should not be outside the evidence nor calculated to arouse a feeling of hostility or resentment against the opposite party. Also, no derogatory or irrelevant reference to the appearance of a party should be permitted. See cases cited in Hancock v. Crouch, Mo.App., 267 S.W.2d 36. There is no evidence in the transcript to prove that plaintiff conducted himself in the manner stated. However, the fact that the trial judge overruled the objection may be an indication that he had observed conduct on the part of plaintiff of the type mentioned in the argument. In any event, we think it was improper to permit a reference to plaintiff as having "shifty eyes." That *202 expression has an unsavory connotation and could be construed as indicating that plaintiff had an unstable, furtive appearance.
However, it does not follow as a matter of course that there should be a reversal of the judgment. "The trial judge has a large discretion `in permitting or restraining the argument, and his rulings will generally be deferred to on appeal.' Goyette v. St. Louis-San Francisco R. Co. (Mo.Sup.) 37 S.W.(2d) 552, 556. On the motion for a new trial, the trial judge determined that the argument complained of did not improperly influence the jury. The trial judge hears the testimony and the arguments, and in view of his opportunity to weigh and determine the likely or possible effect of the alleged prejudicial argument, we are inclined to defer to his rulings unless it appears that the protested arguments so patently pass legitimate bounds as to be manifestly prejudicial and the ruling of the trial court thereon a clear abuse of discretion." Cordray v. City of Brookfield, 334 Mo. 249, 88 S.W.2d 161, 165. In the instant case the point under consideration was called to the attention of the trial judge in the motion for new trial and the motion was overruled. Since the statement complained of did not "patently pass legitimate bounds," and we see nothing in the transcript to indicate prejudice, we defer to the opinion of the trial judge and accordingly rule that the argument under consideration was not such as would require the granting of a new trial.
Two other contentions of error relating to defendant's argument are briefed by plaintiff. One concerns an argument in regard to the number of damage suits for personal injuries that had been filed by plaintiff. However, plaintiff did not make any objection to that argument and we accordingly rule that the alleged error is not preserved for appellate review. O'Brien v. City of St. Louis, Mo.Sup., 355 S.W.2d 904 [5]. The other contention relates to an argument which plaintiff says "was improper and prejudicial in that it told the jury that the plaintiff and his attorney had conspired to commit perjury in order to defeat the possible claim of contributory negligence." The objection made to that argument, however, was as follows: "Mr. Byrne: That is improper argument, Your Honor. That presumes something not in evidence, that there was a slick linoleum. The Court: Well, I will overrule the objection." It will be noted that the ground of objection stated in the trial court is entirely different from the objection presented here. As we view this situation, there is nothing before us for review. The ground of objection actually stated in the trial court has not been asserted on appeal and hence is considered abandoned. Marshall v. City of Gladstone, Mo.Sup., 380 S.W.2d 312. And the ground of objection presented here, not having been asserted in the trial court, may not be considered by this court. "Since an appellate court is not a forum in which to make a new case, or in which new points will be considered, but is merely a court of review to determine whether or not the rulings of the trial court, as there presented, were correct, a party seeking the correction of error must stand or fall on the case which was made in the trial court, and thus it follows that only those objections or grounds of objection which were urged in the trial court, without change and without addition, will be considered on appeal." 4 C.J.S. Appeal & Error § 253, p. 770. This point is therefore ruled adversely to plaintiff.
The judgment is affirmed.
FINCH, P. J., and EAGER, J., concur.
DONNELLY, J., not sitting.
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660 So.2d 499 (1995)
Evelyn Aucoin SELLERS, Plaintiff-Appellee,
v.
Nolan Joseph SELLERS, Defendant-Appellant.
No. 95-196.
Court of Appeal of Louisiana, Third Circuit.
May 31, 1995.
Rehearing Denied October 10, 1995.
*501 Roger Chadwick Edwards Jr., Abbeville, for Evelyn Aucoin Sellers.
Bernard Seymour Smith, Lafayette, for Nolan Joseph Sellers.
Before KNOLL and SULLIVAN, JJ., and BROUILLETTE[*], J. Pro Tem.
HAROLD J. BROUILLETTE, Judge. Pro Tem.
As part of a continuing dispute over a period of several years involving custody, support and community property, Nolan Sellers brought this action against his former wife, Evelyn Sellers, seeking to have the court: (a) declare null a judgment requiring him to pay $300 per month rent for the use of the community home; (b) declare null a sheriff's sale of the community home; and (c) order the cancellation of inscriptions of money judgments in favor of Evelyn Sellers recorded in the mortgage records of Vermilion Parish. The trial court denied all demands and Nolan Sellers has appealed on all issues. Evelyn Sellers answered seeking damages for frivolous appeal.
A judgment of separation from bed and board was rendered in 1984 granting custody of the four children of the marriage to Evelyn Sellers and ordering Nolan Sellers to pay alimony pendente lite and child support. Following that judgment, a number of motions to make child support arrearages executory were filed, heard and granted. Judgments on those motions were signed on February 10, 1987 in the amount of $1,340 plus interest and attorney's fees[1]; on June 12, 1988 in the amount of $2,177.50 plus interest and attorney's fees; and on April 20, 1992 in the amount of $5,950 plus interest.
A hearing on March 23, 1992, which resulted in the April 20, 1992 judgment for arrearages noted above, also involved rules for contempt, to increase child support, reduce child support, change of custody and matters relating to community property. The rules were tried before Judge Diana Simon and both parties were represented by attorneys who later withdrew their representation and are not counsel in this litigation. The minute entry for that hearing states, inter alia:
Nolan Sellers, Jr. is to pay the sum of $300.00 per month as rent on the community property. He is to get credit on the insurance paid by him.
A formal judgment was signed on April 20, 1992 clearly indicating that it emanated from the March 23, 1992 hearing. It was "Approved As To Form And Content" by both attorneys. The judgment makes no mention of the $300 rent which was included in the minutes.
Evelyn Sellers' present counsel enrolled as counsel on August 2, 1993 and filed a motion on September 14, 1993 seeking various orders and decrees. The motion alleges that Nolan Sellers had been ordered to pay rent on the family home in the amount of $300 per month. A hearing on all issues contained in the motion was assigned for September 27, 1993. The court minutes for September 27, 1993 provide:
A Pre-Trial [sic] was held in Chambers with Counsel. Both motions before the Court were withdrawn in Open Court. Stipulation Agreement by the parties. Stipulation to be set out in Judgment. Judgment to be signed upon presentation.
Apparently no stipulation was ever signed. With his letter to the court dated October 20, 1993, counsel for Evelyn Sellers enclosed two separate judgments. The letter stated that they had not been approved by opposing counsel because he was attempting to contact Nolan Sellers for authorization of the approval.
Without the approval of Nolan Sellers' counsel, the trial court signed both judgments, the first recognizing the three prior arrearage judgments as mentioned earlier *502 and ordering seizure of Nolan Sellers' one-half interest in the family home and the second rendering a separate judgment for $300 per month rent on the family home. The preamble to each of the judgments states:
This matter came to be heard on March 23, 1992, however a Judgment was never signed and counsel for Plaintiff and Defendant have been replaced. The matter was brought to the Court's attention at a regularly fixed rule this 27th day of September, 1993.
A writ of fieri facias was issued as directed by the court in the first October 21, 1993 judgment. It ordered seizure and sale of Nolan Sellers' interest in the family home. The sale proceeded routinely except that there was one postponement of the sale date at the direction of counsel for Evelyn Sellers. The sale was finally conducted on May 4, 1994 and Evelyn Sellers was the highest bidder for her former husband's undivided one-half interest. The record reflects that the $300 per month rent judgment was included by the sheriff in calculating the amount of the writ.
VALIDITY OF SHERIFF'S SALE
Nolan Sellers asserts that the sheriff's sale of the community home on May 4, 1994 should be annulled because (a) the writ included the judgment of February 10, 1987, which had been satisfied, and (b) the property was not reappraised when the sale was rescheduled from January 5, 1994 to May 4, 1994. He also questions the judgment of $300 per month rent being included in calculations of the amount of the writ. That judgment should be discussed first.
For the reasons discussed later in this opinion, the judgment of October 21, 1993 ordering the payment of a $300 monthly rental is set aside as a nullity. However, this is not grounds to set aside the sale because it was, at the time of the sale, a recorded executory judgment. These facts are comparable to a sheriff's sale on a judgment which is subsequently reversed on devolutive appeal. It has long been well established that the validity of sheriff sales made in execution of judgments which are executory are not affected by the subsequent reversal of the judgment on appeal. State v. Mutual Investment Company, 214 La. 356, 37 So.2d 817 (1948); Wetherbee v. Lodwick Lumber Company, 194 La. 352, 193 So. 671 (1940); Continental Securities Corporation v. Wetherbee, 187 La. 773, 175 So. 571 (1937). The reasoning and logic of those cases clearly apply to the present case.
With reference to Nolan Sellers' complaint about the failure to reappraise the property after the "cancellation" of the original sale date, the record shows clearly that this was simply a postponement of the sale date at the request of counsel and it was properly re-advertised in the official journal of the parish. There is nothing in the record to show that the original appraisal was not accurate and it is further pointed out that Nolan Sellers did not choose to name an appraiser as he was entitled to do.
To overcome the presumption of the validity of an appraisal, there must be a showing that the appraisal was fundamentally defective. John Deere Company v. Loewer, 505 So.2d 973 (La.App. 3 Cir.1987); Plauche-Locke Securities, Inc. v. Johnson, 187 So.2d 178 (La.App. 3 Cir.1966). The law is clear that if the sheriff's return shows that the property was sold after appraisement, it will be assumed that there was a legal appraisement unless the contrary is proved. Stockman v. Money, Inc., 277 So.2d 504 (La. App. 1 Cir.), writ not considered, 281 So.2d 738 (La.1973); Jones v. Alford, 172 So. 213 (La.App. 2 Cir.1937).
There were in fact errors in the sheriff's sale. As noted above, the February 10, 1987 judgment had been fully satisfied by prior sheriff's sale and should not have been included in the writ. Additionally, the writ directs the sheriff to seize and sell the property to satisfy a judgment rendered on October 21, 1993. The notice of seizure states that the amount of the writ is $9,467.50 plus interest, attorney's fees and costs. This was clearly an addition of the $1,340.00, $2,177.50, and $5,950.00 judgments which were recognized in the October 21, 1993 judgment. The writ was really issued to satisfy these three separate judgments rendered on three separate *503 occasions before October 21, 1993. This court is not aware of any authority for gathering up a number of judgments and accumulating them into one judgment for purposes of seizure and sale. However, we feel that this was an administrative error of the clerk of court or sheriff and that there was no damage resulting because there were valid and executory judgments to support the writ.
It was error to include the February 10, 1987 judgment in the judgment of recognition of October 21, 1993 and it follows that it was also error to include it in determining the amount of the writ. However, there were two valid judgments to support the seizure and sale and the error of including the February 10, 1987 judgment does not require a cancellation of the sale. As noted hereinafter, a recalculation of the distribution of the proceeds of the sale by the trial court will be required based upon this court's ruling.
In evaluating the claim of Nolan Sellers that the sale should be set aside because of the errors pointed out above, it should be noted that Nolan Sellers was properly served with all required notices and took no action to enjoin the sale; he waived his right to name an appraiser; and, perhaps most important, he attended and observed the sale without protest. In Edwards v. Edwards, 282 So.2d 858, 861 (La.App. 1 Cir.), writ refused, 284 So.2d 777 (La.1973) the court held:
Equally applicable herein is the well established rule that a party who is present at a judicial sale and is aware of defects in the proceedings, but sits idly by without making any protest or objection, is barred and estopped from subsequently attacking the validity of the sale on the basis of the known defects. The reason for the rule is the protection of the integrity of judicial sales. Harris v. First Nat. Bank in Arcadia, 185 La. 284, 169 So. 341; Greenwood Planting & Mfg. Co. v. Whitney C.T. & S. Bank, 146 La. 567, 83 So. 832; Vinton Oil & Sulphur Co. v. Gray, 135 La. 1049, 66 So. 357; Hibernia Nat. Bank v. Sarah Planting & Refining Co., 107 La. 650, 31 So. 1031; Parson v. Henry, 43 La.Ann. 307, 8 So. 918; Mullen v. Follain, 12 La. Ann. 838.
On the issue of setting aside the sheriff's sale, the judgment of the trial court is affirmed.
NULLITY OF JUDGMENT
Nolan Sellers claims that the judgment of October 21, 1993, which orders the payment of $300 per month as rent on the family home, is a nullity. We agree.
As pointed out earlier, the minutes of the March 23, 1992 hearing indicated that the rental was to be paid. However, it was excluded from the formal judgment which was signed on April 20, 1993. It is important to note that the attorneys and the judge who were present at the March 23, 1992 hearing and who signed the April 20, 1992 judgment played no part in the hearing of September 27, 1993 and the judgment signed on October 21, 1993.
Counsel for Evelyn Sellers argues that Judge Duplantier, who signed the October 21, 1993 judgment had the authority to require Nolan Sellers to pay rent, citing Rozier v. Rozier, 583 So.2d 87 (La.App. 3 Cir. 1991). He argues that the judgment is not an amendment of the April 20, 1992 judgment but is in effect a new judgment rendered by Judge Duplantier ordering the rent payment. The record does not support this argument. The judgment clearly reflects that the October 21, 1993 judgment was "[i]n accordance with the minute entry of March 23, 1992." It was not a determination on the merits by Judge Duplantier that the rent should be paid.
It is very important to note that although the judgment states that a judgment was never signed as rendered on March 23, 1992, that is clearly an error. A detailed judgment was prepared and signed by Judge Simon on April 20, 1992 and perhaps more importantly the judgment was approved as to form and content by both attorneys. It is significant that Nolan Sellers' attorney at the time of the October 21, 1993 judgment did not agree to the judgment being signed.
The judgment is clearly an amendment of the April 20, 1992 judgment. Is it a valid *504 amendment? La.Code Civ.P. art. 1951 provides:
Art. 1951. Amendment of judgment
A final judgment may be amended by the trial court at any time, with or without notice, on its own motion or on motion of any party:
(1) To alter the phraseology of the judgment, but not the substance; or
(2) To correct errors of calculation.
Clearly, a judgment ordering the payment of $300 per month rent is a substantive judgment. With different counsel and a different judge, there is no way of knowing why the provision was omitted from the April 20, 1992 judgment and there is nothing in the record to show that the omission was unintentional. There could have been discussions between March 23 and April 20, 1992 in which an agreement was reached that rent would not be due and this may have been approved by the judge. But even if clearly shown to have been an unintentional omission, the law clearly precludes such an addition to the earlier judgment.
This case is remarkably similar to LeBlanc v. LeBlanc, 600 So.2d 160 (La.App. 3 Cir. 1992). In that case, the trial court amended a judgment to add a reimbursement to the wife of $3,691.80 for house payments she had made before the community was settled. This amendment was made on a motion to amend the judgment, and the trial court permitted the amendment on the basis that the minutes of court indicated that the wife was awarded such a reimbursement. This court reversed, holding:
Under La.C.C.P. art. 1951, providing that the final judgment may be amended to alter the phraseology of the judgment but not the substance or to correct errors of calculation, the judgment may be amended where the amendment takes nothing from or adds nothing to the original judgment. As a general rule, a final judgment is not subject to a substantive amendment by the trial judge on his motion or the motion of any party; in such event recourse is by timely application for a new trial or timely appeal. Villaume v. Villaume, 363 So.2d 448 (La.1978); Zeigler v. Zeigler, 420 So.2d 1342 (La.App. 3 Cir. 1982).
In the present case, the trial judge amended the judgment to allow plaintiff reimbursement of $3,691.80 for house notes she had paid. This was done because the minutes of the court reflected that plaintiff had been awarded that amount. However, we find that such an amendment is a substantive amendment. It adds an award for reimbursement to plaintiff that was not in the April 9, 1985 judgment.
Therefore, plaintiff's proper recourse was to apply for a new trial or appeal from the judgment dated April 9, 1985. Plaintiff did not file the motion to correct the error until September 8, 1989, some four years after the first judgment. For these reasons, we hold that the trial judge should not have amended the April 9, 1985 judgment to reflect this award for reimbursement. Since the time for taking an appeal has elapsed, no court can alter the substance of the judgment. LeBlanc, 600 So.2d at 162.
In Gulfco Investment Group, Inc. v. Jones, 577 So.2d 775, 777 (La.App. 2 Cir. 1991) the court held:
Contrary to Gulfco's assertions, Art. 1951 does not mandate the amendment of a final judgment to conform with the trial court's oral or written reasons for judgment where the amendment would make substantive changes to the original judgment. Villaume v. Villaume, supra; Hebert v. Hebert, 351 So.2d 1199 (La.1977). Indeed, the trial court's written judgment is controlling even though the trial judge may have intended otherwise. Hebert v. Hebert, supra; Shatoska v. Whiddon, 468 So.2d 1314 (La.App. 1st Cir.1985), writ denied, 472 So.2d 35 (La.1985); Sibley v. Insured Lloyds, 442 So.2d 627 (La.App. 1st Cir.1983). (Underscoring added).
A substantive amendment to a judgment is an absolute nullity. Labove v. Theriot, 597 So.2d 1007 (La.1992); Coomes v. Allstate Insurance Company, 517 So.2d 436 (La.App. 1 Cir.1987); Almerico v. Katsanis, 458 So.2d 158 (La.App. 5 Cir.1984); Templet v. Johns, 417 So.2d 433 (La.App. 1 Cir.), writ *505 denied, 420 So.2d 981 (La.1982). An absolute nullity may be raised at any time and in any proceeding where the validity of such a judgment is asserted. Labove, 597 So.2d 1007; Charia v. Mungoven, 550 So.2d 939 (La.App. 5 Cir.1989); State v. Minniefield, 467 So.2d 1198 (La.App. 2 Cir.1985); Succession of Barron, 345 So.2d 995 (La.App. 2 Cir.1977).
We hold that the judgment of October 21, 1993 for the $300 per month rent was a substantive amendment to the judgment of April 20, 1992 and is therefore null and void.
CANCELLATION OF JUDGMENTS
The record is unclear as to which of the several judgments in favor of Evelyn Sellers and against Nolan Sellers have been satisfied. Nolan asserts that they have all been satisfied and that he is entitled to have the court order their cancellation.
As discussed earlier, with respect to the judgment of February 10, 1987 which was recorded on February 19, 1987 as mortgage entry # 8701975, this judgment was satisfied by payment in full to Evelyn Sellers in disbursement of the proceeds of a sheriff's sale on June 24, 1987. The proces verbal of the sale is in the record of this case and is recorded in the public records of Vermilion Parish. It constitutes authority for the Recorder of Mortgages to cancel the inscription of the judgment in full. Accordingly, the Recorder of Mortgages of Vermilion Parish is ordered to cancel the inscription of said mortgage by authority of this judgment upon payment of the cancellation fee normally charged for a conventional cancellation. See La.R.S. 9:5171 and 9:5165.
The judgment in favor of Evelyn Sellers and against Nolan Sellers dated October 21, 1993 ordering the payment of $300 per month rental for use of the family home was recorded on May 4, 1994 as mortgage entry # 9404294. This judgment has been adjudicated a nullity in this opinion and accordingly, the Recorder of Mortgages of Vermilion Parish is ordered to cancel the inscription of the judgment by authority of this judgment upon payment of the cancellation fee normally charged for a conventional cancellation. See La.R.S. 9:5171 and 9:5165.
Because the proces verbal of the sheriff's sale of Nolan Sellers' one-half interest in the family home on May 4, 1994 indicates that the writ was "not fully satisfied," there is no way for this court to determine which, if any, of the remaining judgments have been satisfied. An accurate disbursement of the proceeds of the sheriff's sale is further complicated by virtue of the writ having included the judgment of February 10, 1987, which had been previously paid, and the judgment of October 21, 1993, which this court has declared a nullity. Accordingly, this case is remanded to the district court for the purpose of determining a proper disbursement of the proceeds of the sheriff's sale of May 4, 1994 and to determine which, if any, of the judgments noted in the sheriff's sale have been satisfied and to order cancellation of the satisfied judgments.
FRIVOLOUS APPEAL
Evelyn Sellers answered the appeal of Nolan Sellers seeking damages for frivolous appeal. It is obvious from the foregoing discussion that there were genuine issues raised on appeal and, indeed, this court has found merit with respect to at least one of those issues. Accordingly, the appeal was not frivolous and the claim of Evelyn Sellers for damages is therefore denied.
CONCLUSION
For the reasons and in the particulars set forth in this opinion, the judgment of the trial court of September 28, 1994 is affirmed in part, reversed in part and remanded for proceedings consistent with this opinion.
Costs of this appeal are assessed one-half to Nolan Sellers and one-half to Evelyn Sellers.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
NOTES
[*] Honorable Harold J. Brouillette participated in this decision by appointment of the Louisiana Supreme Court as Judge Pro Tempore.
[1] The judgment of February 10, 1987 was paid with proceeds from the June 24, 1987 sheriff's sale of a boat, motor and trailer belonging to the community, the writ having been returned by the Sheriff "fully satisfied" after making "payment in full" to Evelyn Sellers.
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170 N.J. Super. 144 (1979)
405 A.2d 874
NATALIE LITAROWICH, AN INFANT BY HER GUARDIAN AD LITEM WALTER LITAROWICH AND WALTER LITAROWICH, INDIVIDUALLY, PLAINTIFFS,
v.
FRANCIS WIEDERKEHR, JOSEPHINE WIEDERKEHR, EUGENE WIEDERKEHR, ESKA COMPANY, A CORPORATION OF IOWA, R & S HOME AND AUTO STORES, THE ESKA COMPANY, A DELAWARE CORPORATION, AND TALLEY INDUSTRIES, INC., A DELAWARE CORPORATION, DEFENDANTS.
Superior Court of New Jersey, Law Division.
July 23, 1979.
*145 Mr. Christopher R. Wood for plaintiff (Messrs. Rafano & Wood, attorneys).
Mr. Stephen O. Mortenson for defendants The Eska Company and Talley Industries, Inc. (Messrs. Connell, Foley & Geiser, attorneys).
Messrs. McMenaman & Grasso, attorneys for defendant R & S Home and Auto Stores.
Mr. Eugene F. Lynch for defendants Wiederkehr.
COHEN, J.S.C.
The infant plaintiff was injured in 1976 while using an allegedly defective snowblower. She sued the owner and the retailer of the snowblower and several other defendants. One was The Eska Company, an Iowa corporation that made the machine in 1966. Another was Talley Industries, Inc., a publically traded Delaware corporation that purchased the assets of Eska (Iowa) in 1969. A third was The Eska Company, a Delaware subsidiary of Talley that was formed in 1969 to receive the assets of Eska (Iowa).
The matter is here on motions by Talley and Eska (Del.) for summary judgment. They say they may not be held liable for injuries caused by a defective product merely because they later bought and held the assets of the maker. Plaintiff agrees but *146 says that Talley and Eska (Del.) did more than merely buy the manufacturer's assets. They bought its name, its good will, its plant facilities, and continued its business. Eska (Iowa) received Talley stock in payment, and distributed the stock to its shareholders and then dissolved.[1] The transaction, plaintiff argues, was really a de facto merger or consolidation, in which predecessor liabilities survive. Therefore, the argument concludes, Talley and Eska (Del.) took on the contingent products liabilities of Eska (Iowa) whether they meant to do so or not.
The question whether a purchase of corporate assets is really a merger or consolidation can arise in a number of settings.[2] One of them involves contingent product liabilities.[3] It is surprising to find so few authorities analyzing and deciding the choice-of-law problems that multistate corporate acquisitions and reorganizations necessarily create. On the motions here, the appropriate choice of law is the dispositive issue.
*147 The moving parties argued that they are entitled to judgment in their favor as a matter of Delaware law,[4] but correctly concede that under New Jersey law there are material facts in dispute that would defeat the motion.[5] There is no New Jersey authority dictating the appropriate choice of law to make in the present setting. McKee v. Harris-Seybold Co., 109 N.J. Super. 555 (Law Div. 1970), aff'd 118 N.J. Super. 480 (App.Div. 1972), mentioned the issue but found it unnecessary to decide. Wilson v. Fare Well Corp., 140 N.J. Super. 476 (Law Div. 1976), did not mention it. All parties agree that New Jersey's choice-of-law rules invoke the local law of that state which has the most significant contacts and greatest governmental interest in the dispute and the parties. Heavner v. Uniroyal, Inc., 63 N.J. 130 (1973); Rose v. Port of New York Auth., 61 N.J. 129 (1972).
Eska (Iowa) was an Iowa corporation with its manufacturing facilities in Dubuque. Talley's headquarters are in Arizona. Its tie to Delaware arises only out of its incorporation there. Its stock is traded on the New York Stock Exchange. Eska (Del.) is physically located in Dubuque, Iowa, and, like the Iowa corporation before it, sells its products in many different states. The Agreement and Plan of Reorganization executed by Talley and Eska (Iowa) mentions Talley's New York counsel and Eska's Washington, D.C., counsel, and contains a provision that it be interpreted according to Delaware law.
Most of the little attention the present conflicts question has attracted has been in the federal courts. The results have varied widely. They seem to cluster, however, in two groups, one treating the successor liability issue as one of contract *148 interpretation, and the other focusing on the consequences of the relationship between the corporate parties and the injured plaintiff.
Kloberdanz v. Joy Mfg. Co., 288 F. Supp. 817 (D.Colo. 1968), arose out of a 1964 Nebraska injury for which plaintiff sought to hold defendant liable as the 1960 purchaser of assets of the manufacturer of a 1953 product. The manufacturer was a California corporation. The purchaser of assets was a Pennsylvania corporation. The question of de facto merger or consolidation was a question of California law, said the District Court sitting in Colorado, because the Colorado courts would interpret the contract of acquisition according to the law of the state where it was made.[6]Lex loci contractu no longer requires that result in New Jersey, but the case has another significance. If the law of California controlled the District Court, it was because the court conceived the question of successor liability as a question to be answered by the contract between the corporations. It would follow, then, that the corporations which made the contract were free to shape the consequences of their transaction and to choose a body of law and impose it on contingent tort claimants.[7]
The same problem came up in Shane v. Hobam, Inc., 332 F. Supp. 526 (E.D.Pa. 1971), where Judge Higginbotham decided the conflict-of-law issue by inference. The offending machine had been manufactured in New York in 1948 by a company that sold its assets in 1962 to defendant. Plaintiff's injury took place in 1968 in Pennsylvania. The District Court sitting in Pennsylvania discussed various theories of liability. Included in the *149 discussion of liability based on the manner of acquisition is a citation to an opinion applying New York law to such a question. The footnote explains that the agreement for the purchase of assets provided for its interpretation under New York law. Thus, Judge Higginbotham apparently accepted the Kloberdanz view of the matter as one of contract interpretation.[8] One supposes that he would also permit the corporate parties to choose a body of law to control the extent of successor liability for contingent tort claims.
Shannon v. Samuel Langston Co., 379 F. Supp. 797 (W.D.Mich. S.D. 1974) took a different tack. There a Michigan plaintiff had lost his arm in a machine made in New Jersey by a New Jersey corporation. Before the accident the assets of the New Jersey manufacturer were sold to a Delaware corporation headquartered in Ohio, which continued New Jersey operations through a New Jersey subsidiary. The assets purchase agreements were made in Ohio. The opinion does not say whether the agreements expressed a choice of law.
The District Court searched the states for significant contacts and interests and selected New Jersey law for the intimate contacts of both the predecessor and successor manufacturers with that state. Plaintiff prevailed under New Jersey law. The court does not say whether he would have done so under Michigan or Ohio law.
Lopata v. Bemis Co., 406 F. Supp. 521 (E.D.Pa. 1975), represents the most thorough published analysis of the question facing this court. There, a New Jersey resident was injured at his New Jersey job by an allegedly faulty machine. He received New Jersey worker's compensation. He then moved to Pennsylvania, his former home, before starting suit. The machine had been made in Indiana by an Indiana corporation. It later sold most of its Indiana assets to a Missouri corporation pursuant to an *150 agreement which, by its terms, was to be interpreted according to Indiana law.
The plaintiff urged application of Pennsylvania law. The defendant argued for Indiana law. The court held for the law of New Jersey. It was the place of injury, a fact deemed important since it involved not only local worker's compensation and the allocation of the cost of employment injuries but also the accountability of corporate suppliers of machinery used in local employment. Moreover, plaintiff was a New Jersey resident when injured and, therefore, was entitled to the benefit of the duties New Jersey imposes on corporations that choose to do business here. Since the manufacturer subjected itself to New Jersey tort law by making a product for sale here, the court said, a successor corporation should be subjected to the same liabilities. In answer to the arguments of Indiana corporate location and contractual choice of Indiana law, the court pointed out that the issue was one of tort liability to third persons who were not parties to the corporate arrangements and who should not be bound thereby.
Menacho v. Adamson United Co., 420 F. Supp. 128 (D.N.J. 1976), followed Lopata and applied New Jersey law where a New Jersey resident was injured at his New Jersey employment by a machine made by an Ohio corporation whose assets subsequently were brought by a Pennsylvania corporation.
The present case is about a New Jersey injury to a New Jersey resident caused by a snowblower manufactured for interstate sale and sold to a New Jersey retailer. New Jersey's contacts and interest are plain, even without the employment element found in Lopata and Menacho. Delaware's interest is not so clear. It seems little more than an interest in the interstate sanctity of protective corporate laws.[9] Iowa and *151 Arizona have as much interest in Delaware corporations that physically operate there. The corporate parties chose a body of local law to govern themselves, but they cannot thereby shut out a tort claimant whose concerns were unrepresented in the acquisition arrangements.
The real interest opposing application of the law of the state of residence and injury is not the interest of another state. It is the interest of the involved corporations in having an identifiable and reliable body of law by which to order their affairs. Corporate planners want to know when an acquisition will include contingent product liabilities and when it will not. Plans for escrows and indemnities can be made. The acquisition price may be affected. But it is more important that a worker's or consumer's cause of action for product fault not disappear in the shuffling of corporate papers and the invocation of protective foreign law.
Eska (Iowa) chose to sell its products in New Jersey, among other states. It subjected itself to New Jersey's view of what tort law was necessary to protect its workers and consumers. One who buys Eska's physical assets and operates a business with them is similarly subject to New Jersey's view of what is necessary to protect its workers and consumers.[10] Predictability in corporate transactions may be desirable. But, it does not weigh heavy against the need for a meaningful remedy for an injured person with a valid cause of action for product fault.
New Jersey law will be applied in this case, then, because New Jersey has an interest greater than the state of incorporation *152 or the state where the corporations physically operate. That does not necessarily mean, however, that our law should always be preferred. It may well be argued in another case that the foreign law affords our resident a better remedy. In such a case, New Jersey may have no interest either in applying its law where it will disadvantage its own resident, or in giving foreign corporations the benefit of liability restrictions their own states would not locally apply. That state of facts is not before this court.
Defendants' motions for summary judgment denied.
NOTES
[1] Eska (Iowa) has never been served and has not participated in this case. Normally, the corporate seller of assets dissolves after satisfying creditors and shareholders. Disappearance of the corporate manufacturer and the usual nonliability of shareholders for post-dissolution claims make successor liability a matter of vital concern. See Henn and Alexander, "Effect of Corporate Dissolution on Products Liability Claims," 56 Cornell L.Rev. 865 (1971). Especially troublesome are cases in states like New Jersey, where strict liability claims accrue only when actual injury occurs, Rosenau v. New Brunswick, 51 N.J. 130 (1968), which may be many years after corporate dissolution.
[2] Generally, see Annotation, "Similarity of Ownership or Control as Basis for Charging Corporation Acquiring Assets of Another with Liability for Former Owner's Debts," 49 A.L.R.3d 881 (1973). Also affected by the distinction are the rights of pre-dissolution creditors, Jackson v. Diamond T. Trucking Co., 100 N.J. Super. 186 (Law Div. 1968), and of shareholders. Good v. Lackawanna Leather Co., 96 N.J. Super. 439 (Ch.Div. 1967); Applestein v. United Board & Carton Corp., 60 N.J. Super. 333 (Ch.Div. 1960), aff'd 33 N.J. 72 (1960); 15 Fletcher, Cyclopedia of Corporations (Perm.Ed.) § 7122.
[3] See Note, "Assumption of Products Liability in Corporate Acquisitions," 55 B.U.L.Rev. 86 (1975).
[4] They rely on 8 Del.Code § 271, and Hariton v. Anco Electronics, Inc., 40 Del. Ch. 326, 182 A.2d 22 (1962), aff'd 41 Del. Ch. 74, 188 A.2d 123 (Sup.Ct. 1963).
[5] Wilson v. Fare Well Corp., 140 N.J. Super. 476 (Law Div. 1976); McKee v. Harris-Seybold Co., 109 N.J. Super. 555 (Law Div. 1970), aff'd 118 N.J. Super. 480 (App.Div. 1972).
[6] In diversity jurisdiction a federal court applies the conflicts rules of the state where it sits. Klaxon Co. v. Stentor Electrical Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).
[7] Within limits, the parties may choose a body of local law to govern their transaction. Shotwell v. Dairymen's League Coop. Ass'n, 22 N.J. Misc. 171, 37 A.2d 420 (Dist.Ct. 1944).
[8] The opinion cites Kloberdanz on another point.
[9] Compare § 301 with § 302 of Restatement, Conflict of Laws 2d. See also, Tankersley v. Albright, 374 F. Supp. 538 (N.D.Ill.E.D. 1974).
[10] New Jersey's attitude toward successor liability is not unusually liberal. See Judge Coolahan's discussion in Menacho v. Adamson United Co., 420 F. Supp. 128 (D.N.J. 1976); Knapp v. North American Rockwell Corp., 506 F.2d 361 (3 Cir.1974), cert. den. 421 U.S. 965, 95 S.Ct. 1955, 44 L.Ed.2d 452 (1975); Cyr. v. B. Offen & Co., Inc., 501 F.2d 1145 (1 Cir.1974).
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421 S.W.2d 905 (1967)
Thomas Lee WHITAKER, Appellant,
v.
The STATE of Texas, Appellee.
No. 40726.
Court of Criminal Appeals of Texas.
November 8, 1967.
Rehearing Denied January 3, 1968.
Sidney E. Dawson, Dallas, for appellant.
Henry Wade, Dist. Atty., Arch Pardue, Cecil Emerson, J. R. Ormesher and James M. Williamson, Asst. Dist. Attys., Dallas, and Leon B. Douglas, State's Atty., Austin, for the State.
OPINION
WOODLEY, Presiding Judge.
The offense is drunk driving; the punishment, one year in jail and a fine of $250.00.
*906 Trial was before a jury on a plea of not guilty and upon separate hearing the jury assessed the punishment.
The sufficiency of the evidence to sustain the conviction is not challenged.
Witnesses who observed appellant immediately after the collision testified that he had the odor of alcohol on his breath; that he had lost control of his faculties and was unable to walk without being assisted, and that in their opinion he was intoxicated.
Testifying as a witness in his own behalf appellant admitted having consumed two and a half bottles of beer just prior to driving his automobile away from a tavern on to a heavily traveled highway and colliding with other automobiles. His version was that he was sober; that the collision caused his car to stop so suddenly that his head hit the windshield and rear view mirror, breaking both of them; that the lick on the head addled him and caused him to lose the normal use of his bodily faculties.
Testimony was offered to corroborate appellant's testimony that the windshield and rear view mirror were broken and that appellant had a skinned place and blood on his head.
Appellant's first and second grounds of error relate to his requested charges which were refused.
There are no formal bills of exception.
The instrument consisting of the two requested charges does not itself reflect that such charges were presented before the court read his charge to the jury, as required by statute. See Art. 36.15 Vernon's Ann.C.C.P., and cases listed under Note 47.
If the claimed error in the refusal of the requested charges is before us, we hold that the court's ruling is supported by the case of McDonald v. State, 163 Tex.Cr. R. 244, 289 S.W.2d 939, and the Court did not err in refusing the requested charges which instructed an acquittal if the jury believed that appellant's condition was caused by a lick on the head and he was not under the influence of intoxicating liquor.
Loftin v. State, Tex.Cr.App., 366 S.W.2d 940, cited by appellant, was distinguished in the opinion from McDonald v. State, supra, and other cases in which the evidence disclosed that the defendant had consumed alcoholic beverages.
The next three grounds of error relate to "have you heard" questions propounded to one of appellant's character witnesses on cross-examination such as are authorized under the holding of this court in Adams v. State, 158 Tex. Crim. 306, 255 S.W.2d 513. Appellant is mistaken in assuming that the holding in the Adams case has been overruled. See Villarreal v. State, Tex.Cr.App., 384 S.W.2d 891.
The next four grounds of error relate to cross-examination of appellant wherein he was asked: "what symptoms do you display when you are drunk""do you get drunk and drive home and sleep it off" "do you think it affects your walk when you get drunk"and "did you have a driver's license with you."
We are unable to agree with appellant's contention that the propounding of these questions constitutes grounds for reversal because they imputed to appellant specific acts of misconduct not culminating in a prosecution and not available for impeachment.
We note in this connection that, at the hearing on punishment, appellant admitted a prior conviction for drunk driving, and at the trial testified that it took about 12 beers to make him drunk.
The remaining ground of error relates to the testimony of J. W. Foster, accident investigator for the Dallas Police Department, wherein he testified that the amount of damage to the '60 model Pontiac (driven by appellant) was about $350.00, possibly more, and the '59 Pontiac traveling east and the third car involved in the accident, a '60 model Ford, were total losses.
*907 The admission of such testimony, over the objection that the issues did not involve whose fault it was but whether the defendant was drunk, was not error. The evidence was admissible as a part of the transaction tending to shed light on the ultimate issue. Allen v. State, 149 Tex. Crim. 612, 197 S.W.2d 1013.
The judgment is affirmed.
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680 F. Supp. 859 (1987)
Mildred June STEVENSON
v.
PANHANDLE EASTERN PIPE LINE COMPANY.
Civ. A. No. H-86-4688.
United States District Court, S.D. Texas, Houston Division.
October 9, 1987.
L. Chapman Smith, Baker & Botts, Houston, Tex., for defendant.
*860 John E. Sherman, P.C., Houston, Tex., for plaintiff.
MEMORANDUM AND ORDER
DEANDA, District Judge.
Plaintiff Mildred June Stevenson instituted this lawsuit against Defendant Panhandle Eastern Pipe Line Company claiming that her federal Constitutional due process and privacy rights, as well as her rights against self-incrimination and unreasonable searches under the Fourth Amendment were violated by Defendant's initiation of a drug testing program. Defendant placed Plaintiff on indefinite leave when she notified Defendant of her refusal to subject herself to urinalysis testing.
On February 13, 1987, Defendant moved for summary judgment on Plaintiff's complaint. On June 10, 1987, the Court granted Plaintiff's motion for a 20-day extension to either respond to Defendant's motion or file a first amended complaint. Plaintiff then moved to file a first amended complaint, adding the same causes of action but under the Texas Constitution as well as the United States Constitution. Defendant, on June 29, 1987, answered the first amended complaint; additionally, the Defendant moved for summary judgment on the first amended complaint on July 24, 1987. On July 27, 1987, the Court mistakenly denied Plaintiff leave to file a first amended complaint for failure to include a certificate of opposition, overlooking the fact that the Court had granted Plaintiff leave to amend on June 10, 1987, and that Defendant had already answered Plaintiff's first amended complaint.
On September 28, 1987, Plaintiff again moved to file a first amended complaint. Plaintiff already had a first amended complaint on file, to which Defendant had responded. This additional first amended complaint contains the same allegations as the first amended complaint on file. There is a vague allegation that "Plaintiff's common law rights notwithstanding any statutory rights have been breached by Defendant's refusal to pay Plaintiff for two (2) months earned salary." This statement fails to state any additional claim and can only be interpreted as explaining the source of Plaintiff's monetary damages.
On September 14, 1987, Plaintiff moved to dismiss her complaint. Defendant, however, opposed Plaintiff's motion, seeking dismissal with prejudice. Under F.R.Civ.Pro. 41(a)(1)(i), a plaintiff can voluntarily dismiss without court order only if no responsive pleading or summary judgment motion has been filed. Because Defendant opposed Plaintiff's dismissal without prejudice, the Court finds Plaintiff's motion should be denied and the Court should rule on the pending summary judgment motions.
As Defendant's motions for summary judgment point out, it is well settled that private action is not subject to the restrictions of the United States and Texas Constitutions. See, e.g., Jackson v. Metropolitan Edison Co., 419 U.S. 345 (1974); Gerena v. Puerto Rico Legal Serv. Inc., 697 F.2d 447 (1st Cir.1983). Plaintiff's complaint and response to Defendants' motions fail to raise any question of material fact on the state action issue. Plaintiff fails completely to raise any issue over the State of Texas' involvement in Defendant's testing program. Plaintiff's argument that the Federal Government's involvement through its implicit approval of drug testing, and by implementing its own testing program, meets the requisite level of state action is ludicrous. See Blum v. Yaretsky, 457 U.S. 991, 102 S. Ct. 2777, 73 L. Ed. 2d 534 (1982). Thus, there is no genuine issue of material fact and Defendants are entitled to judgment as a matter of law.
For the above reasons, the Court ORDERS Plaintiff's motion for leave to file a first amended complaint is MOOT. The Court further
ORDERS Plaintiff's motion to dismiss is DENIED. The Court further
ORDERS Defendant's motions for summary judgment are GRANTED.
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421 S.W.2d 413 (1967)
Jack CARPENTER, Appellant,
v.
GLOBE LEASING, INC., Appellee.
No. 16864.
Court of Civil Appeals of Texas, Fort Worth.
November 3, 1967.
*414 Behan & Leech, and James Behan, Grand Prairie, for appellant.
Sonfield, Sonfield & Lawrence, and Robert L. Sonfield and Robert L. Sonfield, Jr., Houston, for appellee.
OPINION
RENFRO, Justice.
A default judgment was entered in the District Court on September 2, 1966, in favor of Globe Leasing, Inc., against Jack Carpenter.
Plaintiff's original petition alleged that on January 23 and January 29, 1966, Globe and Carpenter entered into written rental contracts wherein Carpenter agreed to pay Globe $15.00 per day and eight cents per mile for rental of trucks and trailers; that defendant failed and refused to pay the amounts due under the contracts in the amount of $218.40, and further plead that defendant drove one of the trucks under an overpass where there was insufficient clearance, damaging the trailer in the amount of $2,800.00. The petition further alleged that it became necessary for plaintiff to employ attorneys to collect the sums due and that $500.00 was a reasonable attorneys' fee.
The court entered judgment for plaintiff.
On appeal by writ of error, the defendant claims the proper measure of damages was not used in determining the amount of damages to the trailer, there was no competent evidence or pleadings to support the judgment either as to damages or attorneys' fee.
Although properly served with citation, defendant did not answer to the suit.
After service, plaintiff served defendant with request for admissions of fact as provided by Rule 169, Texas Rules of Civil Procedure.
Defendant ignored the request for admissions.
Hence the court had before it plaintiff's pleading, the unanswered request for admissions *415 and whatever evidence plaintiff might have had. Defendant filed nothing and did not appear for trial.
The court entered an order which decreed the request for admissions of fact admitted.
The defendant, by his failure to answer the 16 requests for admission, admitted every fact necessary for rendition of judgment on the rental and damages to the trailer. The requests for admission covered every fact pleaded by plaintiff as to such damages.
In Masten v. Masten, 165 S.W.2d 225 (Tex.Civ.App., 1942, writ ref.), this court, through Associate Justice Speer, wrote at considerable length on Rule 169. It was said: "There were sixteen numbered paragraphs in the written request. They each inquired if defendant admitted some one of the material facts necessary for plaintiff to establish his right of recovery. (Same number and to same effect as in instant case.) * * * Rule 169, Texas Rules of Civil Procedure, which at all times during this controversy had the dignity of a statute, provides, in effect, that in circumstances involved here, the plaintiff can make a request in writing to defendant for admissions by him of the truth of the relevant matters of fact set forth in the request, and unless the defendant, within the time prescribed by the rule, denies under oath the truth of the facts contained in the request, or sets forth specifically why he cannot either truthfully admit or deny them, all such matters will be deemed as admitted by him as true. * * * we think the effect of Rule 169 is comparable to a legal admission made in the applicable pleadings of a party, which will admit of no denial by him."
The Masten case has been followed or cited with approval in numerous appellate opinions. Typical is O'Connor v. City of Dallas, 337 S.W.2d 741 (Tex.Civ.App., 1960, writ dism.), where the court stated: "The defendant (after having been timely served) wholly failed to make any answer to the request for admission of facts, within the time and as provided by Rule 169, Texas Rules of Civil Procedure, and therefore, the answers called for under the decision of Masten v. Masten, Tex.Civ.App., 165 S.W.2d 225, writ refused, must be taken as true * * *."
Facts admitted by the defendant by reason of his failure to answer the requests were sufficient to support the judgment rendered.
In addition, the judgment recites that the court heard the evidence in the case. That evidence, except for the admissions with the rental contracts attached, was not brought forward. We must assume such evidence supported the judgment, both as to the truck-trailer and attorneys' fee.
The points based on the claim of no competent evidence are overruled.
We think, too, the pleadings were sufficient to support the judgment rendered.
Rule 45, T.R.C.P., only requires that a petition consist of a statement in plain and concise language of the plaintiff's cause of action, and provides that the fact "That an allegation be evidentiary or be of legal conclusion shall not be ground for objection when fair notice to the opponent is given by the allegations as a whole."
Certainly the petition in the case was sufficient to give defendant fair notice what plaintiff was seeking and the reasons why.
"In order to support a default judgment it is not necessary that a plaintiff set out in his pleadings the evidence upon which he relies to establish his asserted cause of action. * * * it is not requisite that a petition be technically sufficient to state a cause of action in order to sustain a default." Edwards Feed Mill, Inc. v. Johnson, 158 Tex. 313, 311 S.W.2d 232 (1958).
The court in Sagebiel's, Inc. v. Sumrall, 358 S.W.2d 251 (Tex.Civ.App., 1962, ref., n.r.e.), discussing the question of sufficiency of the pleadings in a default judgment case, said: "While neither the pleadings nor *416 evidence are as specific and detailed as they might have been if the case had been contested in the trial court, nevertheless, we are forced to the conclusion that it is not shown that the * * * court's assessment of damages was based on evidence of injuries not pleaded or on incompetent testimony. The petition would not have been subject to a general demurrer under the old practice."
The above holding is applicable to the instant case.
Finding no reversible error in the record, all points of error are overruled and the judgment of the trial court is affirmed.
Affirmed.
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421 S.W.2d 921 (1967)
James PATTERSON et al., Appellants,
v.
Billie Barbara HALL et vir, Appellees.
No. 11540.
Court of Civil Appeals of Texas, Austin.
October 18, 1967.
Rehearing Denied November 8, 1967.
Rehearing Denied November 29, 1967.
*923 Charles Ramsey, San Marcos, Barkley, Cutcher & Alderson, Taylor, for appellants.
Wallace T. Barber, San Marcos, Emmett Shelton, Sr., Holloway & Holloway, Austin, for appellees.
HUGHES, Justice.
Billie Barbara Hall and husband, Nathan Hall, appellees, brought this suit against James Patterson, Frances Patterson Lee, a feme sole, Annie Mabry Gilliland and husband George W. Gilliland, Matie E. McKellar, a feme sole, Edith Butler and husband, W. S. Butler and the State Bank and Trust Company of San Marcos, Texas, Administrator of the Estate of Barbara L. Everett, deceased, to recover the title to and possession of 812.5 acres of land located in Hays County.
Trial to a jury resulted in a verdict and judgment for appellees. From this judgment, Matie E. McKellar, Frances Patterson Lee, Annie Mabry Gilliland, George W. Gilliland and Annie K. Patterson[1] have appealed.
This case is before us without a statement of facts.
Appellants' first five points are that the trial court erred in failing to submit as part of its charge their requested instructions one through five.
The trial court submitted the following special issues to the jury which answered as indicated:
"SPECIAL ISSUE NUMBER ONE: Do you find from a preponderance of the evidence that Barbara Everett made an oral gift to the Plaintiffs, Billie Barbara Hall and Nathan Hall, of the land described in the Plaintiffs' Original Petition and known as the `Home place' at or about the time the Plaintiffs first moved on such lands in about 1962?
Answer: NO.
SPECIAL ISSUE NUMBER TWO: Do you find from a preponderance of the evidence that Barbara Everett made an oral gift to the Plaintiffs, Billie Barbara Hall and Nathan Hall, of the land described in the Plaintiffs' Original Petition and known as the `Home Place' during the year 1964?
Answer: YES.
SPECIAL ISSUE NUMBER THREE: Do you find from a preponderance of the evidence that the Plaintiffs, Billie Barbara Hall and Nathan Hall, entered into possession of such land relying on such gift, with the consent of Mrs. Everett?
Answer: YES.
SPECIAL ISSUE NUMBER FOUR: Do you find from a preponderance of the evidence that the Plaintiffs, Billie Barbara Hall and Nathan Hall, made valuable and permanent improvements on such land in reliance on the gift, with the knowledge and consent of Barbara Everett?
Answer: YES."
Appellants timely requested and the trial court refused to give the following instructions and definitions:
"DEFENDANTS' REQUESTED INSTRUCTION NUMBER ONE
In connection with Special Issues Numbers 1 and 2, you are instructed that to establish an oral gift of land there must have been a present gift. To constitute a present gift, there must have been an intent on the part of Barbara Everett to convey the property in question at the time she made the gift, if she made a gift. A promise to convey land in the future or to make a gift in the future, or to leave property in a will is not sufficient positive action to constitute a present gift.
*924 DEFENDANTS' REQUESTED INSTRUCTION NUMBER TWO
In connection with Special Issue Number 3, you are instructed that the word `possession' as used therein does not necessarily mean exclusive possession, but can mean the joint possession of Plaintiffs with Barbara Everett, however, it must be such possession in Nathan and Billie Hall that they would have the right of control which pertains to the status of an owner, and not the status of an employee.
DEFENDANTS' REQUESTED INSTRUCTION NUMBER THREE
In connection with Special Issue Number Four, you are instructed that the term `valuable and permanent improvements' as used therein means the improvements made must be of a permanent nature, and of such value, in comparison with the nature and value of the property upon which the improvements are made, as to enhance the value of such property to a substantial degree. Improvements of an insignificant value are not sufficient.
DEFENDANTS' REQUESTED INSTRUCTION NUMBER FOUR
In connection with Special Issue Number Three, you are instructed that the word `possession' as used therein does not necessarily mean exclusive possession, but can mean the joint possession of Plaintiffs with Barbara Everett, however, it must be such possession in Nathan and Billie Hall that they would have the right of control which pertains to the status of an owner.
DEFENDANTS' REQUESTED INSTRUCTION NUMBER FIVE
In connection with Special Issue Number Four, you are instructed that the term `valuable and permanent improvements' as used therein means the improvements made must be of a permanent nature, and of such value, in comparison with the nature and value of the property upon which the improvements are made, as to enhance the value of such property to a substantial degree."
Appellants' points five through ten are that the trial court erred in overruling objections made to the charge to the jury. Three of the objections were to Special Issue No. 2, supra, and were (1) that it was in the nature of a general charge and did not define an oral gift or state its elements (2) that their requested instruction No. 1, supra, was not given in connection with such issue and (3) that no instructions were given by which the jury could determine whether the gift inquired about had become complete at any stated time.
Another objection to the charge was that Special Issue No. 3, supra, was a general charge and permitted the jury to return a general verdict as to possession of the land without the benefit of appellants' requested instructions, supra, as to such issue.
The objection to the charge presented in point ten was that Special Issue No. 4, supra, was a general charge which permitted the jury to return a general verdict as to improvements without the benefit of their requested instructions, supra, as to this issue.
Point eleven is that the trial court erred in overruling objections to the definition of "possession" given in the charge in connection with Special Issue No. 3, supra. The objections were that the definition was incomplete and did not conform to the elements of possession set out in the requested instructions of appellants, copied above. The Court instructed the jury that the word "possession" as used in this issue does not necessarily mean exclusive possession, but can mean the joint possession of plaintiffs with Barbara Everett.
The record discloses that in the pleading on which appellees went to trial they alleged a gift of this property occurring in 1962, *925 and that during the trial a trial amendment was filed in which a gift in 1964 was alleged. The 1962 gift was negated and the 1964 gift was affirmed by the jury.
It is our opinion that the above points cannot be evaluated without a statement of facts. The general rule, supported by many authorities, is that a charge not glaringly erroneous under any state of facts that could arise under the pleadings will not be reviewed without a statement of facts. Freiberg, Klein & Co. v. Lowe, 61 Tex. 436, Trinity & Brazos Valley Ry. Co. v. Lunsford, 160 S.W. 677, Tex.Civ.App. Austin, writ ref. The rule applies not only to the charge given but to requested charges refused. Day v. Gulf, C. & S. F. Ry. Co., 297 S.W. 501, Tex.Civ.App. Austin, n. w. h., and cases therein cited.
Even though a charge given may appear to be erroneous, the appellate court, without a statement of facts, cannot determine whether the error was prejudicial except where the erroneous charge given, taken in connection with the pleadings and verdict leaves no doubt that the finding of the jury must have been controlled by it. Williams v. Texas & N. O. Ry. Co., 100 S.W.2d 1077, Tex.Civ.App. Waco, n. w. h., and authorities therein cited.
One of the latest cases applying the principles of the above cases is Lanier, Inc. v. Bexar County National Bank, 376 S.W.2d 42, Tex.Civ.App. San Antonio, n. w. h.
Rule 277, Texas Rules of Civil Procedure, does, in part, provide that the trial court shall submit such explanatory instructions and definitions of legal terms as shall be necessary to enable the jury to properly render a verdict on the issues submitted to it.
The problem here, however, is that without a statement of facts we cannot tell whether the failure to give such requested instructions was prejudicial to appellants. In fact, we cannot tell whether any issues should have been submitted to the jury. It could be that the parol gift and all of its elements were established as a matter of law by the testimony and admissions of appellants upon the trial.
There is no question presented that the verdict of the jury and the judgment rendered pursuant to it were not within the scope of the pleadings of the parties. In view of this, we will not analyze the pleadings.
It is our opinion that the charge to the jury was not so glaringly erroneous when considered with the pleadings for us to hold, as a matter of law, that the jury was necessarily misled thereby.
So believing, we overrule all points presented by appellants and affirm the judgment of the trial court.
Affirmed.
ON MOTION FOR REHEARING
On April 17, 1967, appellants filed a motion herein for an extension of time within which to file a statement of facts. The reason given was that the court reporter who reported the case had been unable to prepare the statement of facts as shown by an attached affidavit of such reporter. We quote from this affidavit:
"I am a free lance independent court reporter residing in Houston, Harris County, Texas. I do court reporting as a profession, taking depositions and very frequently fill in for official court reporters when they are unable to be in attendance in their regular court. Because of the illness of the Official Court Reporter, Mr. A. C. Fridge, I was requested to take, and did take and report the cause of Billie Barbara Hall, et vir, vs. James Patterson, et al, No. 8269, in the District Court of Hays County, Texas, such trial beginning on October 31, 1966, and testimony having been received from 16 witnesses for three days.
Immediately after the trial, being November 4, 1966, James L. Cutcher of *926 Taylor, Texas, one of the attorneys for the Defendants, James Patterson, et al, called me by long distance telephone and at that time ordered a transcript of the Objections to the Court's Charge, and in such telephone conversation Mr. Cutcher also advised me that he would need a Statement of Facts. On this occasion Mr. Cutcher advised me that he would file a Motion for New Trial and desired to use a copy of the Statement of Facts at the time of arguing his Motion for Net (sic) Trial and further advised me that he desired to have the Statement of Facts transcribed, regardless of whether the Court did grant a new trial or not.
On December 9, 1966, I mailed the transcription of the Objections to the Court's Charge, together with my letter dated December 9, 1966, stating that I would need a deposit of $500.00 before beginning work on the Statement of Facts, a copy of which letter is attached hereto. Thereafter, I received a letter from Mr. Cutcher dated December 27, 1966, a copy of which is attached hereto. I later received a letter from Mr. Cutcher dated February 23, 1967, on February 25, 1967, together with checks totaling $500.00 as deposit on the Statement of Facts, a copy of which letter is attached hereto.
Since February 25, 1967 when the Statement of Facts was ordered, my workload, consisting of depositions, Statement of Facts and substituting in various courts in Houston, LaGrange and Lockhart, has continued to increase. This, coupled with the fact that I have had to take care of some private matters outside of my regular duty as a court reporter has caused me to be unable to transcribe the Statement of Facts as ordered by Mr. Cutcher.
Mr. Cutcher telephoned me sometime during the first week of March asking about the Statement of Facts. At that time I was advised for the first time the Statement of Facts was due some time the very last of March. At that time I informed Mr. Cutcher it would be impossible for me to have the Statement of Facts prepared by the date he had informed me it was due.
As of this date I have been unable to begin on the Statement of Facts and I feel it will take at least forty-five (45) days with the workload I am now carrying before I will be able to finish the Statement of Facts.
WITNESS MY HAND this 14th day of April, 1967
/s/ M. A. Baker, Jr.
M. A. Baker, Jr."
We also copy below the letter from appellants' attorneys to Mr. Baker dated December 27, 1960:
"Dear Mr. Baker:
Enclosed please find our check in the sum of $20.00 for payment of reporting voir dire and transcribing objections to the Court's charge.
We are discussing with our clients your requirement of payment in advance on the Statement of Facts and will forward the same soon. We have borne all expenses for these people as we are not worried about the money since there is an additional 700 acre tract of land out of which we will recoup all expenses. However, we would like for them to get their feet wet in this thing then they will be more personally involved and, therefore, we have requested that they furnish the $500.00 deposit to you.
When I send you the deposit, I will also send the deposition and letter."
On April 26, 1967, we overruled the motion of appellants but granted motion to amend as shown by the following order:
"Appellants' Motion for Extension of Time to File Statement of Facts in the above cause was today submitted and overruled, with leave granted to amend his motion within ten days from this date by showing, if he can, that if the *927 Statement of Facts had been ordered earlier, say within a week of the date when the motion for new trial was overruled, that, nevertheless, the court reporter could not have completed the statement of facts within the sixty days allowed."
On May 8, 1967, appellants amended their motion by filing an affidavit of Mr. Cutcher, an attorney for appellants, and by filing an additional affidavit from Mr. Baker.
We quote from the affidavit of Mr. Cutcher:
"The Motion for New Trial in this cause was overruled and ordered entered on February 1, 1967. Affiant, at such time, was in the process of preparing for a jury trial in the District Court of Williamson County, Texas, which was to be tried on February 6, 1967, and which was the first cause on the jury docket at such time, which said cause was, in fact, tried and terminated on February 6, 1967. Your Affiant had been advised by the Court Reporter, M. A. Baker, Jr., of Houston Texas, that such Court Reporter required a cash deposit of $500.00 prior to beginning the preparation of the Statement of Facts in this cause and Affiant, therefore, had his clients conform to such request. On February 10, 1967, Affiant attempted to contact his clients to secure such funds for the deposit, such clients having previously agreed that the Patterson family would furnish $250.00 of said deposit and Mrs. Matie E. McKellar would furnish the other $250.00, as this represented their proportionate interest among themselves in the cause of action. This Affiant was advised that Mrs. Matie E. McKellar, who is elderly, was out of the State of Texas and, therefore, this Affiant, on February 10, 1967, called Mr. Edwin I. McKellar, Jr., Attorney at Law of Houston, Texas, who is the son of Mrs. Matie E. McKellar, and this Affiant was then advised that Mrs. Matie E. McKellar was then in Pittsburg, Pennsylvania, where she had gone to visit her daughter, this Affiant being further advised by Mr. Edwin I. McKellar, Jr., that Mrs. Matie E. McKellar had become seriously ill while visiting her daughter in Pittsburg, Pennsylvania, had been hospitalized and had undergone a surgical operation, whereupon Mr. McKellar stated that he would contact his mother and have her furnish such funds. Mr. McKellar did so contact his mother and her check was received by this Affiant February 22, 1967, and said check was then placed with the check of the Patterson family and was mailed to said Court Reporter by this Affiant on February 23, 1967.
Thereafter, this Affiant called such Court Reporter during the first week of March to inquire what progress such Court Reporter was making on transcribing such Statement of Facts, and this Affiant has personally called said Court Reporter nine times thereafter, attempting to either secure the Statement of Facts or an affidavit from said Reporter showing why the same has not been completed.
Such Court Reporter has stated to this Affiant in telephone conversations that he, the said Court Reporter, would not have been able to transcribe the Statement of Facts even if he had received the deposit immediately after February 1, 1967; however, said Court Reporter, thereafter, has refused to make such statement in an affidavit where it could be filed with the Court. Such Court Reporter has also advised this Affiant in such telephone conversations that since receiving the $500.00 deposit he, the said Court Reporter, has thereafter taken and transcribed certain depositions for other attorneys who were his regular customers in Houston, Texas, thereby giving preference to such work of his regular customers.
This Affiant has discussed with such Court Reporter the contents of affidavits *928 to be filed with the Court of Civil Appeals; however, such Court Reporter, after having advised this Affiant of facts which he would include in an affidavit to be filed by him, such Court Reporter did not so include such facts and such Court Reporter would not sign any affidavit that he did not personally prepare himself. Affiant states that the two affidavits signed by such Court Reporter and filed with the Court of Civil Appeals were not prepared by this Affiant, but were furnished to this Affiant by the Court Reporter and, in fact, when this Affiant was advised by the Clerk's Office by their letter of April 26, 1967, to the effect that Appellants' Motion for Extension of Time to File the Statement of Facts in this cause was overruled with leave granted to amend the Motion within ten (10) days, this Affiant called such Court Reporter and advised such Court Reporter of the overruling of the Court and requested that the Court Reporter sign an affidavit showing the facts that such Court Reporter had related to this Affiant orally, and said Court Reporter advised this Affiant that he, the said Court Reporter, `did not see the necessity of a further affidavit.' However, thereafter, said Court Reporter did execute the affidavit dated May 6, 1967, which, as stated above, was prepared by the said Court Reporter."
We quote from the affidavit of Mr. Baker:
"It is my opinion that I would not have been able to prepare the statement of facts so that it could have been filed within the time allowed by the Texas Rules of Civil Procedure if I had received the order for the statement of facts several days prior to February 25, 1967, the date received, and perhaps as long as a week prior to such date."
Also we copy a letter from Mr. Baker to an attorney for appellee, dated May 6, 1967.
"In accordance with my advice to you that I would furnish to you a copy of any affidavit or statement which I furnished to opposing counsel, I enclose herewith a copy of affidavit which I have this day mailed to Mr. Cutcher.
For your information, Mr. Cutcher was rather insistent that I should make a statement that if I had received the order even two weeks earlier than I received it I still could not have prepared the statement of facts in time; but I felt I could not truly make such a statement as to any time more than a week prior to February 25, 1967."
We adhere to our previous ruling in denying appellants' motion for an extension of time within which to file a statement of facts.
Notice of appeal was given on February 1, 1967.
Rule 377(c), T.R.C.P. provides, in part, that, "Promptly after notice of appeal is given and where a request is made of the official court reporter for the preparation of a transcript of all or any part of the evidence adduced on the trial of the case * * *," certain steps must be taken.
This rule clearly requires that a statement of facts must be requested promptly after notice of appeal is given.
Our holding simply is that waiting twenty-three or twenty-four days before ordering a statement of facts is not acting promptly within the above rule and that unless it be shown that had the statement of facts been ordered promptly it still could not have been prepared within the time allowed good cause within Rule 386, T.R. C.P., as construed in Matlock v. Matlock, 151 Tex. 308, 249 S.W.2d 587, is not shown. There the Court emphasized that under the Rule appellant must show "good cause why he could not file" (italics ours) the record timely, and further stated that Courts of Civil Appeals have but little discretion *929 in determining whether to permit the late filing of a transcript.
The affidavit of the court reporter here merely shows that had the statement of facts been ordered a week earlier, he could not have prepared it in time. This showing does not meet the requirement of Matlock that appellant must show good cause why he could not timely file the statement of facts. See Douglas v. Wheeler, 306 S.W.2d 956, Tex.Civ.App. Austin, writ ref. n. r. e.
We are aware of the Supreme Court opinion in Wigley v. Taylor, Tex., 393 S.W.2d 170, where the Court without citing Matlock states "* * * we cannot say that the Court of Civil Appeals abused its discretion in denying the motion (under Rule 386, T.R.C.P.) inasmuch as counsel waited forty-eight days after judgment was entered by the trial court before ordering the transcript."
If by that language the Court implies that the Court of Civil Appeals in Wigley had the discretion to grant such motion notwithstanding the forty-eight day delay in ordering the transcript, then this Court certainly would have the discretion to grant the motion before us. Under the affirmative authorities cited herein, we do not believe we have discretionary authority to grant appellants' motion. If, however, we do have such authority, we would, without hesitation, grant the motion.
Appellants say that they find themselves at the mercy of the court reporter. We agree. The records of this Court disclose that the court reporter and clerk of the trial court have the power of life and death over appeals. This is an unhealthy situation which only the rulemakers can remedy.
We did not write on this question in our original opinion for the reason that no assignment of error pertaining thereto was in appellants' brief.
The motion is overruled.
Motion Overruled
ON SECOND MOTIONS FOR REHEARING
Appellant Matie E. McKellar calls our attention to a separate notice of appeal dated November 28, 1966, on behalf of all appellants, which was filed February 6, 1967.
All appellants gave notice of appeal in the order overruling the motion for new trial on February 1, 1967. The sufficiency of this notice of appeal is not attacked and we find no fault in it; nor is it contended that it has been abandoned. In our opinion, the notice of appeal filed February 6, 1967, is surplusage and is ineffective to prolong the period for taking steps to obtain a statement of facts under Rule 377, T.R.C.P. All second motions for rehearing are overruled.
NOTES
[1] Annie K. Patterson answered and judgment was taken against her although she was not named in appellees' petition.
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421 S.W.2d 915 (1967)
Venida A. BYRD, Appellant,
v.
The STATE of Texas, Appellee.
No. 40738.
Court of Criminal Appeals of Texas.
November 8, 1967.
*916 Pena & McDonald, by L. Aron Pena, Edinburg, for appellant.
Oscar B. McInnis, Dist. Atty., Edinburg, and Leon B. Douglas, State's Atty., Austin, for the State.
OPINION
WOODLEY, Presiding Judge.
The offense is felony embezzlement; the punishment, two years.
The indictment alleged the embezzlement of $85.19 in money from Valley Transit Co. Inc., a corporation, by appellant, its agent and bailee.
The first ground of error is that the court erred in allowing admission of evidence and allusion to the commission by defendant of other crimes and transactions.
Art. 40.09, Sec. 9, Vernon's Ann.C.C.P., requires that the defendant's brief shall set forth separately each ground of error of which defendant desires to complain on appeal.
The brief fails to point out any particular evidence or allusion, or ruling of the court in regard to same. We note, however, that the evidence as to shortages in other similar transactions relating to money collected by appellant, as station agent at the Edinburg Bus Station, appears to have been admitted without objection and was limited in the court's charge, to which there were no objections. Further, we agree with the state's contention that the evidence so limited was admissible under Campbell v. State, 163 Tex. Crim. 545, 294 S.W.2d 125, to show system, intent and knowledge.
The second ground is that the trial court committed material error in making comment on the weight of the evidence at various incidents of the trial. This assignment *917 of error does not comply with the requirements of Art. 40.09, Sec. 9, supra, that the grounds of error be set forth separately.
We have examined the portion of the record indicated in connection with this ground of error and find no comment of the court to which objection was made or which violated Art. 38.05 V.A.C.C.P., which provides that the judge shall not comment upon the weight of the evidence or its bearing in the case, or make any remark calculated to convey to the jury his opinion of the case. A comment by the court not reasonably calculated to prejudice the rights of appellant is not ground for reversal. Vasquez v. State, 163 Tex. Crim. 16, 288 S.W.2d 100; Adams v. State, 165 Tex. Crim. 523, 309 S.W.2d 245; Collins v. State, Tex.Cr.App., 376 S.W.2d 354.
The third ground of error is that the court erred in considering other charges pending against appellant in assessing punishment.
This claim of error relates to a statement by the court at the time he passed on appellant's application for probation. The jury had previously returned its verdict finding appellant guilty and, the defendant having elected to have the punishment assessed by the court, the court had assessed the minimum punishment.
We find no denial of due process of law in the court's refusal to grant probation, based in part upon other charges pending against appellant.
The fourth ground of error is that the verdict of the jury and consequent judgment of the court where contrary to the law and the evidence.
This complaint relates to the variance between the total receipts from ticket sales shown by the State's Exhibits and the amount alleged to have been embezzled.
State's Exhibit No. 3, compiled by appellant, reflects that on February 25, 1966, the total receipts for tickets and express, less commission, was $100.04 whichdeducting $14.85 chargedleft a balance of $85.19 due and to be deposited to the account of the Corporation. The undisputed evidence shows that such sum was not deposited by appellant as required by her agency agreement.
The amount shown by the state's evidence to have been embezzled being more than $50.00, any variance between the allegations and proof as to the amount embezzled would not be fatal.
The evidence in support of the allegation as to agency and the receipt of more than $50.00 by the appellant on February 25, 1966, which was not deposited in the bank in accordance with the agency agreement is not disputed. The jury rejected appellant's testimony to the effect that she did not embezzle or appropriate any of the corporation's money.
The evidence is deemed sufficient to sustain the jury's verdict, and ground of error No. 4 is overruled.
The remaining ground for reversal is that appellant was not afforded effective and competent counsel. Appellant's trial counsel as well as her counsel on appeal were of her own choosing. The brief concedes that trial counsel was "a man of tremendous experience in the practice of law." Without questioning his general competency, the brief presents the contention that the entire record of the trial proceedings reflects that appellant was not adequately represented.
While the writer's views are expressed in his dissenting opinion in Rodriguez v. State, 170 Tex. Crim. 295, 340 S.W.2d 61, the majority opinion therein does not support appellant's ground of error.
The constitutional right to counsel does not mean errorless counsel, and whether counsel is employed or is court appointed, his competency or the adequacy of his representation of his client is not to be *918 judged by hindsight. Fletcher v. State, Tex.Cr.App., 396 S.W.2d 393.
The contention that appellant was denied her right to effective aid of counsel is overruled.
The judgment is affirmed.
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680 F. Supp. 1250 (1988)
Donald FISHER, Plaintiff,
v.
Joseph A. HERTRICH, United Air Lines, Inc., and Unknown Others, Defendants.
No. 87 C 7811.
United States District Court, N.D. Illinois, E.D.
March 10, 1988.
*1251 Peter F. Zullo, Law Offices of Peter F. Zullo, Chicago, Ill., for plaintiff.
Robert P. Casey, Elk Grove Township, Ill., Joel H. Kaplan, Gary S. Kaplan, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, Ill., for defendants.
MEMORANDUM OPINION
BRIAN BARNETT DUFF, District Judge.
Donald Fisher brought suit against United Air Lines, Inc. ("United"); Joseph Hertrich, United's Director of Flight Operations; and unknown others in the Circuit Court of Cook County. Fisher's three-count complaint alleged assault and battery, intentional infliction of emotional distress, and a violation of his free speech rights under the Illinois constitution.
Defendants removed the lawsuit to federal court, claiming that this court had jurisdiction either because of diversity of citizenship or because Fisher's claims arise under the Railway Labor Act ("RLA"), 45 U.S.C. §§ 151 et seq. (1986). Apparently conceding that diversity does not exist, defendants now base their removal petition entirely on the RLA.
Before the court is Fisher's motion to remand his case to state court pursuant to 28 U.S.C. § 1447(c). For the reasons stated below, that motion is denied.
FACTS
On August 1, 1985, Donald Fisher was standing in the United Flight Operations Area at O'Hare Airport waiting for his flight to depart. Fisher was employed by United as a pilot.
United had just suffered its first pilots' strike in over thirty years. Although the pilots had been back at work for approximately six weeks, some resentment remained. In particular, some senior pilots had begun wearing small yellow ribbons to protest United's treatment of employees who had honored the pilots' picket line. Fisher and several other pilots were wearing these ribbons.
Hertrich walked up to Fisher and instructed him to remove the ribbon. Fisher refused to do so, apparently because Hertrich had been working at O'Hare for only four weeks and Fisher did not recognize him. Hertrich then commanded Fisher to remove the pin, and again Fisher refused. At this point, Hertrich took Fisher's arm, turned him around, and proceeded to escort him out of the Flight Operations Area. Fisher subsequently was terminated for insubordination.
United's Flight Operations Manual ("FOM"), distributed to all United pilots, sets forth the company's standards regarding the personal appearance of its employees. It explicitly states that United flight officers may wear one of two United pins *1252 and/or the Airline Pilots Association ("ALPA") pin; the wearing of all other pins violates company rules.
The collective bargaining agreement ("CBA") between United and the ALPA provides for the discipline or discharge of United pilots. Insubordination, defined by a United employee manual as the refusal to comply with a direct order, is one of the offenses for which a pilot may be disciplined or discharged.
Following his termination, Fisher sought redress through the grievance procedures negotiated by the ALPA and United. Hertrich, United, and the other unknown defendants harassed him, fabricated documents concerning his case, and otherwise singled him out for improper treatment, in order to cause him emotional distress and to deny him his right to free speech under the Illinois constitution.
DISCUSSION
Section 1447(c) of Title 28 of the United States Code requires district courts to remand cases that were removed improvidently and without jurisdiction. Whether Fisher's case is one of those depends on whether his state law claims fall into an area that is completely pre-empted by federal law. Caterpillar, Inc. v. Williams, ___ U.S. ___, 107 S. Ct. 2425, 2430, 96 L. Ed. 2d 318 (1987). If so, it does not matter that plaintiff articulated only state claims in his complaint; under the "complete pre-emption" doctrine, any state claim intruding on an area occupied by federal law must be treated from its inception as a federal cause of action. Id.
The RLA completely pre-empts state law tort claims when adjudicating them requires the court to interpret the parties' collective bargaining agreement. Leu v. Norfolk & Western Railway Company, 820 F.2d 825, 829 (7th Cir.1987). In such cases, the "remedy [under the RLA] is exclusive; the [plaintiff] has no state remedies." Id. (quoting Graf v. Elgin, 790 F.2d 1341, 1346 (7th Cir.1986)).
In its decision in Farmer v. United Brotherhood of Carpenters & Joiners, 430 U.S. 290, 97 S. Ct. 1056, 51 L. Ed. 2d 338 (1977), the Supreme Court formulated an exception to the general pre-emption rule. It held that where the alleged conduct was so outrageous as to invoke a state's interest in protecting its citizens, pre-emption did not apply. Because the court did not want to go too far, however, it added a caveat in order to protect the federal labor relations scheme from interference:
[W]e reiterate that concurrent state-court jurisdiction cannot be permitted where there is a realistic threat of interference with the federal regulatory scheme.... [S]omething more is required before concurrent state-court jurisdiction will be permitted. Simply stated, it is essential that the state tort be either unrelated to [a violation of the collective bargaining agreement] or a function of the particularly abusive manner in which the [violation] is accomplished or threatened rather than a function of the actual or threatened [violation] itself.
Id. at 305, 97 S.Ct. at 1066 (footnote omitted).[1]
Under these standards, it is clear that Fisher's intentional infliction of emotional distress claim is in fact a federal claim. His allegations of harassment, of being unfairly singled out for termination, and of being the victim of an unfair grievance process all relate to the question of whether he was fairly discharged in the first place. A discharge is fair if done in compliance with the terms of the collective bargaining agreement. Thus resolution of Fisher's intentional infliction claim necessarily *1253 implicates the CBA and impinges on federal labor law. See Choate v. Louisville and Nashville Railroad Company, 715 F.2d 369 (7th Cir.1983); Beers v. Southern Pacific Transportation Company, 703 F.2d 425 (9th Cir.1983). The Seventh Circuit recently noted that intentional infliction claims which arise out of a discharge are "invariably" pre-empted. Lancaster v. Norfolk and Western Railway Company, 773 F.2d 807, 815 (7th Cir.1985).
Fisher's assault and battery allegations must be dealt with in the same way. While it might initially appear that an assault and battery claim has little to do with a collective bargaining agreement, the facts of this case reveal quite the opposite. Because Fisher was discharged for insubordination, one of the hotly contested issues in this case is how Hertrich treated Fisher when he requested him to remove the yellow ribbon. If Hertrich grabbed Fisher threateningly, as Fisher suggests, then perhaps Fisher would have been justified in refusing to follow Hertrich's order. On the other hand, if Hertrich touched Fisher lightly on the arm the way people often do, it appears more likely that Fisher was behaving in a disrespectful and insubordinate manner. Resolving the merits of Fisher's tort claims would embroil this court in debating the propriety of Fisher's dismissal. This we clearly may not do, as wrongful discharge suits are also routinely pre-empted under the Railway Labor Act. Lancaster, supra.
The Farmer pre-emption exception does not save Fisher's tort claims. As stated earlier, the Farmer doctrine applies only when the alleged tort either is unrelated to a violation of the CBA or is so abusive as to be outrageous. Neither condition is present here. Moreover, the Seventh Circuit recently applied the Farmer exception in very different circumstances in the Lancaster case. In Lancaster, the plaintiff was not discharged; he left his job voluntarily. He alleged, and the jury apparently found, that plaintiff's supervisors had threatened and struck him on numerous occasions, causing severe emotional injury. Judge Posner reasoned that the CBA was not implicated, and hence the Farmer exception applied, because "[t]he employment context [was] wholly incidental." Id. at 816.
Neither the employment context nor the CBA is incidental in this case. The interaction between Fisher and Hertrich occurred solely because of their employment relation, and implicated two provisions of the CBA one on insubordination, and one on wearing pins or emblems. Unlike Lancaster, a labor dispute is in the forefront of this case. Not only do the alleged acts give rise to a grievance under the CBA, but Fisher even implies in his complaint that Hertrich's actions resulted from residual frustration over the pilots' strike. Labor relations concerns thus permeate this lawsuit, making pre-emption of Fisher's tort claims appropriate.
This court now turns its attention to the last count of the complaint, which alleges a violation of Fisher's free speech rights under the Illinois constitution. The pre-emption analysis with respect to this claim must be slightly different, for many of the authorities cited thus far dealt solely with state tort actions.
Because neither party has cited, nor this court found, a case pre-empting a constitutional claim, this court is reluctant to do so here. Moreover, if defendants did in fact violate the Illinois constitution, such action would constitute particularly abusive conduct under the Farmer exception. Count III of Fisher's complaint therefore is not pre-empted. This court refuses to remand the claim, however, because it can be joined by means of pendent jurisdiction to Counts I and II.
CONCLUSION
Fisher's motion to remand is denied.
NOTES
[1] Although this court is deciding the jurisdictional and pre-emption issues together, such analysis does not offend the Seventh Circuit's ruling in Lingle v. Norge Division of Magic Chefs, Inc., 823 F.2d 1031 (7th Cir.1987) (jurisdictional and pre-emption issues to be decided sequentially). Fisher's claims arise under federal law, and thus removal is proper, only if the claims are "completely pre-empted." Caterpillar, Inc. v. Williams, supra. In such circumstances, the "arising under" and pre-emption issues are the same. Id.; Williams v. Hitachi Zosen Clearing, Inc., 1987 U.S. Dist. LEXIS 8654, 3 n. 4 (N.D.Ill.) [Available on WESTLAW, 1987 WL 14095].
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549 S.W.2d 434 (1977)
Curtis REINTSMA, Appellant,
v.
GREATER AUSTIN APARTMENT MAINTENANCE et al., Appellees.
GREATER AUSTIN APARTMENT MAINTENANCE et al., Appellants,
v.
Curtis REINTSMA, Appellee.
Nos. 12514, 12526.
Court of Civil Appeals of Texas, Austin.
March 30, 1977.
Rehearing Denied April 20, 1977.
*435 Jerry Frank Jones, Basham, Owen & Jones, Elgin, for Curtis Reintsma, appellant and cross-appellee.
Mary Ellen Felps, Austin, for Greater Austin Apartment Maintenance, C. H. Chee *436 and E. K. Chee, appellees and cross-appellants.
Rehearing Denied in 12514 April 20, 1977.
O'QUINN, Justice.
This lawsuit, resulting in appeals by both parties which are now consolidated for disposition, involves an action brought to recover a security deposit of $80 on an apartment rental, together with statutory penalties and attorney's fees.
The tenant appeals from a judgment entered May 5, 1976, solely on the ground that the attorney's fees awarded were inadequate, and the landlord appeals from a judgment dated June 17, 1976, attacking the judgment on two grounds.
By inference only are we able to assume now, after oral argument and filing of post-submission briefs by both parties, that the parties intend appeals to be from a judgment nunc pro tunc entered by the trial court November 4, 1976, purporting to set aside "all prior judgments in this cause."
Curtis Reintsma brought this suit in April of 1975 against Greater Austin Apartment Maintenance, a partnership composed of C. H. Chee and E. K. Chee. Although Reintsma did not plead the statute under which penalties and attorney's fees were sought, the record discloses that Article 5236e, V.A. C.S. (Acts 1973, 63rd Leg., p. 1182, ch. 433, eff. Sept. 1, 1973) provided the grounds for suit.
Section 4(a) of Article 5236e provides: "A landlord who in bad faith retains a security deposit in violation of this Act is liable for $100 plus treble the amount of that portion of the deposit which was wrongfully withheld from the tenant, and shall be liable for reasonable attorneys fees in a lawsuit to recover the security deposit."
The cause was tried before the court without aid of a jury on December 12, 1975. The record reveals a series of five judgments thereafter, the first being unsigned and undated, and the last being the judgment nunc pro tunc in November of 1976, purporting to set aside the prior judgments.
The trial court's docket reflects an entry dated December 12, 1975, which reads: "Judgment for Plf in amount of $340.00 plus $340.00 atty fees JFD jr." The first signed judgment shows a date of April 30, 1976; the second judgment was dated May 5, 1976; and a third judgment, termed "Final Judgment," was dated June 17, 1976. It is not necessary to repeat details of each judgment in disposing of this appeal, but it is sufficient to note that each entry was defective, and later set aside by the order nunc pro tunc.
After an undated judgment, followed by a menstrual sequence of judgments in April, May, and June, no further attempt at a judgment was made until the judgment nunc pro tunc was entered November 4, 1976.
Meanwhile, however, Reintsma's attorney had given notice of appeal from the judgment of May 7, 1976, and had posted cash in lieu of bond on June 1, 1976. Attorney for the Chee partners gave notice of appeal from the judgment of June 17, 1976, and filed supersedeas and cost bond dated July 27, 1976.
In giving written notice of appeal in May of 1976, Reintsma, through counsel, made it clear that appeal was from the "Court's ruling on attorney's fees" only, and that on appeal appellant would ask that his attorney "be awarded attorney's fees of $680.00 for work done to date of trial, for $500.00 for work done in making appeal and $150.00 for work done enforcing judgment, if such work is necessary."
Premature posting of bond and making cash deposit in lieu of bond, are not ineffective because filed prior to entry of the judgment nunc pro tunc in November, 1976, after records and briefs had been filed with the Clerk of this Court. Panhandle Construction Co. v. Lindsey, 123 Tex. 613, 72 S.W.2d 1068, 1072 (1934); Reavley and Orr, Trial Court's Power to Amend Its Judgments, 25 Baylor L.Rev. 191 (1973). We find the errors sought to be corrected by the judgment nunc pro tunc were clerical in nature and a judgment "now for then" was the proper procedure to cause the record to speak the truth. Hays v. *437 Hughes, 106 S.W.2d 724 (Tex.Civ.App. Austin 1937, writ ref'd); City of San Antonio v. Terrill, 501 S.W.2d 394, 397 (Tex.Civ.App. San Antonio 1973, writ ref'd n. r. e.).
We dispose first of the appeal by Reintsma complaining of an inadequate award of attorney's fees. Appellant contends the trial court abused its discretion in not allowing a fee of $680, instead of $340, plus $500 for making an appeal and allowance of $150 to enforce judgment if such work becomes necessary. We overrule these contentions.
Although this Court has power to suggest remittitur of an excessive allowance as condition to affirmance, we are not authorized to increase the trial court's allowance of attorney's fees. Grimes v. Robitaille, 288 S.W.2d 211, 213 (Tex.Civ.App. Galveston 1956, writ ref'd n. r. e.). Allowance of attorney's fees rests in the sound discretion of the trial court, and its judgment will not be reversed without showing that the court abused its discretion. Magids v. Dorman, 430 S.W.2d 910, 912 (Tex. Civ.App. Houston (14th Dist.) 1968, writ ref'd n. r. e.).
We must assume that in exercise of its discretion the trial court considered the established elements, discussed by this Court in McFadden v. Bresler Malls, Inc., 526 S.W.2d 258, 263-4 (Tex.Civ.App. Austin 1975, no writ), in determining reasonable attorney's fees. The trial court no doubt further took into consideration the recognized rule that award of attorney's fees when imposed by statute is in the nature of a penalty, the fixing of which should rest largely within the court's discretion.
We note that the judgment nunc pro tunc provides that "Plaintiff's attorney is hereby awarded the sum of $420.00 representing an $80.00 award of attorney's fees pursuant to work performed as a result of Plaintiff's Motion to Strike and CompelSecond and $340.00 as an amount equal to the damages awarded to the Plaintiff above." In his brief, filed prior to the November judgment, counsel for Reintsma complains that the trial court "awarded only $340.00 as attorney's fees," whereas, counsel argues, proof had been made to support an award of $680. It appears undisputed, however, that the trial court relied, not only on the docket sheet, but also upon his "own recollection" of pronouncements upon conclusion of trial in December of 1975, in entering the judgment nunc pro tunc on November 4, 1976. Thus this last judgment corrected clerical errors. 4 McDonald, Texas Civil Practice, sec. 17.08.1 (1971).
This Court has authority, in looking at the entire record to determine whether an award of attorney's fees is excessive, to draw on the common knowledge of the justices of the Court and their experience as lawyers and judges, and to view the matter in the light of the testimony, the record, and the amount in controversy. Southland Life Ins. Co. v. Norton, 5 S.W.2d 767, 769 (Tex.Comm'n App.1928, holding approved). We regard as excessive any award exceeding $340 for attorney's fees.
We now consider the appeal brought by defendants below, by which they offer two points of error. The basis of the appeal is that punitive damages, as provided by statute, were not justified because no evidence or insufficient evidence supported a claim of bad faith on the part of the landlords in withholding the deposit. Both points of error are leveled at the judgment of June 17, 1976, which was set aside by the judgment nunc pro tunc of November 4, 1976.
These contentions of the landlord appellants are not supported by the record. The trial court found that there was bad faith on the part of the landlords in withholding the deposit, and we find evidence in the record of prolonged refusal, without excuse, to return the deposit. No proof was made of damages to the premises, or other basis for withholding all or any part of the deposit. We conclude that the trial court properly applied the statute against landlords who in bad faith retained the security deposit in violation of the statute. The damages awarded followed the statute. The points of error are overruled.
We return now to the matter of attorney's fees. As already stated, we regard as *438 excessive any amount in excess of $340 as award for attorney's fees. In this conclusion we have proceeded as required by the rule of Southland Life. Pursuant to our duty under Rule 440, we suggest remittitur of an award of attorney's fees in excess of $340. If Reintsma through counsel files in this Court, within fifteen days from date of this opinion and judgment, a remittitur of $80, the judgment of the trial court will be reformed and affirmed for the sum of $340 as award for attorney's fees, and will be in all other things affirmed. If remittitur is not filed, the judgment will be reversed on the matter of attorney's fees only, and we will remand the cause for proceedings on that issue alone.
Judgment affirmed on condition remittitur be filed.
ON REHEARING
Curtis Reintsma failed to file a remittitur of $80 within fifteen days from date of our original opinion filed March 30, 1977. Reintsma did file, without remittitur, motion for rehearing on April 14, 1977. The motion for rehearing is overruled, and judgment of the trial court is reversed on the award of attorney's fees, which this Court has found to be excessive, and on that issue alone. The cause is remanded for trial, solely on the issue of attorney's fees for Reintsma's counsel, in conformity with the opinion of this Court.
Judgment of the trial court is affirmed in part and reversed in part. The cause is remanded for trial on the issue of attorney's fees.
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43 Md. App. 259 (1979)
405 A.2d 284
STATE OF MARYLAND
v.
STANLEY HIKEN.
No. 953, September Term, 1978.
Court of Special Appeals of Maryland.
Decided September 6, 1979.
The cause was argued before MOYLAN, MOORE and MACDANIEL, JJ.
Stephen Rosenbaum, Assistant Attorney General, with whom were Francis B. Burch, Attorney General, William A. Swisher, State's Attorney for Baltimore City, and Haven Kodeck, Assistant State's Attorney for Baltimore City, on the brief, for appellant.
Joseph F. Murphy, Jr., for appellee.
MOORE, J., delivered the opinion of the Court.
*260 In compliance with Maryland Rule 746,[1] the trial of appellee, Stanley Hiken, under four indictments charging him with arson and related crimes, was scheduled for December 19, 1977 in the Criminal Court of Baltimore, 3 months and 12 days from the date of the indictments. The trial did not take place as scheduled, however, essentially because the State's evidence in the possession of the Baltimore Police Department Arson Squad was subpoenaed approximately 2 weeks before the trial date by the United States District Court for the District of New Jersey in connection with a grand jury investigation in that jurisdiction of the same occurrence.[2] Nine months and 23 days from the date of Mr. Hiken's arrest, the court below (Allen, J.) granted appellee's second motion to dismiss for lack of a speedy trial. The State seeks a reversal. Finding no error, we will affirm.[3]
I
There was no evidentiary hearing below. Appellee's motion to dismiss for lack of a speedy trial was granted at the last *261 of five proceedings in open court[4] on June 30, 1978 after extensive colloquies between court and counsel and upon a proffer of evidence with which the State substantially agreed. The operative facts may be summarized as follows:
Appellee, Stanley Hiken, conducted a formal men's wear business in Baltimore City. In connection with this business, Hiken maintained a warehouse for formal wear storage at 1640 East Baltimore Street which was owned by S. Hiken Formal Wear, Inc. A fire occurred at the warehouse on December 11, 1976. A 9-month investigation into the fire was conducted by the Office of the State's Attorney and the Arson Squad of the Baltimore City Police Department. During this 9-month period, Mr. Hiken's records were subpoenaed as were members of his family and other individuals who appeared and testified before the grand jury. Mr. Hiken ultimately was charged, in four separate indictments, with arson of the warehouse,[5] conspiracy,[6] solicitation, and insurance fraud.[7]
On September 7, 1977, the date of the indictments, Hiken was arrested at his place of business in the 3600 block of Eastern Avenue in Baltimore City. Detective John Dillon of the Arson Squad took him from his establishment in handcuffs and drove him to the Southeastern District of the Baltimore City Police Department. There, after the prosecution pressed for the surrender of his passport, he was released on his own recognizance.
A trial date was set for December 19, 1977. In November, the United States District Court for the District of New *262 Jersey[8] subpoenaed appellee's business records.[9] An Assistant United States Attorney in New Jersey, Thomas McKay, III, was aware of Mr. Hiken's Maryland trial date. Nevertheless, at a meeting in his office in Camden, New Jersey on December 7, 1977,[10] attended by appellee's counsel, James F. Murphy, Jr., by Assistant State's Attorney Haven Kodeck of Baltimore City, and Detective John Dillon of the Baltimore City Police Department, Mr. McKay served a subpoena duces tecum upon Detective Dillon, returnable before the grand jury in Camden on December 13, 1977. Mr. Dillon was ordered to bring "all documents, reports, physical evidence, or other materials in [his] possession pertaining to the investigation of a fire at 1640 E[ast] Baltimore Street, Baltimore, Maryland, on 12/11/76."
Detective Dillon delivered documentary and physical evidence to the New Jersey grand jury on December 13, 1977, as required by the subpoena. Thereupon, Mr. Kodeck indicated to Mr. Murphy that a request for a change of Mr. Hiken's trial date of December 19, 1977 would be made. No motion was filed. Mr. Murphy requested a formal hearing, on the record, in the chambers of the Honorable Anselm Sodaro, then Administrative Judge.
Proceedings before Judge Sodaro, December 16, 1977.
Appellee's counsel assured Judge Sodaro that he was ready and desirous to proceed to trial. The court suggested to Mr. Kodeck that xerox copies of the State's evidence be obtained but the latter responded that copies could not be provided "at this late date." With extreme reluctance, Judge Sodaro removed the case from the trial calendar, preserving, however, the December 19th trial date for the hearing of *263 motions, filed on December 14th and December 16th, to dismiss all but the arson indictment. Judge Sodaro stated:
"I must agree with counsel, for both parties, that the United States Attorney acted highhandedly, and not only did he act high-handedly, but he has, in fact, caused embarrassment to the defense and the State, and the administration of justice of this city, because, obviously, it's an important case. It was especially set for trial for a particular court." (Emphasis added.)
He also stated that upon the return of the evidence from New Jersey, forecast by Mr. Kodeck for the following month, he would "make available, the Court to which this case has been assigned, Criminal Court Part XI, at anytime, even including the postponement of cases and assignments that have been scheduled for the Court so that this case may proceed expeditiously."
Proceedings before Judge Allen, December 19, 1977.
When appellee's motions came on for consideration by the court (Allen, J.) on December 19, 1977 the date which was to have been the trial date counsel for Mr. Hiken informed the court at the outset that his motions were addressed to the related charges but not the "substantive indictment," the arson indictment. He said, "We request an immediate trial on that issue." Subsequently, he informed Judge Allen: "[I] sincerely believe that my client is entitled to an immediate trial. The defense is ready to proceed and indicated to the chief judge on Friday that we were ready to proceed." The court observed that the matters presented were of some complexity and that the State should file a reply. The State requested, and received, a period of three weeks for that purpose.
Proceedings before Judge Allen, January 17, 1978.
When the case came again before the court on the pending *264 motions on January 17, 1978, Judge Allen stated at the very outset:
"Mr. Kodeck, Mr. Murphy has made his position very clear, he insists on trial for his client, as he calls it, immediate trial." (Emphasis added.)
The State then advised the court that it had been unable to complete the research necessary to respond to the defense's motions. An additional two-week period of time was requested. Judge Allen granted the request but ordered that "the material" be submitted to him by January 31 and that the hearing be held on February 7th. Before the conclusion of the proceedings, counsel for Mr. Hiken restated his objections to the original postponement of the trial and informed Judge Allen of the proceedings in New Jersey which had been the occasion of the change of the trial date by Judge Sodaro. Counsel stated that "extraordinary cause" within the meaning of Rule 746 had not been shown and that the State should have moved to quash the subpoena served upon Detective Dillon. The court ordered that a transcript of the proceedings before Judge Sodaro be obtained. The court also ruled, "at this time I'm going to deny Mr. Murphy's motion for an immediate trial. I guess it it's a motion for speedy trial."
Proceedings before Judge Allen, February 8, 1978.[11]
The court, having read the State's memorandum in response to appellee's pending motions addressed to the indictment charging conspiracy, solicitation, and insurance fraud, questioned the State's Attorney and defense counsel extensively with respect to the matters of law and fact involved before taking the motions under advisement. He assured counsel that he would rule expeditiously upon the motions.[12] Before adjournment, the court inquired of counsel whether the case had been continued indefinitely by Judge *265 Sodaro or merely "postponed." The State replied, "It was just continued until such time as the evidence that was subpoenaed from [the] Baltimore City Police Department to [the] New Jersey authorities was returned to the Baltimore City Police Department." Counsel for the defendant confirmed this statement but added, "But it's a situation, I think, you know, a rose by any other name and regardless of whether it's characterized as a postponement or a continuance, I continue to insist upon an immediate trial for my client and have done so at every juncture."
The court then rejoined:
"Mr. Murphy [defense counsel], it's very clear that you are laying the groundwork brick-by-brick. You always ask for an immediate trial and what I'm concerned about is this: maybe I really shouldn't be concerned about it but we don't have any control over this continuance if we are dependent upon another jurisdiction and another court system to release some documents and we are now, how many months since indictment?
MR. MURPHY: September was the indictment.
THE COURT: September 7th, October, November, December, January, five months, and with Mr. Murphy insisting very strongly at every meeting, insisting on an immediate trial we may be moving towards the point that our courts are going to say that, appellate courts are going to say that a continuance is a postponement. I really think. I don't know what could be done about it but it seems to me the State ought to make some sort of demand for the return of these records. I think the burden is on the state to make some motion in that direction.
Have you done that as yet?
MR. KODECK: Not as yet, Your Honor. I believe that the prospects of getting them back are very imminent.
THE COURT: Because when Mr. Murphy gets up around six months he's going to be talking about *266 speedy trial and things like that and I don't know what the Court of Appeals would do in a situation where we have allowed, not we, but the State has allowed instruments to get out of its hands that delay the trial and have not insisted on getting them back. So, I'll dispose of all your motions within a day or so and let you know.
MR. MURPHY: Thank you, Your Honor. Again, the issue where the evidence is and why it's unavailable to the State has again come up and Your Honor is familiar with the history of how it got there and the prejudicial effect it has on my client as proffered the last time we were in court. So, it is for that reason that I request that the indictment be dismissed and that the dismissal order entered very shortly.
THE COURT: I will rule on your motions. That's the best I can do. I will rule on your motions ." (Emphasis added.)
The court's ruling on the motions was almost immediately forthcoming. On February 15, 1978, Judge Allen (a) dismissed the indictment charging solicitation to commit arson; (b) denied the motion to dismiss the insurance fraud indictment; (c) denied a motion to suppress certain financial records allegedly acquired contrary to Md. Ann. Code art. 11, §§ 224-227 (Supp. 1978); and (d) denied the motion to dismiss the conspiracy indictment, granting the State leave to amend that indictment "by interlineation to add the names of co-conspirators whose identities were known or should have been known to the Grand Jury at the time of indictment."
Further Motions to Dismiss Indictments.
On March 2, 1978, counsel for Mr. Hiken filed a motion to dismiss the remaining three indictments, claiming that the State's "action and inaction" had violated Mr. Hiken's right to a speedy trial. The motion stated in part:
"7. Nearly six months have passed since the Defendant has been indicted, and the State has taken *267 no action to set these charges for trial on the merits. Defendant again alleges that none of the postponements or continuances requested by the State have been for `extraordinary cause' within the meaning of the above-captioned Rule [746 (b)] because the State has taken no steps to prevent the actions of the federal government which the State alleges to have caused its inability to present its case to a trier of fact." (Emphasis added.)
The record contains no response by the State to this motion. It appears that some time in March the evidence was returned by the New Jersey federal authorities. We are told that the defendant's counsel was not informed of their receipt. The record does not reflect any action by the State, at that juncture, to obtain a new trial date in accordance with Judge Sodaro's instructions of December 16, 1977.
On May 2, 1978, essentially on the basis of a denial of due process, counsel for Hiken filed a motion to dismiss the indictments and a comprehensive supporting memorandum. The principal grounds for the motion were that: (1) one Monty Artwell, who had previously given testimony under oath before the Baltimore grand jury, and whom Mr. Hiken intended to subpoena as a witness, had given false testimony in New Jersey involving the fire and was subject to a perjury indictment there;[13] and (2) the Maryland State authorities and the New Jersey federal authorities were "engaged in a joint investigation which caused the first postponement of this case and subsequent violations of Defendant's rights." The latter violations, as particularized in the motion, were serious, alleging that: State and federal authorities were engaged in an abuse of the grand jury process, the end result of which was to enable Maryland authorities to gather evidence for criminal charges pending before the Criminal Court of Baltimore, which it would not otherwise constitutionally be able to obtain. "The facts of the instant case clearly cry out for the intervention of this Honorable Court," the memorandum insisted.
*268 Judge Allen instructed the State to respond in writing. Although a reply memorandum was apparently submitted, it is not contained in the record before us.
On June 22, 1978, however, Hiken filed a "Second Motion To Dismiss For Lack Of Speedy Trial," in which it was stated that the State's answer to the defendant's May 2nd motion "simply argued that the matters raised therein be deferred until trial." Appellee's motion continued:
"Specifically and of paramount importance to the instant Motion, the State's response to the aforegoing Motion mentions absolutely nothing about the Defendant's claim that the office of the State's Attorney for Baltimore City and the Baltimore City Police Department has engaged in a deliberate strategy to delay the trial in order to work with the office of the United States Attorney for the District of New Jersey in the hope that the latter law-enforcement agency shall develop evidence not now in the possession of the State. Therefore, the Defendant's allegations must be taken as true for purposes of the Court's disposition of this Motion." (Emphasis in original.)
Proceedings before Judge Allen, June 30, 1978.
In open court on June 30, 1978,[14] extensive colloquies again took place between the court and counsel with respect to the pending motions. During the course of this hearing, Hiken's counsel complained again, as he had at virtually every other hearing, that the action of the federal authorities in New Jersey not only made possible the discovery of evidence against Mr. Hiken which normally would not have been available to the State, but that it was also contrary to stated policy of the Department of Justice in connection with the exercise of the power to prosecute a defendant under both *269 federal and state law for the same act or acts. See Claybrooks v. State, 36 Md. App. 295, 304-05, n. 5, 374 A.2d 365, 371 (1977). That policy, as disclosed in Claybrooks, was based upon a 1959 Memorandum to United States Attorneys from then Attorney General William O. Rogers. It stated that the power to conduct a federal prosecution after a State prosecution "has been used sparingly by the Department of Justice in the past. The purpose of this memorandum is to insure that in the future we continue that policy. After a State prosecution there should be no federal trial for the same act or acts unless the reasons are compelling." The federal policy, as represented to the lower court by counsel for Hiken, was, however, that "once there's a completed State prosecution the Justice Department will not permit an indictment unless the Attorney General himself authorizes it, so had this case proceeded to trial on December 19, 1977, for better or for worse, whatever the result was for Mr. Hiken, the Justice Department's policy would have precluded his indictment in New Jersey absent the actual written authorization of the Attorney General of the United States." The latter statement is not supported by the policy memorandum quoted above from the opinion of this Court in Claybrooks.[15]
As previously indicated, there was no evidentiary hearing on June 30, 1978, but counsel for the defendant made a proffer of facts with which the State substantially concurred. *270 At the conclusion of the hearing, appellee's due process motion filed on May 2, 1978 was denied. The second motion to dismiss for lack of a speedy trial filed on June 22, 1978 was granted. The court observed that what "makes the nine months different from any other nine months was the loss to the federal authorities of the evidence required to proceed here, when they really didn't have to do it and when they could have fought the subpoena and went ahead and tried his case." Judge Allen concluded that the Barker[16] analysis had been triggered, that appellee's right to a speedy trial had been repeatedly asserted and that the State's Attorney had not rebutted the presumption of prejudice which arose from the 9-month, 23-day delay. In so concluding, Judge Allen stated in part from the bench:
"The State has failed to even suggest or the State has suggested there's no prejudice, but there is a substantial representation by the defense that prejudice is very substantial, and in fact the defense feels that the Defendant is going to be indicted almost momentarily, and that once he is indicted the prejudice will be insurmountable because then he will stand for trial in two jurisdictions, perhaps. And the defense attaches even more lurid motives to the State's saying what they intend to do is simply to hold Mr. Hiken in some sort of suspended animation down here in Maryland until he's indicted in New Jersey and nol pros the cases down here.
Of course, that is just speculation; isn't it, Mr. Murphy, speculation. But the facts come through loud and clear that this case is nine months old, almost ten months old and that the Defendant at the behest of another jurisdiction without ever any attempt to fight the seizure, not seizure, but the subpoenaing of certain documents to protect its own prosecution has allowed the case to be delayed a very substantial length of time.
I think the delay is prejudicial, and I'm going to *271 grant the Defendant's motion to dismiss on the grounds of denial of speedy trial." (Emphasis added.)
II
As we noted at the outset,[17] the Court of Appeals in State v. Hicks, No. 130, Sept. Term, 1978 (filed June 25, 1979), and on motion for reconsideration, filed July 19, 1979, has held that Maryland Rule 746 is mandatory and not directory but that this new interpretation is "entirely prospective." In cases like the instant appeal, not affected by the court's holding, Rule 746 remains directory only, not mandatory. The starting point, in our appraisal of the State's claims of error, is the familiar case of Barker v. Wingo, 407 U.S. 514 (1972).[18] The court in Barker held that four factors should be balanced in determining whether a defendant has been denied a speedy trial: the "length of delay; the reason for the delay; the defendant's assertion of the right; and prejudice to the defendant." Id. at 530.
1. Length of Delay.
The duration of the delay is the mechanism which triggers the analysis and is itself one of the factors to be balanced. State v. Wilson, 35 Md. App. 111, 371 A.2d 140 (1977), aff'd, 281 Md. 640, 382 A.2d 1053 (1978), cert. denied, 439 U.S. 839 (1978). Here, the period of delay extends from September 7, 1977, the date when Mr. Hiken was indicted and arrested, to at least June 30, 1978, when his motion to dismiss for lack of a speedy trial was granted, a period of 9 months and 23 days.[19]
*272 We firmly reject the State's contention that the delay is not of constitutional dimension. As Barker held, "[T]he length of delay that will provoke such an inquiry is necessarily dependent on the peculiar circumstances of the case." Id. at 530-31. While the State correctly points out that the crimes charged here were not "ordinary street crimes" but crimes of greater complexity, it fails utterly to acknowledge the fact that a 9-month investigation by the police arson squad and the Office of the State's Attorney had preceded Mr. Hiken's indictment and arrest. Under these circumstances, the State was, or certainly should have been, ready for trial within a very short time after the indictments and the almost 10-month period involved is surely of constitutional dimension.[20]
2. Reason for the Delay.
A "brooding omnipresence" here is the subpoena issued by the United States District Court in New Jersey, almost two weeks before the trial date of December 19th in Part X of the Criminal Court of Baltimore. As we read the record, the Office of the State's Attorney for Baltimore City capitulated to an Assistant United States Attorney in Camden, New Jersey, showing little consideration for the orderly administration of justice in Maryland. We find no evidence that the top echelons of the Office of the State's Attorney of Baltimore City were in any way involved or concerned. It does *273 not appear that any effort was made, at appropriate levels, to moderate the demands of the Camden office so as to postpone compliance with the subpoena until after the trial in Maryland had occurred. No motion to quash was, it appears, even contemplated. Detective Dillon had no alternative but to deliver to the Camden office of the United States Attorney for the District of New Jersey everything that Maryland had as a result of nine months of investigation. The power of a court was invoked only after the evidence had been surrendered and then only to pray a continuance.
Judge Sodaro very properly spoke of the "embarrassment" and "handicap" to the State of Maryland "because of the actions of the United States Attorney's Office in Camden, New Jersey...." On the other hand, the Office of the State's Attorney for Baltimore City became clearly vulnerable to the charge, in appellee's brief, that it "did not want to begin Appellee's prosecution on December 19, 1977, and used the federal subpoena as an excuse not to do so."
The record does not disclose when the evidence came back from Camden except that it occurred some time in March 1978. We are told that the State made no effort to notify Mr. Hiken's counsel of its receipt. Patently, it made no effort to set the case for trial. The State, in its brief, argues that "the delay without a trial date being set from March 1978, when the evidence was returned, to May 2, 1978 [the date of appellee's motion to dismiss on due process grounds] again cannot be deemed anything but the orderly administration of justice [which] Epps v. State, [276 Md. 96, 345 A.2d 62 (1975)] labeled as neutral, not chargeable to either party." We reject this argument. Similarly, we reject the further statement in appellant's brief that:
"The time period from May 2, 1978 to June 30, 1978 was taken up by the preparation, as ordered by the trial court, by the prosecution of a reply to defense counsel's May 2 motion and by the normal delay in the scheduling of a hearing on the motion. This time period is thus chargeable to Appellee."
The undeniable truth is that the absence of State's evidence, *274 not the intervening motions, was the cause of the delay. Surely, an accused who properly asserts by motion "technical defect defenses" should not be penalized in the evaluation by the court of his claim that he was denied his right to a speedy trial.
In our judgment, on the record before us, the responsibility for substantially all of the delay in this case must rest on the doorstep of the State.
3. Assertion of the Right.
The transcripts of the five court proceedings before Judge Allen abundantly support his conclusion that Hiken, through counsel, clearly and forcefully asserted his right to a speedy trial "at every possible turn."
The State argues that his assertion of the right was deficient because no written motion for a speedy trial was ever filed. This argument is untenable. Oral assertions of the right, on the record, are clearly sufficient. The State further contends that appellee's motions to dismiss for lack of a speedy trial do not support his claims of assertion of the right. The State's reliance, in this respect, on Nocera v. State, 36 Md. App. 317, 374 A.2d 608 (1977) is altogether misplaced. It is true that we stated there, in language quoted in the State's brief, that a motion to dismiss is "not a motion to be tried, but a motion not to be tried ... and, therefore, does not tend to support appellant's argument that he effectively demanded a speedy trial." Id. at 321; 374 A.2d at 611. But the motion to dismiss in Nocera was not made until the day of trial. Here, the written motions were made in March and again in June of 1978, before any new trial date had been obtained by the State, despite the fact that the State's evidence had, at long last, been returned to Maryland from the federal authorities in New Jersey.
4. Prejudice to the Accused.
In Barker v. Wingo, the Court identified three interests of defendants "which the speedy trial right was designed to protect...: (1) to prevent oppressive pretrial incarceration, (2) to minimize anxiety and concern of the accused; and (3) to *275 limit the possibility that the defense will be impaired. 407 U.S. at 532. As Judge Moylan carefully explained for this Court in State v. Wilson, whenever the delay is of "constitutional dimension," as here, prejudice will be presumed. This presumption "is not conclusive but rebuttable." As Judge Moylan expressed it:
"The State, for its part, may come forward and meet its burden of producing evidence and negate the presumed prejudice."
35 Md. App. at 124; 371 A.2d at 149.
Although there was no pretrial incarceration here, the trial court's characterization of the prejudice to the appellee as "very substantial" was amply supported. The anxiety and concern of the accused had to be extreme. All during the period of the delay, he was under a constant threat of indictment by the grand jury in New Jersey, an indictment ultimately returned but one which, as appellee argues with persuasive effect, might not have resulted if the case had proceeded to trial as scheduled in Maryland. Indeed, it was precisely the threat of a federal indictment which appellee's counsel cited, at every turn, in urging an "immediate trial" in Baltimore.
Again, although not relied upon by the trial court, there was evidence of impairment of the defense. In advance of the original trial date, counsel for Hiken applied for an intrastate subpoena for Monty Artwell. In testimony before the grand jury in Baltimore, Artwell said that an individual named Levin in New Jersey had sent Artwell to Baltimore to burn the appellee's warehouse and to make the appellee the scapegoat. This testimony was recanted by Artwell after the original trial date in this case and he was indicted for perjury. The State offered no response below to appellee's proffer that his defense had been prejudiced by the loss of Artwell as a witness; and, although the circumstances are somewhat bizarre, we do not accept the State's rationalization in its brief that "as of June 30, 1978 the substance of Artwell's testimony was speculative at best." The crucial date was December 19, 1977, the original trial date.
*276 The court below properly held that the appellee was denied his right to a speedy trial and dismissed the remaining three indictments.
Judgments affirmed; Mayor and City Council of Baltimore to pay the costs.
NOTES
[1] Maryland Rule 746, effective July 1, 1977, provides in subsection (a) that a trial date must be set "within 30 days after the earlier of the appearance of counsel or the first appearance of the defendant before the court pursuant to Rule 723 (Appearance Provision for or Waiver of Counsel), [and that] a trial date shall be set which shall be not later than 120 days after the appearance or waiver of counsel or after the appearance of defendant before the court pursuant to Rule 723." Under subsection (b) the county administrative judge or his designee may grant a change of the trial date upon motion in writing or in open court and "for extraordinary cause shown." (Appellee's counsel entered his appearance on Sept. 27, 1977.)
[2] Subsequent to oral argument in this appeal, we were informed that appellee was indicted on May 23, 1979 in the United States District Court for the District of New Jersey, in a five-count indictment. The charges included conspiracy, wire-fraud, and racketeering, all arising out of a fire in Baltimore on December 11, 1976.
[3] The case of State v. Hicks, 285 Md. 310, 403 A.2d 356 (1979) held that Md. Rule 746 is mandatory and not directory, overruling Young v. State, 15 Md. App. 707, 292 A.2d 137, summarily aff'd, 266 Md. 438, 294 A.2d 467 (1972), and that dismissal of the indictment is ordinarily the appropriate sanction for violation of the 120-day trial date requirement. The Hicks case could not be determinative of this appeal, however, because, as the Court of Appeals ruled on motion for reconsideration in a per curiam opinion filed on July 19, 1979, the holdings in Hicks "will be entirely prospective, applying only to future criminal prosecutions and only to those pending cases where, as of our mandate in this case, there have been no appearances of counsel or first appearances of defendant pursuant to Rule 723." Id. at 338.
[4] These proceedings took place on December 16, 1977, December 19, 1977, January 17, 1978, February 8, 1978, and June 30, 1978. The first proceeding was occasioned by the State's motion for a continuance of the trial date to which the defendant objected. The subsequent hearings were in connection with motions addressed to the indictments by the appellee, culminating in the second motion to dismiss for lack of a speedy trial.
[5] Md. Ann. Code art. 27, §§ 7, 10 (a), 111 (1976 & Supp. 1978).
[6] Id., § 38 (1976).
[7] Id., art. 48A, § 233 (1979).
[8] We glean from the record that the United States Attorney's Office and the Grand Jury in the United States District Court for New Jersey were investigating the possible involvement in the Baltimore arson of two individuals also engaged in the formal wear business in Pennsauken, New Jersey.
[9] Xerox copies were later obtained by Mr. Hiken's counsel and were in his possession in time for the trial date of December 19, 1977.
[10] The purpose of the meeting was to review tapes that might contain exculpatory evidence in Mr. Hiken's case and that of a co-defendant in the Maryland proceedings.
[11] Although set by Judge Allen for February 7 at the hearing on January 17, the date was changed by the Criminal Assignment Office to February 8.
[12] As indicated infra, the court issued its order with respect to the motions, a week later, on February 15, 1978.
[13] It appears that Artwell was, indeed, later indicted for perjury.
[14] The transcript of this proceeding discloses that the attorneys and Judge Allen conferred in chambers on June 29, 1978 concerning the motions to be heard the following day and that the Assistant State's Attorney and defense counsel agreed that a trial date would be selected after disposition of the motions, if necessary.
[15] The State's brief on this appeal points out that the Justice Department's policy on this subject at the time of the hearing in this case was contained in a memorandum of then Attorney General Edward H. Levi, dated January 18, 1977, reprinted in 24 Crim.L. Rptr. 3001 (Nov. 22, 1978), stating in part:
"Prosecution in another jurisdiction The nature of the offense may be such that the federal interest in prosecution is less substantial than the interest of state or local authorities. In such cases it is entirely appropriate for the attorney for the government to consider deferring to state or local prosecution, especially if it appears that the state or local prosecution would be successful and would result in the imposition of an appropriate sentence."
Mr. Levi emphasized that the above was not to be construed in the nature of "guidelines" and that "they impose no obligations on United States Attorneys, their assistants, or other attorneys for the government [nor do] they confer any rights or benefits, substantive or procedural, enforceable at law by any party to litigation with the United States."
[16] Barker v. Wingo, 407 U.S. 514 (1972).
[17] See note 1, supra.
[18] We observe that, even where there has been full compliance with Rule 746, the Barker analysis may well result in a finding that the accused's speedy trial rights were denied. In the instant case, as in Hicks, there was compliance with subsection (a) of Rule 746. It also appears that as of the date of the proceedings in chambers before Judge Sodaro, 3 days before trial, there was "extraordinary cause" for a change of the trial date.
[19] A somewhat longer period of time may arguably be involved because no new trial had been set as of June 30, 1978, when the motion to dismiss was heard, and in all likelihood no such trial date could have been set without some additional delay.
[20] Wilson v. State, 281 Md. 640, 382 A.2d 1053 (1978) (4-year, 2-month delay was presumptively prejudicial); Jones v. State, 279 Md. 1, 367 A.2d 1 (1976), cert. denied, 431 U.S. 915 (1977) (2-year, 5-month delay was presumptively prejudicial); Epps v. State, 276 Md. 96, 345 A.2d 62 (1975) (1-year, 14-day delay was presumptively prejudicial); Smith v. State, 276 Md. 521, 350 A.2d 628 (1976) (16-month delay was prejudicial); State v. Dean, No. 591, Sept. Term 1978 (Ct. Spec. App. filed April 12, 1979) (2-year period prejudicial); State v. Statchuk, 38 Md. App. 175, 380 A.2d 225 (1977) (10-month, 21-day delay was prejudicial); Dorsey v. State, 34 Md. App. 525, 368 A.2d 1036 (1977) (11-month delay was prejudicial when case was relatively uncomplicated); Pyle v. State, 34 Md. App. 60, 366 A.2d 90 (1976) (11-month delay was prejudicial when case was relatively uncomplicated); Lee v. State, 32 Md. App. 671, 363 A.2d 542 (1976) (19-moth delay was sufficient to trigger the Barker analysis); State v. Becker, 24 Md. App. 549, 332 A.2d 272 (1975) (9 1/2-month delay was prejudicial); Matthews v. State, 23 Md. App. 59, 325 A.2d 897 (1974) (12-month delay was not prejudicial); McIntyre v. State, 17 Md. App. 526, 302 A.2d 672 (1973) (6 1/2-month delay was prejudicial); State v. Hunter, 16 Md. App. 306, 295 A.2d 779 (1972) (5 1/2-month delay was not prejudicial); Thompson v. State, 15 Md. App. 335, 290 A.2d 565 (1972) (5 1/2-month delay was not prejudicial).
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CR2-090
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-92-090-CR
MICHAEL FLORENCE,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 299TH JUDICIAL DISTRICT
NO. 106,042, HONORABLE JON WISSER, JUDGE
PER CURIAM
In a bench trial, Michael Florence was convicted of aggravated sexual assault of
a child and sentenced to 30 years in the Texas Department of Criminal Justice, Institutional
Division. Tex. Penal Code Ann. § 22.021 (1989). Appellant brings two points of error: (1) the
trial court erred by failing to inquire about the existence of any plea bargain agreement before
accepting the guilty plea; and (2) the judgment of conviction is void because the guilty plea was
not entered freely, knowingly, and voluntarily. We will overrule both points of error and affirm
the judgment of conviction.
The key issue in both points of error is whether a plea bargain existed. Appellant
asserts that a "casual reader may succumb to the proposition that the Statement of Facts (the Plea)
in the trial court ostensibly reflects a 'no plea bargain' case." Appellant would have us assemble
a plea bargain from a number of "curiosities and peculiarities" in the record. This we decline
to do.
Appellant contends that the proper standard to apply in determining whether a plea
bargain exists is subjective, based on the defendant's point of view. Wayne v. State, 756 S.W.2d
724 (Tex. Crim. App. 1988). Wayne, however, says that the subjective component, particularly
with regard to after-the-fact claims of plea negotiations, must be balanced with a close scrutiny
of all the circumstances. Id. at 733. The objective record must establish that the defendant's
actions were taken in the reasonable belief he was negotiating a plea agreement. Id.
One of the circumstances on which appellant relies to show a plea bargain existed
is the State's waiver of all but the first paragraph of the indictment in this cause. Appellant argues
that the State could have bargained for dropping the rest of the indictment in return for a guilty
plea. The State, however, simply could have determined that the other paragraphs in the
indictment were unnecessary because it had indictments pending in two other cases against
appellant and was confident of a conviction. (1)
Appellant also relies on the following exchange:
Q: Did anyone offer you anything in order to have you plead guilty to this
offense, other than the plea bargain we talked about? No, there is no plea
bargain. Did anyone offer you anything in order to have you plead guilty to
this offense?
A: No, sir.
Appellant runs through a number of possibilities to explain the exchange, among them, a simple
"slip of the tongue." We lean toward that possibility, particularly in view of trial counsel for
appellant stating that "we have no plea bargain agreement."
Appellant was cautioned several times that the full range of punishment, five to
ninety-nine years or life, was available to the judge. He never attempted to say he thought he had
an agreement with the State for a twenty-year sentence in exchange for a guilty plea. Both sides
stated that no plea bargain existed. We think it was not reasonable for appellant to think he had
a plea bargain, even if we assume, as appellant argues, ignorance of the legal process.
In fact, what the record reveals is a defense strategy gone awry. Trial counsel's
argument at the sentencing hearing was that "some consideration should be made for the fact that
Mr. Florence has admitted his guilt . . . ." He argued that appellant "has admitted his wrong and
is pleading for the Court and the system to assist him in getting the attention he needs . . . ." He
then requested a twelve year sentence. In his motion for new trial, he again emphasized that
appellant had pleaded guilty and requested a sentence reduction based on that act.
In his first point of error, appellant complains that the trial court failed to comply
with Tex. Code Crim. Proc. Ann. art. 26.13(a)(2) (1989) because the court failed to ask appellant
if he was pleading guilty based on a plea bargain with the State. When there is no plea bargain
agreement, however, article 26.13(a)(2) does not apply. McCravy v. State, 642 S.W.2d 450, 461-62 (Tex. Crim. App. 1980) (opinion on motion for reh'g). If there is no plea bargain, then it
would be a useless act for the court to tell the defendant whether it would accept the plea bargain,
as required by article 26.13(a)(2). We overrule point of error one.
In his second point of error, appellant complains that the plea was not entered
freely, knowingly, and voluntarily because appellant thought he had a plea bargain for twenty
years. We have found, however, that no plea bargain existed and it was not reasonable for
defendant to believe one existed. That appellant may have pleaded guilty with the hope of getting
a lighter sentence does not invalidate the plea. (2) Galvan v. State, 525 S.W.2d 24, 26 (Tex. Crim.
App. 1975); Rice v. State, 789 S.W.2d 604, 607 (Tex. App. 1990, no pet.). We overrule point
of error two.
Having overruled both points of error, we affirm the judgment of conviction.
[Before Chief Justice Carroll, Justices Aboussie and B. A. Smith]
Affirmed
Filed: August 12, 1992
[Do Not Publish]
1. 1 The pre-sentence investigation report (PSI) is not in our record. At the sentencing hearing,
the State recommended thirty years. The prosecutor referred to the PSI as showing a "history of
problems assaulting little girls." Defense counsel referred to prior misdemeanor convictions,
again apparently relying on the PSI.
2. 2 We note the judge's comment at the punishment hearing, on accepting the State's
recommendation of 30 years, that he thought a jury would give appellant the maximum amount
possible, so appellant's strategy may have been at least partially successful.
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rivers
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-488-CV
CARROLL RIVERS AND BARBARA RIVERS,
APPELLANTS
vs.
SCHULT HOMES CORPORATION, TEXAS LIFESTYLE MANUFACTURED HOUSING
CORPORATION, CHARLES DEVOE TREADWELL, INDIVIDUALLY,
AND ST. PAUL'S FIRE AND MARINE INSURANCE COMPANY,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
NO. 453,511, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING
Appellants Carroll Rivers and Barbara Rivers filed suit against several defendants
in connection with the purchase of a mobile home. The trial court dismissed the suit for want of
prosecution. We will affirm the trial-court judgment.
THE CONTROVERSY
The court below dismissed the appellants' suit on the motion of appellee St. Paul's
Fire and Marine Insurance Company ("St. Paul's). The appellants maintain the trial court erred
by dismissing the case and by denying their motion to reinstate. We disagree. We believe the
chronology set forth below supports our decision.
August 7, 1986--The appellants purchased a mobile home from appellee Texas
Lifestyle Manufactured Housing Corporation ("Texas Lifestyle").
November 19, 1988--Alleging that the mobile home was defective and that Texas
Lifestyle made misrepresentations concerning the quality of the mobile home, the appellants filed
a Deceptive Trade Practices-Consumer Protection Act suit against Texas Lifestyle in November
1988. See Tex. Bus. & Com. Code Ann. §§ 17.41-.63 (1987 & Supp. 1992). They also joined
in the suit the manufacturer of the mobile home, Schult Homes Corporation. Both defendants
filed timely answers.
February 16, 1989--The appellants filed an amended petition joining in the suit
Charles Devoe Treadwell. In their petition the appellants alleged Texas Lifestyle was the alter
ego of Treadwell and that Treadwell was individually liable for their damages. Treadwell and
Texas Lifestyle filed a general denial.
September 11, 1989--The appellants filed a supplemental petition joining St. Paul's
in the suit. (1) St. Paul's filed a general denial.
October 25, 1989--Schult Homes responded to the appellants' interrogatories.
November 6, 1989--Treadwell and Texas Lifestyle responded to the appellants'
request for production of documents.
December 5, 1989--The appellants responded to St. Paul's interrogatories and
request for production, which were propounded to them on October 11, 1989.
June 26, 1991--St. Paul's filed a motion to dismiss the suit for want of prosecution,
alleging the appellants had taken no affirmative action to set their case for trial in the twenty-two
months since they had joined St. Paul's as a defendant. No other defendant filed a motion to
dismiss the cause, although counsel for Schult Homes appeared at the hearing and urged the court
to dismiss the cause as to all defendants.
July 5, 1991--The appellants filed a motion in opposition to the motion to dismiss.
In that motion they conceded that pretrial discovery was complete and that they were ready for
trial, but offered their counsel's trial schedule as an excuse for failing to proceed to trial earlier.
The appellants stated they could try the case in January or February 1992.
July 11, 1991--In a hearing on St. Paul's motion, the trial court granted the motion
to dismiss for want of prosecution. The court signed the order reflecting the dismissal on July
29, 1991.
July 26, 1991--The appellants filed a motion to reinstate the case.
August 5, 1991--The trial court held a hearing on the appellants' motion to reinstate.
During that hearing Barbara Rivers testified the case was ready for trial in December 1989. She
also testified she sold the mobile home in May 1990. According to Barbara Rivers, she and her
husband did not bring the case to trial sooner because their attorney, Wade Arledge, was involved
in other trials.
In the August 5 hearing, Arledge argued that he had been actively proceeding to
a resolution of the case, despite the appearance of inactivity from December 1989 to June 1991.
In support of his argument, he submitted for the court's in camera inspection the following
correspondence:
(1) A January 4, 1989, letter from Arledge to the Texas Department of Licensing and
Regulation (the "Department");
(2) a July 4, 1990, letter from Arledge to the Department;
(3) a July 27, 1990, letter from the Department to Arledge;
(4) an August 6, 1990, letter from Arledge to the Department;
(5) an August 6, 1990, letter from Arledge to the appellants;
(6) a November 26, 1990, letter from the appellants to Arledge;
(7) a December 6, 1990, letter from Arledge to the appellants;
(8) a December 17, 1990, letter from the appellants to Arledge; and
(9) a February 18, 1991, letter from the appellants to Arledge.
After inspecting the foregoing correspondence, the trial judge offered the appellants
the "option" of nonsuiting St. Paul's only and proceeding to trial against the remaining defendants.
The judge granted a short recess to allow the appellants to decide whether to nonsuit St. Paul's.
Following the recess, the appellants accepted the judge's suggestion to nonsuit St. Paul's. After
counsel for St. Paul's reurged the trial judge not to reinstate the cause as to any defendants, the
judge apparently reconsidered, saying, "The Court does not find there is sufficient cause to
reinstate the cause under Rule 165a, and the ruling of July 11th stands." On the same day, the
trial judge signed the order denying the motion to reinstate.
The appellants appeal from the order dismissing the cause.
DISCUSSION
Motion To Dismiss
In their first point of error, the appellants contend the trial court abused its
discretion (1) by granting St. Paul's motion to dismiss and (2) by dismissing the case against all
defendants when only St. Paul's filed a motion to dismiss.
Whether the plaintiff prosecuted the suit with diligence is an issue committed to the
trial court's sound discretion. See Bevil v. Johnson, 307 S.W.2d 85, 87 (Tex. 1957); Ozuna v.
Southwest Bio-Clinical Labs., 766 S.W.2d 900, 901 (Tex. App. 1989, writ denied). This
standard applies whether the court dismisses the cause pursuant to its inherent power or pursuant
to a party's motion to dismiss. See Allen v. Bentley Labs., Inc., 538 S.W.2d 857, 860-61 (Tex.
Civ. App. 1976, writ ref'd n.r.e.).
We cannot say the trial court abused its discretion in the present case. The last
activity the appellants directed toward the defendants occurred in October 1989; the appellants'
last interaction whatsoever with the defendants occurred in December 1989. During the
succeeding nineteen months the appellants made no attempt to proceed to trial or to conduct
further discovery. We conclude they did not prosecute the suit with diligence, and they have
shown no abuse of the trial court's discretion. See Ozuna, 766 S.W.2d at 902-03 (affirming a
dismissal for want of prosecution when the plaintiffs failed to prosecute the suit for a nineteen-month period); Allen, 538 S.W.2d at 860-61 (same).
The appellants also complain of the trial court's dismissal of the suit as to all
defendants, rather than to just St. Paul's, the only party to file a motion requesting dismissal.
That motion, however, requested that the case be dismissed; St. Paul's did not ask simply that it
be nonsuited. The order of dismissal granted no more relief than St. Paul's requested.
Apparently arguing that a court may not grant a motion that would benefit parties
other than the movant, the appellants call our attention to Teer v. Duddlesten, 664 S.W.2d 702
(Tex. 1984). In Teer, the plaintiffs sued three defendants. Two of the defendants filed a motion
for summary judgment, which the trial court granted. The judgment, however, included a
summary judgment for the third defendant as well. The supreme court reversed the judgment,
holding that a trial court errs when it grants summary judgment for a party who did not move for
judgment. Id. at 704. The appellants contend Teer is analogous to the case at bar, and therefore
the trial court erred by granting a dismissal as to those parties who did not move for dismissal.
We believe Teer is distinguishable from the present case. In a summary-judgment
case, the parties are not always similarly situated: An issue of material fact may exist as to one
party but not another. Consequently, a trial court should not grant summary judgment for any
party who has not moved for and proved its entitlement to judgment as a matter of law. If, on
the other hand, a suit is dismissed for want of prosecution, the only issue is the plaintiff's want
of due diligence in prosecuting the suit. That issue does not vary from one defendant to another
as a rule. We therefore conclude Teer is inapplicable.
Moreover, a trial court may dismiss a case for want of prosecution pursuant to its
own inherent power. Veterans' Land Bd. v. Williams, 543 S.W.2d 89, 90 (Tex. 1976) (A court
possesses "the inherent power to dismiss a suit for failure to prosecute it with due diligence even
without statutory or rule authority."); see also Tex. R. Civ. P. Ann. 165a(4) (Supp. 1992).
Therefore, even if the trial court dismissed St. Paul's from the suit pursuant to the latter's motion,
the court could still dismiss the entire case by virtue of its inherent power to dismiss suits because
of the plaintiff's want of diligence. (2) Because the appellants did not properly request or obtain
findings of fact and conclusions of law, they assumed the burden of showing the judgment was
not supported by any legal theory raised by the evidence. See Point Lookout West, Inc. v.
Whorton, 742 S.W.2d 277, 279 (Tex. 1987). We conclude the trial court's dismissal order was
supported by two theories, the trial court's inherent power to dismiss and St. Paul's motion to
dismiss. Therefore, the appellants have not met their burden.
Finally, we note that the evidence adduced at the hearing on the appellants' motion
to reinstate established that defendants Treadwell and Texas Lifestyle have disappeared and cannot
be found. Consequently, if the trial court had nonsuited St. Paul's without dismissing the case,
the motion to dismiss would gain St. Paul's nothing: after taking a default judgment against
Treadwell and Texas Lifestyle, the appellants would be able to recover on the bond posted by St.
Paul's on behalf of Treadwell and Texas Lifestyle. See Tex. Rev. Civ. Stat. Ann. art. 5221f,
§ 13(f) (Supp. 1992) ("Any judgment obtained against a principal is conclusive against the surety
or other security if notice of the filing of suit is given as required by this section."); see also
Longoria v. Foremost Ins. Co., 725 S.W.2d 371, 372 (Tex. App. 1987, writ ref'd n.r.e.). Had
the trial court retained Treadwell and Texas Lifestyle in the suit, St. Paul's would find itself in
the same circumstances as if the court had denied its dismissal motion.
We cannot say the trial court abused its discretion in dismissing the cause of action
in its entirety. See Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 938-39 (Tex. App.
1987, no writ). We therefore overrule the first point of error.
Motion To Reinstate
In their second point of error, the appellants contend the trial court abused its
discretion by denying the motion to reinstate the cause. The appellants also contend in their
fourth point of error that insufficient evidence supports the trial court's denial of their motion to
reinstate the case.
We must first determine whether the trial court abused its discretion by impliedly
finding the appellants failed to use due diligence in prosecuting their suit. See Eustice v.
Grandy's, 827 S.W.2d 12, 15 (Tex. App. 1992, no writ) (when a trial court denies a motion to
reinstate a cause dismissed for want of prosecution, the proper standard of review is whether the
trial court abused its discretion). (3)
The appellants carry the burden of showing they exhibited due
diligence in prosecuting their case. See Stromberg Carlson Leasing Corp. v. Central Welding
Supply Co., 750 S.W.2d 862, 864 (Tex. App. 1988, no writ). In determining the issue of due
diligence, we may consider the entire history of the case, including the length of time the case was
on file, the amount of activity in the case, the request for a trial setting, and the existence of
reasonable excuses for delay. See State v. Rotello, 671 S.W.2d 507, 509 (Tex. 1984); Frenzel
v. Browning-Ferris Indus., Inc., 780 S.W.2d 844, 845 (Tex. App. 1989, no writ).
The sale made the subject of this suit occurred in 1986. The appellants filed suit
in 1988; they joined St. Paul's in the suit in September 1989. The appellants did not serve any
discovery requests on any defendant after October 1989. The parties completed discovery by
December 5, 1989, and Barbara Rivers testified that the case was ready to go to trial at that time.
Yet the appellants took no further action to proceed to trial during the next nineteen months.
Moreover, in their response to the motion to dismiss, the appellants indicated they would not be
able to proceed to trial for at least six or seven months. We cannot say the trial court abused its
discretion in finding the appellants failed to prosecute their suit with due diligence. See Ozuna,
766 S.W.2d at 902-03.
Although the appellants advance various explanations for their delay, we do not
believe their explanations demonstrate an abuse of discretion by the court below. The appellants
first contend delay was justified because their improvements to the mobile home made calculation
of damages difficult. This argument on appeal contradicts Barbara Rivers's testimony in the court
below that the case was ready for trial in December 1989. Moreover, the appellants sold the
mobile home in May 1990, more than a year before St. Paul's filed its motion to dismiss; the
appellants' damages were calculable at the time they sold the mobile home. Finally, consumers
suing under the Deceptive Trade Practices Act may allege alternatively various measures of
damages and elect to recover the greatest amount contained in the verdict. See Kish v. Van Note,
692 S.W.2d 463, 466 (Tex. 1985).
The appellants also argue that their attorney's trial schedule caused the delay.
Arledge presented testimony that he was involved in two lengthy criminal trials and one civil trial
during the period from December 1989 to the summer of 1991. This excuse presented the trial
court with a question of fact as to whether the appellants reasonably explained their delay. See
Coleman v. Hughes Blanton, Inc., 599 S.W.2d 643, 645 (Tex. Civ. App. 1980, no writ). By its
denial of the motion to reinstate, the trial court impliedly found the appellants' excuse lacking in
merit. From our review of the case law, we cannot say this was an abuse of discretion. See id.
(rejecting a party's excuse that his attorney missed a fifteen-day deadline for responding to a
motion to dismiss because the attorney was involved in other jury trials); see also Frenzel, 780
S.W.2d at 845 (rejecting a party's claim that the trial court abused its discretion in dismissing the
case because the appellant was conducting legal research during the period of delay); Hargrove
v. City of Garland, 581 S.W.2d 699, 701 (Tex. Civ. App., writ dism'd) (rejecting a party's claim
that his attorney's litigation schedule and "preoccupation" with Christmas holidays reasonably
explained a failure to meet a filing deadline), cert. denied, 444 U.S. 901 (1979).
Finally, the appellants contend they were actively pursuing a resolution of the case
in the period between December 1989 and June 1991. In support of their argument, they point
to the correspondence between Arledge and the appellants and between Arledge and the
Department of Licensing and Regulation. The appellants, however, do not explain how
correspondence between an attorney and his client or correspondence between an attorney and a
nonparty state agency constitutes diligent prosecution of a case. Such correspondence does not
obtain a trial setting or otherwise bring the suit closer to resolution. See Southern Pac. Transp.
Co. v. Stoot, 530 S.W.2d 930, 932 (Tex. 1975) (holding that a court is entitled to dismiss a case
for want of prosecution when the plaintiff makes no attempt to bring the case to trial). After
examining the correspondence in camera, the trial court denied the motion to reinstate the case,
thereby impliedly finding the correspondence did not establish due diligence. We find nothing
in the record or the appellants' argument to establish that the trial court abused its discretion in
making that determination. Even if the appellants somehow intended the correspondence to be
a prelude to settlement negotiations, as they appear to suggest in their brief, settlement activity
does not excuse want of diligent prosecution. See Texas Soc'y, Daughters of the Am. Revolution
v. Estate of Hubbard, 768 S.W.2d 858, 860 (Tex. App. 1989, no writ).
We conclude the appellants have not shown the trial court abused its discretion by
denying the motion to reinstate the case. See Rotello, 671 S.W.2d at 509; Speck v. Ford Motor
Co., 709 S.W.2d 273, 276 (Tex. App. 1986, no writ). We therefore overrule the second point
of error.
In their fourth point of error, the appellants maintain the trial court's denial of their
motion to reinstate the case is contrary to the great weight and preponderance of the evidence. (4)
Because the appellants did not obtain findings of fact and conclusions of law, we must assume that
the trial court made all the necessary findings to support its judgment. See Burnett v. Motyka, 610
S.W.2d 735, 736 (Tex. 1980). The appellant may challenge the implied findings by insufficient-evidence points, however, just as if there were jury findings or a trial court's findings of fact.
Id.
To determine whether an implied finding is contrary to the great weight and
preponderance of the evidence, we must consider and weigh all the evidence, including any
evidence contrary to the trial court's judgment. See id.; see also Cain v. Bain, 709 S.W.2d 175,
176 (Tex. 1986); In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951). We set aside the trial-court judgment only if it is so contrary to the overwhelming weight of the evidence as to be
clearly wrong and unjust. Cain, 709 S.W.2d at 176.
The trial court impliedly found that (1) the appellants did not prosecute their suit
with due diligence, and (2) they did not have a reasonable explanation for their failure to prosecute
their suit. Because the appellants took no affirmative action to obtain a trial setting for nineteen
months, we believe the evidence is sufficient to support the first implied finding. The record
before us does not compel the conclusion that the appellants were making a diligent effort to get
the case to trial.
In the trial court, the appellants urged those excuses set forth in our discussion of
point of error two as justification for their failure to prosecute the suit earlier. The trial court
rejected the appellants' explanations. We cannot say the trial court's action is so contrary to the
overwhelming weight of the evidence as to be clearly wrong and unjust.
We overrule the fourth point of error.
Bias of Trial Judge
In their third point of error, the appellants contend "the trial court abused its
discretion when it abandoned its role as an impartial fact finder and became an advocate for [St.
Paul's]." According to the appellants, the trial court's withdrawal of its initial offer to nonsuit
St. Paul's and the subsequent dismissal of the entire cause "amounts to something less than
impartiality, and exceeds the authority granted the court." The appellants cite no authority for
their contention.
We detect no bias in the trial court's action. The trial court merely offered the
appellants a choice between taking a nonsuit and suffering a denial of their motion to reinstate;
this suggestion was an apparent attempt to find a compromise between the parties' positions. We
believe the trial court was entitled to reconsider the offer after the attorney for St. Paul's argued
against the nonsuit, explaining that such a procedure prejudiced St. Paul's because its indemnitee,
Texas Lifestyle, had disappeared. We note that the trial court had not signed an order or even
orally rendered judgment nonsuiting St. Paul's. We decline to infer bias when a trial court
reconsiders a course of action during a hearing because of a further review of the facts or the law.
Even if we were to presume bias on the part of the trial court against the appellants,
this alone would not constitute error. The appellants would also have to point to an erroneous
ruling made by the court as a result of the bias; the erroneous ruling, rather than the bias itself,
would give the appellants the right to complain. See Quarles v. Smith, 379 S.W.2d 91, 92 (Tex.
Civ. App. 1964, writ ref'd n.r.e.); see also Grider v. Boston Co., 773 S.W.2d 338, 346 (Tex.
App. 1989, writ denied). We held above that, under the facts presented, the trial court acted
within its discretion by overruling the motion to reinstate. Therefore, the appellants have
presented no erroneous ruling arising from the alleged bias. We overrule the third point of error.
See Christopher v. Fuerst, 709 S.W.2d 266, 269 (Tex. App. 1986, writ ref'd n.r.e.) (rejecting
a claim that the trial court dismissed a case for want of prosecution because of bias).
Failure To File Findings of Fact and Conclusions of Law
In their fifth point of error, the appellants contend the trial court erred by failing
to file findings of fact and conclusions of law. St. Paul's responds that the appellants did not
timely file their request for findings of fact and conclusions of law. We agree.
A party requesting findings of fact and conclusions of law must file its request in
writing within twenty days after judgment is signed. Tex. R. Civ. P. Ann. 296 (Supp. 1992).
The trial court signed the order of dismissal on July 29, 1991. The appellants filed their request
for findings of fact and conclusions of law on August 27, 1991, twenty-nine days after the signing
of the judgment. Thus, their request was untimely under Rule 296.
The appellants argue that (1) their motion to reinstate operated as a motion for new
trial, and (2) their time for filing their request began on the day the trial court denied their motion
to reinstate, citing Davis v. Laredo Diesel, Inc., 611 S.W.2d 943 (Tex. Civ. App. 1981, writ
ref'd n.r.e.). Davis, however, preceded the 1984 amendment to Rule 296. Before the 1984
amendment, a party could request findings of fact and conclusions of law "within ten days from
rendition of final judgment or order overruling motion for new trial." The present rule requires
a party to file a request for findings of fact and conclusions of law "within twenty days after
judgment is signed." Tex. R. Civ. P. Ann. 296 (Supp. 1992) (emphasis added). The date the
court overrules the motion for new trial or motion to reinstate is no longer significant for purposes
of Rule 296. We conclude Davis is inapplicable to the present case.
Moreover, the trial court signed the order denying the motion to reinstate on
August 5, 1991. The appellants did not file their request for findings of fact and conclusions of
law until August 27, 1991, twenty-two days after the denial of the motion to reinstate. Therefore,
even if we were to accept the appellants' argument concerning the timetable, they failed to file
their request within the allotted time. We overrule the fifth point of error.
Finding no error, we affirm the trial-court judgment in all respects.
Jimmy Carroll, Chief Justice
[Before Chief Justice Carroll, Justices Jones and Kidd]
Affirmed
Filed: July , 1992
[Publish] [Do Not Publish]
1. It appears from the record that St. Paul's posted a security bond for Texas Lifestyle in
compliance with the Manufactured Housing Standards Act. See Tex. Rev. Civ. Stat. Ann. art.
5221f, § 13 (Supp. 1992) (requiring a manufacturer or retailer of mobile homes to post a bond
in order to receive a certificate of registration from the commissioner of the Texas Department
of Licensing and Regulation).
2. Although the order of dismissal refers to St. Paul's motion to dismiss, the order does not
specifically state that the motion is the sole ground for dismissal. The July 29, 1991, order of
dismissal recites:
On this day came on to be heard the Defendant St. Paul's Fire and
Marine Insurance Company's Motion to Dismiss Plaintiff's case for want of
prosecution. The Court having heard the argument of counsel and the evidence
presented, the Court is of the opinion that the Motion is well taken and should
be granted.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that
Plaintiff's case is now dismissed in its entirety for want of prosecution.
3. Relying on Texas Rule of Civil Procedure 165a(3), the appellants contend the trial court
must reinstate the case "upon finding after a hearing that the failure of the party or his attorney
was not intentional or the result of conscious indifference but was due to an accident or
mistake or that the failure has been otherwise reasonably explained." See Tex. R. Civ. P.
Ann. 165a(3) (Supp. 1992). We disagree. Several courts have held that the Rule 165a(3)
reinstatement standard applies only to cases dismissed for want of prosecution because of the
failure of an attorney or party to appear at trial. See, e.g., Eustice v. Grandy's, 827 S.W.2d
12, 15 (Tex. App. 1992, no writ); Ozuna, 766 S.W.2d at 903. Rule 165a(3) does not apply
when a court dismisses a cause pursuant to its inherent power or a party's motion. Eustice,
827 S.W.2d at 15.
4. In their brief, the appellants complain the evidence is insufficient to support the
judgment. Because they bore the burden of proof on the issue of reinstatement and the trial
court found that they did not carry that burden, they must argue instead that the trial-court
finding is contrary to the great weight and preponderance of the evidence. See William
Powers, Jr. and Jack Ratliff, Another Look at "No Evidence" and "Insufficient Evidence," 69
Tex. L. Rev. 515, 519 (1991).
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680 F. Supp. 56 (1988)
Ronald ALMAN, as Trustee, Board of Trustees, Northeast Department, ILGWU Health and Welfare Fund, ILGWU Health Services Plan, and ILGWU National Retirement Fund, Plaintiff,
v.
GEORGE MANUFACTURING CORP. and George Kalell, Defendants.
Civ. A. No. 85-2754-T.
United States District Court, D. Massachusetts.
February 11, 1988.
*57 Donald J. Siegel, Segal, Roitman & Coleman, Boston, Mass., for plaintiff.
Wendy Manz, Lexington, Mass., Howard M. Brown, Kaye, Fialkow, Richmond & Rothstein, Boston, Mass., for defendants.
MEMORANDUM
TAURO, District Judge.
Plaintiff, trustee of three International Ladies' Garment Workers' Union ("ILGWU") employee benefit funds ("the Funds"), seeks to collect unpaid pension, health and welfare contributions from the defendants, George Manufacturing Corporation ("the Corporation") and George Kalell, its sole shareholder, officer and director. The action is brought pursuant to §§ 502(a)(3) and 515 of the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended, 29 U.S.C. §§ 1132(a)(3) and 1145 (1982). Both plaintiff and Kalell have moved for summary judgment.
I.
The Corporation and the Boston Joint Board, Cloak, Skirt and Dressmakers' Union (an association of ILGWU locals) were parties to a collective bargaining agreement covering the Corporation's employees. The agreement was signed by Kalell on behalf of the Corporation.
Under the collective bargaining agreement, the Corporation was required to make periodic contributions to the funds. Beginning some time in 1983, the Corporation fell in arrears and, as of February 23, 1985, owed $122,758.94 to the Funds.
Plaintiff filed the instant action on July 3, 1985 to collect the past-due contributions. All parties, thereafter, stipulated that judgment would enter against the Corporation for $119,358.94.[1] Judgment entered on October 28, 1985.
Plaintiff's judgment against the Corporation has remained substantially unsatisfied, because the Corporation is insolvent.[2] Plaintiff, consequently, seeks to recover the Corporation's debt from Kalell personally on the grounds that, as a matter of "economic reality", a corporate officer-shareholder in Kalell's position is an "employer" under § 3(5) of ERISA, 29 U.S.C. § 1002(5) (1982) (defining "employer" as "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan").[3]
*58 II.
Kalell may not be held liable for the Corporation's debt. ERISA provides that:
Every employer who is obligated to make contributions to a multiemployer plan under the terms of this plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with the law, make such contributions in accordance with the terms and conditions of such plan or such agreement.
29 U.S.C. § 1145 (emphasis added). This section does not require all "employers" to make such contributions. Rather, the only employers affected are those already "obligated to make contributions ... under the terms of the plan or under the terms of a collectively bargained agreement." Id.
Liability for delinquent contributions is neither created nor directly imposed by this section of ERISA. It is, instead, a matter of contract. See Solomon v. Laranne Sportswear Corp., 648 F. Supp. 407, 409 (E.D.N.Y.1986) ("ERISA creates no independent substantive duty to make payments beyond that specified in the terms of the plan and the collective bargaining agreement."); Mason Tenders District Council Welfare Fund v. Dalton, 648 F. Supp. 1309, 1316 (S.D.N.Y.1986) (there is an "explicit link in ERISA between an employer's statutory duty to contribute to a benefit plan and the employer's existing contractual obligation to make benefit payments").
Kalell signed the collective bargaining agreement on behalf of the corporation, not as an individual.[4] Even accepting plaintiff's argument that Kalell was a statutory "employer," he, nonetheless, did not fall within that class of "employers" who were contractually bound to contribute to the Funds.
III.
For the above reasons, plaintiff's motion for summary judgment must be denied, and Kalell's cross-motion for summary judgment must be granted.
An order will issue.
NOTES
[1] The figure of $119,358.94 represents obligations which had accrued through February 23, 1985, minus payments received of $3400. The judgment also provided for payment of interest at the rate of 9% from February 23, 1985; costs of $130; and attorney fees of $1840.
[2] The Corporation ceased its manufacturing operations on October 18, 1985, and executed an assignment for the benefit of creditors the same day. The Corporation's machinery was sold at auction on October 25, 1985. Plaintiff was entitled to a distribution from the assignee on his claim against the corporation.
[3] The First Circuit has not yet ruled on whether this definition of "employer" includes controlling officers or shareholders. See DeBreceni v. Graf Bros. Leasing, Inc., 828 F.2d 877, 880 n. 2 (1st Cir.1987). That question may be answered when the First Circuit decides an appeal now pending, Massachusetts Laborers' Health and Welfare Fund v. Starrett Paving Corp., C.A. No. 86-411-Z (D.Mass. July 14, 1987) [Available on WESTLAW, 1987 WL 14820], appeal filed August 27, 1987. To date, most judges in this district have applied the economic reality test urged by plaintiff. See, e.g., Starrett Paving, supra, slip op. at 2 (Zobel, J.); Trustees of Amalgamated Insurance Fund v. Danin, 648 F. Supp. 1142, 1147 (D.Mass.1986) (Wolf, J.); Rubenstein v. Tri-State Transport, Inc., 646 F. Supp. 1, 2 (D.Mass.1984) (Skinner, J.); Alman v. Taunton Sportswear Mfg. Corp., C.A. No. 85-2122-C (D.Mass. June 15, 1987) (Caffrey, J.) [Available on WESTLAW, 1987 WL 12554]; Alman v. Frank's Sportswear Co., Inc., C.A. No. 84-2042-S (D.Mass. Jan. 24, 1985) (Skinner, J.), slip op. at 8; Alman v. Servall Manufacturing Co., C.A. No. 82-746-MA (D.Mass. April 9, 1984) (Mazzone, J.); Massachusetts State Carpenters Pension Fund v. Atlantic Diving Co., Inc., 635 F. Supp. 9, 14-15 (D.Mass.1984) (Mazzone, J.).
[4] An individual might be held liable for debts of a corporation if facts are presented to justify "piercing the corporate veil". See Alman v. Danin, C.A. No. 84-50-S (D.Mass. Nov. 13, 1985) (Skinner, J.), slip op. at 11-13, aff'd 801 F.2d 1 (1st Cir.1986) (piercing corporate veil to hold individuals liable for unpaid contributions under ERISA). Plaintiff here concedes that there are no grounds for piercing the corporate veil.
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680 F. Supp. 1438 (1988)
KONA HAWAIIAN ASSOCIATES, a Hawaii limited partnership, et al., Plaintiffs,
v.
The PACIFIC GROUP, a California limited partnership, et al., Defendants.
No. CV 86-0581.
United States District Court, D. Hawaii.
February 4, 1988.
*1439 *1440 *1441 James A. Kawachika, Phillip L. Deaver, Bays, Deaver, Hiatt, Kawachika & Lezak, Honolulu, Hawaii, for plaintiffs.
William J. Keegan, Collins & Zapala, San Jose, Cal., James Wagner, Paul DiBianco, Wagner, Watson & DiBianco, Honolulu, Hawaii, for defendants.
MEMORANDUM OF DECISION AND ORDER GRANTING PARTIAL SUMMARY JUDGMENT
LETTS, District Judge, Sitting by Assignment.
This case involves agreements allegedly made by the defendants to purchase the equity interest in the Kona Lagoon Hotel ("Hotel") from plaintiff Kona Hawaiian Associates ("KHA"). The transaction never closed. KHA filed suit against the Pacific Group, Wellfleet Associates, Ribec Corp., Tony Marterie & Associates, (collectively, "Pacific defendants") and their alleged partners in the transaction, U.S. Hotel Properties Corporation, U.S. Hotel Properties Resort and Hotel Management Corporation, Getty Financial Corporation, Horst Osterkamp, Wallace Smith, and J. Ronald Getty (collectively, "USHP defendants").
KHA alleged causes of action for: (1) breach of contract; (2) promissory estoppel; (3) negligent misrepresentation; (4) intentional misrepresentation; (5) breach of the covenant of good faith and fair dealing; (6) unfair business practices; and (7) assumpsit.
The Pacific defendants crossclaimed against the USHP defendants, alleging: (1) breach of partnership agreement; (2) bad faith breach of contract; (3) breach of fiduciary duty; (4) fraud; (5) negligent misrepresentation; (6) deceptive trade practices; (7) interference with prospective advantage; and (8) contribution and indemnity.
The USHP defendants crossclaimed against the Pacific defendants and Marco Radomile ("Radomile") alleging that any breach of contract or misconduct occurred as a result of acts by Radomile or some or all of the Pacific defendants and that the USHP defendants have been damaged as a result and should be indemnified by them.
The USHP defendants have brought before this Court six motions for summary judgment. These motions assert that, on the basis of undisputed facts, some or all of the USHP defendants are entitled to summary judgment in their favor by virtue of or with respect to: (1) the liquidated damages clause in the agreement to purchase the Hotel, (in which motion the Pacific defendants joined); (2) the statute of frauds; (3) KHA's fifth claim of relief (breach of the covenant of good faith and fair dealing); (4) KHA's sixth claim of relief (unfair business practices); (5) Getty Financial Corporation's liability; and (6) Smith and Osterkamp's liability as individuals.
In order to prevail on their motions for summary judgment, the USHP defendants must establish that no genuine issue of material fact exists and that they are entitled to judgment as a matter of law. Recent Supreme Court cases on summary judgment make clear that the standard is similar to that for directed verdict. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202 (1986); Schwarzer, Summary Judgment and Case Management, 56 Antitrust L.J. 213, 216 (1987). Accordingly, there is a genuine issue of material fact if a reasonable jury could properly return a verdict for the nonmoving party, considering the evidentiary burden. Anderson, 106 S.Ct. at 2512-13; T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 631 (9th Cir.1987). As with a directed verdict, the court may not weigh evidence and must draw all inferences in favor of the nonmoving party. T.W. Electric Service, 809 F.2d at 631. Finally, if the nonmoving party does not refute a showing that the nonmoving party cannot prove an essential element of its case, summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. *1442 317, 106 S. Ct. 2548, 2552-53, 91 L. Ed. 2d 265 (1986).
This analysis calls for a two-step inquiry for the trial judge on summary judgment. If the record is complete, the trial judge must first determine whether the record provides a basis for a directed verdict. If there is such a basis, the judge must then consider whether there is reason to believe that live testimony at trial, if it tracked the affidavits, would present a serious issue of credibility. In Anderson, the Supreme Court indicated that the judge's summary judgment determination should not intrude upon the jury's functions of drawing inferences from evidence and making credibility determinations. Anderson, 106 S.Ct. at 2513. Accordingly, if the trial judge believes that even undisputed live testimony will present credibility questions better suited for the finder of fact at trial, the judge should not grant summary judgment.[1]
In this case, the six motions for summary judgment overlap, and several are dispositive of all of the claims made against some of the defendants. The Court deals with each of the summary judgment motions on its individual merits in order to promote economy of trial and efficiency of review.
I. STATEMENT OF UNCONTROVERTED FACTS
For purposes of decision of these motions, the Court has reviewed all of the voluminous documents placed before it in connection with these motions and finds the following facts to have been established without substantial controversy.
As a starting point, the Court finds that there is no written agreement between KHA and any USHP defendant, nor is there any document which purports to evidence any such agreement which bears both the signature of KHA and of any USHP defendant. KHA, Pacific, the USHP defendants and the Bishop Estate (defined below) were all represented by competent counsel who were engaged to represent their interests in connection with the proposed transaction, and who prepared and/or reviewed all of the legally binding substantive documents.
A. EVENTS PRIOR TO THE KHA-PACIFIC TRANSACTION
KHA is a Hawaii limited partnership. KHA owned the equity in the Hotel at all relevant times until its interest was extinguished in May 1986 by foreclosure of the First Mortgage interest. This First Mortgage interest was held by the Trustees of the Estate of Bernice Parrahi Bishop ("Bishop Estate") and was in default at all times relevant to this case.
The Hotel operated at a loss at all relevant times; it was understood by all parties and other interested persons that the Hotel could not be made profitable without a substantial capital infusion in addition to any consideration which might go to KHA for the purchase of its equity interest.
On July 1, 1983, the Bishop Estate commenced foreclosure proceedings against KHA. Soon thereafter KHA filed for bankruptcy under Chapter 11 of the Bankruptcy Act. During 1984, KHA entered into an agreement with its creditors, including the Bishop Estate, whereby the creditors consented not to seek a lifting of the automatic bankruptcy stay of proceedings against KHA until April 1, 1985. The express purpose of this agreement, which left the automatic stay intact during its term, was to provide time to permit KHA to effect a private sale to someone who could refurbish and operate the Hotel profitably.
B. KHA'S INITIAL DEALINGS WITH THE PACIFIC GROUP
On February 1, 1985, the defendant Pacific Group ("Pacific"), a California general partnership of which Radomile was the *1443 Managing Partner, agreed to purchase the Hotel from KHA pursuant to a one page Deposit Receipt, Offer and Acceptance ("DROA"). The DROA provided for a total purchase price for the Hotel of $15,000,000 and was executed by KHA in exchange for an initial deposit of $200,000 by Pacific. The DROA also provided, by Addendum ("DROA Addendum"), that Pacific would "have until April 1, 1985 to determine whether acceptable financing ... [was] available," and that if Pacific determined that it was not, it would be entitled to have its initial deposit of $200,000 returned with interest, without further obligation. The DROA Addendum further provided that if acceptable financing were found, or if this condition were waived, Pacific would be required to deposit another $200,000; thereafter, Pacific would be required to close the purchase within 60 days and if it failed to do so, KHA would be entitled to keep the $400,000 total deposit. All other remedies for Pacific's failure to close the DROA were expressly waived.
1. The Purchase Agreement, Addendums and Extensions
On March 1, 1985, the DROA was superseded by a 34-page Agreement of Purchase and Sale ("Purchase Agreement"). The Purchase Agreement was drafted and reviewed by counsel for both parties, and documents necessary for the closing ("Closing") thereunder were to be prepared by counsel. The Purchase Agreement contained provisions, similar to that of the DROA which permitted Pacific to withdraw without obligation on or before April 1, 1985 if it did not obtain "acceptable financing" and which required Pacific to deposit an additional $200,000 if it waived or met this condition, and to close within 60 days. The Purchase Agreement also contained a provision which permitted KHA to negotiate with other potential buyers of the Hotel during the period between execution of the Purchase Agreement and the contemplated Closing thereunder.
The Purchase Agreement contained no representations concerning the identity of the partners of Pacific, the authority of its signatory ("Wellfleet Associates by Radomile") to bind Pacific or any of its partners, nor any representations as to the financial condition of Pacific as such, nor any of its partners.
Further, under the Purchase Agreement, Pacific's obligation at Closing was limited to delivering consideration for the purchase price and its share of closing costs, there being no other obligation running from Pacific to KHA under the express terms of the Purchase Agreement.
On March 9, 1985, an Addendum (the "March 9 Addendum") was added to the Purchase Agreement which provided that if Pacific should default in its obligation to close the Purchase Agreement, the $400,000 deposit would be retained as liquidated damages with all other remedies expressly waived. Consistent with the original terms of the DROA, the March 9 Addendum also established May 31, 1985 (sixty days after April 1, 1985) as the date of the Closing.
On April 1, 1985, the agreement between the Bishop Estate and KHA to delay any proceeding to lift the automatic bankruptcy stay (and thus permit foreclosure of the first mortgage on the Hotel) expired. On that date, Pacific made the second $200,000 deposit and waived the condition that "acceptable financing" be available. The Bishop Estate did not proceed to obtain a lifting of the automatic stay.
The Closing did not occur on May 31, 1985, and on June 9, 1985 KHA and Pacific agreed to extend the Closing ("June 9 Extension") until July 31, 1985. The June 9 Extension is evidenced by a letter agreement signed by Pacific which begins, "We understand that you have agreed to give us an extension ..." and is signed "Acknowledged and Agreed" by KHA. The June 9 Extension provided that Pacific would be responsible for KHA's costs, including attorney's fees incurred "in contemplation of Closing" from July 1, 1985 until the Closing or such prior time as Pacific advised KHA that it would not close. The June 9 Extension also provided that if Pacific did not close on July 31, 1985, and if KHA should agree to a further extension, "the purchase price shall be increased by all *1444 non-extraordinary losses"; the term "non-extraordinary losses" to be defined as part of any such extension agreement. Further, the June 9 Extension provided that should the $400,000 be transferred to the Bishop Estate, that amount, plus interest, would be credited against the liquidated damages and other amounts owed to KHA by Pacific.
On July 1, 1985, KHA, Pacific and Bishop Estate agreed that the $400,000 would be transferred to Bishop Estate and retained by it without obligation for refund in any circumstances if Pacific did not close under the Purchase Agreement by July 31, 1985.
The Closing did not occur on July 31, 1985 and no extension of the Purchase Agreement was agreed upon on that date either by KHA and Pacific alone or by either of them with Bishop Estate.
On August 8, 1985, KHA conditionally extended the Purchase Agreement pending assurances of the commitment of a "Mr. Smith" (apparently not Wallace Smith, a party hereto) with a contemplated closing of August 30, 1985, which closing was later extended to September 18, 1985.
The Closing did not occur on September 18, 1985, and KHA and Pacific, or KHA, Pacific, and Bishop Estate, did not enter into a further extension on that date.
C. THE USHP DEFENDANTS
Sometime after August 1, 1985, and prior to October 15, 1985, Pacific commenced discussions with U.S. Hotel Properties Corp. ("USHPC") and/or its subsidiary U.S. Hotel Properties Resort and Hotel Management Corp. ("RHMC") concerning participation by USHPC and/or RHMC with Pacific in the acquisition and/or subsequent management of the Hotel. The defendant Wallace Smith ("Smith") participated in those discussions.
USHPC is a California corporation, owned by Horst Osterkamp, a California resident individual, and Getty Financial Corporation ("Getty Financial" or "Getty"), a California corporation which is wholly-owned by J. Ronald Getty. Osterkamp is the chief executive officer of USHPC and of Getty Financial.
RHMC is a California corporation which is a wholly-owned subsidiary of USHPC; Wallace Smith is the chief executive officer of RHMC. Smith was not an officer, director or shareholder of USHPC at any relevant time. USHPC and RHMC share office space, clerical and staff personnel and other facilities.
USHPC and RHMC do business under their own names and under the name U.S. Hotel Properties ("USHP"), a fictitious name which is not the name of any corporation, partnership, or other legal entity. USHP, as such, is not a legal entity; it has no capacity to acquire or own assets. Getty Financial does not do business under the name USHP. USHPC and RHMC use the name USHP to connote their general capability together or separately to consider, negotiate, structure and consummate transactions involving the acquisition of equity interests in hotel properties and the management of hotel and resort properties.
Doing business as USHP, USHPC holds itself out as able to arrange for equity placements of hotel properties by syndication or direct placement to a loosely knit group of investors with whom it has dealt on occasion in the past ("USHP Investors"), but it does not hold itself out as being able to bind USHP Investors, and did not so hold itself out in this case.
Management contracts initiated and negotiated under the name USHP ordinarily are executed and performed by RHMC. Transactions involving hotel equity placements initiated, negotiated and structured under the name USHP ordinarily are consummated by having USHPC form a limited partnership, of which USHPC is the general partner, and having the partnership acquire the interest with the necessary funds provided through the purchase of limited partnership interests by USHP Investors. USHPC does not have the authority to bind any of the USHP Investors and USHPC has no agreement, arrangement or understanding whereby any USHP Investor will participate in all transactions in *1445 which interests are offered, or in any percentage interest of particular transactions.
Transactions initiated, negotiated and structured under the name USHP are individually tailored by counsel to suit the particular circumstances of the transaction and the USHP Investors who participate; there is no set format for all transactions.
D. NEGOTIATIONS BETWEEN PACIFIC AND THE USHP DEFENDANTS
After the first contact between Pacific and USHPC, negotiations ensued between Pacific and USHPC doing business as USHP which resulted in a letter dated October 15, 1985 ("Letter Understanding"). The Letter Understanding was signed by Smith. It began "Pursuant to our meeting of this date, this will serve to confirm our understanding ...," and was signed "Accepted and Approved" by Richard Berchelli, Director, and Marco Radomile, Managing Director of the Pacific Group. The Letter Understanding confirmed an understanding that RHMC would perform certain services for Pacific in preparation for its acquisition of the Hotel, and additional services thereafter if the acquisition were completed. The Letter Understanding also confirmed the parties' understanding that RHMC would "assist ... [Pacific] in seeking investors and financing for the Hotel" and further confirmed that USHP would receive certain compensation if Pacific were successful in acquiring the Hotel.
E. TRANSACTIONS AFTER THE INITIAL PACIFIC-USHP NEGOTIATIONS
On November 7, 1985, by an agreement purporting to be effective August 1, 1985, (the "November 7 Extension") Pacific and KHA extended the Closing under the Purchase Agreement to December 2, 1985. Between November 7, 1985 and January 23, 1986, various discussions took place involving Smith using the name USHP, and Pacific, KHA, the Bishop Estate and other creditors, including one or more of their lawyer representatives.
1. The Smith Notes
Smith produced notes of meetings in which he participated, "Smith November Notes" and "Smith December Notes," respectively, which purported to reflect some of the substance of meetings held November 25, 1985 and December 23, 1985 among Smith, Radomile and representatives of KHA and/or its creditors. Smith's November Notes appear to contemplate a division of a 25% interest in the Hotel among Osterkamp, USHP, Getty Financial, and others. Smith's December Notes appear to reflect a different understanding.
It was understood at all times by all relevant parties that any participation in the equity of the Hotel by USHP Investors would be through the acquisition of limited partnership interests in a limited partnership to be formed, and that the partnership interests had not yet been fixed.
2. December 1985 to January 1986
During December 1985 and January 1986, Pacific undertook active negotiations with the KHA bankruptcy trustee and other potential partners for the acquisition of the Hotel at a price less than $15,000,000.
On January 23, 1986, Osterkamp transmitted to KHA an offer ("Osterkamp Offer") for the purchase of the Hotel for a price of $11,900,000. Prior to making the January 23 Offer, Osterkamp never actually authorized any commitment of his own funds or those of USHP or Getty Financial. The Osterkamp Offer is not an offer which commits anyone but Osterkamp. Osterkamp was aware that Smith was having discussions with Pacific regarding the management and operation of the Hotel beginning in September 1985. Later, Osterkamp became aware that these discussions also included a possibility of USHP assisting in a syndication, as reflected in the Letter Understanding. Osterkamp discussed internally the potential acquisition of the Hotel by a group of investors sometime in late November 1985 or early December 1985.
On January 14, 1986 Osterkamp participated in discussions with KHA for the first time. Osterkamp confirmed to KHA's representative *1446 that he was part of a verbal partnership agreement with Pacific for the purpose of acquiring the Hotel, but made clear that he considered the transaction still to be in the negotiating stage, among other things, by stating unequivocally that the purchase price was too high.
F. OTHER FINDINGS
The remaining documents placed before the Court, other than deposition excerpts and affidavits, have been considered but the Court does not deem it necessary to make specific findings with regard to them. The deposition excerpts and affidavits placed before the Court have been considered, and where uncontroverted and necessary to the Court's decisions, have been incorporated into the foregoing findings.
II. DISPUTED FACTS ACCEPTED AS TRUE FOR MOTION PURPOSES
The following material facts, as to which there is substantial controversy, and in the view of the Court are unlikely to be proven at trial are nevertheless viewed in the version most favorable to the nonmoving parties and therefore accepted as true for purposes of deciding these motions for summary judgment. See T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630-631 (9th Cir.1987).
Smith, with Osterkamp's knowledge and approval, held himself out to KHA and Pacific as having authority to bind RHMC, USHPC, Osterkamp, and Getty Financial. Smith represented to KHA and Pacific that the parties that he represented had the financial resources to close the Purchase Agreement by raising money from the USHP Investors or from their own personal funds.
Smith orally purported to agree on behalf of all of those whom he represented (RHMC, USHPC, Osterkamp and Getty Financial) to close the Purchase Agreement and to deliver the funds necessary to do so. At the time Smith made this representation, Osterkamp was aware of it. Neither Osterkamp nor Smith intended that this agreement would be carried out. Their intent instead was to lull KHA and Pacific into a false sense of security so that they would not take steps to find other buyers, and so that they would be forced to sell the Hotel at a sacrifice price in order to avoid foreclosure by the Bishop Estate.
III. THRESHOLD CONCLUSIONS OF LAW
1. The DROA was a binding agreement between KHA and Pacific. The DROA expressly excluded damages beyond the successive $200,000 deposits, and was neither specifically enforceable, nor enforceable by suit for the stated purchase price, by virtue of the liquidated damages provision.
2. The Purchase Agreement was a binding agreement between KHA and Pacific and superceded the DROA. The March 9 Addendum was a legally binding addendum to the Purchase Agreement.
3. As modified by the March 9 Addendum, the Purchase Agreement was not specifically enforceable nor enforceable by suit for the stated purchase price, by virtue of the liquidated damages provision.
4. The June 9 Extension was a legally binding agreement. It renewed the obligations of the Purchase Agreement as they had existed between the parties on May 31, 1985 and extended the closing thereunder to July 1, 1985.
5. As modified and renewed by the June 9 Extension, the Purchase Agreement was not specifically enforceable nor enforceable by suit for the purchase price, by virtue of the liquidated damages provision.
6. The language in the June 9 Extension which purported to cover future extensions was precatory in nature, and not legally enforceable. Even were this language to be given legal effect, it would provide only for increases in the purchase price payable at closing, if any, and would not render the Purchase Agreement specifically enforceable nor enforceable by suit for the purchase price.
7. On August 1, 1985, after the closing of the Purchase Agreement did not occur, the parties were at rest. No party had any right to enforce the Purchase *1447 Agreement, except such right as KHA may have had to sue Pacific under the June 9 Extension for such closing costs, if any, as it may have incurred between May 31, 1985 and July 1, 1985.
8. The Letter Understanding expressed the outline of an agreement in principle among USHP (undifferentiated as between USHPC and RHMC as legal entities), and Pacific, but the Letter Understanding was not expressed in contractual terms and was not a legally binding agreement.
9. The November 7 Extension was a legally binding agreement. It renewed the obligations of the Purchase Agreement as they existed between KHA and Pacific on July 31, 1985, and extended the closing to December 2, 1985.
10. As modified and renewed by the November 7 Extension, the Purchase Agreement was not specifically enforceable nor enforceable by suit for the purchase price.
11. The November 7 Extension did not add any new party to the Purchase Agreement.
IV. DISCUSSION AND FURTHER CONCLUSIONS OF LAW
If the facts stated above could be proven at trial, KHA and Pacific would have an action for fraud against USHPC, RHMC, Smith and Osterkamp on the basis of which KHA could recover any actual damages which it suffered in reliance on the misrepresentations of Smith.
Those actions will survive the Court's decision on the motions before it. The issues posed by the instant motions involve whether KHA and Pacific also have the right to recover the purchase price set forth in the Purchase Agreement on the basis of a contract theory of recovery, and whether they can hold anyone other than Smith, RHMC and USHPC responsible for the misrepresentations of Smith.
A. LIQUIDATED DAMAGES
1. Standing to Raise Defense
Pacific and J. Ronald Getty pleaded the liquidated damages clause in the Purchase Agreement as a defense to this action. The USHP defendants initially did not plead the clause as a defense, and first attempted to do so by seeking leave to amend their answer and counterclaim on October 14, 1987. The magistrate denied leave to amend and, when asked to reconsider his ruling on October 30, 1987, declined to do so. The USHP defendants now seek summary judgment based on the clause if they are found to be partners with Pacific in the Purchase Agreement. Pacific joined in the USHP defendants' motion.
KHA opposes this motion by arguing that the USHP defendants may not raise the defense because it is not in their pleadings and that Pacific may not merely join in the motion, but must notice its own motion and give KHA an opportunity to respond.
The law of the case doctrine directs the Court to give great deference to matters previously decided in a case,[2] particularly where the prior ruling was made by a different judge in the same court. Where there is a showing of demonstrable error or clear injustice, however, it is not improper for a court to depart from a prior ruling. Arizona v. California, 460 U.S. 605, 618 n. 8, 103 S. Ct. 1382, 1391 n. 8, 75 L. Ed. 2d 318 (1983); Russell, 678 F.2d at 785.
In this case, the error or injustice which would follow from adhering to the prior ruling is clear. The Federal Rules of Civil Procedure provide for liberal amendment of pleadings. Fed.R.Civ.P. 15(a). Although the request for leave to amend was made close to the date of trial, KHA had notice of the defense, because Pacific had pleaded it. More than ample discovery had been had upon the issue. Indeed, KHA's opposition to the merits of the motion on liquidated damages indicates that the defense was no surprise to them. Without any evidence of surprise or injustice to KHA by allowing the amendment, denial of leave to amend was probable error and was clearly contrary to the interests of justice in this case. Foman v. Davis, 371 U.S. *1448 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962). KHA is attempting to hold the USHP defendants to the full purchase price of a contract which they never signed. On the basis of the record before the Court in fact there is reason to doubt that the USHP defendants ever read the Purchase Agreement to which KHA would ask that they be bound. The injustice of refusing to accord them, on procedural grounds, a defense available by the express terms of the contract seems manifest. Accordingly, leave to amend the pleadings is granted nunc pro tunc to include liquidated damages as a defense.
Once it has been decided that the USHP defendants may assert the defense of liquidated damages, it makes little difference whether Pacific may join in their motion or not, since the disposition of the issue as to the USHP defendants is necessarily dispositive of the issue between KHA and Pacific. The Court therefore rules as to both Pacific and the USHP defendants.
2. Liquidated Damages Clause
In opposition to the merits of this motion, KHA states that the parties did not intend the liquidated damages clause to be included in the Purchase Agreement as extended by the extension agreements and that, even if it were included, it is unenforceable under Hawaii law.
a. Contract Interpretation: The construction and legal effect of a document is a question of law for the Court. Hanagami v. China Airlines, Ltd., 67 Haw. 357, 688 P.2d 1139, 1144 (1984). Determining whether or not the document is ambiguous is also a question of law. Id.; Bishop Trust Co., Ltd. v. Central Union Church of Honolulu, 3 Haw. App. 624, 656 P.2d 1353, 1356 (1983). The interpretation of any ambiguity and intent, however, lies within the province of the jury. Bishop Trust Co., 656 P.2d at 1356.
KHA attempts to preclude summary judgment by raising the issue of the parties' intent to be bound by the liquidated damages clause, thus claiming that the contract is ambiguous. The extrinsic evidence presented by KHA, however, does not render ambiguous the clear language of the various agreements. There are three separate agreements which purport to set forth the buyer's contract obligations to KHA as the seller of the Hotel. The DROA and Purchase Agreement both contained the same liquidated damages clause. Both provided that if Pacific failed to close the transaction, the $400,000 deposited with KHA would be retained as liquidated damages and the parties waived all other remedies. Both clauses unambiguously and expressly set forth that the $400,000 was the exclusive remedy available to KHA for breach.
Moreover, the liquidated damages clauses are entirely consistent with the remainder of the agreements. Neither the DROA nor the Purchase Agreement contained any representations about the financial condition of the Pacific defendants, of the ability of Pacific to close the transaction, or of the ability of Pacific to respond in damages for any failure on their part to meet their obligations. These agreements required only that Pacific was to deliver a non-refundable sum of $400,000 by April 15, 1985 in order to secure the right to close the transaction, and that in order to close, Pacific was required to deliver the balance of the purchase price, or lose the $400,000. The clear intent and legal impact of these documents was that Pacific acquired for $400,000 an option to purchase the Hotel which, if not exercised, would cause it to be the option purchase price.[3]
The transaction did not close on the date stated. KHA retained the deposit money, subsequently transferred it to the Bishop Estate for its continued forebearance on the First Mortgage. In the June 9 Extension, the parties extended the closing date to July 31, 1985, provided that Pacific would be responsible for KHA's costs in contemplation of closing. The June 9 Extension *1449 also provided that if closing was extended further, the purchase price would be increased by net operating losses.
KHA argues that this extension demonstrates that it was contemplated that damage remedies would be reinstated if the transaction did not close on July 31, 1985. In fact, however, the extension demonstrates just the opposite. The DROA and Purchase Agreement never contemplated a damage remedy. Accordingly, there was no such remedy to reinstate.
More importantly, however, the June 9 extension did make clear that if the closing were again deferred, KHA would be compensated, and it makes clear howby adding to the purchase price the damages suffered by KHA as a result of the delay. Regardless of whether this language would be given legal effect if Pacific had ever come forward with an offer to close, this language of the extension agreement, hardly serves to create a damage remedy where none otherwise exists. On the contrary, this language, which was drafted by lawyers, is an entirely appropriate way to compensate an optionor for holding an option open for late exercise, and the Court entertains no doubt that this was both to purpose and intent.
In fact, however, the option was not extended and no new agreement was reached. As of August 1, 1985, all of the mutual obligations under the agreements were clearly at rest. No one had any legal basis for suit to change the status quo except for KHA's possible right to sue under the June 9 Extension for any additional closing costs which it incurred between June 1 and July 1, 1985. Subsequent retroactive "extensions" of the Purchase Agreement, without more, could hardly suffice to create rights which did not exist on the date the Agreement expired.
Although on the basis of the record before the Court there is reason to doubt that any of the USHP defendants or their counsel ever read the Purchase Agreement, before they allegedly bound themselves to perform it, for purposes of this motion, the Court must assume that they did. Assuming that they read it, or that they are to be charged with knowledge of its contents, what they would have gleaned from the Purchase Agreement itself was that the buyer's shoes into which they were stepping gave them the option or right to acquire the Hotel by paying the purchase price. It would also have provided assurance that upon failure to close, their obligation as Buyer under the Purchase Agreement was already fully discharged by the transfer of the liquidated damage amount to the Bishop Estate. No document or testimony which has been introduced in this case suggests that any USHP defendant knowingly and intentionally purported to bind himself or any other USHP defendant to any contract capable of specific enforcement or exposure to unliquidated damages.
The documents are unambiguous and consistent. They make no reference whatsoever to any notion that the remedies which were expressly waived in the liquidated damages provision were ever reinstated. Accordingly, KHA is only entitled by contract to the initial $400,000 deposit which it has already received and any costs in contemplation of closing as provided in the June 9 Extension.
b. Enforceability of the Provision: KHA argues that under Hawaii law, the liquidated damages clause is unenforceable as a penalty. Hawaii law is clear that a liquidated damages clause that constitutes a penalty will not be enforced. If the breach was not in bad faith, the nonbreaching party may be required to return any amount in excess of what is reasonably related to the its damages. Ventura v. Grace, 3 Haw. App. 327, 650 P.2d 620, 622-23 (1982); Gomez v. Pagaduan, 1 Haw. App. 70, 613 P.2d 658, 661-62 (1980).
Where, as in this case, the nonbreaching party is claiming that the deposit is too low, however, Hawaii law is not the same. KHA cites Gomez, 613 P.2d at 658, as its primary authority. In Gomez, the Hawaii Court of Appeals allowed the seller to retain installment payments on the property pursuant to the liquidated damages clause. 613 P.2d at 660. The court also upheld the *1450 award to the seller of the lost rental value of the property which loss was occasioned by the fact that the buyer took possession of the property before the closing.
KHA urges that this addition to the liquidated damages award supports its position that where liquidated damages are too low, the provision will not be deemed exclusive. But it is clear in Gomez that the additional damages awarded were not the loss of the bargain, but rather for the rental value which the buyer received by virtue of taking possession before the close, and not as damages suffered by reason of the buyer's failure to close. Here, of course, Pacific never took possession, and so it did not receive any such value. The court in Gomez did not award the seller any damages by virtue of the loss of the benefit of its bargain because of the buyer's refusal to close. For that element of damages, the liquidated damage payment was deemed controlling in Gomez and it is for that point that Gomez is relevant here.
KHA in essence sold Pacific an option to purchase the Hotel for a price of $400,000. This price is approximately 10% of the roughly $4,000,000 value which is ascribed to the KHA equity by the Purchase Agreement. The option created by the Purchase Agreement reflected the product of arm's length bargaining. KHA retained full freedom to negotiate with other parties for the sale of the property if the option were not exercised. Were the property worth the purchase price, so that other buyers could be readily found, upon failure by Pacific to exercise the option, KHA could have sold the property to another party and kept the $400,000. That KHA was unable to find another buyer at any acceptable price strongly suggests that $15,000,000 was a seller's price. It all the more suggests the basic option nature of the Purchase Agreement. For that option, the $400,000 option price was not a bargain.
The Purchase Agreement made clear on its face that there was doubt about Pacific's ability to raise financing. Both parties bargained for the liquidated damages clause. KHA, which still retained both the property and the deposit at the time of breach cannot now be heard to complain that its estimate was too low and that Pacific, which never claimed the financial wherewithall to close the Purchase Agreement should now be required to do so. The parties had the chance to modify the clause and did not do so.
In sum, KHA will be held to its own initial estimate of damages. The liquidated damages clause is enforceable and remained in effect without modification. The damages on KHA's breach of contract claim are thereby limited to $400,000.
3. Scope of Clause
Finally, KHA asserts that, if in effect and enforceable, the liquidated damages clause precludes a suit for damages only on the contract causes of action. Here, KHA is correct. The clause is unambiguous and waives damages for breach of contract. A waiver of the parties' right to recover for the torts of negligent or intentional misrepresentation cannot be inferred absent some evidence supporting that interpretation. Further, such a disclaimer of tort liability would be construed strictly and would be required to state explicitly on its face a limitation of tort liability for negligence and will not be interpreted to cover intentional torts. See Prosser, Dobbs, Keeton, and Owen, Prosser and Keeton on Torts 484 (5th Ed.1984).
Accordingly, the liquidated damages clause prohibits KHA from recovering damages in excess of $400,000 for its breach of contract claim only. The tort causes of action remain unaffected as to the damages actually incurred after the date of any misrepresentation or omissions which can be proven at trial.
B. STATUTE OF FRAUDS
The USHP defendants also contend in this motion that the statute of frauds bars proof of the alleged oral partnership agreement between the USHP defendants and Pacific to acquire an equity interest in the Hotel. The Court agrees.
As previously indicated, all parties to the negotiations concerning the transaction in question were represented by competent *1451 counsel who understood sophisticated transaction documentation. Counsel demonstrated in the DROA that they knew how to draft a document which temporarily bound the parties pending the drafting of a more detailed agreement. Counsel demonstrated in the Purchase Agreement that they knew how to draft a detailed binding agreement for the purchase of property. They demonstrated in the June 9 Extension that they knew how to draft binding agreements in letter form which include express statements as to what is agreed between the parties. Finally, they showed in the Letter Understanding that they could draft a document which avoided the use of the words "agree" and "agreement" and used words such as "understanding" and "approved" to signify that the letter represented no more than an expression of nonbinding understandings rather than a legally binding contract.
The suggestion that parties to a negotiation of a multi-million dollar contract, all represented by competent counsel, intended to become bound to an oral contract without any signed documentation to reflect it, demeans beyond recognition the important role which transaction lawyers play in our society and the protections which they afford for which their clients, quite willingly, pay very handsome fees. Courts must not confuse agreements in principle or understandings reached before transaction lawyers are called upon to draft legal agreements with those agreements that are legally binding. To do so would seriously destroy the process by which transaction lawyers and their clients arrive at legally binding agreements.
Hawaii's statute of frauds requires that any contract for an interest in land and any authority for the signing party to buy land be in writing. Hawaii Rev.Stat. Section 656-1. In the case here, KHA cannot enforce the USHP defendants' alleged oral promise to purchase the Hotel for two reasons. First, the USHP defendants are not signatories to the Purchase Agreement or any of the extensions. Under the statute of frauds, KHA cannot do so without some writing evidencing the agreement signed by the party to be charged, USHP. Hawaii Rev.Stat. Section 656-1.
Second, while partnership agreements in general do not have to be in writing to be enforced,[4] the alleged partnership agreement between Pacific and the USHP defendants contemplated only the transfer of a specific piece of land. It is not alleged that there was ever an intent to form a general partnership in which Pacific and any USHP defendant would go into the general business of buying and selling real estate. Under Hawaii law, therefore, because the writing contemplating transfer of the land, the partnership agreement here, must be in writing. Honolulu Memorial Park, Inc. v. City and County of Honolulu, 50 Haw. 189, 436 P.2d 207 (1967); Harrison v. Bruns, 10 Haw. 395 (1896).[5]
This is almost a paradigm case, for application of the statute of frauds. This is not a case in which there are no documents. The oral contract which is urged to exist between Pacific and the USHP defendants is wholly inconsistent with the copious paper trail produced by the lawyers who represented the parties in this transaction. In the view of the Court, the documents presented for purposes of these motions go far toward proving the USHP defendants' assertions that they did not enter into any contract with anyone for the purchase of the Hotel. Even Smith's November Notes and December Notes evidence different deals, if they evidence any deal at all. This suggests that the parties present knew *1452 that no deal had solidified and that no one expected to become bound to any specific contract which was not drafted and reviewed by counsel, and executed by the parties.
Accordingly, KHA and Pacific may not attempt to enforce an oral agreement to buy land against the USHP defendants. The USHP defendants' motions for summary judgment as to these breach of contract claims are therefore granted.
C. KHA'S FIFTH CLAIM FOR RELIEF: BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING
The USHP defendants request summary judgment as to KHA's fifth claim for relief, breach of duty of good faith and fair dealing.[6] Here, the Court holds that KHA does not have a claim for breach of duty of good faith and fair dealing against the USHP defendants.
Courts interpreting the law of Hawaii have been reluctant to recognize claims for breach of an implied covenant of good faith and fair dealing.[7] Even if this Court were to apply the reasoning of the jurisdictions which do imply a covenant of good faith, KHA's claim here still would fail. In California, for example, the covenant of good faith and fair dealing is implied into every contract. Crisci v. Security Ins. Co., 66 Cal. 2d 425, 58 Cal. Rptr. 13, 426 P.2d 173 (1967). As discussed above, however, there is no binding contract between KHA and the USHP defendants from which to imply a covenant of good faith.
Furthermore, even in California, where courts have held that a tort claim for breach of the covenant of good faith also may exist, in order to establish such a claim, a "special relationship" must be present between the parties to the contract. See Seaman's Direct Buying Service, Inc. v. Standard Oil Company of California, 36 Cal. 3d 752, 768-69, 686 P.2d 1158, 206 Cal. Rptr. 354 (1984).[8] Because the courts of Hawaii are reluctant to imply a covenant of good faith in situations where a contract exists, see Parnar, 65 Hawaii at 377, 652 P.2d 625, this Court, applying Hawaii law, will not imply a tort claim in a situation where no contract exists.[9]
Accordingly, KHA's fifth claim for relief against the USHP defendants fails and the USHP defendants' motion for summary judgment as to this claim is granted.
*1453 D. KHA'S SIXTH CLAIM FOR RELIEF: UNFAIR AND DECEPTIVE BUSINESS PRACTICE
The USHP defendants also request summary judgment as to KHA's unfair and deceptive business practice claim. The Court grants this motion.
In order to state a claim under Hawaii Revised Statutes Section 480-13, a plaintiff must establish either that: (1) the defendants are "merchants"; or (2) the plaintiff's suit against the defendants is in the public interest. See Island Tobacco Co. v. R.J. Reynolds, 63 Haw. 289, 301, 627 P.2d 260 (1981); Ai v. Frank Huff Agency, Ltd., 61 Haw. 607, 607 P.2d 1304 (1980).
The USHP defendants here are not "merchants" within the meaning of Chapter 480.[10] In order to be a merchant, a person must be a dealer in goods or services which are the subject of the transaction challenged as an unfair and deceptive practice. Ailetcher v. Beneficial Finance Co. of Hawaii, 2 Haw. App. 301, 632 P.2d 1071, 1075-76 (finance company not a merchant). The transaction here, a real estate transaction involving the sale of a hotel, is not a transaction involving goods or services. See, e.g., Lacey v. Edgewood Home Builders, Inc., 446 A.2d 1017 (R.I.1982); Wendling v. Cundall, 568 P.2d 888 (Wyo. 1977). Accordingly, in this transaction, as a matter of law,[11] the USHP defendants are not merchants within the meaning of the Unfair Business Practices Act.
Moreover, there is no showing that the dispute here is in the public interest. The transaction was a purely private transaction, involving the sale of the Hotel from one private party to another, and is not sufficiently in the public interest to support an unfair business practice claim under Section 480-13. See Ai v. Frank Huff Agency, Inc., 61 Hawaii at 614, 607 P.2d 1304; Ailetcher, 632 P.2d at 1076.
Summary judgment therefore is granted in favor of the USHP defendants as to KHA's sixth claim for relief.
E. LIABILITY OF GETTY FINANCIAL
Getty Financial requests summary judgment on the basis that there is no triable issue of fact regarding its involvement in the alleged partnership to purchase the Hotel. In order to hold Getty Financial liable for KHA's breach of contract claim, KHA's other claims for relief, or any of the Pacific Group's claims for relief, it must be shown that someone acting as Getty Financial's agent or someone who had apparent/ostensible authority either bound Getty Financial to the Purchase Agreement, or made a fraudulent representation in its name or behalf. See generally 2 Fletcher Cyclopedia of the Law of Private Corporations, Section 438 (rev. perm. ed. 1982) (actual, implied and apparent authority).
There is no genuine issue of material fact regarding such a commitment or representation. In their motion and opposition papers, the parties devote much space to debating whether Smith claimed authority during negotiations with Pacific to bind Getty Financial to contractual commitments. In his declaration, Smith contends that he never did so, but Radomile asserts in his deposition that Smith claimed to represent Getty Financial.[12]
The dispute, however, is not material to this motion for summary judgment. See T.W. Elec. Serv. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987). Even if Smith claimed ability to commit Getty Financial, it is uncontroverted that he had no actual authority to commit Getty *1454 in any way. Smith was neither an officer nor director of Getty Financial. He did not hold any other position with Getty Financial from which he might derive some color of authority to bind Getty orally to obligations involving multi-million dollar commitments.
Any claim of authority alleged to have been made by Smith therefore, would only be relevant to a claim that he had the apparent authority to act on behalf of Getty Financial. Apparent authority requires an act or omission by an authorizing party which could reasonably lead a person to believe that the party claiming authority has it. Guaschino v. Eucalyptus, Inc., 3 Haw. App. 632, 658 P.2d 888, 894, (1983).
In the Court's view, Getty Financial did nothing on the basis of which a reasonable businessman could conclude that Smith had authority to act on its behalf.[13] Corporations, which necessarily must act through agents, ordinarily do not consummate multi-million dollar transactions based upon oral contracts entered into by individuals without written evidence of their own authority or any evidence of approval by boards of directors. As previously noted, transaction lawyers who represent parties to negotiations over such transactions do not expect that binding oral agreements will be entered into before a definitive agreement is drafted. Even the chief executive officer of a corporation has no apparent authority to bind a corporation to such major commitments outside the ordinary course of business without any action by the board of directors.[14] To deem a person's authority to make binding oral commitments as legally "apparent" in a transaction in which the parties are represented by counsel who are preparing and reviewing documents by which the transaction is to be implemented, again would denigrate the entire function of transaction lawyers.
Furthermore, even assuming that Osterkamp, Getty Financial's chief executive officer, knew that Smith was holding himself out as acting for Getty Financial, nothing that Osterkamp did or said himself would provide justification for a reasonable businessman to assume that Smith had the apparent authority to bind Getty Financial. First, Osterkamp himself did not have apparent authority to bind the corporation to a $15,000,000 transaction. Osterkamp himself, therefore, could not have been an authorizing party sufficient to induce any reasonable assumption regarding Smith's authority. Second, Smith carried no evidence of authority to bind Getty Financial, and Osterkamp never did anything to suggest that Smith had any such authority until long after the alleged contract was formed.
Because there is no material dispute that no one had the actual or apparent authority to commit Getty Financial Corporation to purchase the Hotel, Getty Financial cannot be bound to either the Purchase Agreement with KHA or to the alleged oral partnership agreement with the Pacific defendants. Therefore, summary judgment in favor of Getty Financial is granted as to all causes of action.
F. INDIVIDUAL LIABILITY OF SMITH AND OSTERKAMP
KHA seeks, on the basis of contract liability, to hold Smith and Osterkamp individually liable for the purchase price of the Purchase Agreement. Smith and Osterkamp *1455 assert that no genuine issue of material fact exists as to this basis of liability.
1. Osterkamp
As to Osterkamp, it is clear that he neither committed himself nor authorized anyone to commit him individually to the Purchase Agreement. He did not sign it, and no evidence has been offered that he ever agreed to perform it individually. The only evidence that KHA presents committing Osterkamp to participate individually in any proposed deal is Smith's November Notes, allegedly dividing a 25% interest in the Hotel between Osterkamp, USHP and Getty Financial. These notes, if accepted as construed by KHA and Pacific, do not indicate whether the interests described were to be taken individually or as interests in a general partnership acquirer. The notes also do not indicate what consideration, if any, the recipients were to give in exchange for the interests received. The notes certainly do not indicate that Osterkamp intended to be individually bound for the entire purchase price if, for any reason, the transaction never closed.[15]
KHA argues that Smith purported to commit Osterkamp. There is no evidence, however, that Osterkamp in fact authorized Smith to do so. Accordingly, KHA must rely again on a claim of apparent authority. KHA argues that in past, unrelated transactions, Osterkamp has acted as a general partner. This assertion, however, does not support KHA's position that Smith had the apparent authority to bind Osterkamp. No showing is made that those past transactions were negotiated by Smith, nor is there any showing that Osterkamp became bound in any way to those past transactions other than by personally signing the relevant legal documents.
The fact that Osterkamp offered to buy the Hotel in January 1986 also does not support KHA's claim. To the contrary, Osterkamp's offer shows that Osterkamp expected to become bound to this transaction, if at all, only pursuant to properly executed documents reflecting both legal offer and acceptance. The Osterkamp Offer, which clearly did contemplate that Osterkamp would be personally bound, was in writing, obviously drafted by counsel and contained the kinds of provisions that one would expect in an offer by which an individual offered to commit himself to so large a transaction.
Finally, the only other evidence of Osterkamp's knowledge of Smith's dealings is the evidence presented in the motion on Getty Financial's liability. As the Court held as to that motion, such evidence indicates that nothing Osterkamp did or said could lead a reasonable person to believe that Osterkamp intended to be individually responsible, pursuant to the Purchase Agreement, for the entire purchase price necessary to close the purchase of the Hotel. Accordingly, Osterkamp may not be held individually liable on the Purchase Agreement and summary judgment on the breach of contract claim is appropriate.
2. Smith
Smith testifies that he never committed himself individually to the Purchase Agreement. Like Osterkamp, Smith did not sign it. Radomile, on the other hand, testifies that Smith said he was providing the equity in the transaction. While a reasonable jury might conclude on the basis of some of the statements attributed to Smith that he expected individually to put some equity into the deal, and that he was binding "USHP" to get a group willing to provide the equity, no reasonable jury could conclude that Smith was binding himself individually to deliver the entire purchase price pursuant to the Purchase Agreement. KHA presents no direct evidence of such a commitment. Accordingly, summary judgment also is granted in favor of Smith as to his personal commitment to perform the entire contract between Pacific and KHA.
V. CONCLUSION
The liquidated damages defense limits the liability of Pacific and the USHP defendants on KHA's contract claim. The *1456 statute of frauds bars proof of the USHP defendants' alleged partnership agreement to buy the Hotel. Summary judgment is granted in favor of the USHP defendants on the fifth and sixth claims of KHA's complaint. Getty Financial is no longer a party to this action. Osterkamp and Smith individually are not parties to the breach of contract cause of action.
Accordingly, the causes of action remaining for trial on KHA's complaint are promissory estoppel (reliance), negligent misrepresentation or nondisclosure, intentional misrepresentation or nondisclosure, and assumpsit.
NOTES
[1] Such a situation would be presented, for example, by a case involving a police officer's fatal shooting of a citizen. The officer's affidavit that the officer shot the citizen in self-defense might be uncontroverted, but a trial judge might still determine that live testimony should be heard to determine the officer's credibility.
[2] See Russell v. C.I.R., 678 F.2d 782, 785 (9th Cir.1982).
[3] Initially, of course, the option was for the mere transfer of possession of the $200,000 with the right to have it returned with interest on or before April 15, 1985 if "acceptable financing" were unavailable.
[4] See generally Corbin on Contracts, Sections 411, 471.
[5] KHA also contends that the statute of frauds cannot bar proof of the alleged partnership agreement because the USHP defendants made the representations for the purpose of practicing fraud. KHA cites Dobison v. Bank of Hawaii, 60 Haw. 225, 587 P.2d 1234 (1978), which deals with the subject of when representations regarding credit are actionable. The rationale of the court in Dobison does not apply here because plaintiffs here have a remedy in tort for any damages suffered as a result of misrepresentations made by defendants. The Court here, based upon the statute of frauds only prohibits KHA from enforcing the contract based on oral representations.
[6] Specifically, KHA alleges:
1. That Defendants owed a duty of good faith and fair dealing to Plaintiff because of a special relationship existing between Plaintiff and Defendants,
2. That Defendants breached that duty by delaying the closing of the purchase of the hotel, and
3. That Plaintiff incurred general and special damages as a result.
[7] In Okada v. MGIC Indemnity Corp., 795 F.2d 1450, 1456 (9th Cir.1986), the Ninth Circuit noted:
it is unclear whether Hawaii would recognize a duty of good faith and fair dealing for insurance contracts, or bad faith for a breach of such a duty. Neither party cites Hawaii cases, the district court cites a California case for this proposition, and no Hawaii case appears to discuss this issue directly.
See also Parnar v. Americana Hotels, Inc., 65 Haw. 370, 377, 652 P.2d 625 (1982) (Hawaii Supreme Court refusing to imply a covenant of good faith in an employment contract).
[8] The characteristics of such contracts where a tort remedy will be implied include:
(1) the contract must be such that the parties are in inherently unequal bargaining positions;
(2) the motivation for entering the contract must be a nonprofit one, i.e., to secure peace of mind, security, or future protection;
(3) ordinary contract damages are not adequate because (a) they do not require the party in the superior position to account for its actions, and (b) they do not make the inferior party "whole";
(4) one party is especially vulnerable because of the type of harm it may suffer and of necessity places trust in the other party to perform; and
(5) the other party is aware of this vulnerability.
Wallis v. Superior Court, 160 Cal. App. 3d 1109, 1118, 207 Cal. Rptr. 123 (1984).
[9] Even if this Court were to extend the California rule to Hawaii law, the Court is doubtful as to whether the requisite "special relationship" would be present between two parties who have not attained the relationship of being parties to a contract. Here, there is no evidence of any contract between KHA and the USHP defendants, and therefore the Court would be reluctant to find any "special relationship."
[10] Hawaii Rev.Stat. Section 490:2-104(1) defines "merchant" as follows:
"Merchant" means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill.
[11] Determining whether a person is a merchant is a matter of law. County of Milwaukee v. Northrop Data Systems, Inc., 602 F.2d 767, 771 (7th Cir.1979).
[12] For purposes of this motion, of course, the Radomile version must be believed.
[13] In this regard, it must be noted that Getty Financial bears the name of J. Ronald Getty and is wholly owned by him. J. Ronald Getty, rather than Osterkamp, would bear the burden of any judgment against Getty Financial. J. Ronald Getty was named an individual defendant herein, but has been dismissed from this action. Osterkamp, who was the chief executive of Getty Financial, was also the chief executive of USHPC, which indisputably was involved in the negotiations. Absent any showing of a corporate intent of Getty Financial to be involved, however, Osterkamp's actions cannot be attributed to it.
[14] See Fletcher Cyclopedia of the Law of Private Corporations, Section 451 at 374 ("Thus, it has been held that the mere fact that a person is a the head of the business office of a ... company is not sufficient to establish an apparent agency to make a special and unusual contract involving a large sum.") No suggestion has been made here that for Getty Financial to enter into a transaction of this size, acting as a principal for the full commitment of $15,000,000, would be within its ordinary course of business.
[15] In fact, at all times, any general liability to be incurred in the transaction was to be assumed by the general partner in a general partnership to be formed, the interests in which were never agreed upon.
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405 A.2d 222 (1979)
Jon M. DELANO
v.
CITY OF SOUTH PORTLAND and Middlesex Mutual Insurance Company.
Supreme Judicial Court of Maine.
August 27, 1979.
*223 Richardson, Hildreth, Tyler & Troubh by Ronald D. Russell, Portland (orally), for plaintiff.
Hewes, Culley & Feehan by George W. Beals (orally), Richard D. Hewes, Portland, for defendants.
Before McKUSICK, C. J., WERNICK and ARCHIBALD, JJ., and DUFRESNE, A. R. J.
DUFRESNE, Active Retired Justice.[1]
On January 21, 1972 Jon M. Delano sustained a work-related injury to his left knee while in the employ of the City of South Portland as a heavy equipment operator, his job classification being Equipment Operator II. Up until June 9, 1975 Delano did receive total disability benefits during several periods of disablement due to the original injury and three subsequent recurrences. *224 By arrangement with the Director of the Public Works Department, Richard R. Brado, Delano then returned to work for the City as dump attendant, with the understanding that he would retain his classification of Equipment Operator II, although the dump attendant job was classified as that of a Laborer I. They also agreed that Delano would only work forty hours tending the dump and would not have to put in any overtime; on Delano's express concern about having to return to work as a "wing man" on the trucks for fear of re-injuring the knee, Brado assured him that he would not be called upon to do that type of work.
In late 1975 during a snow storm, one of Delano's supervisors assigned him to serve as a "wing man" on a snow plow. Delano refused the assignment, advising the supervisor of his fear of re-injuring his knee in that position and of his understanding with Mr. Brado that he would not be called upon to do that type of work. A check with the Director confirmed the previous agreement and Delano was not pressed to serve.
Following the receipt of a letter from Delano's treating physician at the request of the Director of the Public Works Department to the effect that, because of his leg injury, Delano could not operate heavy equipment, the City, on March 26, 1976 officially notified Delano that, due to his inability to perform the duties of an Equipment Operator II according to the medical reports, his classification was being changed from Equipment Operator II to Laborer I at the current hourly pay rate for said classification. The reclassification entailed a reduction in pay of $26.00 per week.
Delano then filed three petitions with the Industrial Accident Commission:[2] on April 22, 1976, a petition for further compensation on account of partial incapacity pursuant to 39 M.R.S.A., § 55; on May 26, 1976 a petition for transfer to suitable work during period of rehabilitation as provided in 39 M.R.S.A., § 66-A; and on June 15, 1976 a petition requesting a Commission determination whether the City had discriminated against Delano and, if so, for an award of net wages lost by reason of such discrimination under 39 M.R.S.A., § 111.
The petitions were consolidated for hearing, which took place on September 30, 1976. By order dated November 8, 1978 the Commissioner found that Delano's demotion in job classification constituted the type of discrimination prohibited by 39 M.R.S.A. § 111 and ordered the City of South Portland
"to pay to Jon M. Delano the difference between the wage rate of a laborer and that of an Operator II, from March 29, 1976, as long as such wage disperity (sic) between the classifications exist,"
dismissing without prejudice the petition for transfer to suitable work on the ground of mootness. The City appeals from the Superior Court's conforming pro forma decree. We sustain the appeal.
Section 111 of Title 39 provides as follows:
"§ 111. Discrimination
No employee shall be discriminated against by any employer in any way for testifying or asserting any claim under this Act. Any employer who so discriminates against any employee shall be liable to such employee on petition before the commission and hearing before the commission, for all net wages lost suffered by such employee by reason of such discrimination."
Noting that "[t]his provision, as any provision under the Worker's Compensation Act, must be construed liberally in favor of the worker in keeping with the expressly declared intent of the Act," the Commissioner interpreted the section broadly as prohibiting employer discrimination against an employee for exercising a right afforded an injured employee under the Act, including "the right not to be forced into employment which is likely to aggravate his injury or which [the employee] will be unable to carry out because of his injury." Finding *225 that the City's change of classification respecting Delano's employment status was a demotion resulting directly from Delano's refusal to carry out his previous assignment to the "wing man" position on the snow plow and that Delano's unwillingness to comply with his supervisor's request was the exercise by an employee of the right within the scope of the Worker's Compensation Act not to be forced into work particularly hazardous to his current work-related impaired physical condition, the Commissioner further found that such action by the City was unlawful discrimination within the meaning of section 111 of the Act. The City contends, however, that the only employer discrimination prohibited by section 111, except when based upon an employee's "testifying" in a proceeding under the Act, contemplates discriminatory action resulting solely from the filing of a petition for compensation. With this narrow interpretation of the Act, we disagree.
Thus, the issue for decision is, what did the Legislature intend when it prohibited employer discrimination against an employee "in any way" for "asserting any claim under this Act?"
In determining legislative intent respecting any ambiguity in the Workers' Compensation Act, we must bear in mind the Legislature's mandate that the Act be given a liberal construction "with a view to carrying out its general purpose." 39 M.R. S.A., § 92. The basic objective of the Act, in compelling employers to pay compensation benefits to their employees when suffering work-related injuries, is to transfer the burdens resulting from industrial injuries from the individual employee to the employer with the ultimate distribution of the cost of such industrial insurance program upon the consumer-society as a whole. See Brown v. Palmer Construction Company, Inc., Me., 295 A.2d 263, 264-265 (1972); Bartley v. Couture, 143 Me. 69, 78, 55 A.2d 438, 443 (1947); MacDonald v. Employers' Liability Assurance Corporation, 120 Me. 52, 112 A. 719 (1921).
Implementing the legislative will, our Court has consistently given the Act a liberal construction favorable to the employee, which it is by law mandated to do, to accomplish its intended beneficial results and carry out its general humanitarian purpose. Gilbert v. Maheux, Me., 391 A.2d 1203, 1205 (1978); Ross v. Oxford Paper Co., Me., 363 A.2d 712 (1976); In re Dudley, Me., 256 A.2d 592 (1969).
We recognize, however, that, notwithstanding the legislative mandatory directive to apply a liberal interpretation to the Act generally, such does not justify judicial creation of rights or liabilities under the guise of construction. The scope of liberality to be afforded the Act must come from the Legislature. Simpson's Case, 144 Me. 162, 167, 66 A.2d 417, 419 (1949).
Though courts must afford equal treatment under the law to employer and employee, even when applying the liberal construction rule mandated by the Legislature (White v. Eastern Mfg. Co., 120 Me. 62, 112 A. 841, 16 A.L.R. 1165 (1921)), nevertheless, we must not lose sight of the factual purpose and intended objective of the Workers' Compensation Act, i. e. adequate protection to employees against the consequences of work-related injuries through its comprehensive benefit-compensation structure.
The One Hundred and Fifth Legislature in 1971 extended the Act's general remunerative benevolent protectiveness to employees by prohibiting specifically any employer discrimination in connection with employee "testifying or asserting any claim under this Act." See P.L.1971, c. 190. (39 M.R.S.A., § 111). Reading the word "claim" literally may possibly support the City's narrow interpretation which it requests this Court to place on the legislative terminology. But, our statutory obligation to construe the Act liberally in favor of the employee (39 M.R.S.A., § 92) demands that we construe the word "claim" in its broad sense as the equivalent of "right."
Militating against a narrow construction is the very language of section 111 protecting employees against discrimination by employers in any way, i. e. of any kind, because of employee enforcement of the *226 Act including any provisions thereof. If the Legislature had intended to restrict the terms "asserting any claim under this Act" to mean the assertion of a claim for compensation or benefits as distinguished from the voicing of any right under the workers' compensation law, it would have been so easy to say so directly as the Legislature consistently did in other areas of the Act, such as in section 64-A, where the same reads in part: "In any claim for compensation, where the employee etc. . . .;" or in section 69, where the terminology used is also: "A claim for compensation under this Act, . . .;" or in section 95, where the language is: "Any employee's claim for compensation under this Act shall be barred. . .."
The One Hundred and Fifth Legislature, which enacted the anti-discrimination section 111 as an integral part of the Workers' Compensation Act, at the same session, passed the Human Rights Act which protects generally the right to freedom from discrimination in employment, declaring it to be a civil right. This Act prohibits employment discrimination (except where based on a bona fide occupational qualification) such as, for an employer to discriminate against an employee with respect to tenure, promotion, transfer, compensation or in any other matter directly or indirectly, related to employment, because of his race or color, religion, age or country of ancestral origin. P.L.1971, c. 501.
The One Hundred and Sixth Legislature expanded the Human Rights Act to prohibit employment discrimination against an employee because of physical handicap. P.L. 1973, c. 705, § 5, effective June 28, 1974. The same Legislature, at its regular session, had already enacted employee protective legislation in connection with statements of injured employees to insurance carrier investigators and employer representatives, making them admissible in evidence only under certain specified conditions, one of which is that the employee has been previously advised in writing: "E. The employer may not discriminate against him in any manner for refusing to make such a statement or exercising in any way his rights under this Title." (Underscoring ours). P.L.1973, c. 554 (39 M.R.S.A., § 112). We note that the Legislature did not limit the advisory notice to be given the employee to the fact that the employer may not discriminate against him by reason of the latter's exercise of his rights under this additional new section to the Workers' Compensation Act, but that the advice should be that the employer may not discriminate against the employee for exercising in any way his rights under this Title, meaning under the Workers' Compensation Act as a whole.
The Legislature in enacting 39 M.R.S.A., § 112 necessarily had in mind the only discrimination section of the Workers' Compensation Act, i. e. section 111, and in its use of language somewhat different from the section 111 draft, it was, without any doubt, construing the terms of section 111asserting any claim under this Actto be the equivalent of the terminology of section 112exercising in any way his rights under this Title.
True, we said in Toothaker v. Maine Employment Security Commission, Me., 217 A.2d 203 (1966), that legislative construction by a subsequent Legislature of any given statute passed by a prior Legislature is not conclusive upon the judicial branch of government in ascertaining the intention of the enacting Legislature.[3] Nevertheless, when there is ambiguity in prior legislative terminology, subsequent enactments of a legislature throwing light on the legislative intent underlying a former related act, may be taken into consideration in dissipating the uncertainty in the prior statute. People v. Kezerian, 63 Ill.App.3d 610, 20 Ill. Dec. 178, 181, 379 N.E.2d 1246, 1249 (1978); Washington v. St. Charles Parish School *227 Board, La., 288 So. 2d 321 (1974); County of Nevada v. MacMillen, 11 Cal. 3d 662, 114 Cal. Rptr. 345, 522 P.2d 1345, 1353 (1974); Inexco Oil Company v. Oil and Gas Conservation Com'n, Wyo., 490 P.2d 1065, 1067 (1971); Collins v. Town of Derry, 109 N.H. 470, 256 A.2d 654, 655 (1969); Crosby v. Barr, Miss., 198 So. 2d 571 (1967); General Realty Improvement Co. v. City of New Haven, 133 Conn. 238, 50 A.2d 59 (1946). Also Red Lion Broadcasting Co. v. F. C. C., 395 U.S. 367, 89 S. Ct. 1794, 23 L. Ed. 2d 371 (1969); but see Mattz v. Arnett, 412 U.S. 481, 93 S. Ct. 2245, 37 L. Ed. 2d 92 (1973).
The word "claim," in its primary meaning is used to indicate the assertion of an existing right. In its secondary meaning it may be used to indicate the right itself. Appeal of Beach, 76 Conn. 118, 55 A. 596 (1903). See Webster's Third International Dictionary. We hold that, in the use of the expression "asserting any claim under this Act" in 39 M.R.S.A., § 111, the Legislature was referring to any right conferred by the Workers' Compensation Act on the employee, and not merely to the voicing of a demand for benefits by petition or otherwise. In reaching this conclusion, we are merely carrying out the legislative direction to construe the provisions of the Act liberally. As a result, we achieve a harmonious consistency in our interpretation of sections 111 and 112. Also, by rejecting the literal and narrow meaning of the word "claim" for the broad sense of "right" in section 111, we maintain uniformity of purpose in the Legislature's statutory scheme of proscribing unlawful employment discrimination under the Maine Human Rights Act and the Workers' Compensation Act. Both serve to protect the rights of the handicapped individual in the person of an industrial injured employee.
It is our duty to view as one piece of legislation the several statutes governing a particular subject matter such as in this case discrimination in employment and, when there is need for construction, to favor such an interpretation as will, as nearly as possible, make the particular statutes a consistent and harmonious part of a single legislative chart. In re Belgrade Shores, Inc., Me., 359 A.2d 59 (1976); Finks v. Maine State Highway Commission, Me., 328 A.2d 791 (1974); Inhabitants of Town of Amity v. Inhabitants of Town of Orient, 153 Me. 29, 134 A.2d 365 (1957).
The Commissioner construed the phrase "asserting any claim under this Act" to comprehend the exercise by Delano of "the right not to be forced into employment which is likely to aggravate his injury or which he will be unable to carry out because of his injury." He found "that the demotion of Jon Delano was a direct result of the exercise of his rights not to engage in employment particularly hazardous to his condition resulting from his earlier employment injury, employment which he specifically had been told he would not be required to perform by his supervisor, and a limitation which I find reasonable in the light of all the circumstances."
Although our Workers' Compensation Act does not expressly declare that an injured employee has a right not to be forced into employment hazardous to his work-related injury and that he may refuse an offer of such work, even when tendered by his employer, without suffering Commission diminution or termination of his compensation benefits on petition for review by reason of decrease or ending of his work incapacity, such right is implicit in the Act. The employer and employee have parallel corresponding rights and obligations under the Act. It is the duty of the employee to accept available work within his limited ability to perform, i. e. suitable work within the tolerance of his physical condition. The employer has a right to expect this from his employee.
"It is held generally that in the ordinary case an injured employee has the duty of being cooperative, within reason, and of attempting to perform work, when offered, which in the opinion of qualified medical witnesses he can safely do in order that his actual working capacity may, if possible, be ascertained. An injured employee who without good reason does not carry out that duty may have to *228 suffer the consequences." Fulford Mfg. Co. v. Lupoli, 75 R.I. 488, 67 A.2d 846 (1949).[4]
On the other hand, the employer has no right to insist that the employee accept work which he cannot, in fact, perform due to his limited physical capacity or which he reasonably apprehends will subject him to serious injury or significant aggravation of his present physical disability. Such reasonable apprehension will justify his refusal to do the work or his decision to quit, if he has undertaken the work. See Newsom v. Caldwell & McCann, 51 So. 2d 393 (La.App. 1951); Akins' Case, 302 Mass. 562, 20 N.E.2d 453 (1939).[5]
The Commissioner in the instant case found that the change of job classification from Equipment Operator II to Laborer I in the case of the petitioner appellee was discrimination by the City appellant in violation of 39 M.R.S.A., § 111. This conclusion is premised entirely on inferences as opposed to direct evidence. In such a case, we are at liberty to review such inferences. Rugan v. Dole Co., Me, 396 A.2d 1003, 1005 (1979); Sargent v. Raymond F. Sargent, Inc., Me., 295 A.2d 35, 42 (1972). After careful study of this record, we are convinced that it is devoid of competent evidence to sustain the reference finding and that under such circumstances the issue becomes one of law and mandates a reversal. Crosby v. Grandview Nursing Home, Me., 290 A.2d 375, 379 (1972).
The Commissioner's inference of unlawful discrimination was deducted from the following stated facts. The review of Delano's work capacity was initiated by the Director shortly after Delano had refused the assignment to the "wing man" position on the snow plow in late 1975. The Director suspected Delano of being a malingerer. The initiation of the investigation of petitioner's medical condition was directed at finding a basis for demoting him. The demotion was intended to make petitioner's employment with the City of South Portland less lucrative and thus secure his resignation. The medical reports received from the treating physician were stale. There was hearsay evidence that the Director at some indefinite time had stated that he would get rid of the petitioner entirely if he had more authority.
The record before us and before the Commissioner is very unsatisfactory. There is no evidence in the record respecting the City's qualification requirements in relation to either the job classification of Equipment Operator II or Laborer I. No attempt was made to show that the City in the past had treated other injured municipal employees differently from the action taken in Delano's case. Delano testified that he had seen his doctor three times in late 1975. A letter from the doctor dated October 23, 1975 to the petitioner's attorney states that Delano's condition had reached an end result and that his diagnosis suggested that Delano had suffered a 10% permanent loss of physical function of his left leg. Delano's supervisor, Arvin Erskine, testified that shortly prior to the change of classification in early 1976 the Director had received a letter from the doctor saying that because of his leg injury Delano could not operate heavy equipment. The conclusory testimony to the effect that the Director considered Delano a malingerer came from the petitioner himself as a self-serving statement without factual support or sustentative explanation.
The burden of showing discrimination in violation of 39 M.R.S.A., § 111 was on the petitioner. The evidence stopped short of *229 such a demonstration. Given the fact of the change in classification because of the petitioner's admitted physical disability, it does not follow that such action by the City constituted automatically discrimination in violation of section 111. As in the case of discrimination in employment because of age, the petitioner has the burden of proving that his refusal to accept the assignment to the "wing-man" position on the snow plow was a substantial factor motivating his reclassification to a lower-salaried position, since reclassification based on the lack of bona fide qualification for the higher classified occupation would be entirely proper and not discrimination in violation of section 111.
Taking our cue from the holding in Wells v. Franklin Broadcasting Corporation, Me., 403 A.2d 771 (1979the benefit of which the Commissioner did not have), in which case we construed the provisions of the Maine Human Rights Act respecting discrimination in employment because of age (5 M.R.S.A., §§ 4571-72), admittedly a statute of similar societal concern as, and in pari materia with, the injured employee discrimination section of the Workers' Compensation Act (39 M.R.S.A., § 111), we cannot say from the instant record that the Commissioner applied the correct principle of law in reaching his conclusion that there was a violation of section 111. His finding was that
"the demotion of Jon Delano was a direct result of the exercise of his rights not to engage in employment particularly hazardous to his condition resulting from his earlier employment injury, . . .." (Emphasis supplied).
That Delano's assertion of his right to refuse as non-suitable the assignment to the position of "wing man" on the snow plow may have motivated the City officials to reexamine Delano's work capacity and reclassify him so far as his employment status with the City was concerned and that Delano's demotion may have been a direct result thereof, it does not follow automatically that the alleged retaliatory motive, mixed as it was with employer motivation to reclassify an injured and handicapped employee on the ground of lack of occupational qualification to remain in the more strenuous and higher classified position, was a substantial factor in the employee's demotion. The trier of facts, in an employment discrimination petition under 39 M.R. S.A., § 111, must determine as a fact whether the discharge or demotion of the injured employee was rooted substantially or significantly in the employee's exercise of his rights under the Workers' Compensation Act.[6] Besides the failure of the evidence to support the inferential findings of the Commissioner, there was error in the standard used to determine discriminatory conduct in violation of 39 M.R.S.A., § 111.
We should not be taken to acquiesce, however, in the propriety of the open-ended relief under section 111 which the instant Commission decree provides, i. e. to pay to the petitioner the difference between the wage rate of a Laborer I and that of an Equipment Operator II from March 29, 1976, as long as such wage disparity between the classifications exists. Should the Commissioner find on re-hearing that the employee's assertion of right under the Workers' Compensation Act was a substantial factor motivating the employee's demotion in job classification, then the Commissioner should determine in Delano's petition for further compensation on account of partial incapacity (which has not been acted upon), whether the employee, because of his physical condition, is unable to perform the duties of Equipment Operator II or is unable to perform those duties in a manner which would not reasonably entail a recurrence of the original injury, and if so, to determine under the Act whether the employee is entitled to further compensation. Notwithstanding employer discrimination in the instant case, should *230 that finding be legally reached by the Commissioner on re-hearing, Delano would not be entitled under section 111 to "net wages lost" for any period of time following a Commission decision that he cannot perform the duties of Equipment Operator II or is unable to perform those duties in a manner which would not subject him to aggravation of his present physical condition, nor, if he should be found capable of performing the duties of Equipment Operator II, for any period of time following reinstatement of the employee by the employer to the higher job classification either voluntarily or on Commission order.
Inasmuch as Wells v. Franklin Broadcasting Corporation was decided after the case was heard and the Commissioner entered his decree, we conclude that fairness to the parties demands that the case be remanded for further proceedings where supplemental evidence to replenish the instant scanty record may be more fully developed.
The entry is:
Appeal sustained.
Pro forma decree of the Superior Court vacated.
Case remanded to the Superior Court with instructions to remand to the Workers' Compensation Commission for further proceedings consistent with this opinion.
It is further ordered that the employer pay to the employee an allowance for counsel fees in the amount of $550, together with his reasonable out-of-pocket expenses, for this appeal.
POMEROY, DELAHANTY, GODFREY and NICHOLS, JJ., did not sit.
NOTES
[1] Sitting by assignment.
[2] The name of the Industrial Accident Commission has since been changed to Workers' Compensation Commission. P.L.1978, c. 612.
[3] To the same effect, see Hilligoss v. LaDow, 368 N.E.2d 1365 (Ind.App.1977); State ex rel. Grand Jury, etc. v. Pate, Okl., 572 P.2d 226 (1977); Swarthmore Company v. Comptroller of the Treasury, 38 Md.App. 366, 381 A.2d 27 (1977); Esquire, Inc. v. Ringer, 192 U.S.App. D.C. 187, 591 F.2d 796 (D.C.Cir. 1978). Contra: Anderson v. City of Seattle, 78 Wash.2d 201, 471 P.2d 87 (1970).
[4] Accord: Medina v. The Zia Company, 88 N.M. 615, 544 P.2d 1180 (N.M.App.1975); Morrison v. Merrick's Super Market, Inc., 300 Minn. 535, 220 N.W.2d 344 (1974); Akins' Case, 302 Mass. 562, 20 N.E.2d 453 (1939); Jordan v. Decorative Co., 230 N.Y. 522, 130 N.E. 634 (1921).
[5] The right in the employee to refuse hazardous work was recognized as a right the exercise of which is protected against discrimination under the Occupational Safety & Health Act of 1970, 29 U.S.C. §§ 651 et seq., in Marshall v. Whirlpool Corp., 593 F.2d 715 (6th Cir. 1979). See also Judge Wisdom's dissenting opinion in Marshall v. Daniel Construction Co., Inc., 563 F.2d 707 (5th Cir. 1977).
[6] The parties may possibly protect themselves in avoiding discrimination treatment or charges by entering into trial work agreements as now provided by 39 M.R.S.A., § 100A (P.L.1977, c. 349), petitioning for transfer pursuant to 39 M.R.S.A., § 66A, or petitioning for review of incapacity under 39 M.R.S.A., § 100.
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549 S.W.2d 19 (1977)
GABER COMPANY, Appellant,
v.
Leila RAWSON et al., Appellees.
No. 1533.
Court of Civil Appeals of Texas, Houston (14th Dist.).
March 9, 1977.
Rehearing Denied March 30, 1977.
*20 Paul W. Persons, Houston, for appellant.
W. James Kronzer, Jr., Nick C. Nichols, Kronzer, Abraham & Watkins, Russell H. McMains, Fulbright & Jaworski, Warren Y. Pennington, Brackeen & Pennington, Houston, for appellees.
CIRE, Justice.
Defendant appeals from a judgment for plaintiff in a wrongful death action.
*21 This suit arises out of a multiple-vehicle accident in which Bryan Rawson was killed. At about 1:00 p. m. on December 9, 1970, a truck traveling northeast on Houston's Southwest Freeway dropped a number of boxes containing lavatories onto the freeway. The truck did not stop. Shortly thereafter, cars encountering the boxes slowed to avoid hitting them, resulting in a four-car collision. The third car in line, driven by the decedent, was hit by a large truck owned and operated by Containerized Refuse Haulers, Inc. A fire broke out and burned the Rawson vehicle, causing the death of both Rawson and his passenger, Robert E. Nolan.
Appellee Leila Rawson, widow of the decedent, brought this wrongful death action against appellant Gaber Co., a wholesale plumbing distributor, alleging that it was a Gaber Co. truck that dropped the boxes of lavatories, causing the accident and her husband's death.
The case was submitted on 26 special issues, and the jury's affirmative answers to the first four issues formed the basis for finding Gaber Co. liable. In the first special issue, the jury found that the truck from which the lavatories fell was owned by Gaber Co. In the second issue, the jury found that the driver of the truck was engaged in the service of Gaber Co. and in the furtherance of its business. Special issue number three read:
Do you find from a preponderance of the evidence that the boxes of sinks or lavatories could have been prevented from falling off the truck by the exercise of ordinary care upon the part of Gaber Company and its employees?
The fourth issue read:
Do you find from a preponderance of the evidence that such failure was a proximate cause of the injuries, if any, and the death of Bryan Rawson?
The jury failed to find any contributory negligence on the part of the decedent. It found that Mrs. Rawson was entitled to compensation for her pecuniary loss in the amount of $167,000; that the decedent would have been entitled to $10,000 as compensation for his physical pain and mental anguish; that the market value of the Rawson vehicle immediately before the accident was $2,000 and that its value after the accident was $25; and that reasonable funeral and burial expenses were $2,000. Based on this verdict, the court entered judgment that Mrs. Rawson, individually and as administratrix of the estate of Bryan Rawson, recover of Gaber Co. $179,000, plus interest and costs.
Gaber Co. brings this appeal on five points of error. Each of these points attacks the judgment of the trial court on grounds of legal and factual sufficiency. However, appellant has not properly preserved its factual sufficiency points. To do so, they must have been included in a motion for new trial. Appellant's original motion for new trial was timely filed on June 2, 1976. Its amended motion for new trial was filed on June 22, 1976, the last day such motion could have been timely filed. Tex. R.Civ.P. 329b. The amended motion did not contain any ground for new trial asserting that the verdict of the jury was grounded on insufficient evidence or that it was so against the great weight and preponderance of the evidence as to be manifestly unjust. The first two grounds complained of the court's error in overruling its motion for instructed verdict; the next ten grounds complained of the error of the court in overruling defendant's objections to certain issues; and the thirteenth ground complained of the error of the court in "overruling defendant's motion to disregard and set aside Special Issues and the jury's findings thereto . . .." It was not until July 7, 1976, when appellant filed its "Supplement to Amended Motion for New Trial," that the factual sufficiency points were raised. This supplement had no effect as a motion for new trial. It was not filed within 20 days after the original motion for new trial was filed. Moreover, a party may not file more than one amended motion for new trial. Draper v. Liberty Mut. Ins. Co., 484 S.W.2d 135, 136 (Tex.Civ.App.Texarkana 1972, writ ref'd n. r. e); Tex.R.Civ.P. 329b. Appellant's points of error thus *22 present only questions of law. In passing on these points, we consider only that evidence favorable to the appellee, and draw from the facts proven only those reasonable inferences which tend to support the trial court's judgment. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.Sup.1965); Dictaphone Corp. v. Torrealba, 520 S.W.2d 869, 870 (Tex.Civ.App.Houston [14th Dist.] 1975, writ ref'd n. r. e.).
In its first point of error, appellant asserts that the evidence shows as a matter of law that the boxes on the freeway did not fall from a Gaber Co. truck operated by a Gaber Co. employee in the course and scope of his employment and that there was no evidence to support the jury's finding to that effect.
On the question of ownership, there is the testimony of William L. Gruber and Ruth Anne Vetterick that they saw a Gaber Co. truck drop some boxes at the site of the accident on the afternoon it occurred. They said they were traveling about two car lengths directly behind the truck when a box fell off the back of the truck. They swerved their car to avoid hitting the box, then pulled up beside the driver, blew their horn, and began motioning to him in an attempt to inform him that he was losing boxes. They further testified that they saw more boxes drop off the truck and that after their honking and motioning they saw the driver turn off at the next exit. They proceeded down the freeway and, after crossing an overpass, saw behind them a large cloud of black smoke. Both witnesses testified that the truck carried a sign saying "Gaber Co." Gruber's statement to the police, which was introduced into evidence, stated that the sign he saw was printed on the rear of the truck. However, he and Mrs. Vetterick testified that the sign was positioned over the cab of the truck. W. J. Spaulding, the officer who investigated the accident, testified it occurred on the down slope of the Newcastle overpass on the Southwest Freeway. He saw between seven and ten boxes containing white, 18 inch diameter, lavatory sinks on the eastbound portion of the freeway and took two of these into custody. He took one of the boxes to the Gaber Co. offices the next day and was told by the dispatcher that the company handled such sinks, but that they had not lost any in this accident.
Appellant next contends that Mrs. Rawson failed to prove that the truck was being operated by a Gaber Co. employee within the course and scope of his employment. Appellant says that appellee must rely upon the "branded truck doctrine" to hold Gaber Co. liable for the negligent acts of its employee committed while driving its vehicle. Appellant correctly states the law to be that proof of the employer's ownership of the vehicle and that the driver was employed by such employer creates a presumption that the driver was acting within the course and scope of his employment when the accident occurred. This presumption can be nullified by positive proof to the contrary. Robertson Tank Lines, Inc. v. Van Cleave, 468 S.W.2d 354, 357 (Tex.Sup. 1971); Broaddus v. Long, 135 Tex. 353, 356, 138 S.W.2d 1057, 1058 (1940). Appellant argues that it offered such positive proof, the presumption vanished, and appellee was left with no evidence. This argument fails for several reasons. First, this is not an employee deviation case. Second, the argument does not focus upon the conduct complained of in this suit. Mrs. Rawson did not contend that the boxes fell off the truck because of any negligence in the manner in which the truck was driven. The negligence upon which this suit was based, and about which special issue number three inquired, was the failure of Gaber Co. to prevent the boxes from falling off the truck. Gaber Co. had a duty to secure its cargo in a way that would prevent it from falling off the truck and causing havoc on the freeway. It was established that the boxes were loaded by Gaber Co. employees under the direction of Johnnie Harlan, foreman at Gaber Co. He was in charge of the loading dock at the time of the accident. He testified that company drivers under his supervision loaded the trucks and that he had the duty of securing the load on the trucks. In his deposition, read into evidence, *23 Harlan testified that there were no tailgates on the company's flatbed trucks; that the loads, sometimes being two stacks of boxes, were secured with one rope for each stack; that a tarpaulin was sometimes used; and that improperly packed boxes could come out of the truck. The witnesses Gruber and Vetterick testified that the truck was heavily loaded. Third, there was no positive proof by appellant rebutting the presumption and, in addition to the proof that this was a Gaber Co. truck and that on the date of the accident all of their trucks were being operated by Gaber Co. employees, there was further evidence bearing on the course and scope issue. Using his handwritten dispatch log, which was put into evidence, Harlan testified that the one or more trucks with Gaber Co. Signs had been out around the time of the accident making deliveries in the southwest part of town, accessible by the Southwest Freeway. In his deposition, Harlan said that Gaber Co. handled this type of product (a round, 18 inch diameter, white, steel lavatory), and that a load of such lavatories was sent on the day of the accident to one of the locations accessible by the Southwest Freeway. We overrule this point.
Appellant's second point asserts that there was no evidence of negligence on the part of a Gaber Co. employee in the course and scope of his employment proximately causing the accident, nor were there any findings on this issue. We disagree. As just stated, the evidence showed that the only persons involved in the loading process were Gaber Co. employees, and any negligence in loading must have been theirs.
Under this point, appellant also contends that special issues three and four were global. However, we view these issues as a broad submission, which the trial court may use in its discretion. Members Mut. Ins. Co. v. Muckelroy, 523 S.W.2d 77, 81 (Tex.Civ.App.Houston [1st Dist.] 1975, writ ref'd n. r. e.); Tex.R.Civ.P. 277. The point is overruled.
In its third point, appellant contends there was no evidence that the boxes were the cause in fact of the accident and the resultant death of Mr. Rawson. We cannot agree with this contention. The witnesses Gruber, Mrs. Vetterick, and Cornejo all testified that their cars had to take evasive action to avoid hitting the falling boxes. Furthermore, Cornejo testified that when he looked in his rear view mirror other cars were slowing down and dodging the boxes. Finally, the witness David L. Wamstead testified to the res gestae statement made by the driver of the first car that he had to stop or hit the box; Wamstead also stated that there was a box directly in front of this car which the driver had either hit or just came close to hitting. This point is overruled.
Appellant's fourth point asserts that the evidence established as a matter of law that the decedent was contributorily negligent in failing to maintain an assured clear distance behind the vehicle it was following, so that it could be safety brought to a stop without a collision, as required by statute, Tex.Rev.Civ.Stat.Ann. art. 6701d, § 61(a) (1977). Appellant bases this contention on the testimony of the truck driver, Thomas, that the decedent was driving his car two or three car lengths behind the preceding car and that he did not have time to apply his brakes before the accident. However, Thomas and the witness Wamstead also testified that there was a blind spot at the scene of the accident and that a driver could not see ahead because of the slope of the road. Thomas testified that all of the traffic on the freeway was traveling at about the same speed, 45 to 50 miles per hour. This was some evidence of a permissible excuse for the alleged violation of the statute, i. e., the deceased was confronted by an emergency not due to his own misconduct. Impson v. Structural Metals, Inc., 487 S.W.2d 694, 696 (Tex.Sup.1972). Appellant had the burden of proof on the question of violation of the statute, L.M.B. Corp. v. Gurecky, 501 S.W.2d 300, 303 (Tex.Sup. 1973), and he did not establish the violation as a matter of law. We overrule this point.
In his fifth point, appellant asserts that there was no evidence to support *24 the jury's findings of damages for conscious pain and suffering and pecuniary loss. On the issue of pain and suffering, there was eye-witness testimony that the decedent lived for a very short time after the accident, as well as medical testimony that this was possible. On the question of whether there was any evidence of pecuniary loss, appellant argues that there was no evidence of the condition of Mrs. Rawson's own health, which was pertinent to her life expectancy and thus, to her recovery, and there was no evidence that the decedent had any income at any time or was able to contribute to the support of Mrs. Rawson. Mrs. Rawson testified at trial, and the jury could determine her health or physical condition from her appearance. See Atlantic Coast Line R. R. Co. v. McDonald, 50 Ga. App. 856, 179 S.E. 185, 186, cert. denied, 296 U.S. 621, 80 L. Ed. 441, 56 S. Ct. 143 (1935). Mrs. Rawson also gave evidence of her husband's income which would support the jury finding on pecuniary loss. This point is overruled.
Affirmed.
J. CURTISS BROWN, C. J., not participating.
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549 S.W.2d 760 (1977)
Lester ADLER, Appellant,
v.
Victor MORAN, Jr., et al., Appellees.
No. 15660.
Court of Civil Appeals of Texas, San Antonio.
March 30, 1977.
Rehearings Denied April 27, 1977.
*761 Hall & Zaffirini, Laredo, for appellant.
Goodman & Cronfel, Laredo, for appellees.
CADENA, Justice.
This case involves the application of the doctrine of equitable adoption or, as it is sometimes called, adoption by estoppel. Lester Adler, defendant below, appeals from a judgment, based on jury findings, awarding plaintiffs, Victor Moran, Jr., Xochitl Moran Hernandez, Rene Moran, and Yolanda Moran Couler, an undivided one-half interest in certain land located in Laredo, Webb County, Texas. The judgment is based on the theory that, under the doctrine of equitable adoption, plaintiffs inherited the interest of their stepmother, Ramona Guevara Moran, who died intestate in 1959.
Defendant claims as purchaser of the land in question at a foreclosure sale held in accordance with the provisions of a deed of trust executed by plaintiffs' father, Victor Moran, Sr., as security for a debt incurred by him, after the death of his second wife, Ramona Guevara Moran.
Plaintiffs' natural mother, the first wife of their father, died prior to 1930. In 1930 plaintiffs' father married Ramona Guevara *762 and lived with her until her death in 1959. It is agreed that the land in question was a part of the community estate of plaintiffs' father and Ramona.
In answer to the first six special issues submitted, the jury found: (1) Prior to her marriage to plaintiffs' father in 1930, Ramona agreed to adopt plaintiffs. (2) As a result of such promise, plaintiffs' father married Ramona. (3) Plaintiffs rendered to Ramona "the same affection, services and duties of natural children" until her death in 1959. (4) Prior to the marriage, Ramona "agreed to assume the duties and burdens of parenthood in relation to" plaintiffs. (5) Ramona raised and cared for plaintiffs from the date of the marriage until her death "as if they had been her own natural children." (6) Plaintiffs lived with Ramona, from the time of her marriage to plaintiffs' father in 1930 until her death in 1959, "in the relationship of sons and daughters" to Ramona, conferring upon her "the benefits of parenthood."
By applying the doctrine of equitable estoppel, the majority of American courts have permitted a person to inherit, under the laws of descent and distribution, as a child of a deceased intestate even though the person claiming the right of inheritance is not the natural child of the deceased and has not been adopted by the deceased in compliance with the requirements of the statutes governing adoption. However, the courts applying the doctrine have experienced some difficulty in explaining the result on the basis of existing legal concepts.
Perhaps a majority of the courts granting relief on the basis of the doctrine of equitable adoption speak in terms of specific performance of a contract to adopt. Annot., 171 A.L.R. 1315, 1316 (1947). Other courts explain the result as an application of the doctrine of equitable estoppel. Annot., 27 A.L.R. 1365 (1923). A few courts repudiate the doctrine of equitable adoption altogether, saying that the adoption statutes furnish the sole means by which a "nonbiological" relationship of parent and child can be created. Clarkson v. Bliley, 185 Va. 82, 38 S.E.2d 22 (1946).
There is at least dictum by the Texas Supreme Court to the effect that the remedy of specific performance of a contract to adopt is available in Texas. But this observation is followed immediately by a statement that the "real classification of the remedy is that of estoppel." Cubley v. Barbee, 123 Tex. 411, 73 S.W.2d 72, 83 (1934).
In Cavanaugh v. Davis, 149 Tex. 573, 235 S.W.2d 972 (1951), the Supreme Court said that a person claiming the protection of the doctrine of equitable adoption must allege and prove either an unsuccessful attempt by the "adoptive parent"[1] to comply with the requirements of the adoption statute or an agreement by the adoptive parent with the child, or with the child's parents or with some other person in loco parentis that he would adopt the child.
In Cubley, the Supreme Court, using traditional estoppel language, spoke in terms of precluding "adoptive parents and their privies from asserting the invalidity of adoption proceedings, or, at least, the status of the adopted child, when, by performance upon the part of the child, the adoptive parents have received all the benefits and privileges accruing from such performance, and they by their representations induced such performance under the belief of the existence of the status of adopted child." 73 S.W.2d at 79, 80. The Cubley opinion speaks in terms of "representation" rather than "contract," but at least since the Cavanaugh decision the Texas courts have consistently required an agreement to adopt.[2]*763 Grant v. Marshall, 154 Tex. 531, 280 S.W.2d 559 (1955); In re Estate of Wood, 543 S.W.2d 701, 703 (Tex.Civ.App.Beaumont 1976, no writ).
Insofar as the case before us is concerned, combining the "estoppel" language found in Cubley with the requirement of a contract to adopt embodied in Cavanaugh, it was incumbent on plaintiffs, in order to find shelter in the doctrine of equitable adoption, to prove (1) an agreement by Ramona, made with plaintiffs, or with their father, or with someone standing in loco parentis to plaintiffs to adopt plaintiffs; (2) reliance by plaintiffs upon the existence of the adoptive status; and (3) performance by plaintiffs.[3]
Defendant does not challenge the sufficiency of the evidence to support the findings made by the jury in answer to the first six special issues. Instead, defendant urges that the verdict will not support the judgment because it contains no findings of factual elements essential to the conclusion that plaintiffs were equitably adopted by Ramona, and that the missing findings cannot be supplied under the doctrine of implied findings by the court because the evidence is legally and factually insufficient to support the required findings of fact. Specifically, defendant argues that, although the jury found that Ramona had agreed to adopt plaintiffs, there is no finding that such agreement was made with plaintiffs, or with their father, or with someone in loco parentis, and that absent a finding that plaintiffs knew of the agreement, there can be no basis for concluding that plaintiffs relied on the existence of the agreement to adopt.
We consider first defendant's contention, embodied in its first two points, that there is no evidence or, in the alternative, insufficient evidence, to support an implied finding that the agreement to adopt was made by Ramona with plaintiffs or with plaintiffs' father, or with someone standing in loco parentis to plaintiffs.
The only evidence relating to the agreement by Ramona to adopt plaintiffs came from her brother, Elias Guevara. The record indicates that plaintiffs' father was incapable of testifying because of poor health.
In keeping with custom in Laredo, in 1930 plaintiffs' father called upon Elias Guevara, Ramona's oldest living male relative, to ask for Ramona's hand in marriage. Ramona was present at this meeting, and it is clear that there was some discussion concerning plaintiffs. Elias testified through an interpreter and some difficulty in construing his testimony is created by the fact that frequently the questions and answers were separated by objections by counsel and remarks by the trial judge.
On direct examination, the brother was asked whether there was any discussion concerning the minor children. The answer, as it appears in the statement of facts, was, "No sir. Because" At this point defendant's attorney objected on the ground that the answer was not responsive. After the court overruled the objection, the witness answered, "Yes, sir." When the witness was asked to explain, defense counsel interjected, "I think that was an answer. Go ahead and just start over." The court *764 then said that the answer was, "No, because my sister agreed to adopt them." Counsel for defendant then stated that he thought the answer had been, No, because "My sister had agreed to adopt them from the beginning."
The witness was then asked whether there had been any "discussion or agreement" concerning the children. Defendant's counsel again objected, protesting that the question called for an answer "that has no reference to time or parties involved." After the court commented that the answer was "not yet in the record," defendant objected to the "form" of the question "because it doesn't limit the witness to any particular time or any particular conversation." In response to the court's suggestion that the question be rephrased, plaintiffs' attorney then asked if there had been any discussion concerning the children prior to the marriage. The witness replied, "The same question that you just asked me shouldn't be asked two times." At this point the court pointed out that the word "discussion" means one thing in English while, if literally translated into Spanish, "it means a slightly different thing." He suggested counsel should "try to get something that would be equal both in English and in Spanish." The question was then repeated, with the word "conversation" substituted for "discussion." After an objection by defendant's attorney was overruled, a question was asked inquiring whether there had been any conversation prior to the marriage between Ramona and plaintiffs' father. Before the question could be answered, counsel for defendant pointed out, "Your Honor, there obviously was some conversation before their marriage." The court replied that the witness should be allowed to state whether there had been any conversation. Defendant's attorney then objected that the question was "leading." After this objection was overruled, defendant's attorney requested that the court instruct the witness to answer the question. The statement of facts shows the following:
THE COURT: Mr. Interpreter, will you ask the witness if he can answer that yes or no?
A Which?
THE COURT: If there was any conversation or agreement.
A On what?
THE COURT: Now, finish the question.
Q With reference to the status of the children and their future.
[DEFENSE COUNSEL]: Your Honor, I will object to that as being leading. If there was any kind of agreement
THE COURT: I will overrule the objection. Go ahead.
[COUNSEL FOR DEFENDANT]: Can the witness be instructed to answer the question yes or no, please?
THE COURT: All right. Mr. Interpreter
THE INTERPRETER: Yes.
THE COURT: Tell him to answer the question yes or no. We cannot accept any explanation at this time. If there is any explanation required, the attorney will ask for them. So listen to the question and answer it, if you can, yes or no. All right.
A Yes, sir. There was an agreement.
Q What kind of an agreement? Would you explain to us, please?
A My sister said that she was willing to adopt the children and that she would be responsible for all of them and everything.
We cannot say, as a matter of law, that the trial judge could not reasonably conclude that the answer of the witness, when he was finally allowed to give it, was a statement to the effect that the agreement was between Ramona and plaintiffs' father. The judge took an active part in this portion of the proceedings and clearly was in a position to evaluate the answer in what courts like to call "the totality of the circumstances." Plaintiffs' father was present during the conversation, and the conclusion that he was a party to the agreement finds support in the jury finding, unchallenged by defendant, that he married *765 Ramona "as a result of" her promise to adopt his children.
Defendant's "no evidence" point is overruled.
However, we cannot say that the evidence is sufficient to support the finding that the agreement was made with plaintiffs' father. It is settled that a person claiming the protection of the equitable adoption doctrine must establish the facts giving rise to the estoppel by evidence which is "clear, unequivocal and convincing." Cavanaugh v. Davis, supra, 235 S.W.2d at 973. In determining whether the evidence in this case satisfied that requirement, we must note the following series of questions and answers during cross-examination of Ramona's brother:
Q And before you would let your sister marry Mr. Moran, you wanted to make sure that your sister understood the obligations that she was getting herself into?
A Of course so. Yes.
Q And the conversation that you had with your sister was to assure you that she understood those obligations?
A That's the way it is.
Q And her agreements were made with you so that you would allow her to get married to Mr. Moran?
A As long as she would adopt his children.
Q And those were the conditions that you placed on the marriage?
A Those were the conditions. Yes, sir.
While the answer of the witness to the question concerning the identity of the person with whom the agreement was made is, at least to some extent, unresponsive, and subject, in any event, to interpretation, this portion of the testimony can be construed as a statement to the effect that Ramona made the agreement with her brother. Under the "preponderance of the evidence" standard for evaluating the quantum of evidence, conflicting answers by a witness raise an issue of fact to be resolved by the trier of fact. Without pretending to define the meaning of the term "clear, unequivocal and convincing," it can be safely said that a requirement of such proof contemplates something more than proof by mere preponderance of the evidence. It must be concluded that the evidence of Ramona's brother is not "unequivocal" and that it is insufficient to support the finding that the agreement to adopt was made with a person who is within the category of those with whom such an agreement must be shown.
Defendant's third and fourth points assert that there is no jury finding to the effect that plaintiffs relied on the agreement to adopt, and that the evidence is legally and factually insufficient to support an implied finding of such reliance. This asserted error was not embodied in defendant's motion for new trial. The error, if any, has been waived. City of Austin v. Daniels, 160 Tex. 628, 335 S.W.2d 753 (1960).
In answer to issues 7, 8, and 9 the jury found that the Laredo National Bank, at the time it acquired its lien, had knowledge of the fact that plaintiffs claimed an interest in the land and had knowledge of facts sufficient to put a prudent mortgagee on inquiry which, if diligently pursued, would have led to the discovery of plaintiffs' claim. In his fifth and sixth points defendant urges that there is no evidence to support these findings and, in the alternative, that the evidence is insufficient to support such findings.
Defendant's contention is that since the bank paid value for the legal interest, which it acquired under the deed of trust, it was entitled to protection against the equitable interest of plaintiffs unless the evidence establishes that, at the time it acquired its lien, it had actual or constructive notice of plaintiffs' claim. Defendant relies on Fleming v. Ashcroft, 142 Tex. 41, 175 S.W.2d 401 (1943). Plaintiffs rely on the rule applied in such cases as McDougall v. McDougall, 316 S.W.2d 295 (Tex.Civ.App. Eastland 1958, writ ref'd n. r. e.), to the effect that one who purchases from an heir must ascertain the identity of all persons *766 who are entitled to take by inheritance property belonging to the estate of an intestate deceased.
In Fleming, the Supreme Court said (175 S.W.2d at 407):
The following excerpt from the opinion of the Court of Civil Appeals in the present case * * * sufficiently discloses the grounds of its holding . . . `Paraphrasing the conclusions as stated in Marshburn v. Stewart, supra, and Mayor v. Breeding, supra, both applicable to this record, we conclude that the law having invested [the surviving spouse of the adoptive parent], as survivor of the community, with the apparent legal title in fee simple to this land, and such apparent title having passed to appellants for a valuable consideration, that before [those claiming under the equitably adopted child] can defeat the same, [they] must show that at the time appellants purchased their respective interests they had notice of the equitable rights of [the adopted child], or had notice of facts sufficient to put appellants upon inquiry, and that such inquiry, pursued with reasonable diligence, would have necessarily discovered the real facts upon which [the adopted child's] claim to an interest in the land involved in this suit is predicated. * * *'
We approve the foregoing holding of the Court of Civil Appeals and the grounds and reasoning upon which it was based.
It is clear that the Supreme Court considered that the interest inherited by a person who successfully invokes the doctrine of equitable adoption is an equitable interest. The opinion expressly distinguishes between a claim based on a statutory adoption and a claim based on an agreement to adopt. 175 S.W.2d at 407. It appears that this distinction can be validly made only if it be assumed that the estoppel does not operate against a purchaser from an heir of the adoptive parent, since it allows such person to show that, for the purposes of inheritance, the child has not been legally adopted.[4]
Basic to the Fleming holding is the assumption that on the death of the adoptive parent intestate the legal title to his estate does not vest in the person claiming the protection of the doctrine of equitable adoption. This conclusion finds support in some of the language found in Cubley v. Barbee, supra, where the Supreme Court, after pointing out that the doctrine of equitable *767 adoption was merely an application of the doctrine of estoppel rather than a remedy decreeing specific performance of the contract to adopt, said, "Of course, there is a specific performance in the sense that the naked legal title to property may have been taken by the apparently legal heirs, which the court may divest out of them and vest in the adopted heir." 73 S.W.2d at 83.
It may be assumed that at the time of the decisions in Cubley (1934) and Fleming (1943) it could be persuasively argued that upon the intestate death of the adoptive parent the legal title to his estate descended only to his "apparent" legal heirs. However, under present statutes relating to inheritance and adoption there is no basis for holding that on the intestate death of the adoptive parent the title to his estate is, by some unexplained process, divided into "legal" and "equitable" title, with only the "apparent legal heirs" succeeding to the "legal" title.
In 1955 the Legislature adopted the present Probate Code which provides that upon the death of a person intestate all of his estate vests "immediately in his heirs at law." Tex.Prob.Code Ann. § 37. Under the provisions of § 38 of the Code, upon the death of Ramona intestate in 1959, her interest in the community estate vested in her "child or children." According to § 3(b), the word "child" includes "an adopted child, whether adopted by any existing or former statutory procedure or by acts of estoppel." Thus, the statute makes a child adopted "by acts of estoppel" one of the "heirs at law" in whom Ramona's estate vested immediately.
Prior to 1955, then, there was no statutory provision recognizing a child adopted by acts of estoppel as an heir at law. Since 1955, however, such a child stands, by legislative mandate, on the same footing, insofar as his rights of inheritance are concerned, as a natural child of the intestate or a child adopted by compliance with the statutory provisions relating to adoption. Since our present statutes make no distinction between a natural child, a child adopted by compliance with statutory requirements, and a child adopted by acts of estoppel, there is no basis for distinguishing among the three types of children. It cannot be seriously argued, without ignoring the statutes, that upon the death of a person intestate the interests which "vest immediately" in the children are somehow different. If natural children and children adopted in compliance with the adoption statute receive the legal title from the intestate parent, then, necessarily, the child adopted by acts of estoppel receives the same quality of title.
Since 1955 there is no basis for the distinction made in Fleming between a claim based on "adoption" and one based on "an agreement to adopt." At the time Fleming was decided, it could, with some reason, be said that on the death intestate of one of the adoptive parents, `the law . . . invested [the surviving spouse] . . . with the apparent legal title in fee simple to' the estate of the intestate. 175 S.W.2d at 407. This argument could be advanced because, at that time, no statute existed making children adopted by acts of estoppel the legal heirs of the adoptive parent. In 1959, when Ramona died, the situation had been changed by the Legislature.
The holding by the Supreme Court in Heien v. Crabtree, 369 S.W.2d 28 (1963), does not support the view that a child adopted by acts of estoppel receives only an equitable interest in the estate of the intestate adoptive parent. The actual holding in that case was merely that an equitable adoption did not create the legal status of parent and child for the purpose of allowing the adoptive parent to inherit from the child. This holding is undoubtedly correct, since the doctrine of estoppel in pais has never been applied in order to protect the adoptive parents. After pointing out that the adoptive parents "Through neglect or design . . . breached their agreement to adopt," the Court pointed out that there would be "no basis in promises, acts or conduct on the part of [the child] upon which to erect an estoppel," since he breached no duty to the adoptive parents or "in any way misled them to their detriment." *768 369 S.W.2d at 30. The simple holding in Heien, then, is that the term "adopted child," as used in the provision in § 40 of the Probate Code, allowing parents by adoption to inherit from an "adopted child," did not include a child adopted by acts of estoppel. That is, there is no statute making the adoptive parent an heir of an equitably adopted child.
It is true that in Heien the Supreme Court said that the language of the Probate Code § 3(b), which is a legislative recognition of the doctrine of equitable adoption, indicates a mistaken "legislative assumption that our courts had held that a child may be adopted by acts of estoppel, and thus that a legal status of parent and child is created by acts of estoppel." 369 S.W.2d at 30. Although it is possible to find fault, as did the dissenters in Heien, with the notion that the Legislature, in promulgating rules regulating intestate succession, is in some way bound by, and powerless to change, prior judicial holdings, such criticism would serve no useful purpose here. In adopting the rule that a child adopted by acts of estoppel becomes the heir of the adoptive parent, the Legislature correctly analyzed the effect of judicial holdings in cases applying the doctrine of equitable adoption. There is no way out of the Probate Code, even by charging the Legislature with ignorance of judge-made law, the unambiguous declaration of intent that a child adopted by acts of estoppel is the legal heir of the adoptive parent.
Since the statutes place natural children, legally adopted children, and children adopted by acts of estoppel on the same footing, it must be concluded that the interest which plaintiffs acquired in the land in question on the death of Ramona intestate was the complete title, both legal and equitable, rather than a vulnerable equitable interest with the legal title somehow vesting in a person who, under the clear language of the statute, is entitled to inherit nothing. The doctrine of bona fide purchaser is, therefore, inapplicable.
Defendant's fifth and sixth points are without merit.
The judgment of the trial court is reversed and the cause is remanded for a new trial.
BARROW, C. J., concurs in the result.
NOTES
[1] The term "adoptive parent" is used to designate the person from whom one claiming under the doctrine of equitable adoption claims to have inherited under the statutes of descent and distribution.
[2] No Texas case has attempted to justify the requirement of a contract to adopt. Traditionally, an estoppel results from the detrimental reliance by one person on the representations of another. The representations need not rise to the dignity of a contract. Undeviating adherence to the requirement of a contract to adopt would seem to preclude the finding of an equitable adoption where the adoptive parent has merely represented to the child that a valid adoption in compliance with the statutory requirements has been accomplished in the past. In order to protect the child who has relied on such representation, a court would be required, somehow, to transform the misrepresentation as to the existence of an antecedent fact into a promise to adopt in the future. Denial of relief would also follow where the representation was to the effect that the child is the natural child of the adoptive parent. It has been suggested that the contract to adopt is essential because it reflects an intention to adopt which, once established, justifies the inference that the intention was in some way communicated to the child, thus permitting the finding of the subsequent reliance said to be essential to an equitable adoption. Bailey, Adoption by Estoppel, 36 Tex.L.Rev. 30, 41, 42 (1937). The reason for permitting reliance only on an intention expressed in a contract is not quite clear.
[3] Phrases such as "performance by the child" seem to be no more than a shorthand rendition of the requirement that the child confer love, affection, and other benefits upon the adoptive parent. Our attention has been called to no case in which an attempt was made to define "performance by the child."
[4] The judgment of the Texarkana Court of Civil Appeals, which was affirmed by the Supreme Court in Fleming, was supported by an opinion interpreting Jones v. Guy, 135 Tex. 398, 143 S.W.2d 906 (1940), as holding that the rights acquired by the child were equitable in nature and that the word "privies" as used in the Jones opinion included only the devisees of the deceased adoptive parent. Ashcroft v. Fleming, Tex.Civ.App., 164 S.W.2d 304, 308 (1942). The conclusion that the word "privies" includes only "devisees" is completely indefensible. The defendants in Jones were, indeed, the devisees or legatees of the surviving spouse of the deceased adoptive parent, but the case concerned only succession to the estate of the adoptive parent who had died intestate. It is well settled that the doctrine of equitable adoption cannot be successfully invoked against the devisees of the adoptive parent. The Jones opinion makes this abundantly clear. "[T]he effect of sustaining an estoppel in pais to preclude the adoptive parents and their privies from asserting the invalidity of adoption proceedings * * * is not enforcing a parol contract for the sale of real estate. This is true for the obvious reason that an adopted child does not inherit property in virtue of the status of an adopted child alone but depends upon the intestacy of the adoptive parent, together with the statutes of descent and distribution. Moreover, the status of an adopted child with respect to the property of the adoptive parents is the same as that of the parent's own children.. . . [The adoptive parent] had the right to dispose of his property by will, . . . ." 143 S.W.2d at 910. In Heien v. Crabtree, 369 S.W.2d 28, 30 (Tex.1963), Chief Justice Calvert said that as a result of the doctrine of equitable adoption, "those claiming under and through [the adoptive parent who died intestate] are estopped to assert that a child was not legally adopted . . . ." This statement, since it presupposes the intestate death of the adoptive parent, exposes the error of the Court of Civil Appeal's statement in Fleming to the effect that the estoppel can be invoked only against the devisees of the deceased adoptive parent. The correct rule is exactly the opposite of the rule set forth by the Court of Civil Appeal's opinion in Fleming.
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549 S.W.2d 84 (1977)
Kenneth Allen BRITT, Appellant,
v.
STATE of Arkansas, Appellee.
No. CR-76-206.
Supreme Court of Arkansas, In Banc.
April 18, 1977.
*85 Floyd J. Lofton, Little Rock, for appellant.
Bill Clinton, Atty. Gen. by Robert A. Newcomb, Asst. Atty. Gen., Little Rock, for appellee.
FOGLEMAN, Justice.
Appellant Kenneth Allen Britt was charged with, and found guilty of, two counts of aggravated robbery [Ark.Stat. Ann. § 41-2102 (Crim.Code, 1976)] and one count of battery in the first degree [Ark. Stat.Ann. § 41-1601 (Crim.Code, 1976)]. He was sentenced on each charge; however, the court made the sentences run consecutively and suspended the sentences on one of the robbery charges and on the battery charge. All of the charges were included in one information. Appellant's sole point for reversal is his contention that the court erred in submitting instructions and "finding instructions," or forms of verdict, on three offenses which were part of one criminal transaction "and/or" same conduct. The gist of the argument is that, in spite of the fact that two people were robbed and one of them wounded by appellant's gunfire, all within a few minutes after appellant entered a beauty shop and before he left it, all the acts were part of the "same conduct," and, thus, he could not be convicted of more than one offense under Ark.Stat.Ann. § 41-105(1)(e) (Crim. Code, 1976). We disagree, so we affirm.
The evidence showed that appellant came into a beauty shop operated by Helen McPherson on January 12, 1976, at about 3:00 p.m., locked the door, threatened to "shoot the head off" Mrs. McPherson, put a gun to her head, and said he wanted money. He took money from the cash register and Mrs. McPherson's purse. He then took money from the purse of Mrs. Nethercott, who was in the beauty shop. Mrs. McPherson then went to the back of the shop and got her gun and started firing. Britt fired first, according to Mrs. Nethercott. When the firing stopped, Mrs. Nethercott grabbed appellant and he struck her on the head, splitting it open, and she fell to the floor. Mrs. McPherson took appellant's weapon away from him, but he had another and used it to shoot Mrs. McPherson in the head. She was left lying on the floor. The whole sequence of events did not last more than five minutes. Appellant was also wounded by the gunfire. The net proceeds of the robberies amounted to about $200.
Appellant contends that he could only be convicted of one offense, because of the language in § 41-105(1)(e) that one whose "same conduct" may establish the commission of more than one offense, may not be convicted of more than one of them if the conduct constitutes an offense defined as a continuing course of conduct and this conduct was uninterrupted, unless the law provides that specific periods of such conduct constitute separate offenses. We do not so read the statute.
Neither robbery nor battery in the first degree is defined as a continuing *86 course of conduct. Examples of this kind of offense are: non-support, Ark.Stat.Ann. § 41-2405 (Crim.Code, 1976); promoting prostitution, Ark.Stat.Ann. §§ 41-3004, 3006 (Crim.Code, 1976); erecting or maintaining a gate across a public highway, Ark.Stat.Ann. § 41-2102 (Repl.1964), now codified as obstructing a highway, Ark.Stat. Ann. § 41-2915 (Crim.Code, 1976). "A continuing offense is a continuous, unlawful act or series of acts set on foot by a single impulse and operated by an unintermittent force, however long a time it may occupy; an offense which continues day by day; a breach of the criminal law, not terminated by a single act or fact, but subsisting for a definite period and intended to cover or apply to successive similar obligations or occurrences." 22 C.J.S. Criminal Law § 1, p. 6. The following examples are listed in 22 C.J.S. Criminal Law § 281, p. 731 et seq.: carrying concealed weapon; continuous keeping of a gaming or disorderly house; desertion and neglect to provide for family; embezzlement; engaging in business without license, maintaining nuisance; offenses relating to intoxicating liquors; and a conviction for violating a Sunday law. Another example is found in Eclectic State Medical Board v. Beatty, 203 Ark. 294, 156 S.W.2d 246, where we said:
In the case of State Board of Health v. Roy, 22 R.I. 538, 48 A. 802, 803, the court held that where one obtains a license from a state medical board by false or fraudulent representations, this is a continuing offense. Every time such person undertakes to practice under his license he keeps up and continues the fraud initiated when he obtained by false representations his pretended authority to practice.
The continuing course of conduct contemplated by Ark.Stat.Ann. § 41-105(1)(e) is explained with considerable clarity, and in a manner peculiarly applicable here, in Blockburger v. United States, 284 U.S. 299, 52 S. Ct. 180, 76 L. Ed. 306 (1932). There the court said:
* * * The distinction between the transactions here involved and an offense continuous in its character is well settled, as was pointed out by this court in the case of Re Snow, 120 U.S. 274, 7 S. Ct. 556, 30 L. Ed. 658. There it was held that the offense of cohabiting with more than one woman, created by the Act of March 22, 1882, chap. 47, 22 Stat. at L. 31, was a continuous offense, and was committed, in the sense of the statute where there was a living or dwelling together as husband and wife. The court said (pp. 281, 286 of 120 U.S., 7 S. Ct. 556, 559):
It is, inherently, a continuous offence, having duration; and not an offence consisting of an isolated act. * * * A distinction is laid down in adjudged cases and in textwriters between an offence continuous in its character, like the one at bar, and a case where the statute is aimed at an offence that can be committed uno ictu.
The Narcotic Act does not create the offense of engaging in the business of selling the forbidden drugs, but penalizes any sale made in the absence of either of the qualifying requirements set forth. Each of several successive sales constitutes a distinct offense, however closely they may follow each other. The distinction stated by Mr. Wharton is that "when the impulse is single, but one indictment lies, no matter how long the action may continue. If successive impulses are separately given, even though all unite in swelling a common stream of action, separate indictments lie." Whart. Crim. Law, 11th ed. § 34. Or, as stated in note 3 to that section, "The test is whether the individual acts are prohibited, or the course of action which they constitute. If the former, then each act is punishable separately. . . . If the latter, there can be but one penalty."
The common law rule was certainly contrary to the construction appellant urges upon us. This statute, a part of a comprehensive code, should not be construed to overrule a principle of established common law unless the intent to do so is plain. Our language in Starkey Construction, Inc. v. Elcon, Inc., 248 Ark. 958, 457 S.W.2d 509, is appropriate, viz.:
*87 Of course, as pointed out by appellees, in attempting to codify a large body of law it is almost impossible to anticipate all the factual situations that may arise. And it is for this reason that courts have adopted the principle of statutory construction that a statute will not be construed so as to overrule a principle of established common law, unless it is made plain by the act that such a change in the established law is intended. In Barrentine and Ives v. State, 194 Ark. 501, 108 S.W.2d 784, we said,
It has long been the rule in this state that "A statute will not be taken in derogation of the common law unless the act itself shows such to have been the intention and object of the legislature." (citing cases). A careful reading of the act fails to convince that such was the intention and object of the Legislature.
Appellant, however, seizes upon the language of the commentary to § 41-105(1), which was before the General Assembly, but not adopted by it as a part of the Criminal Code of 1976, giving examples of the "same conduct" as the term is used in the section. There it was said that:
* * * If X comes upon A, B, and C and robs them one at a time, the robberies arise from the "same conduct" despite the fact that X engages in separate acts with respect to A, B, and C. However, "same conduct" does not have application to a situation where X, pursuant to a single scheme, robs A on Monday, B on Tuesday, and C on Wednesday.
It should be noted that the first sentence of the section clearly states that, when the "same conduct," i.e., the robbery of A, B, and C, establish the commission of more than one offense, the defendant (X) may be prosecuted for each such offense, unless the conduct constitutes one of the exceptions listed in the second sentence. Nowhere is it indicated that the robbery of more than one person or a robbery and a subsequent or accompanying battery are only one crime. As a matter of fact, the commentary also contains this statement:
* * * This section retains the basic power of the state to prosecute for as many offenses as are committed by defendant.
The lifting of this example of the "same conduct" out of the context of the full commentary may be misleading, but subsequent statements in that commentary relative to § 41-105(1)(e) show clearly that there was no intention to apply the exception relied upon by appellant as he does. There it is said:
Subsection (1)(e) prohibits multiple convictions for an uninterrupted course of conduct that violates a statute defining a continuing offense. It would find application in prosecutions for such offenses as Nonsupport (Section 2405) or Promoting prostitution (Sections 3004-3006). The proviso at the end of paragraph (e) leaves the legislature free to indicate, for example, that each day that illegal conduct continues constitutes a separate offense. See, e.g., Ark.Stat.Ann. § 41-2103 (Repl. 1964) (Gate across public road).
In considering such illustrations as appellant relies upon, it has been said that "[a]n explanatory tale [sic] should not wag a statutory dog." A. P. Green Export Co. v. U. S., 284 F.2d 383, 151 Ct. Cl. 628 (1960). We add that the commentary to the Criminal Code is a highly persuasive aid to construction, but it is not controlling over the clear language of the statute. See Shultz v. Young, 205 Ark. 533, 169 S.W.2d 648; Keeler v. Superior Court, 2 Cal. 3d 619, 87 Cal. Rptr. 481, 470 P.2d 617, 40 A.L.R. 3d 420; In re Augustin Bros. Co., 460 F.2d 376 (8 Cir., 1972); Northern Pac. Ry. Co. v. Sanders County, 66 Mont. 608, 214 P. 596 (1923); Houston Bank & Trust Co. v. Lee, 345 S.W.2d 320 (Tex.Civ.App., 1961).
Where the language of a statute is clear and unambiguous and susceptible of a sensible construction, resort to extrinsic and collateral aids in construing it is not permitted. Cross v. Graham, 224 Ark. 277, 272 S.W.2d 682; Arkansas State Licensing Board for General Contractors v. Lane, 214 Ark. 312, 215 S.W.2d 707. See also, John B. May Co. v. McCastlain, Commissioner, 244 *88 Ark. 495, 426 S.W.2d 158; 82 C.J.S. Statutes § 351, p. 736. If it is possible to do so, we ascertain the legislative intent from the language used in the statute itself. Arkansas State Highway Commission v. Mabry, 229 Ark. 261, 315 S.W.2d 900. It is only when the statute is ambiguous and there is doubt as to its meaning that we resort to such extrinsic matters to shed light on the legislative intent. Arkansas State Highway Commission v. Mabry, supra; Gibbons v. Bradley, 239 Ark. 816, 394 S.W.2d 489; Callahan v. Little Rock Distributing Co., 220 Ark. 443, 248 S.W.2d 97.
Since we agree with the trial judge's application of the statute, and disagree with appellant's construction of it, the judgment is
Affirmed.
BYRD and HICKMAN, JJ., dissent.
HICKMAN, Justice, dissenting.
The majority chooses to ignore the clear language of the statute involved in this appeal. The pertinent parts of the statute, although interpreted by the majority, were not quoted and they read as follows:
(1) When the same conduct of a defendant may establish the commission of more than one offense, the defendant may be prosecuted for each such offense. He may not, however, be convicted of more than one offense if:
. . . . .
(e) The conduct constitutes an offense defined as a continuing course of conduct and the defendant's course of conduct was uninterrupted, unless the law provides that specific periods of such conduct constitute separate offenses.
We cannot affirm the conviction of both charges of aggravated robbery, if we use our usual rule of strict construction. The statute is primarily intended to prohibit "stacking" charges, and that is what was done. Furthermore, in the Commentary to this statute, there is an example given which is exactly in point with the case before us. The accused in this case was convicted of two counts of aggravated robbery, and in my judgment should have only been convicted of one count of aggravated robbery. I have no argument with the majority regarding the charge of first degree battery.
I am authorized to state that Justice BYRD joins me in this dissent.
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297 B.R. 710 (2003)
In re UAL CORPORATION, et al., Debtors.
No. 02 B 48191.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
August 28, 2003.
*711 *712 Brian D. Sieve, Michael B. Slade, Paul J. Ferak, Kirkland & Ellis, Chicago, IL, for Debtors.
Sidney K. Swinson, Gable & Gotwals, Tulsa, OK, Paula K. Jacobi, Sugar, Friedberg & Felsenthal, Chicago, IL, for Explorer Pipeline Company.
MEMORANDUM OF DECISION
EUGENE R. WEDOFF, Chief Judge.
These cases have come before the court on the motion of Explorer Pipeline Company ("Explorer") for adequate protection, asserting liens (1) on aviation fuel owned by one of the debtors and in the possession of Explorer, and (2) on the cash proceeds of sales of aviation fuel that Explorer delivered after the filing of this case. The debtors have opposed the motion on the basis that Explorer has no lien enforceable in bankruptcy requiring adequate protection. As discussed below, the debtors' position is correct; accordingly, Explorer's motion is denied.
Jurisdiction
Federal district courts have exclusive jurisdiction over bankruptcy cases. 28 U.S.C. § 1334(a). Pursuant to 28 U.S.C. § 157(a), district courts may refer bankruptcy cases to the bankruptcy judges for their district, and, by Internal Operating Procedure 15(a), the District Court for the Northern District of Illinois has made such a reference of the pending case. When presiding over a referred case, a bankruptcy judge has jurisdiction, under 28 U.S.C. § 157(b)(1), to enter appropriate orders and judgments in core proceedings within the case. The pending motion for adequate protection is a core proceeding under 28 U.S.C. § 157(b)(2)(A) (matters concerning the administration of the estate) and (b)(2)(K) (determinations of the validity, *713 extent, or priority of liens). This court therefore has jurisdiction to enter a final order with respect to the matter now before it.
Statement of Facts
Explorer Pipeline Company, headquartered in Tulsa, Oklahoma, is a common carrier of refined petroleum through an interstate pipeline. Tr. 46.[1] Explorer's pipeline extends from refineries in Texas and Louisiana on the Gulf of Mexico, through destinations in Texas and Oklahoma, to a terminal in Hammond, Indiana. Id. Explorer is subject to regulation by the Federal Energy Regulatory Commission ("FERC"), and pursuant to this regulation, Explorer is required to publish FERC-approved tariffs containing the terms and rates under which it is willing to do business. Tr. 51-52.
Explorer's practice is to allocate space in its pipeline to its customers each month, based on the customers'"nominations" of their intended shipment volume for the month in question. Tr. 81-84. Each month, Explorer transports petroleum products in three cycles and allows its customers to choose which cycle to use for shipment. Tr. 84. At the time the customer provides product to Explorer for shipment, Explorer issues a meter ticket receipt, showing a batch number. Tr. 84, UAF Ex. 13. Explorer is then responsible for delivery of the quantity and quality of product reflected in the receipt within the cycle, but Explorer is not required to deliver the identical product that it received from the customer, since refined petroleum products of a particular grade are fungible and may be commingled for pipeline shipment. Tr. 65. Explorer meters the amount of product upon delivery, and the meter ticket indicates its transfer of custody of the product. Tr. 89-90.
United Aviation Fuels Corporation ("UAF"), one of the debtors in these consolidated bankruptcy cases, is in the business of purchasing and transporting aviation fuel for the use of affiliated corporations and other parties. In the course of this business, UAF has contracted with Explorer. Tr. 55-56. It was the practice of Explorer to bill UAF only after delivery of product on UAF's behalf, on the first and fifteenth of the month following the delivery. Tr. 90.
On August 27, 2001, Explorer prepared a letter proposing "volume incentive rates," and UAF accepted this proposal on August 30, 2001. Explorer Ex. 1 (the "Letter Agreement"). The Letter Agreement provided UAF with discounts from the otherwise applicable shipping charges in consideration for UAF's agreement to ship a minimum of 9 million barrels annually for each of the two years between September 1, 2001, and August 31, 2003. The agreement also required UAF to meet monthly minimum shipping amounts, with any deficiency incurring a $1 per barrel penalty. The penalty would become a prepayment for future shipping if used within one year of the termination of the agreement, but otherwise would be forfeited to Explorer. Id.
In accordance with FERC regulations, Explorer applied to FERC for, and obtained approval of, tariffs incorporating the terms of the Letter Agreement. Local Pipeline Tariffs Nos. 56-62; Explorer Exs. 2-8. When the issues related to this litigation arose, Tariff No. 59, commencing August 1, 2002, was applicable. Explorer Ex. 5. Item 111 of the tariff reflects the terms of the Letter Agreement. Id, at pp. 15-17.
*714 In addition to these terms, the tariffs also provided for a lien. Item 60(b) of Tariff No. 59 states:
The Shipper shall be responsible for payment of transportation and all other charges applicable to the shipment, and, if required, shall prepay such charges or furnish guaranty of payment satisfactory to the Carrier. The Carrier shall have a lien on all petroleum products accepted for transportation to secure the payment of all charges.
Id. at 10.
On December 9, 2002, the debtors, including UAF, filed voluntary petitions for Chapter 11 relief with this court. At that time, UAF owed Explorer $464,056.53 for aviation fuel delivered between November 22, 2002 and December 6, 2002, Tr. 34, 68, and Explorer had more than 272,000 barrels of UAF's undelivered fuel in its possession (the "petition-date fuel"), Explorer Ex. 12. The value of the petition-date fuel exceeded the amount due for the prepetition fuel shipments. Tr. 105. Explorer voluntarily delivered the petition-date fuel to UAF, or its designees, after the petition date. Explorer Motion, ¶ 14. No evidence was presented to establish what use was made of the fuel after delivery. Tr. 95.
Since the petition date, UAF, as debtor in possession, has continued to ship fuel through Explorer's pipeline. Explorer Ex. 13. While UAF has paid for all postpetition deliveries, Tr. 80, the prepetition delivery charges remain largely unpaid, Tr. 34, 68.[2] However, the volume of UAF's fuel in the pipeline net of the cost of its transport continues to exceed the amount of Explorer's prepetition transportation claim. Tr. 99 (value of a barrel of fuel is 30 to 35 times the cost of transport), 105 (13-14,000 barrels of fuel would have a value equal to the Explorer's prepetition claim against UAF).
Several months after UAF's bankruptcy filing, on April 30, 2003, Explorer filed the pending motion, seeking an order requiring UAF "to adequately protect Explorer's interest in . . . cash collateral and . . . jet fuel collateral as a condition of [UAF's] use thereof." Motion at 6. In the motion, Explorer stated that it had delivered the petition-date fuel to UAF based on representations from UAF "that it would obtain authority from the Bankruptcy Court to permit it to pay the pre-petition charges owed by it to Explorer in consideration for Explorer continuing to ship jet fuel." However, the motion did not seek relief based on these alleged representations. Rather, the motion contended (1) that UAF was in possession of cash collateral arising from sales of the prepetition-date fuel, which collateral could not be used without a court order directing adequate protection; (2) that UAF had already used cash collateral arising from the sale of the prepetition-date fuel, in violation of the requirements of the Bankruptcy Code, making the imposition of a replacement lien appropriate; and (3) that Explorer had a continuing lien in the aviation fuel in its pipeline at the time the motion was filed, which lien was entitled to adequate protection. Motion at 4-5.
On May 16, UAF responded to the motion in an Omnibus Objection, asserting that Explorer had no lien in the petition-date fuel because it had delivered that fuel postpetition. The objection did not specifically address Explorer's cash collateral arguments. On May 28, the court issued an order requiring that any discovery in connection with the motion be concluded by June 10 and setting the matter for hearing on June 17. The hearing was later continued *715 to July 1, but the discovery cut-off was not extended. On June 25, Explorer filed a reply brief in support of its motion, asserting for the first time a request for relief based on alleged representations by UAF regarding payments for fuel:
But for [UAF's] agreement to pay Explorer, Explorer would have sought adequate protection before delivering any jet fuel in its possession . . . [T]o the extent that Explorer's delivery of [petition-date fuel] to [UAF] over the course of several weeks after the Petition Date affects Explorer's right to adequate protection and Explorer does not believe that it does the Debtors should be estopped from relying on that fact.
Reply at 10 n. 7.
Before the hearing, debtors moved to exclude evidence relating to the estoppel theory on the basis that they had been given insufficient notice that this theory would be asserted. The court sustained this objection at the hearing, limiting evidence to the existence of the liens claimed by Explorer.
Conclusions of Law
Given the court's ruling on Explorer's estoppel claim, the only remaining legal issues in dispute concern the question of whether Explorer has any lien subject to adequate protection. The debtors do not dispute that Explorer would be entitled to adequate protection for whatever lien in cash collateral or aviation fuel that it does retain. And indeed, the right to adequate protection for any such lien is clear under the Bankruptcy Code (Title 11, U.S.C.).[3] Nor do the parties dispute that Oklahoma law generally supplies the applicable nonbankruptcy law.[4] However, the debtors contend, correctly, that none of the asserted several bases asserted by Explorer for a lien on property of the debtors gives rise to the right to adequate protection.
1. The carrier lien under § 7-307 of the Uniform Commercial Code.
In the course of argument at trial (Tr. 124-25), counsel for Explorer briefly referred to a carrier lien under Article 7 of the Uniform Commercial Code (UCC). What counsel had in mind was Okla. Stat. tit. 12A, § 7-307, which states in part:
(1) A carrier has a lien on the goods covered by a bill of lading for charges subsequent to the date of its receipt of the goods for storage or transportation (including demurrage and terminal charges) and for expenses necessary for preservation of the goods incident to their transportation or reasonably incurred in their sale pursuant to law . . .
. . .
(3) A carrier loses his lien on any goods which he voluntarily delivers or which he unjustifiably refuses to deliver.
The lien established by § 7-307 applied to the petition-date fuel. This fuel was "covered by a bill of lading," since the receipts issued by Explorer to UAF fit clearly fit within the UCC's definition of "bill of lading": "a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods." Okla. Stat. tit. 12A, § 1-201(6).
*716 However, the carrier lien of § 7-307 is, by its terms, limited in two respects relevant to this case. First, the lien applies only to the expenses of storage and transportation of the goods covered by a particular bill of lading, not to costs associated with prior deliveries or other obligations of the shipper to the carrier. See In re Lissner Corp., 98 B.R. 812, 818 n. 2 (N.D.Ill.1989) ("Since carriers do not generally claim a lien for charges in relation to other goods or lend money on the security of goods in their possession, there are no provisions for a general lien or a security interest in Section 7-307.") Thus, rather than securing the entire $464,056.53 that UAF owed Explorer for prepetition deliveries, the lien on UAF's petition-date fuel secured only Explorer's claim for delivery of the petition-date fuel itself. The evidence at trial did not establish the amount of this lien,[5] but this is of no moment. Whatever the charges were, UAF paid them, together with all other charges on fuel delivered after the bankruptcy filing.
Second, even if UAF had not paid the charges secured by the carrier lien, that lien, by the plain language of § 7-307(3), terminated upon Explorer's voluntary delivery of the petition-date fuel. Darby v. Baltimore & Ohio R. Co., 259 Md. 493, 498, 270 A.2d 652, 655 (1970) (quoting 1 Hawkland, A Transactional Guide to The Uniform Commercial Code § 1.690103 at 328 (1964), for the proposition that "[t]he validity of the carrier's specific lien is dependent on continuous possession" so that "[if] the carrier voluntarily gives up possession of the goods, the lien is lost").
Moreover, in the same way that Explorer's carrier lien in the petition-date fuel was limited, the carrier lien on the UAF fuel that Explorer currently possesses applies only to the storage and transportation costs associated with that fuel. As to these charges there is no need for any order of adequate protection: UAF has acknowledged its obligation to pay for delivery of this fuel, and Explorer need not surrender possession of the fuel without payment or assurance of payment that it deems adequate.
2. The general possessory lien under Okla Stat. tit 42, § 91 for services related to personal property
Rather than rely on the specific carrier lien established by the Uniform Commercial Code, Explorer relies primarily on another Oklahoma statute Title 42, Section 91 which provides a general possessory lien in favor of any person who provides services related to personal property:
Any person who, while lawfully in possession of an article of personal property, renders any service to the owner thereof by furnishing material, labor or skill for the protection, improvement, safekeeping, towing, storage or carriage thereof, has a special lien thereon, dependent on possession, for the compensation, if any, which is due to him from the owner for such service . . .
Okla. Stat. tit. 42, § 91A.1.
At first glance, this general possessory lien would appear to have exactly the same limitations as the specific carrier's lien under the UCC: it applies only to the compensation due the lienholder for services related to "an article of personal property" in the lienholder's possession, and the lien is "dependent on possession." Thus, the lien would not apply to services provided *717 with respect to items of property that the lienholder had previously surrendered.
Explorer, however, offers a more expansive reading that if services are rendered in connection with multiple lots of property pursuant to a single contract, the servicer may claim a lien, for all amounts due under the contract, upon any lots remaining in the servicer's possession, even though some of the lots on which services were rendered have been surrendered. Illustrative of the decisions cited by Explorer in support of this reading is Braufman v. Hart Publication, 234 Minn. 343, 48 N.W.2d 546 (1951).[6] Applying a Minnesota statute similar to Oklahoma's general possessory lien provision, the Braufman court held that the limiting language of the statute would "not [be] applied literally in cases where the property subject to the alleged lien and other property on which no lien is claimed were delivered to the lien claimant under a single contract relating to both." 234 Minn. at 346, 48 N.W.2d at 549. Braufman arose in the situation of a partially completed printing contract: an entire carload of paper had been delivered to the printer, an initial installment of the job was completed, and the printed paper was released without payment. Thereafter, the owner of the paper sought return of the remaining unprinted paper, but the printer refused, claiming a lien for printing costs attributable to first installment. After a review of common law decisions adopting a "single-contract" rule for purposes of a common law possessory lien, the court found that under the rules of statutory construction applicable in Minnesota, "the absence of express language in our lien statute obliges us to hold that it is a subsisting rule of law" and hence that "several articles of personal property, delivered under the same contract, [must] be treated as a unit under our lien statute," so that the printer had a lien on the undelivered paper for the services rendered on the paper that had been delivered. 234 Minn. at 351, 48 N.W.2d at 551.
Although no Oklahoma court appears to have addressed the question, the "single-contract" rule recognized in Braufman might be found by Oklahoma courts to apply to the interpretation of Oklahoma's general possessory lien statute, and if the statute were applicable in the present case such an interpretation could have the effect of giving Explorer a lien on fuel now in its possession for all of the services it provided under the Letter Agreement. The Letter Agreement, after all, is a "single contract" obligating UAF to ship a minimum volume of aviation fuel through Explorer's pipeline for a two-year period, and both the UAF fuel now in Explorer's possession and each of the prepetition shipments of fuel for which UAF did not pay Explorer were shipped pursuant to this contract.
However, it is unnecessary to determine whether the courts of Oklahoma would apply the "single-contract" rule to Oklahoma's general possessory lien statute, because, to the extent that this statute were so interpreted, it would conflict with the specific carrier lien provisions of the Uniform Commercial Code, discussed above, and so would be inapplicable. The Oklahoma Supreme Court has repeatedly applied a "long-standing rule of construction in this jurisdiction" mandating that "where there are two statutory provisions, one of which is special and clearly includes the matter in controversy, and prescribes something different from the general statute, the special statute, and not the general *718 statute, applies." City of Tulsa v. Smittle, 702 P.2d 367, 371 (Okla.1985); Oxley v. City of Tulsa, 794 P.2d 742, 751 (Okla.1989); Carter v. City of Oklahoma City, 862 P.2d 77, 80 (Okla.1993). Here, the carrier lien of UCC § 7-307 clearly includes the matter in controversy the extent of a lien claimed by a carrier in goods covered by a bill of lading and it limits the lien to charges for services provided in connection with the property covered by the bill of lading. If the general possessory lien statute is interpreted according to the "single contract" rule, it would provide something quite different: that the possessory lien on goods covered by a bill of lading extends not only to charges for services provided in connection with the goods covered by the bill of lading, but also to outstanding charges for services provided by the carrier in connection with other property of the shipper, as long as all shipments were made under the same overall contract. In the case of such a conflict, the Oklahoma rule of construction directs that the specific statute is applicable.[7]
Accordingly, the general possessory lien provisions of Okla. Stat. tit. 42, § 91 do not add to the carrier lien rights accorded to Explorer under § 7-307 of the UCC, which, as discussed above, do not require an order awarding adequate protection.
3. The contractual lien established by Explorer's FERC tariffs.
The final basis Explorer asserts for its lien claims is a provision in the FERC-approved tariffs incorporated into its contract with UAF.[8] As noted above in the Findings of Fact, these tariffs state that "the Carrier [Explorer] shall have a lien on all petroleum products accepted for transportation to secure the payment of all charges." Explorer Ex. 5 at 9.
This language does not clearly define the extent of the lien it grants. "All charges" could mean "all outstanding charges owed by the shipper to the carrier, regardless of how the charges arose," as Explorer contends. However, "all charges" could also mean "all charges incurred in connection with the particular petroleum products accepted for shipment."
The latter, limited interpretation is the more appropriate, for several reasons. First, it accords with ordinary commercial understanding, as reflected in the Uniform Commercial Code. See Lissner, 98 B.R. at 818 n. 2 (observing, as noted above, that "carriers do not generally claim a lien for charges in relation to other goods" than those being shipped). Second, it is supported by context. The sentence immediately preceding the grant of lien states: "The Shipper shall be responsible for payment of transportation and all other charges applicable to the shipment, and, if required, shall prepay such charges or furnish guaranty of payment satisfactory to the Carrier." Explorer Ex. 5 at 9 (emphasis added). Thus, "all charges" in the sentence granting a lien would most reasonably *719 be understood to be a shortened expression for "payment of transportation and all other charges" applicable to the petroleum products involved in particular shipment on which the lien is granted.[9] Third, the limited interpretation follows the rule that ambiguity in a contract should be construed against the party that drafted the contract. King-Stevenson Gas and Oil Co. v. Texam Oil Corp., 466 P.2d 950, 954 (Okla.1970). Explorer drafted the tariffs approved by FERC, and there is no indication that FERC changed the lien language that Explorer suggested.
With its ambiguity resolved in favor of a limitation to the charges for the particular products being shipped, the contractual lien imposed by Explorer's tariffs is also coextensive with the carrier lien created by § 7-307 of the UCC and does not require an award of adequate protection.
With respect to this contractual lien, however, there is an additional factor, unique to bankruptcy, bearing on Explorer's claim. Like the carrier lien of the UCC, the contractual lien of the tariffs applied to the petition-date fuel in Explorer's possession. However, unlike statutory liens, liens created by contract do not ordinarily apply to property that is acquired by a debtor after the filing of a bankruptcy case. Section 552(a) of the Bankruptcy Code provides generally that "property acquired by the estate or by the debtor after the commencement of the case is not subject to any lien resulting from any security agreement entered into by the debtor before the commencement of the case." Section 552(b) sets out exceptions to this rule one for lodging receipts and another for a security interest that extends both to prepetition property of the debtor "and to proceeds, product, offspring, or profits of such property." These exceptions have no application here. The aviation fuel acquired by UAF after the bankruptcy filings is in no sense a "proceed, product, offspring, or profit" of the fuel it provided to Explorer prior to the filing. Thus, as Explorer's counsel conceded at trial (Tr. 122-23), Explorer has no contractual lien on the UAF fuel presently in its possession, since all of this fuel would have been acquired by UAF postpetition.
4. Cash collateral.
Much of Explorer's motion for adequate protection is premised on the assertion that UAF sold fuel that Explorer had delivered, and that Explorer has a security interest in the proceeds of the sales, rendering the proceeds "cash collateral" subject to the special protections of § 363(a) and (c)(2). However, Explorer introduced no evidence that UAF sold any of the delivered fuel. More importantly, Explorer made no showing that any of the liens it asserts extended to the proceeds of the fuel it delivered on UAF's account. To the contrary, both of the statutory liens on which Explorer relies are expressly possessory, terminating when Explorer delivered the collateral in question, and so *720 could not apply to proceeds UAF obtained after it received the collateral from Explorer. The tariff lien makes no mention at all of proceeds. Thus, Explorer's lien rights did not extend beyond the aviation fuel it transported on behalf of UAF. It never had an interest in cash collateral.
5. Misrepresentation.
As noted earlier, Explorer has asserted that it delivered petition-date fuel to UAL in reliance on promises that UAF would pay the full amount of Explorer's claim for fuel delivered prepetition. If Explorer had actually been harmed by a tortious misrepresentation of the debtors during the course of this bankruptcy case, it could make a claim against the debtors for payment of a priority administrative expense based on the misrepresentation. See Reading Co. v. Brown, 391 U.S. 471, 485, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968) (torts committed during the operation of a debtor's business in bankruptcy may be accorded administrative claim status); Yorke v. N.L.R.B., 709 F.2d 1138, 1143 (7th Cir.1983), cert. denied, 465 U.S. 1023, 104 S.Ct. 1276, 79 L.Ed.2d 680 (1984) (failure to engage in good faith collective bargaining gives rise to an administrative expense).
However, the rulings set out above indicate that Explorer would not have been damaged by any of the representations it attributes to the debtors. The only lien that Explorer ever had was for the delivery charges attributable to the fuel in its possession. At any time, Explorer could have insisted on satisfaction of that lien before releasing the fuel it had transported. Before the bankruptcy filing, when Explorer released fuel without payment, it lost its lien on that fuel. Thus, Explorer was always an unsecured creditor with respect to its prepetition delivery charges. No representation of the debtors caused any change in this position.
Explorer is now being paid for all of its fuel deliveries after the bankruptcy filing, and it has a general unsecured claim for its prepetition deliveries. It is not entitled to more.
Conclusion
For the reasons set out above, Explorer's motion for adequate protection is denied. A separate order will be entered to that effect.
NOTES
[1] "Tr." Refers to the Transcript of Proceedings for the hearing on Explorer's motion, conducted on July 1, 2003. "Explorer Ex." and "UAF Ex." refer, respectively, to the exhibits of Explorer and United Aviation Fuels Corporation.
[2] The charges were reduced by Explorer's exercise of a setoff in the amount of $25,227.53, pursuant to court order of May 23, 2003, leaving a balance of $438,829.
[3] Under § 363(c) of the Code, if the lienholder does not consent, a debtor may only use cash collateral pursuant to a court order issued on a finding of adequate protection. In re Gaslight Village, Inc., 6 B.R. 871, 875 (Bankr.D.Conn.1980). Similarly, as to non-cash collateral, a lienholder has the right to adequate protection upon a motion brought under § 363(e) of the Code.
[4] Since the parties did not discuss choice of law, the court need not examine the issue. In re Stoecker, 5 F.3d 1022, 1029 (7th Cir.1993).
[5] Charges for fuel delivery under the applicable tariff were between 73.9 and 112.9 cents per barrel. See Explorer Ex. 5 at 20. An average rate of 100 cents per barrel would have resulted in delivery charges slightly in excess of $272,000.
[6] The issue is also thoroughly discussed in In re Ash Handkerchief Corp., 191 B.R. 588, 591-93 (Bankr.S.D.N.Y.1996).
[7] This result also avoids what would otherwise be a difficult problem of notice for third parties dealing in goods covered by bills of lading. Under § 7-307, the possessory lien of the carrier is limited to the costs of transporting and storing the goods covered by a bill of lading; under the "single-contract" interpretation of the general possessory lien statute, the carrier's possessory lien could have an unlimited extent.
[8] The parties agree that the FERC tariffs are simply part of their contractual relationship, as opposed to administrative regulations with independent legal effect. See Aero Trucking, Inc. v. Regal Tube Co., 594 F.2d 619, 621 (7th Cir.1979) (noting, in the similar context of regulation of trucking rates, that "it has long been held that properly published tariffs are incorporated into any agreement between the shipper and carrier").
[9] The decision that Explorer relies on most heavily in support of its tariff-based lien argument, Arco Pipe Line Co. v. Basin Refining, Inc. (In re Basin Refining, Inc.), Adversary No. 381-0646, Bankruptcy No. 381-00792-F (Bankr.N.D.Tex. July 30, 1982), held that tariff-created lien did extend to amounts owing under crude oil shipments that had been completed at the time the lien was asserted. However, the grant of the lien in the Basin Refining tariff was substantially different from the one here. It read (slip op. at 9-10): "All crude petroleum which is received from a Shipper or is destined to a Consignee who has failed to pay Carrier for gathering, transportation, or demurrage charges shall be subject to the imposition of a lien by Carrier to obtain payment of such charges." This difference in the language granting the lien deprives the Basin Refining decision of any value in interpreting the lien in Explorer's tariffs.
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549 S.W.2d 805 (1977)
Jean Feraca CASALE, Appellant,
v.
Frank Louis CASALE, Appellee.
Supreme Court of Kentucky.
January 14, 1977.
Rehearing Denied April 22, 1977.
Frank E. Haddad, Jr., Louisville, for appellant.
Natalie S. Wilson, Eblen, Milner, Rosenbaum & Wilson, Lexington, for appellee.
STEPHENSON, Justice.
In a proceeding for dissolution of marriage, the sole issue presented to the trial court was that of custody of the parties' infant child. The trial court awarded custody to the father. The mother appeals. We reverse.
The mother, appellant, and the father, appellee, were married in 1968. The child was born in 1973. The father is an assistant professor of political science at the University of Kentucky. The mother has pursued a graduate program at the University and is employed there as a part-time instructor in English. In 1975, the parties separated and a suit for dissolution of marriage was filed. Agreement was reached on all issues save that of custody of the infant child. This issue was heard by the trial court, and after a lengthy hearing compiling a voluminous record of testimony, the trial court entered findings of fact and conclusions of law awarding custody of the child to the father.
The trial court stated in the findings of fact that "[t]he Court's decision in this case is based pure and simply on intuition..." the mother "`by her nature' is not better suited to have custody of the child ..." and "the mother is a very self-centered person."
We have reviewed the testimony in this case and appreciate the dilemma encountered by trial courts in making a determination of custody between contending parents. The testimony reveals that both parents love and want the child; both parents participated *806 in the day-to-day care of the child; and there is no testimony to indicate that either parent would be unsuited to caring for and raising the child. Much of the testimony is opinion testimony by various witnesses as to the most suitable parent.
The trial court relied on two of the factors in Parker v. Parker, Ky., 467 S.W.2d 595, 596 (1971), in determining custody:
"1. Which of the parents shows the greater character and stability that would make him or her the more suitable person to preside over a home in which the children can adequately be reared?
"2. All factors contributing to the breaking up of a home and marriage."
While we could agree that the testimony taken as a whole could be evaluated to indicate a marginal preference for the father as the most suitable person to have custody of the child, the test is the "best interests" of the child, and it is in this respect that we believe the trial court erred in awarding custody to the father.
In 1972, the General Assembly adopted the Uniform Marriage and Divorce Act (ULA) embodied in KRS Chapter 403.
KRS 403.270 is dispositive of the issue presented here. This section provides:
"(1) The court shall determine custody in accordance with the best interests of the child. The court shall consider all relevant factors including:
(a) The wishes of the child's parent or parents as to his custody;
(b) The wishes of the child as to his custodian;
(c) The interaction and interrelationship of the child with his parent or parents, his siblings, and any other person who may significantly affect the child's best interests;
(d) The child's adjustment to his home, school, and community; and
(e) The mental and physical health of all individuals involved;
(2) The court shall not consider conduct of a proposed custodian that does not affect his relationship to the child."
We say this because of the reasoning contained in the Commissioners' Notes to § 402 of the Uniform Marriage and Divorce Act (ULA), pp. 504, 505. This section was enacted as KRS 403.270. The Commissioners' Note applicable here is as follows:
"The five factors mentioned specifically are those most commonly relied upon in the appellate opinions; but the language of the section makes it clear that the judge need not be limited to the factors specified. Although none of the familiar presumptions developed by the case law are mentioned here, the language of the section is consistent with preserving such rules of thumb. The preference for the mother as custodian of young children when all things are equal, for example, is simply a shorthand method of expressing the best interest of children and this section enjoins judges to decide custody cases according to that general standard."
In our opinion, the situation here is precisely that contemplated by KRS 403.270.
For all practical purposes "all things are equal" here and the preference that the mother should have custody of a young child has not been overcome by the testimony in this case. Parker and KRS 403.270 abrogated the rule that the mother must be shown to be unfit before an award of custody of a child of tender years could be made to the father. We are not prepared to define precisely the quantum of proof necessary to overcome the preference that the mother should be the custodian of children of tender years. This is a value judgment that has to be decided on a case-by-case basis. Here the evidence is so close, we are of the opinion that the natural preference for the mother should prevail.
Our holding here is not, in our opinion, inconsistent with Parker. The factors recited in Parker are not too greatly at variance with the factors embodied in KRS 403.270 enacted a year later. To evaluate the holdings in Parker the facts must be considered. Parker involved the issue of custody of three children, ages 13, 9, and 5. The parents had been divorced in 1966 and the *807 children awarded to the father. The issue presented in Parker arose when the mother, having remarried, applied in 1969 for a change of custody from the father to the mother. The factual situation here is completely different. We are of the opinion that implicit in Parker is the result we reach in this case. Parker recited that it is not indispensible that a trial court find that a mother is morally unfit to have custody of children as a prerequisite of awarding custody to the father and declining to change custody. Further, Parker states 467 S.W.2d at page 596:
"There has existed in the law the concept that the mother has the better right to young children. However, the basis of this rule is nothing more or less than the fact that under normal conditions a mother by her nature is better equipped to nurture and care for small children. It is more a practical consideration than a rule of law."
This is what we are saying here in application to a completely different factual situation.
We are of the opinion the trial court did not properly evaluate Parker or apply the reasoning of determining the best interests of the child as required by KRS 403.270. For this reason, we hold the findings of the trial court to be clearly erroneous.
The judgment is reversed.
REED, C. J., and JONES, LUKOWSKY, PALMORE, STERNBERG and STEPHENSON, JJ., sitting.
All concur.
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119 B.R. 610 (1990)
In re William Douglas PAEPLOW, Debtor.
William D. PAEPLOW, Plaintiff,
v.
Edmond W. FOLEY, R. Kent Rowe, R. Kent Rowe, III, Jerry E. Huelat, V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, Defendants.
Bankruptcy No. 82-30928-RKR, Adv. No. 90-3085.
United States Bankruptcy Court, N.D. Indiana, South Bend Division.
September 24, 1990.
*611 Henry A. Hoover, South Bend, Ind., for plaintiff.
Edmond W. Foley, South Bend, Ind., for defendants.
AMENDED ORDER
ROBERT K. RODIBAUGH, Senior Bankruptcy Judge.
On July 25, 1990, William Douglas Paeplow, the debtor herein, filed his Verified Complaint for Injunction under 11 U.S.C. Section 524 against Edmond W. Foley, R. Kent Rowe, R. Kent Rowe III, Jerry E. Huelat, V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen. The defendants filed their Verified Motion to Strike and Request for Expedited Hearing on August 14, 1990, to which the debtor responded on August 27, 1990. The court held a hearing on the defendants' motion on August 28, 1990, and took the matter under advisement on September 7, 1990, after giving the parties the opportunity to file briefs.
At the pre-trial conference on the debtor's complaint on September 12, 1990, the parties advised the court that they have no further evidence to submit concerning the complaint unless the court grants attorney's fees to either party as a form of sanction, in which case the parties will need to present additional evidence to establish the necessary amount of the fees. Defendants' motion and the debtor's complaint thus are ripe for decision.
Background
William Douglas Paeplow filed his petition under Chapter 7 of the Bankruptcy Code on September 3, 1982. In his complaint the debtor alleges that on October 17, 1988, the defendants filed an Amended Complaint in the St. Joseph Superior Court, St. Joseph County, Indiana, to collect an obligation which has been discharged. The debtor indicates that he listed the obligation in his bankruptcy schedules and that this court discharged the same along with the debtor's other debts on January 6, 1984. The defendants' Amended Complaint is captioned V.L. Beagles, et al., v. Janis A. Paeplow in Cause No. R-4348 in the St. Joseph Superior Court. According to the debtor, defendants Edmond W. Foley, R. Kent Rowe, R. Kent Rowe III, and Jerry E. Huelat, who are attorneys, filed the Amended Complaint on behalf of defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, who are creditors of the debtor. The debtor contends that the defendants filed the complaint although they were aware that the debtor's obligation to them had been discharged in the debtor's Chapter 7 case. The debtor notes that the state court complaint concerns certain residential property which the debtor and his wife, Janice A. Paeplow, own as tenants by the entirety, subject to a purchase money mortgage lien. The debtor submits that he and Mrs. Paeplow have paid each mortgage installment payment due and payable on the property thereby increasing their equity in the real estate. Inasmuch as the trial on the defendants' complaint is scheduled for September 26, 1990, the debtor requests an injunction. The debtor asserts that he has no adequate remedy at law and that unless the court grants the relief which he has requested, he will suffer irreparable harm. The debtor also requests a monetary judgment against defendants along with attorney's fees and expenses, punitive damages, and sanctions.
In their Verified Motion to Strike and Request for Expedited Hearing the defendants ask the court to strike the debtor's complaint for injunction pursuant to Federal Rule of Civil Procedure 11. They allege that the debtor's complaint is not grounded in fact or law and that the debtor has filed his complaint in order to delay and harass them. The defendants request the court to *612 sanction the debtor and at least to require him to reimburse them for their reasonable expenses in this matter. In support of their motion the defendants allege the following pertinent facts:
1. That on the 5th day of October, 1981, the plaintiff, William Paeplow, together with his wife, Janet, executed a joint note payable to the First Interstate Bank at its offices in Roswell, New Mexico, in the sum of Sixty Thousand ($60,000.00) Dollars to be paid in full on or before April 5, 1982.
2. That on or about the aforesaid date, the defendants, V.L. Beagles, Betty Beagles, Pete Cassen and Karen Cassen executed an agreement subordinating their rights to certain inventory and other property owned by the plaintiff, to the rights of the First Interstate Bank of Roswell, New Mexico arising out of the aforesaid note.
3. That Mr. and Mrs. Paeplow defaulted on said note and Mr. Paeplow filed a petition in bankruptcy on September 3, 1982. In order to protect their interests in the property they had subordinated to First Interstate Bank, the Beagles and the Cassens assumed liability on said note.
4. That on December 12, 1983, a motion for relief from automatic stay, was filed by First Interstate Bank of Roswell seeking permission for leave to file an action in state court against Mr. Paeplow solely for the purpose of obtaining a joint judgment against William Paeplow and his wife so that execution might obtain against certain real estate owned by Mr. and Mrs. Paeplow as tenants by the entireties. . . .
5. That on January 16, 1984, this court granted First Interstate Bank the right to proceed in rem on its joint claim against Mr. and Mrs. Paeplow in State Court, and to enforce any subsequent Judgment lien against the aforesaid real estate. . . .
7. That First Interstate Bank assigned its rights in and to said note to V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, all of whom have now stepped into the shoes of First Interstate Bank, and are in a position to seek a joint judgment lien on the aforesaid entireties property.[1]
8. That on September 28, 1987, the Beagles and the Cassens filed their own motion for relief from stay for purposes of proceeding in State Court against William Paeplow in order to obtain a joint judgment with regard to the aforesaid note: Mr. Paeplow never objected to this motion for relief from automatic stay.
9. That on September 30, 1987, this court entered an order noting that a discharge had been issued as to Mr. Paeplow on January 6, 1984, at which time the stay was lifted as to all creditors.
10. That on October 19, 1988, a Motion for Leave to File an Amended Complaint was filed in the state court action pending against Mrs. Paeplow on the aforesaid note, requesting leave to add William Paeplow as a named defendant in order to proceed against the real property held by Janice and William Paeplow as tenants by the entireties; and on October 21, 1988, Judge Brook of the St. Joseph Superior Court granted the motion and allowed William Paeplow to be joined as an additional party defendant. Neither Mr. Paeplow or [sic] his counsel ever objected to this request.
11. That on October 31, 1988, defendants, Beagles and Cassens filed their amended complaint adding William Paeplow as a named defendant without objection by either Mr. or Mrs. Paeplow; and that matter is now being pursued in the St. Joseph Superior Court, Cause No: R-4348. . . .
12. That on November 28, 1988, William Douglas Paeplow answered the complaint in the aforesaid proceeding in state court and never pled discharge in bankruptcy as an affirmative defense in that matter even though he would have been required to do so by .T.R. 8 of the Indiana Rules of Trial Procedure.
13. That the Beagles and Cassens filed a motion for summary judgment in *613 the above action and the matter was briefed and argued by both parties (Judge Brook of the St. Joseph superior Court currently has said motion under advisement); and at no time in briefing or arguing that motion did plaintiff or his attorney ever object to Judge Brook exercising jurisdiction over this claim; nor did they ever argue or plead that Mr. Paeplow's obligations were discharged in bankruptcy.
14. That it has been almost two (2) years since plaintiff filed his answer to the amended complaint naming him as a party in the state court action and not once was the trial court in that matter, even up to the present time, ever asked to consider the effect of Mr. Paeplow's discharge on the pending state court action.
15. That during this entire time, plaintiff made no request of this Honorable Court with regard to this issue, but rather plaintiff and his counsel permitted an amended complaint to be filed, without objection, against Mr. Paeplow; permitted that matter to proceed through summary judgment without any suggestion that the action was improper; and permitted the case to be set for trial without ever asking this court to intervene. . . .
Defendants' motion at 1-5 (August 14, 1990).
The defendants argue that by his conduct the debtor has waived any objection he may have to the continuance of the proceeding in the St. Joseph Superior Court. In addition, the defendants argue that applicable law permits them to proceed in the state court despite the debtor's discharge because they "are not seeking an order of personal liability against the [debtor], but are merely attempting to obtain a joint judgment against Mr. and Mrs. Paeplow so that execution against the aforementioned entireties property can be made." Defendants' motion at 5 (citing this court's decision in In re Jeffers, 3 B.R. 49, 52-53 (Bank.N.D.Ind.1980)). The defendants contend that the debtor has set forth insufficient facts to support his claim for bad faith and punitive damages against them. As the trial in the state court is set for September 26, 1990, the defendants assert that the debtor merely attempts in bad faith to delay the state court trial by filing his complaint for injunction in this court.
In his response to the defendants' motion filed on August 27, 1990, the debtor submits that he has set forth a substantive basis for obtaining an injunction against the defendants. Initially, he points out that 11 U.S.C. § 727 operates to discharge a debtor from all pre-petition obligations except those debts excepted from discharge under § 523. Moreover, based upon this court's unpublished opinion in Gilbert v. Indiana Bank and Trust Co. of Fort Wayne (In re Gilbert), Bankr. No. FB 76-513, (Bankr.N.D.Ind. September 30, 1977), the debtor submits that this court already has determined that a creditor may not proceed against property held by the debtor and his spouse as tenants by the entirety to collect a debt which was not secured by a lien on the property prior to the debtor's discharge because the underlying indebtedness (of the debtor) was discharged in bankruptcy.[2] The debtor also cites Harris v. Manufacturers Nat. Bank of Detroit, 457 F.2d 631 (6th Cir.1972), cert. denied, 409 U.S. 885, 93 S. Ct. 118, 34 L. Ed. 2d 142 (1972), and other cases in support of his argument. The debtor argues that these cases do not leave creditors without remedy when only one spouse files a petition in bankruptcy and the creditor has not yet obtained a judgment or lien on the husband and wife's tenants by the entirety property. In such a case the creditor may request a stay of the debtor's discharge in order to obtain a judgment and perfect its lien. The debtor indicates that although the defendants' assignor, First Interstate Bank, requested relief from the stay in this case, it and/or the defendants failed to obtain a stay of the debtor's discharge.
*614 The debtor further argues that the defendants are precluded by res judicata from claiming monetary damages against the debtor in state court because on September 21, 1984, the court dismissed with prejudice the adversary proceeding which First Interstate Bank filed against the debtor to collect the indebtedness arising from the Paeplows' promissory note to First Interstate Bank. As a dismissal with prejudice operates to bar a subsequent proceeding seeking the same relief, the debtor asserts that defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen, as assignees of First Interstate Bank, are barred from seeking monetary relief from him in the state court. Based upon § 524(a) of the Bankruptcy Code, the debtor submits that his request for sanctions and damages against the defendants is appropriate.
In their reply to the debtor's response the defendants submit that their sole intent is to obtain a joint judgment against the Paeplows so that they may execute against the property which the Paeplows hold as tenants by the entirety. The defendants state that they do not seek a personal judgment against the debtor concerning his several liability on the promissory note. The defendants note that pursuant to Indiana law a creditor may not proceed against property held jointly by a husband and wife unless the creditor holds a joint judgment against the husband and wife. Because Mrs. Paeplow did not file a bankruptcy petition along with her husband, the defendants submit that they are unable to reach the Paeplows' jointly held real estate unless they are permitted to proceed to obtain a joint judgment against the Paeplows.
The defendants suggest that if they are not able to pursue a joint judgment against the Paeplows, the Paeplows will have immunized a substantial asset from their creditors through manipulation of the bankruptcy process. In support of their position the defendants cite Echelbarger v. First National Bank of Swayzee, Ind., 211 Ind. 199, 5 N.E.2d 966 (1937), First National Bank of Goodland v. Pothuisje, 217 Ind. 1, 25 N.E.2d 436 (1940), and Smith v. Beneficial Finance Co. of Indianapolis, Inc., 139 Ind.App. 653, 218 N.E.2d 921 (1966), arguing that the while a husband and wife's bankruptcy may wipe out their personal or several liabilities stemming from a joint obligation, the bankruptcy does not affect their joint creditor's right to pursue property held by them as tenants by the entirety in order to satisfy their remaining joint liability.
The defendants point out that First Interstate Bank specifically requested relief from the automatic stay for the purpose of obtaining a judgment against the property which the Paeplows held as tenants by the entirety. On January 16, 1984, the court granted First Interstate Bank's motion permitting First Interstate Bank to proceed to obtain a judgment in state court against the Paeplows. Three weeks later, the debtor was discharged. The defendants argue that the court could not have meant to require First Interstate Bank to obtain its judgment within three weeks or lose its right to proceed against the Paeplows' tenants by the entirety property. As First Interstate Bank clearly had established its "claim" against the Paeplows' property, the defendants submit that it had established an equitable or common law lien as to the property. Defendants' reply at 11 (September 5, 1990) (citing Hubble v. Berry, 180 Ind. 513, 103 N.E. 328 (1913), First Bank v. Samocki Bros. Trucking Co., 509 N.E.2d 187 (Ind.App.1987), and Radiotelephone Co. of Indiana v. Ford, 531 N.E.2d 238 (Ind.App.1988)).
The defendants distinguish the court's decision in Gilbert due to the fact that the creditor in Gilbert had not asked for and received relief from the automatic stay to pursue its joint claim against the debtor and tenants by the entirety property as First Interstate Bank did in this case. The defendants further submit that contrary to the circumstances in Gilbert, the debtor in this case failed to assert his bankruptcy as a defense in the state court action as Indiana Trial Rule 8 requires. The defendants accordingly insist that the debtor has waived his defense and any right to invoke the jurisdiction and protection of this court. *615 Defendants' reply at 12 (citing Rouhib v. The Michigan Bank, 345 F.2d 782, 783 (6th Cir.1965)).
Finally, the defendants refute the debtor's argument that they are barred by res judicata from asserting their claims against the debtor. The defendants submit that although the complaint which First Interstate Bank filed against the debtor in this court was dismissed with prejudice, the dismissal does not operate as a bar to their state court action because the complaint concerned only the debtor's personal liability on the promissory note and not his joint obligation with his wife. As they seek only a judgment with respect to the joint obligation of the Paeplows on the promissory note, the defendants allege that the doctrine of res judicata does not apply.
Discussion and Decision
This Order shall represent findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52, made applicable in this proceeding by Bankruptcy Rules 7052 and 9014. This matter is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2) over which the court has jurisdiction pursuant to 28 U.S.C. § 157(b)(1). Initially, the court must consider whether to strike or dismiss the debtor's complaint. Other issues before the court are whether the debtor's discharge operates as an injunction of the defendants' actions to recover a judgment concerning the liability of the debtor and his wife against property which they hold as tenants by the entirety and, if so, whether the debtor has waived his right to assert the injunction in the state court proceeding. In the alternative, if the debtor's discharge does not enjoin the defendants from proceeding in state court, the parties raise the issue of whether the state litigation is barred by res judicata due to previous litigation in this court. Finally, the court must determine whether the award of attorney's fees, expenses, and/or sanctions to any party is appropriate.
1. The debtor's complaint was filed in good faith and contains valid legal arguments so as to withstand defendants' motion to strike
The court declines to strike the debtor's complaint finding that the debtor has filed the complaint in good faith and not merely for purposes of delay or harassment. Although the debtor waited some time after the filing of the state court complaint to file his complaint for injunction in this court, his counsel indicated that he informed attorneys for the defendants at various times that he would file a complaint in this court to protect the debtor's interests if necessary. The court further finds that the complaint is grounded in fact and contains valid legal arguments which merit this court's consideration. The court accordingly proceeds to address the merits of the parties' arguments presented at the hearing on this matter and in their briefs filed with the court.
2. The debtor's discharge operates as an injunction against the defendants' actions
The primary case upon which the debtor relies in arguing that his discharge enjoins the defendants from taking any further action to collect his joint obligation stemming from the promissory note is Gilbert v. Indiana Bank and Trust Co. of Fort Wayne (In re Gilbert), Bankr. No. FB 76-513, (Bankr.N.D.Ind. September 30, 1977).[3] The debtor also relies upon the unpublished decision of the district court which affirmed this court's order, Indiana Bank and Trust Co. of Fort Wayne v. Gilbert (In re Gilbert), No. FB 76-513 (N.D.Ind. June 9, 1978). Northern District of Indiana Local Rule No. B-138 makes applicable herein Northern District of Indiana General Rule No. 38 concerning *616 citation to unpublished legal authorities. General Rule No. 38 provides:
If a party relies upon a legal decision not published in the Federal Supplement, Federal Rules Decision, Federal Reporter, Federal Reporter 2d, Supreme Court Reporter, Bankruptcy Reporter, Northeast Reporter or Northeast Reporter 2d, then the party shall furnish the court with a copy of the relied-upon decision.
N.D.Ind. General Rule No. 38 (1987). Inasmuch as counsel for the debtor indicated at the hearing on this matter that he not only supplied the court with a copy of the Gilbert decision, but also supplied opposing counsel with a copy, the court finds that he has complied with the rules in relying upon this unpublished order of the court.
In Gilbert the debtor had filed a complaint to determine the dischargeability of his joint and several obligation on a promissory note executed with his wife and secured by a mortgage against a single parcel of property. The debtor also sought to enjoin his creditor from taking any action to collect the debt. The debtor had listed the obligation on his schedule of debts and had received his discharge in bankruptcy prior to the time his creditor received a judgment on the note against the debtor in rem and against his wife in rem and in personam. The debtor's primary argument was that although the creditor had the right to sell the real estate securing the promissory note in order to satisfy the debt, the creditor had no right to pursue other property which the debtor and his wife held as tenants by the entirety to collect any deficiency. The court granted summary judgment in favor of the debtor finding "that the bankrupt has a right to a fresh start and, therefore, it is inappropriate that a joint creditor can, subsequent to bankrupt's discharge, maintain a `low profile' while the bankrupt and his wife build an equity in real estate that is tenancy by the entireties property." Gilbert, Bankr. No. FB 76-513, at 2-3 (citing another unpublished decision of the court, In re Zilm, Bankr. No. SB 75-61 (N.D.Ind. September 29, 1975)). The court concluded that "[t]his policy analysis requires that a joint creditor must either perfect its pre-discharge lien or suffer being discharged along with all other unsecured creditors." Id. The court also determined that a creditor in this situation would not be left without a remedy, but that the court would allow the creditor a sufficient stay to attempt to obtain a joint judgment and to perfect it prior to entry of the debtor's discharge. The court enjoined the debtor's creditor from any further proceedings against property which the debtor and his wife held as tenants by the entirety and against which the creditor had not secured a pre-discharge lien finding that "any residual balance of unpaid indebtedness still due on plaintiff's several and joint obligation to defendant reflects an indebtedness that is and has already been discharged in bankruptcy." Id. at 3.
On appeal the district court described the issue in Gilbert as follows:
Does the discharge in bankruptcy of a person serve to bar a creditor from obtaining and satisfying a post-discharge in rem judgment against the bankrupt and his spouse, as husband and wife, as to a joint obligation of the bankrupt and spouse where satisfaction of the judgment is sought only from property held by them as tenants by the entirety at the time of the discharge and where no interest in that property passed to the trustee in bankruptcy or otherwise became subject to the jurisdiction of the bankruptcy court.
Gilbert, No. FB 76-513, at 2-3. The district court indicated that the bankruptcy court had answered the question in the affirmative and affirmed the order. Id. at 3. In its decision the district court observed that under Indiana law:
three distinct forms of liability attach when a husband and wife incur a debt joint and severally: the husband becomes liable personally both jointly and severally; the wife becomes liable personally both jointly and severally; and the marital entity, i.e., the husband and wife as such, becomes liable in rem to the extent of any real property held by the husband and wife as a marital entity, i.e., as tenants by the entirety.
*617 Id. at 5-6. The district court rejected the creditor's argument that the debtor and his wife's execution of a joint promissory note created an "automatic" lien in favor of their joint creditor on property which they held as tenants by the entirety. Id. at 6.
Most important for purposes of this case, the district court affirmed this court's holding that post-petition execution as to the debtor's tenancy by the entirety property is barred. Gilbert, No. FB 76-513, at 7-13. The district court adopted the reasoning and result of the United States Court of Appeals for the Sixth Circuit in Harris v. Manufacturer's Nat'l Bank of Detroit, 457 F.2d 631 (6th Cir.1972), cert. denied, 409 U.S. 885, 93 S. Ct. 118, 34 L. Ed. 2d 142 (1972), in affirming the bankruptcy court's order. In the Harris case (1) the debtor and his wife obtained a loan for which they jointly executed a unsecured promissory note, (2) they defaulted on the note, (3) the husband filed a voluntary petition, (4) the creditor filed suit in state court seeking judgment on the joint debt, (5) the bankruptcy court entered the debtor's discharge, and (6) the debtor filed an action in federal court to enjoin the creditor from proceeding in state court.[4] On these facts the Sixth Circuit reversed the decision of the district court permitting post-discharge execution as to tenants by the entirety property. Specifically, the Sixth Circuit found that the Michigan rule allowing execution as to the debtor's joint liability on property which he and his wife owned as tenants by the entirety conflicted with the provisions of the Bankruptcy Act[5] which grant the debtor a "fresh start." Gilbert, No. FB 76-513, at 11-12 (quoting Harris, 457 F.2d at 635). The court concluded that "the discharged husband's interest in the property . . . cannot be isolated and removed from a joint judgment against both spouses." Id. at 12 (quoting Harris, 457 F.2d at 635 n. 1).
In Gilbert, the district court noted that the Michigan law which the Harris court rejected as conflicting with provisions of the Bankruptcy Act was somewhat different from Indiana law in that Indiana law "limit[ed] the `third' liability recovery to the interest in tenancy by the entirety property held by the bankrupt and spouse at the time of the discharge." Gilbert, No. FB 76-513, at 10 n. 10. The district court determined, however, that the limitation on recovery was insufficient to distinguish the Indiana law. Id. The court observed that the Harris decision did not leave creditors without a remedy:
It is a well established practice for such creditors to petition the bankruptcy court for, and to receive, a stay of discharge pending their obtaining a valid state court judgment which creates a pre-discharge lien on the tenancy by the entirety property. Since this property does not pass to the bankruptcy estate, the lien cannot be invalidated by the bankruptcy estate, and thus, it preserves the creditor's claim as against the tenancy by the entirety property. See, e.g., Davison v. Virginia National Bank, 493 F.2d 1220 (4th Cir.1974); Phillips v. Krakower, 46 F.2d 764 (4th Cir.1931); In re Magee, 415 F. Supp. 521 (W.D.Mo.1976).
Gilbert, No. FB 76-513, at 12-13 n. 5.
Reviewing these decisions as well as those which the defendants cited in their briefs, the court concludes that the rationale and results of the Harris and Gilbert cases should apply to the facts of this case. Although the United States Court of Appeals for the Seventh Circuit apparently has not ruled directly on this question, the court cited Harris approvingly in In re Brandstaetter, 767 F.2d 324, 328 (7th Cir. 1985), stating that "post-discharge efforts *618 to reach purportedly exempt property must fail."[6]
The court regrets that its Order on Motion for Relief from Automatic Stay[7] may have misled defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen into believing that they had the right to pursue the tenancy by the entirety property of the debtor and his wife. The order stated in relevant part:
That the automatic stay of 11 U.S.C. § 362(a) as against Bank shall be and hereby is modified to enable it to proceed in state court on its joint claim against Debtor and Debtor's wife and to enforce any subsequent judgment lien thereby obtained against the real estate located at 51921 Whitestable Lane, South Bend, Indiana held by the Debtor and his wife as tenancy by the entireties property.
Order on Motion for Relief From Automatic Stay at 1 (January 16, 1984). Having received relief from the automatic stay to pursue its judgment lien against the property which the debtor and his wife held as tenants by the entirety, First Interstate Bank failed to take the second necessary step to preserve its claim to the tenancy by the entirety real estate. First Interstate Bank failed to move for a stay of the debtor's discharge while obtaining its judgment lien. As a practical matter, the court believes that First Interstate Bank simply may have lost interest in its claim and therefore failed to take the remaining steps to save its claim. The record shows that First Interstate Bank assigned its interest in the promissory note executed by the debtor and his wife to defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen.
As the debtor listed his indebtedness to First Interstate Bank in his bankruptcy schedules and was granted a discharge before any party obtained a judgment lien on the property which he and his wife held as tenants by the entirety, the court finds that the debtor's joint and several liability arising from the promissory note executed in favor of First Interstate Bank has been discharged. First Interstate Bank and/or its assignees further have been enjoined from the date of the discharge from taking any further action to collect the debtor's portion of the liability. 11 U.S.C. § 524(a)(2) (Callaghan 1989). They, of course, are free to attempt to collect the debtor's spouse's portion of the liability but may not obtain a lien against property which the debtor and his wife held as tenants by the entirety at the time of the debtor's discharge because they failed to preserve their claim to the property prior to the discharge. The court finds this to be so notwithstanding the debtor's action or inaction in the subsequent state court proceeding.
3. The award of attorney's fees, expenses, damages or sanctions against either party is inappropriate
As the law in this jurisdiction concerning the issues at hand was not published but was established in unpublished decisions of this court and the district court prior to 1980, and as the defendants proceeded with their actions in good faith believing that they were entitled to pursue a judgment concerning the debtor's several liability under the joint promissory note executed in favor of First Interstate Bank, the court finds that the award of attorney's fees, expenses, damages or sanctions to either party is inappropriate. The court accordingly declines to grant the same to either party.
Conclusion
WHEREFORE, the court now denies the defendants' motion to strike and grants the debtor's complaint for injunction. The parties' requests for sanctions and/or attorney's *619 fees, expenses, and damages are denied. It is
SO ORDERED.
APPENDIX A
United States District Court
Northern District of Indiana
Fort Wayne Division
In the Matter of Robert Roy Gilbert
a/k/a Robert R. Gilbert
d/b/a Gilbert Construction Company Bankrupt
Robert Roy Gilbert
a/k/a Robert R. Gilbert Plaintiff
vs.
Indiana Bank and Trust Co. of Fort Wayne Defendant
Bankruptcy No. FB 76-513
77-21
ORDER
At South Bend, Indiana, on September 30, 1977.
This matter is before the Court upon the Motion of Robert Roy Gilbert for Summary Judgment upon his complaint, which Motion was filed July 18, 1977. Earlier, on June 29, 1977, the defendant had filed its Motion for Summary Judgment and in the alternative to Dismiss the Complaint of Plaintiff.
The complaint of present concern was filed by the plaintiff-bankrupt on May 23, 1977. That complaint sought a determination of dischargeability of bankrupt's debt to defendant, more specifically a determination that his joint and several obligation on his indebtedness to defendant is discharged and also for injunctive relief against the defendant, enjoining the defendant from the taking or pursuing of any action or process to collect its debt.
The relevant facts may be briefly stated. On December 31, 1975, the plaintiff and his wife obtained a business loan from the defendant, for which they jointly signed a secured promissory note in the amount of $93,400; the note was secured by a mortgage against a single lot. The note was payable in monthly installments and plaintiff and his wife defaulted on the monthly installments due June 30, 1976. On September 17, 1976 the defendant filed its "Complaint on Promissory Note and For Foreclosure of Mortgage"[1] against plaintiff and his wife. On September 22, 1976, plaintiff filed his petition for voluntary bankruptcy, and included among his scheduled debts the balance due on the above-mentioned promissory note. On December 3, 1976, the bankrupt received his discharge in bankruptcy, including the discharge of the debt comprising the subject matter of the defendant's previously filed complaint in the Allen Superior Court. On March 11, 1977, the Allen Superior Court entered a judgment on this same complaint in favor of the defendant[2] and against plaintiff in rem and against his wife in rem and in personam. In its judgment, the Allen Superior Court found the plaintiff (defendant here) entitled to summary judgment as a matter of law against the bankrupt and his wife. The Allen Superior Court further found that the plaintiff (defendant here) was entitled to a joint judgment against the bankrupt and his wife in rem against any and all real estate and interests in real estate owned or held by them as tenants by the entirety as of the date of the bankrupt's discharge in bankruptcy with the amount of such judgment limited to the deficiency remaining after *620 the Sheriff's Sale of the mortgaged real estate.
Both sides in the present matter do not contest that the single piece of real estate used as security for the promissory note should be sold or turned over to the defendant here. It is also their mutual expectation that the value of that real estate will not be sufficient to pay all of the remaining indebtedness on the promissory note of the bankrupt and his wife to the defendant. However, the bankrupt contends that, subsequent to his discharge in bankruptcy, that other tenants by the entireties real property owned by himself and his wife cannot be sold pursuant to the Allen Superior Court Judgment[3] on March 11, 1977 if, as expected, the sale of the mortgaged real estate does not generate sufficient monies to pay the amount of the Allen Superior Court Judgment.
The Court in the present matter, after considering the parties' pleadings, motions, briefs and arguments (on the parties' respective Motions for Summary Judgment) concludes that there has been no genuine issue of fact submitted by either party to the Court and further concludes that, upon the bankrupt's complaint filed on May 23, 1977, the bankrupt is entitled to judgment as a matter of law.
The Court is convinced that both the principles and policy analysis which it previously addressed in an amended order of September 29, 1975 specific to In Re Zilm,[4] are directly applicable to the present matter. While a copy of that order is attached for complete perusal, the Court does wish to emphasize here the policy position underlying both Zilm and the present matter that the bankrupt has a right to a fresh start and, therefore, it is inappropriate that a joint creditor can, subsequent to bankrupt's discharge, maintain a "low profile" while the bankrupt and his wife build an equity in real estate that is tenancy by the entireties property. This policy analysis requires that a joint creditor must either perfect a pre-discharge lien or suffer being discharged along with all other unsecured creditors. This does not mean that the Court will leave the joint creditor bereft of a functionally adequate remedy, since it will, as in Zilm and with consideration of procedural safeguards to the bankrupt and his/her spouse regarding their entireties property, allow a sufficient stay for that creditor to attempt to secure a joint judgment and properly perfect it prior to the Court's discharge of the bankrupt. In the present matter, the defendant chose not to request such a stay prior to the plaintiff's discharge.
Accordingly, the Court determines that, subsequent to the above-mentioned mortgage foreclosure sale[5] and the application of the proceeds of same to plaintiff's joint indebtedness to defendant, any residual balance of unpaid indebtedness still due on plaintiff's several and joint obligation to defendant reflects an indebtedness that is and has already been discharged in bankruptcy.
The Court further enjoins the defendant from any further proceeding(s) against any of the plaintiff's tenancy by the entireties property, specifically that property against which the defendant had not secured a pre-discharge lien.
SO ORDERED.
/s/ Robert K. Rodibaugh
U.S. BANKRUPTCY JUDGE
cc: Dean A. Brown, Esq.
Donald Aikman, Esq.
*621 APPENDIX B
In the United States District Court
for the
Northern District of Indiana
Fort Wayne Division
In the Matter of
Robert Roy Gilbert, a/k/a
Robert R. Gilbert, d/b/a
Gilbert Construction Co., Bankrupt.
Indiana Bank and Trust
Company of Fort Wayne, Appellant,
v.
Robert Roy Gilbert, a/k/a
Robert R. Gilbert, Appellee.
Gilbert Appeal 77-21A
No. FB 76-513
Filed June 9, 1978
MEMORANDUM OF DECISION AND ORDER
This appeal is taken from an order entered by the bankruptcy court on September 30, 1977. In the proceeding lead to that order, appellant contended that appellee's discharge in bankruptcy did not foreclose it from obtaining and satisfying a post-discharge state court judgment, where that judgment is based upon an in rem liability of the bankrupt and spouse, as husband and wife, recognized by state law, and where satisfaction of the in rem liability is to be obtained only by executing against property held by the bankrupt and his spouse as tenants by the entirety as of the date of the discharge. The bankruptcy court determined that the bankrupt's liability on the indebtedness underlying the judgment in rem or otherwise, had been discharged in bankruptcy and, therefore, enjoined appellant "from any further proceeding(s) against any of the [appellee's] tenancy by the entireties property, specifically that property against which the [appellant] had not secured a pre-discharge lien."
Upon entry of the bankruptcy court's order appellant perfected this appeal, presenting the following stated issues for consideration:
(1) Whether appellee's discharge in bankruptcy operate to discharge the in rem liability of appellee and his spouse, as found by the state court, as to the real estate owned by them as tenants by the entirety at the time of the discharge;
(2) Whether the liability of appellee and his spouse to appellant is secured by a pre-discharge lien under Indiana law;
(3) Whether proceedings by appellant against appellee and his spouse in state court were barred by the automatic stay provisions of Bankruptcy Rules 601 or 401; and
(4) Whether appellant is entitled to proceed to enforce the in rem judgment obtained in state court against appellee and his spouse as against the entirety property owned by them at the time of the discharge.
Although appellant's stated issues are somewhat overlapping, the central issue is clear: Does the discharge in bankruptcy of a person serve to bar a creditor from obtaining and satisfying a post-discharge in rem judgment against the bankrupt and his spouse, as husband and wife, as to a joint obligation of the bankrupt and spouse where satisfaction of the judgment is sought only from property held by them as tenants by the entirety at the time of the discharge and where no interest in that property passed to the trustee in bankruptcy or otherwise became subject to the jurisdiction of the bankruptcy court. By its September 30, 1977, order, the bankruptcy court determined that the discharge does serve as such a bar. This court agrees and will affirm the order of the bankruptcy court.
The facts underlying this action are neither complex nor disputed:
On December 31, 1975, the appellee and his spouse obtained a loan from the appellant for which they jointly signed a secured promissory note in the amount of $93,400.00. This note was secured by a mortgage *622 on a single tract of real estate owned by the debtors as tenants by the entirety. The note was payable in monthly installments; the debtors defaulted on the installment due June 30, 1976.
On September 17, 1976, the appellant filed a complaint against the debtors in the Allen County Superior Court, Fort Wayne, Indiana. The complaint was styled: "Complaint on Promissory Note and for Foreclosure of Mortgage."
On September 22, 1976, appellee filed his petition for voluntary bankruptcy, and he included among his scheduled debts the balance due appellant on the promissory note.
On October 5, 1976, the debtors filed their answers to the state court action. Appellee admitted the essential allegations amounting to default but pled his pending bankruptcy petition in defense. The debtor spouse merely admitted those allegations amounting to default.
On October 20, 1976, the first meeting of creditors was held; a trustee was appointed for the bankruptcy estate; and November 19, 1976, was set as the last day for filing objections to the discharge.
On December 3, 1976, no objections to the discharge having been filed, appellee was issued a discharge in bankruptcy.
On February 9, 1977, appellant filed a motion for summary judgment in the state court proceeding.
On March 4, 1977, the appellee filed an affidavit in opposition to the motion for summary judgment. By his affidavit appellee set forth his discharge in bankruptcy as a bar to appellant's recovery.
On March 7, 1977, oral argument was heard from both parties on the state court motion for summary judgment.
On March 11, 1977, summary judgment was entered in the state court action. By the terms of this judgment, the debtor spouse was found to be personally liable on the debt. Appellee was found not to be personally liable on the debt, his discharge in bankruptcy having created a bar to any personal liability against him. Appellee and his spouse, as husband and wife, were found liable on the debt in rem, but not in personam, with satisfaction of the in rem liability limited to their interests in real estate held by them as tenants by the entirety as of the date of appellee's discharge, i.e., December 3, 1976.[1]
On May 23, 1977, appellee filed a complaint in the bankruptcy court to determine the dischargeability of the in rem entirety liability rendered by the state court judgment. In response to the parties' cross-motions for summary judgment on this complaint, the bankruptcy court entered its September 30, 1977, order which forms the basis for this appeal.
The basis for appellant's claim in this action is found in a long line of Indiana decisions. See, e.g., First National Bank of Goodland v. Pothuisje, 217 Ind. 1, 25 N.E.2d 436 (1940); Smith v. Beneficial Finance Co. of Indianapolis, Inc., 139 Ind. App. 653, 218 N.E.2d 921 (1966); Shabaz v. Lazar, 115 Ind.App. 691, 60 N.E.2d 748 (1945). The import of these decisions is as follows:
Under the law of the State of Indiana, three distinct forms of liability attach when a husband and wife incur a debt jointly and severally: the husband becomes liable personally both jointly and severally; the wife becomes liable personally both jointly and severally; and the marital entity, i.e., the husband and wife as such, becomes liable in rem to the extent of any real property held by the husband and wife as a marital entity, i.e., as tenants by the entirety. This third entity and its concomitant liability, i.e., the liability of the marital entity, possesses *623 all of the attributes of the tenancy by the entirety estate in real property as recognized by Indiana law. These decisions further hold that a discharge in bankruptcy does not bar an in rem recovery on the "third" liability, i.e., from the marital entity, unless the tenancy by the entirety property was brought into the bankruptcy estate. The decisions do limit the in rem recovery to the interests in real property held by the marital entity as a tenancy by the entirety at the time of the bankruptcy discharge. The parties do not dispute the state of the Indiana law as it is expressed in these decisions. The overall issue is whether that law conflicts with, and therefore is superseded by, federal bankruptcy law.
Of the stated issues presented by appellant, issues one (1) and four (4) are essentially identical and concern only the overall validity of the state law vis-a-vis federal bankruptcy law. These issues will be treated, infra.
Issue two (2), i.e., whether appellee's liability was secured by a pre-discharge lien recognized under state law, is completely without legal support and, therefore, will be rejected. Appellant argues that a lien is automatically created under state law in favor of a joint creditor as to all tenancy by the entirety property held by a husband and wife at the time they incur a joint obligation. Appellant has not, however, cited any authority in either the Indiana case law or the Indiana statutes which explicitly recognize this automatic lien. Instead, appellant would have this court imply such a lien from the Indiana decisions which hold the marital entity liable for a post-discharge judgment based upon a joint obligation of the husband and wife. To so hold would create yet another legal fiction in the state law governing tenancy by the entirety estates. The state courts have not done so, and neither will this court.[2]
Issue three (3) poses the question whether appellant's state court proceeding was barred by the automatic stay provisions of Rules 401 and 601, Rules Bankr.Proc., 11 U.S.C.A. As to Rule 601 there was no automatic stay, and apppellee concedes as much in his reply brief on this appeal. Rule 601 provides a stay against lien enforcement as to "(1) a lien against property in the custody of the bankruptcy court, or (2) a lien against the property of the bankrupt obtained within 4 months before bankruptcy. . . ." Neither of these provisions is applicable to the facts of this case.
The application of Rule 401 is not as clear. Under Rule 401 actions are stayed if "founded on an unsecured provable debt other than one not dischargeable under clause (1), (5), (6), or (7) of section 35(a)." Rule 401, Rules Bankr.Proc., 11 U.S.C.A. Of course, the central issue in this action is whether the debt of the marital entity is a debt falling within the language of section 35(a), which provides: "A discharge in bankruptcy shall release a bankrupt from all of his provable debts, whether allowable in full or part except such as [are excepted by this section]." 11 U.S.C. § 35(a) (emphasis added). Eight exceptions are listed in this section; it is without dispute that this debt does not fall within any of the eight exceptions. Therefore, to be excepted from the discharge the debt must be found not to be one "of his provable *624 debts." Under the provisions of section 35(c), 11 U.S.C. § 35(c), the bankruptcy court and state courts have concurrent jurisdiction to determine this issue. Therefore, the state court in this action did have jurisdiction to determine if the debt at issue was one "of his provable debts," and the state court proceeding would appear not to have been subject to the automatic stay provisions of Rule 401. See note 4 infra.
The overall issue presented in this appeal, as it is stated in appellant's issues one (1) and four (4), has been previously considered and determined by the United States Court of Appeals for the Sixth Circuit in a situation legally indistinguishable from that now before this court. Harris v. Manufacturer's National Bank of Detroit, 457 F.2d 631 (6th Cir.1972). This court adopts the reasoning and result of the Harris decision.
In Harris the bankrupt/appellant and his wife had obtained a loan from the creditor/appellee for which they jointly signed an unsecured promissory note. They then defaulted, and subsequent to the default Harris filed a voluntary petition in bankruptcy. Subsequent to the filing of the petition in bankruptcy, but prior to the issuance of a discharge, the creditor filed suit in a Michigan state court seeking judgment on the promissory note. Judgment was ultimately entered in the state court for the creditor, but only after the bankrupt had received his discharge in bankruptcy. Prior to entry of the state court judgment, and subsequent to the issuance of the discharge, the bankrupt initiated an action in the federal district court seeking to enjoin the creditor from continuing its state court suit or attempting to levy upon any judgment which might be obtained in that suit. The federal district court denied the bankrupt's claim, holding that Michigan law controlled and that Michigan law would permit post-discharge execution as to tenancy by the entirety property.[3] On appeal, the district court's decision was reversed.
The United States Court of Appeals for the Sixth Circuit first noted that the district court had properly exercised jurisdiction over the action as "`a supplemental and ancillary bill in equity, in aid of and to effectuate the adjudication and order made by the same [bankruptcy] court.' Local Loan Co. v. Hunt, 292 U.S. 234, 239, 54 S. Ct. 695, 697, 78 L. Ed. 1230 (1934)." Harris v. Manufacturer's National Bank of Detroit supra, at 632. The same equitable jurisdiction also lies in this action. Also as in Harris, the equitable nature of this action overrides any res judicata effect which might otherwise normally attach to the state court judgment. This result is essential if the "uniform" application of the federal bankruptcy laws is to be preserved. The court also finds this result to be supported by both the Bankruptcy Act[4] and *625 the United States Supreme Court's decision in Local Loan Co. v. Hunt, supra.
Having determined the federal district court properly exercised its jurisdiction, the Harris court then turned to a determination of the merits of the appellant's claim. After fully considering the policy behind the bankruptcy laws, the court found:
The net effect under the Michigan rule is that only the husband's several liability, and not his joint liability, under the joint obligation constitutes a "provable debt" from which he is released under Section 17 (footnote omitted). . . . Nothing in Section 17 . . . permits the exclusion of the husband's joint liability from provable debts . . . simply because the property attachable under the joint obligation is held by the codebtor spouses as tenants by the entirety. Rather, the Michigan case law at issue here directly conflicts with Section 17 and with the over-riding purpose of the Bankruptcy Act that the bankrupt shall have "a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of pre-existing debt." (citations omitted).
Harris, supra, at 635.
The Harris court also considered and rejected the argument that its decision violated the provisions of section 16 of the Bankruptcy Act, 11 U.S.C. § 34, which provides that the liability of a codebtor shall not be altered by the discharge of the bankrupt. In rejecting this argument, the court noted that "[a]pplication of Section 16 to cases where the spouses hold property as tenants by the entirety . . . would in effect result in a preservation of the entire joint liability of both the husband and wife since the discharged husband's interest in the property . . . cannot be isolated and removed from a joint judgment against both spouses." Harris, supra, at 635 n. 1. Thus, when faced with an apparent conflict between two sections of the Bankruptcy Act, i.e., sections 16 and 17, the court chose that result which best comports with the overall objectives of the Bankruptcy Act.[5]
The Harris decision presents a well reasoned and soundly supported result for a very thorny problem. This court adopts that reasoning and, therefore, affirms the bankruptcy court's order of September 30, 1977.
ORDER
Accordingly, appellant Indiana Bank and Trust Company of Fort Wayne's appeal is denied, and the order of the bankruptcy court, entered September 30, 1977, is hereby affirmed in all respects.
Entered this 9th day of June, 1978.
/s/ Jesse E. Eshbach
United States District Judge
NOTES
[1] The defendants' motion contains no paragraph 6.
[2] The district court affirmed this court's unpublished decision in Gilbert on June 9, 1978. Indiana Bank and Trust Co. of Fort Wayne v. Gilbert (In re Gilbert), No. FB 76-513 (N.D.Ind. June 9, 1978). Both unpublished decisions are attached to this Order.
[3] The court is amused by the fact that when asked how he was able to locate this unpublished opinion of the court, counsel for the debtor admitted that his secretary found the opinion while rummaging through papers discarded when an attorney moved from the building in which his law office is located. The court notes that opinions usually were not published prior to 1980.
[4] One important difference in the case at hand is that the defendants V.L. Beagles, Betty Beagles, Pete Cassen, and Karen Cassen are not parties to the promissory note which the debtor and his wife executed. They are assignees of the original creditor, First Interstate Bank. Another factual variation in this case is that First Interstate Bank requested relief from the automatic stay to pursue its state court judgment prior to the debtor's discharge. First Interstate Bank itself apparently never proceeded to collect a judgment against the debtor but assigned its interest to the above-named defendants.
[5] Harris involved section 17 of the former Bankruptcy Act.
[6] The Brandstaetter case involved the issue of a trustee's right to object to the debtors' claim of exemptions for personal injury causes of action after the debtors' discharge. Due to a time gap between the bankruptcy rules in effect under the former Bankruptcy Act and the new Bankruptcy Code, no statutory time limit for filing objections applied to the case.
[7] The order apparently was a form of order submitted by First Interstate Bank, the movant for relief from stay.
[1] In Allen Superior Court, Allen County, Indiana, Cause No. S-76-2844. See Exhibit A attached to plaintiff's complaint of May 23, 1977.
[2] In Allen Superior Court, Allen County, Indiana, No. S-76-2844. See Exhibit (the judgment) attached to plaintiff's complaint of May 23, 1977.
[3] Id, at pp. 5 and 9.
[4] In Re Larry Lee Zilm, Bankruptcy No. SB 75-61 (N.D.Ind. September 29, 1975) Copy attached.
[5] Reference here is made solely to that real estate described in the Allen Superior Court's judgment of March 11, 1977, Cause No. S-76-2844, at page 6, to wit:
Lot numbered One (1) in St. Vincent Place Addition to the City of Fort Wayne, according to the plat thereof, recorded in Plat Record 12, page 30 in Office of the Recorder of Allen County, Indiana.
[1] The state court also foreclosed the mortgage on the one tract of real estate which the debtors had pledged as security for the promissory note. There is no issue on this appeal as to the propriety of that foreclosure. The property was apparently sold for approximately $27,000, leaving a deficiency on the state court judgment of approximately $76,000. The state court judgment has been entered in the amount of approximately $103,000, i.e., the principal on the note, the interest then accrued, and incidental costs connected with the recovery. It is only the in rem liability on the deficiency which is at issue on this appeal.
[2] Tenancy by the entirety estates have long presented a problem in the orderly administration of bankruptcy estates. Because the property is deemed to be owned entirely by each the husband and the wife, subject only to a survivorship interest in the other, such property is not included in the estate of the bankrupt spouse. See, e.g., Phillips v. Krakower, 46 F.2d 764 (4th Cir.1931); First National Bank of Goodland v. Pothuisje, 217 Ind. 1 25 N.E.2d 436 (1940). In enacting the Bankruptcy Act of 1938, Congress recognized the problems presented by tenancy by the entirety property and chose only a limited approach in remedying them. This limited remedy is found at 11 U.S.C. § 110(a):
All property . . . in which the bankrupt has at the date of bankruptcy an estate . . . by the entirety and which within six months after bankruptcy becomes transferable . . . solely by the bankrupt, shall, to the extent it becomes so transferable, vest in the trustee. . . .
A much more general remedy has been proposed in a pending bankruptcy bill designed to establish more uniformity in the bankruptcy law. Pursuant to this bill, the trustee would be empowered to sell tenancy by the entirety property, under specified conditions, and to divide the proceeds between the non-bankrupt spouse and the bankruptcy estate, accordingly. See H.R. 8200, 95th Cong., 1st Sess. § 363(h) (1977).
[3] Appellant in the instant action seeks to distinguish the underlying Michigan law from that of the State of Indiana. The court finds no legally cognizable basis for making such a distinction. The end result of both laws is to permit post-discharge execution as to tenancy by the entirety property. Regardless of the legal reasoning used by the states to reach that end, if the effect of the Michigan law conflicts with the federal bankruptcy law, so too must the identical effect of the Indiana law. In making this determination, the court is fully aware of appellant's argument that Indiana law limits the "third" liability recovery to the interest in tenancy by the entirety property held by the bankrupt and spouse at the time of the discharge. The court finds this limitation insufficient, in the overall analysis of the Harris decision, to distinguish the Indiana law.
[4] Pursuant to section 14 of the Bankruptcy Act, 11 U.S.C. § 32 the bankruptcy court's order of discharge contained the following provision:
Any judgment heretofore or hereafter obtained in any court other than this court is null and void as a determination of the personal liability of the bankrupt with respect to any [discharged debt].
In addition to this provision, which was added by virtue of the 1970 amendments to the Bankruptcy Act, several other sections of the Act were amended in 1970 to correct long-standing abuses of the bankruptcy laws and to provide a more effective mechanism for the uniform determination and application of those laws. See, e.g., 11 U.S.C. §§ 11(a)(12), 32, 35, and 66 (all as amended). See also 1A Collier on Bankruptcy § 14.69, at 1452-55 (14th ed. 1978). Viewed in their overall context, these laws establish the power of the bankruptcy court to inquire into the validity of a state court judgment to determine if that judgment violates the conditions expressly stated in the bankruptcy court's order of discharge. See discussion of Rule 401, Rules Bankr.Proc., 11 U.S.C.A., supra. If the state court judgment is found to be null and void, the bankruptcy court may then enjoin the creditor from taking any further action based upon the null and void judgment to collect from the bankrupt. That is exactly the approach taken in this action.
[5] The court notes that the result in Harris is not to leave creditors totally without recourse against the tenancy by the entirety property. It is a well established practice for such creditors to petition the bankruptcy court for, and to receive, a stay of discharge pending their obtaining a valid state court judgment which creates a pre-discharge lien on the tenancy by the entirety property. Since this property does not pass to the bankruptcy estate, the lien cannot be invalidated by the bankruptcy trustee, and thus, it preserves the creditor's claim as against the tenancy by the entirety property. See, e.g., Davison v. Virginia National Bank, 493 F.2d 1220 (4th Cir.1974); Phillips v. Krakower, 46 F.2d 764 (4th Cir.1931); In re Magee, 415 F. Supp. 521 (W.D. Mo.1976).
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119 B.R. 516 (1990)
In re Tom HODAK, Debtor.
Edward J. KONIECZKA and Margaret T. Konieczka, his wife, Administrators of the Estate of Stella Michelle Konieczka, deceased, and individuals in their own right, Plaintiffs,
v.
Tom HODAK, Defendant.
Bankruptcy No. 89-0915, Adv. No. 89-0253.
United States Bankruptcy Court, W.D. Pennsylvania.
October 16, 1990.
*517 *518 Michael Balzarini, Balzarini, Carey & Watson, Pittsburgh, Pa., for plaintiffs.
Michael P. Schaefer, Bethel Park, Pa., for defendant/debtor.
Gary L. Smith, Pittsburgh, Pa., Chapter 7 Trustee.
MEMORANDUM OPINION
BERNARD MARKOVITZ, Bankruptcy Judge.
Plaintiffs Edward J. and Margaret T. Konieczka ("plaintiffs") seek in this adversary action to have a debt owed to them by defendant Tom Hodak ("Debtor") declared nondischargeable pursuant to 11 U.S.C. § 523(a)(9). They allege that the debt arises from a judgment entered in state court wherein liability was incurred by Debtor as a result of his operation of a motor vehicle while he was legally intoxicated pursuant to the laws of Pennsylvania.
Debtor maintains that plaintiffs are not entitled to pursue this action because the judgment in question was not entered until after he had filed his bankruptcy petition. He also denies that the injury which gave rise to the debt was in fact caused by his intoxicated condition at the time of the accident.
The parties agree that this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 157(b)(1) and that venue is proper in the United States Bankruptcy Court for the Western District of Pennsylvania.
In accordance with the analysis set forth below, judgment will be entered for plaintiffs and the debt owed to them by Debtor will be declared nondischargeable pursuant to 11 U.S.C. § 523(a)(9).
I
FACTS
The following facts are largely undisputed.
Plaintiffs are administrators of the estate of their daughter, Stella Michelle Konieczka, who suffered fatal injuries on April 9, 1983, in Butler County, Pennsylvania, when a motor vehicle in which she was a passenger was struck by a motor vehicle operated by Debtor. Criminal charges arising out of the collision were filed against Debtor on April 15, 1983.
On April 27, 1983, plaintiffs brought a wrongful death and survival action against Debtor in the Court of Common Pleas of Butler County, Pennsylvania, on behalf of the estate of their daughter and themselves.
On September 23, 1983, Debtor was tried and found guilty by a jury of operating a motor vehicle while the amount of alcohol in his blood by weight was 0.10% or greater, in violation of 75 Pa.C.S.A. § 3731(a)(4). He also was found guilty of homicide by vehicle, in violation of 75 Pa.C.S.A. § 3732.
Debtor was sentenced on December 1, 1983 for his conviction on the charge of homicide by vehicle to a term of imprisonment of 11½ to 23 months, fined $2,500.00, and placed on probation for a period of one (1) year upon his release. He also was sentenced to a term of imprisonment of thirty (30) days and fined $300.00 for his conviction on the charge of operating a motor vehicle while under the influence of alcohol. Debtor was incarcerated at the State Correctional Institution at Greensburg, Pennsylvania, until his release on November 1, 1984.
Plaintiffs made several attempts to make service upon Debtor during his incarceration. For reasons unknown, those attempts were unsuccessful. Successful service finally was made upon Debtor at his place of residence on November 29, 1984. Debtor never responded after service was made upon him. Nothing further happened regarding the wrongful death and survival action until approximately 4½ years later.
*519 On April 9, 1989, Debtor filed a voluntary chapter 7 petition in this court. Debtor sought a discharge of any possible liability to plaintiffs, who were listed as Debtor's sole creditors, in connection with the death of their daughter.
Plaintiffs requested and were granted relief from automatic stay on June 20, 1989 in order to proceed with their action against Debtor in state court.
Default judgment was entered against Debtor on June 23, 1989 in the Court of Common Pleas of Butler County, Pennsylvania, in the wrongful death and survival action. Plaintiffs' claim to date remains unliquidated. The amount of damages to be awarded will be determined at a later time by the Court of Common Pleas.
The present adversary action was commenced by plaintiffs on July 25, 1989.
II
ANALYSIS
A discharge granted under section 727 of the Bankruptcy Code does not discharge an individual from any debt:
. . . to the extent that such debt arises from a judgment or consent decree entered in a court of record against the debtor wherein liability was incurred by such debtor as a result of the debtor's operation of a motor vehicle while legally intoxicated under the laws or regulations of any jurisdiction within the United States or its territories wherein such motor vehicle was operated and within which such liability was incurred.
11 U.S.C. § 523(a)(9).
Section 523(a)(9) is to be broadly construed in order to effectuate its legislative intent and underlying policy. In re Scholz, 111 B.R. 651, 652 (Bankr.N.D.Ohio 1990). Congress sought three objectives when it enacted § 523(a)(9), to-wit:
(1) to deter drunk driving;
(2) to ensure that those who cause injury by driving while intoxicated do not escape civil liability through bankruptcy laws; and
(3) to protect victims of drunk driving.
In re Hudson, 859 F.2d 1418, 1423 (9th Cir.1988).
As has been noted, although plaintiffs commenced their state court action against Debtor approximately six (6) years prior to the time when he filed his bankruptcy petition, judgment against Debtor was not entered until some sixteen (16) or seventeen (17) months after the petition was filed.
Debtor's contention that one must obtain a judgment prior to the filing of a bankruptcy petition in order to obtain relief under § 523(a)(9) is without merit. Every reported decision known to this Court, with the exception of one case subsequently reversed on appeal, has held that a judgment or consent decree need not have been entered prior to the filing of the bankruptcy petition in order for § 523(a)(9) to be operative. See, e.g., In re Hudson, 859 F.2d 1418 (9th Cir.1988), rev'g 73 B.R. 649 (9th Cir. BAP 1987); Matter of Selin, 104 B.R. 98 (Bankr.W.D.Wis.1989); In re Tyler, 98 B.R. 396 (Bankr.N.D.Ill.1989); In re Rose, 86 B.R. 86 (Bankr.E.D.Mich.1988); In re Anderson, 74 B.R. 463 (Bankr.E.D.Wis. 1987). As Debtor has not provided any persuasive reason why this court should take a contrary position, and as this Court concurs with the reasoning of the above cases, we hold that plaintiffs' failure to obtain a judgment against Debtor prior to his bankruptcy filing presents no impediment to their action.
Additionally, the fact that plaintiffs waited a substantial period of time from commencement of their state court action before obtaining a default judgment presents no obstacle in this adversary proceeding. Clearly the Court does not wish to encourage such delays; however, Debtor has not pointed to any prejudice and/or reason why this time gap should affect the outcome of this adversary proceeding.
The essential elements of § 523(a)(9) are as follows:
(1) the debt in question arose from a judgment or consent decree entered in a court of record as a result of debtor's operation of a motor vehicle; and
*520 (2) debtor operated said vehicle while legally intoxicated under the laws of the jurisdiction in which the vehicle was operated and within which liability was incurred.
See Whitson v. Middleton, 898 F.2d 950, 953 (4th Cir.1990) (citations omitted).
Both of these essential elements have been overwhelmingly established in this case.
It is undisputed that the debt at issue here arose from a judgment entered by a court of record on June 23, 1989, and that it was entered as a result of Debtor's operation of a motor vehicle which resulted in the death of Stella Michelle Konieczka on April 19, 1983.
Section 523(a)(9) does not require a determination by the court which entered the judgment that liability was incurred "as a result of "the operation of the motor vehicle while intoxicated. In re Middleton, 100 B.R. 814, 816 (Bankr.E.D.Va. 1988). The section merely requires that a bankruptcy court find that a judgment or consent decree caused a debt or liability "as a result of `his intoxicated use of a motor vehicle'". In re Pahule, 78 B.R. 210, 212 (Bankr.E.D.Wis.1987), aff'd 849 F.2d 1056 (7th Cir.1988). This court may, when making such a determination, either consider evidence submitted to it directly or rely on the doctrines of res judicata or collateral estoppel. In re Tyler, 98 B.R. at 398.
The evidence clearly establishes that Debtor operated a motor vehicle which was involved in the collision that killed Stella Michelle Konieczka while he was legally intoxicated under the laws of Pennsylvania. Debtor was tried and convicted by a jury of operating a motor vehicle while he was under the influence of alcohol, in violation of 75 Pa.C.S.A. § 3731(a)(4).
Debtor, while apparently conceding that the debt in question arose as a result of his operating a motor vehicle while legally intoxicated, denies that the collision was "caused" by his intoxicated condition. This contention is unavailing for several reasons.
To begin with, Debtor has failed to persuade this court that a determination that his intoxicated condition was "the cause" of the injury which gave rise to the debt must be made before he can be denied a discharge of that debt under § 523(a)(9). Nothing in the legislative history would suggest that Congress so intended.
In addition, even if such a determination were required, there is little doubt that the debt incurred by Debtor was "caused by" his severe intoxication. According to Debtor's testimony, he had been drinking alcohol approximately two (2) hours prior to the accident and had last eaten some six (6) hours prior to the accident. Debtor was convicted by the court of the summary offense of failing to stop for a steady red signal at the intersection where the collision took place, in violation of 75 Pa.C.S.A. § 3112(a)(3). There was credible testimony that Debtor, whose person and vehicle reeked of the smell of alcohol after the accident, had a clear view of the intersection at which the accident occurred from a distance of nearly four-tenths (4/10ths) of a mile and yet failed to apply his brakes before the collision. Debtor's uncorroborated testimony relating to the quantity of alcohol consumed and the time frame thereof lacks credibility and flies in the face of well known physical theories. Simply stated, Debtor must have had substantially more to drink prior to operation of his car in order to operate same as he did and to register in excess of .10% on the breathalizer. The inescapable conclusion is that Debtor failed to stop for the red light and collided with the other vehicle because he was severely inebriated.
It follows from the foregoing that the debt owed to plaintiffs by Debtor is not dischargeable pursuant to 11 U.S.C. § 523(a)(9).
An appropriate Order will be issued.
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549 S.W.2d 254 (1977)
Emma TURNER, Individually and as next friend, Appellant,
v.
The COUNTY OF MARION, Appellee.
No. 8467.
Court of Civil Appeals of Texas, Texarkana.
March 29, 1977.
Rehearing Denied April 19, 1977.
Mary Bingham Edwards, Houston, for appellant.
Tony Hileman, Jefferson, for appellee.
CORNELIUS, Justice.
Appellant seeks to appeal from an order of the trial court denying her motion for summary judgment.
*255 Appellant filed this suit seeking damages for the alleged wrongful death of her husband, Ernest Turner. The petition alleged that Mr. Turner was employed by Marion County as an operator of a dirt moving tractor or "front end loader," and that while engaged in the scope of his employment and due to the negligence of the county, he was killed when the vehicle overturned and crushed him. The appellee answered by general denial. After some admissions had been secured pursuant to Tex. R.Civ.P. 169, appellant filed a motion for summary judgment, alleging that appellee had raised no defense, that no material issue of fact existed and that she was entitled to judgment as a matter of law. Appellee resisted the motion on the ground that appellant's petition stated no cause of action, and then filed its own motion for summary judgment. The trial court denied both motions.
An order denying summary judgment is purely interlocutory and is not appealable unless the case comes within the narrow factual situation presented in Tobin v. Garcia,[1] 159 Tex. 58, 316 S.W.2d 396 (1958). See Ackermann v. Vordenbaum, 403 S.W.2d 362 (Tex.1966); Haynes v. Dunn, 518 S.W.2d 880 (Tex.Civ.App. Waco 1975, no writ); Hoover v. Barker, 507 S.W.2d 299 (Tex.Civ.App. Austin 1974, writ ref'd n. r. e.); Garver v. First National Bank of Canadian, 406 S.W.2d 797 (Tex.Civ. App. Amarillo 1966, writ ref'd n. r. e.); Archer v. Skelly Oil Company, 314 S.W.2d 655 (Tex.Civ.App. Amarillo), writ ref'd n. r. e. per curiam, 159 Tex. 154, 317 S.W.2d 47 (1958); 4 McDonald's, Texas Civil Practice, Sec. 17.26.13, p. 183, and cases there cited; Annot., 15 A.L.R.3rd 927 (1967). Appellant recognizes the general rule but contends that her case is an exception because her claim is liquidated, and as both parties moved for summary judgment, the orders denying them had the effect of fully and finally disposing of all issues in the case. We do not agree. Appellant's claim is not a liquidated demand. Worley v. Smith, 26 Tex. Civ. App. 270, 63 S.W. 903 (1901, no writ). Even if her claim could be considered liquidated, the order denying her motion for summary judgment did not finally dispose of all the issues in the case. When a court denies a motion for summary judgment, it inferentially finds that there are one or more material disputed issues of fact and holds the case for trial on the merits. F. & T. Development Co. v. Morris, 248 S.W.2d 233 (Tex.Civ.App. Fort Worth 1952, no writ). The party whose motion has been denied has not been harmed, even if he is correct in his position that there is no material issue of fact and he is entitled to judgment as a matter of law, because he will have his right of appeal should the case ultimately be decided against him in the trial court. F. & T. Development Co. v. Morris, supra.
Here the trial court did not dismiss the case or otherwise enter a final judgment. It merely denied both motions for summary judgment, leaving the case on the docket pending trial. Consequently, the order is interlocutory and not appealable.
The appeal is dismissed.
NOTES
[1] That is, where motions for summary judgment have been filed by all of the real parties at interest and the appeal is prosecuted from a judgment granting one or more of them.
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119 B.R. 985 (1990)
In re Sam ALBERTO, Debtor.
Bankruptcy No. 90-B-06367.
United States Bankruptcy Court, N.D. Illinois, E.D.
October 12, 1990.
*986 *987 Max Chill, Steven R. Radtke, Chill, Chill & Radtke, P.C., Chicago, Ill., for Sam Alberto, debtor.
Michael L. Weissman, Foley & Lardner, Chicago, Ill., for The CIT Group/Equipment Financing, Inc.
MEMORANDUM OPINION
JOHN H. SQUIRES, Bankruptcy Judge.
This matter comes before the Court on the motion for imposition of sanctions under Federal Rule of Bankruptcy Procedure 9011 filed by The CIT Group/Equipment Financing, Inc. ("CIT"), against Sam Alberto (the "Debtor") and his attorneys Chill, Chill & Radtke, P.C. ("CC & R"), and the motion for an order to show cause filed by the Debtor against CIT and one of its attorneys, Michael Weissman ("Weissman"), for a finding of civil contempt and for relief under 11 U.S.C. § 362(h). For the reasons set forth herein, the Court allows both motions.
I. JURISDICTION AND PROCEDURE
The Court has jurisdiction to entertain these matters pursuant to 28 U.S.C. § 1334 and General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. These matters constitute core proceedings under 28 U.S.C. § 157(b)(2)(A) and (O).
II. FACTS AND BACKGROUND
During 1986 and 1987, certain corporations owned, controlled, operated, or managed by the Debtor entered into loan and security agreements with CIT to secure indebtedness. The Debtor unconditionally guaranteed same. As a result of *988 defaults under the agreements, CIT sued the Debtor on July 22, 1988 in a civil action in the United States District Court for the Northern District of Illinois ("the district court action"), which was assigned to Judge Charles R. Norgle.[1] On September 9, 1988, Judge Norgle entered an order of default against the Debtor, followed by a judgment on September 22, 1988, in favor of CIT for $522,722.44, plus interest at the judgment rate. Subsequently, CIT commenced post-judgment enforcement proceedings, which included citations to discover assets pursuant to Federal Rule of Civil Procedure 69(a) and Ill.Rev.Stat. ch. 110, para. 2-1402 and ch. 110A, para. 227 (1989). One citation was issued against the Debtor on October 4, 1988 and served the following day. His first appearance for examination was set for November 4, 1988.
A subsequent minute order was entered March 3, 1989, pursuant to which the Debtor's deposition was to be taken on or before March 14, 1989, after the Debtor produced documents by March 10, 1989. A status hearing on the citation proceeding was continued to April 7, 1989. Although not argued by the parties, but perhaps critical to the ultimate outcome of these proceedings, that day Judge Norgle entered another minute order for turnover and assignment within ninety days to CIT of any and all beneficial interest in Trust No. 1083725 ("the Land Trust") at Chicago Title & Trust Company ("CT & T") which was the trustee.[2] All other matters relating to that citation proceeding and the enforcement of the judgment were referred to a magistrate. CIT filed subsequent motions for sanctions, turnover and contempt against the Debtor before the magistrate in May and June of 1989. Thereafter, the magistrate recused himself for cause pursuant to 28 U.S.C. § 455(a) which resulted in reassignment of the case back to Judge Norgle.
On July 7, 1989, Judge Norgle again ordered the Debtor to execute and deliver to CIT an assignment of the beneficial interest in the Land Trust by July 17, 1989. The corpus of the Land Trust includes certain real property and improvements commonly known as 2424-2554 South Laflin Avenue, Chicago, Illinois (the "Laflin property"). On July 19, 1989, Judge Norgle entered an order finding the Debtor in contempt and that good cause existed for entry of an order pursuant to Federal Rule of Civil Procedure 70, divesting the Debtor of all right, title and interest in and to the beneficial interest in the Land Trust, and vesting same in CIT. CT & T, which at that time was not a party to the post-judgment citation proceedings, was ordered to show on its records the transfer of the beneficial interest in the Land Trust from the Debtor to CIT, subject to a prior collateral assignment in favor of the Tinley Park Bank.
On October 16, 1989, an agreed order was entered by Judge Norgle purportedly resolving all post-judgment proceedings to which counsel for the Debtor, Weissman for CIT, and counsel for an intervenor, Lawndale Trust and Savings Bank ("Lawndale") all agreed. The October 16, 1989 order in relevant part, recited that according to the order of July 19, 1989, CIT was owner of the entire beneficial interest in the Land Trust, subject only to a prior collateral assignment in favor of the Tinley Park Bank. The October 16, 1989 order further recited that CIT contemplated making a private sale of the beneficial interest to A & W Partners, an entity in which the Debtor was to be a partner. The order specifically decreed that following satisfaction of CIT's judgment by the proposed assignment of the beneficial interest to A & W Partners, Lawndale's claim against the beneficial interest would be subordinated only to the prior collateral assignment in favor of Tinley Park Bank. The order also directed CT & T to take certain actions with its records to show the foregoing.
The proposed sale by CIT to A & W Partners did not occur and a motion to amend the agreed order of October 16, 1989 was filed and presented to Judge Norgle *989 on July 30, 1990. Prior thereto, however, the Debtor filed a voluntary Chapter 11 petition on April 5, 1990. Apparently without dispute, the Debtor claims to be in physical possession of the Laflin property titled in the Land Trust. The Debtor has continued to manage his affairs and businesses as a debtor-in-possession pursuant to 11 U.S.C. §§ 1107 and 1108. Max Chill, one of the Debtor's attorneys, was present at the July 30, 1990 hearing before Judge Norgle. He argued, among other things, that the July 7, July 19 and October 16, 1989 orders were improperly entered under the post-judgment citation proceedings because pursuant to Ill.Rev.Stat. ch. 110A, para. 277(f), they were entered more than six months after the Debtor's first appearance scheduled thereunder in November 1988. Chill asserted before the district court, as before this Court, that the district court was therefore without jurisdiction to enter these orders, and that the order Judge Norgle entered on July 30, 1990 and subsequent orders entered by him post-petition in the district court action violated the automatic stay of 11 U.S.C. § 362.
On August 2, 1990, the Debtor filed a plan and disclosure statement. Both are purportedly signed by the Debtor, but were not signed by any of the attorneys at CC & R. Under the Debtor's plan and disclosure statement, the Debtor asserts that he, not CIT, is the beneficial owner of the Laflin property titled in the Land Trust. He proposes to sell the Laflin property to his son, Tom, under certain terms and conditions,[3] with the proceeds to be used to pay allowed claims, as determined by the Court.
CIT attempted to obtain a temporary restraining order from Judge Norgle in the district court action to enjoin the Debtor from filing and presenting the plan and disclosure statement containing such provisions. Judge Norgle did not enter injunctive relief against the Debtor. However, on August 2, 1990, he assessed sanctions in the amount of $350.00 pursuant to Federal Rule of Civil Procedure 11 against the Debtor and Chill for such ownership representations concerning the beneficial interest in the Land Trust as not being an accurate and truthful representation of the status of the subject property and interests in the Land Trust. On August 7, 1990, the Debtor and Chill filed their notice of appeal from Judge Norgle's orders dated October 13, 1989, July 30, 1990 and August 2, 1990. That pending appeal apparently raises some of the same issues asserted here. To date, the Seventh Circuit has not ruled.
Objections to the adequacy of the Debtor's disclosure statement were filed by several creditors. At the September 17, 1990 hearing pursuant to 11 U.S.C. § 1125, the Court sustained the various objections to the adequacy of the original disclosure statement. The objections were sustained in part as a result of the failure to clearly reference and accurately summarize the prior orders of the district court regarding the Laflin property and the Land Trust.
CIT's Bankruptcy Rule 9011 motion was filed August 22, 1990, and the Debtor's section 362(h) motion was filed one week thereafter. The parties have briefed both motions and on September 17, 1990, each party expressly waived evidentiary hearings on the matters, rested on their respective pleadings, and the Court took same under advisement.
III. ARGUMENTS OF THE PARTIES
A. CIT'S RULE 9011 MOTION
CIT asserts that the Debtor's plan and disclosure statement violate Rule 9011 because Judge Norgle's orders entered in July and October 1989 divested the Debtor of any incident of ownership in the beneficial interest in the Land Trust. In addition, CIT claims the plan and disclosure statement omits complete and accurate reference to such orders and misrepresents that the Debtor, rather than CIT, owns the beneficial interest in the Land Trust, subject to the various claims against same. CIT contends that the July 30, 1990 and August 2, 1990 orders reaffirmed that finding and *990 one of the Debtor's counsel, Max Chill, was so advised prior to the time the plan and disclosure statement were filed.
In response thereto, the Debtor asserts that CT & T was a necessary party to the post-judgment citation proceedings, but was never timely brought into the district court litigation until July 13, 1990. Allegedly its records show the Debtor is the sole beneficiary of the Land Trust subject to the various claims against same, including CIT, Lawndale, Tinley Park Bank and others. The Debtor and its attorneys further respond that although Judge Norgle's orders in July and October, 1989 appeared absolute on their face, they were in the nature of a mortgage, and could not operate to divest the Debtor of his beneficial ownership interest. Critical to the Debtor's argument is his contention that the July and October, 1989 orders were untimely entered pursuant to the citation proceedings on dates more than six months after the Debtor's original appearance thereunder in November, 1988. This argument postulates that all such orders by Judge Norgle were therefore void because of a lack of jurisdiction. Additionally, the Debtor contends that due to the fact that A & W Partners was never created to complete the contemplated assignment from CIT (referenced in the agreed order of October 19, 1989), the proposed sale was never consummated, and the beneficial interest was never transferred or otherwise conveyed to or by CIT. Thus, the Debtor concludes that he retains the ownership rights to the beneficial interest in the Land Trust. It is noteworthy that neither party discusses the significance or effect of the April 1989 minute orders purportedly ordering transfer and turnover of the beneficial interest in the Land Trust from the Debtor to CIT within ninety days. Such orders appear to have been entered and docketed within the applicable six months limitation period of Ill.Rev.Stat. ch. 110A, para. 277(f) (1989). CIT replies that the October 12, 1989 order was consented to and approved by the Debtor's then counsel. CIT asserts the district court never lost jurisdiction and therefore, Judge Norgle's orders are effective. Moreover, CIT states that Judge Norgle found the plan and disclosure statement to be violative of Rule 11. Hence, the filing of same in these proceedings violates the Bankruptcy Rule counterpart, Rule 9011.
B. THE DEBTOR'S SECTION 362(h) MOTION
The Debtor asserts that at all times Weissman was CIT's attorney and aware that the Debtor filed a Chapter 11 petition on April 5, 1990, which created a bankruptcy estate under section 541. The Debtor contends that this estate includes his alleged possessory interest in the Laflin property. Both CIT and Weissman were automatically stayed from further proceeding post-petition with the district court action pursuant to section 362(a)(1), (3) and (6). The Debtor argues that Weissman and CIT first violated the automatic stay by pursuing the district court action on July 13, 1990, by citing in CT & T to the district court action. Second, the Debtor claims that the automatic stay was further violated when CIT and Weissman prevailed on the district court to enter the order of July 30, 1990, over the Debtor's objection, prompting the Debtor's appeal of the entry of that order and the October 1989 order to the Seventh Circuit. Third, the Debtor claims that the automatic stay was also violated on August 2, 1990, when Weissman, on behalf of CIT, initiated civil contempt proceedings in the district court action against the Debtor and Chill for filing the plan and disclosure statement. The Debtor seeks relief under section 362(h), contending that to the extent that these proceedings upset the proposed financing commitment and he fails to reorganize, he is entitled to actual damages, plus treble punitive damages, costs and attorneys' fees.
Weissman and CIT, in response, deny any violation of section 362. First, they assert that the October 16, 1989 order, entered with the Debtor's consent, serves to estop the Debtor from claiming that he still holds the beneficial interest in the Land Trust. They additionally argued that Judge Norgle's July 30, 1990 order was entered nunc pro tunc and therefore affirms *991 the July 19, and October 16, 1989 orders he entered which do not violate section 362. Weissman and CIT claim that by virtue of those orders, the beneficial interest in the Land Trust is not property of the Debtor's estate in the Chapter 11 proceedings and therefore, the subsequent post-petition proceedings in the district court do not involve any property of the estate subject to the automatic stay. Next, Weissman and CIT assert that the July 13, 1990 citation proceeding in the district court against CT & T was directed against a non-debtor/third-party and thus it did not violate the automatic stay. In addition, Weissman and CIT argue that full faith and credit must be given by this Court to the pre-petition district court judgment and orders entered in that action. They assert that same are res judicata with respect to the issue of the ownership of the beneficial interest in the Land Trust. Lastly, they argue that the August 2, 1990 sanction order does not violate the automatic stay of section 362.
The Debtor replies with three arguments. First, the district court had no jurisdiction after the citation proceedings against the Debtor allegedly terminated on May 4, 1989, as CIT never obtained an extension of those proceedings pursuant to Ill.Rev.Stat. ch 110A, para. 277(f) (1989). Accordingly, the Debtor asserts that Judge Norgle's orders of April and October 1989 and the orders he entered in July and August, 1990 are void for lack of jurisdiction, including the contempt orders entered as collateral to the citation proceedings. Second, the Debtor argues that the post-petition action taken in the district court involved property of the estate. As a result of CT & T not being made a party to the district court action until June, 1990, the prior district court orders were ineffective to validly transfer to CIT all the Debtor's beneficial interest in the Land Trust. Thus, the Debtor concludes that CIT's citation lien was not perfected and the Debtor can still have the benefits of the automatic stay and attempt to reorganize. Third, the Debtor replies that even if the district court had jurisdiction to enter all its orders, the Debtor had actual possessory interests in the Laflin property, he has collected all the rentals therefrom, and held himself out as the owner thereof. Hence, the Debtor's possessory interest and his claimed equity in the Laflin property, which allegedly exceeds the aggregate amount of the claims and encumbrances against it, are property of the estate under section 541 and protected by the automatic stay pursuant to section 362.
IV. STANDARDS
A. FEDERAL RULE OF BANKRUPTCY PROCEDURE 9011
Bankruptcy Rule 9011(a) provides:
Every petition, pleading, motion and other paper served or filed in a case under the Code on behalf of a party represented by an attorney, except a list, schedule, statement of financial affairs, statement of executory contracts, statement of intention, Chapter 13 Statement, or amendments thereto, shall be signed by at least one attorney of record in the attorney's individual name, whose office address and telephone number shall be stated. A party who is not represented by an attorney shall sign all papers and state the party's address and telephone number. The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney's or party's knowledge, information, and belief formed after reasonable inquiry it is well-grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, such as to harass, to cause delay, or to increase the cost of litigation. If a document is not signed it shall be stricken unless it is signed promptly after the omission is called to the attention of the person whose signature is required. If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which *992 may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney's fee.
Fed.R.Bankr.P. 9011(a) (emphasis added).
Bankruptcy Rule 9011 and Rule 11 are analogous. Thus, the authorities construing Rule 11 are applicable to the case at bar. The Court has jurisdiction to impose sanctions under these rules. In re TCI Ltd., 769 F.2d 441, 448 (7th Cir.1985); In re Chicago Midwest Donut, Inc., 82 B.R. 943 (Bankr.N.D.Ill.1988); see also In re Arkansas Communities, Inc., 827 F.2d 1219, 1221-1222 (8th Cir.1987) (Rule 9011 can be applied by bankruptcy court even though it is not an Article III court). The primary purpose of both rules is to deter unnecessary filings for the benefit of the judicial system. Szabo Food Service, Inc. v. Canteen Corp., 823 F.2d 1073, 1077-1080 (7th Cir.1987). It is well established that "[t]he standard for imposing sanctions under Rule 11 is an objective determination of whether a sanctioned party's conduct was reasonable under the circumstances." Brown v. Federation of State Medical Boards, 830 F.2d 1429, 1435 (7th Cir.1987). See Dreis & Krump Mfg. Co. v. International Ass'n. of Machinists & Aerospace Workers, 802 F.2d 247, 255 (7th Cir.1986). Subjective bad faith is no longer the inquiry. See, e.g., Brown, 830 F.2d at 1435. Once the Court finds a Rule 11 violation, it is required to impose a sanction for the protection of the judicial process and to relieve the financial burden that baseless litigation imposes on the other side. Szabo, 823 F.2d at 1082; see also PainWebber Inc. v. Can Am Financial Group, Ltd., 121 F.R.D. 324, 329 (N.D.Ill.1988), aff'd, 885 F.2d 873 (7th Cir.1989); Mars Steel Corp. v. Continental Illinois Nat. Bank & Trust Co., 120 F.R.D. 53, 55 (N.D.Ill.1988), aff'd, 880 F.2d 928 (7th Cir.1989).
Rule 11 contains two grounds for sanctions. The first ground is the "frivolousness clause." Brown, 830 F.2d at 1435. The relevant inquiry for this ground has two prongs: (1) whether the attorney or party made a reasonable investigation into the facts; and (2) whether the attorney or party made a reasonable investigation of the law.[4] In making a determination of whether the attorney or party made a reasonable inquiry into the facts of the case, the following five factors must be considered: (1) whether the signer of the documents had sufficient time for investigation; (2) the extent to which the attorney had to rely on his or her client for the factual foundation underlying the pleading, motion, or other paper; (3) whether the case was accepted from another attorney; (4) the complexity of the facts and the attorney's ability to do a sufficient pre-filing investigation; and (5) whether discovery would have been beneficial to the development of the underlying facts. Brown, 830 F.2d at 1435; see also R.K. Harp Invest. Corp. v. McQuade, 825 F.2d 1101, 1103-1104 (7th Cir.1987). A pleading, motion, or paper is not well-grounded in fact if it is contradicted by uncontroverted evidence that was or should have been known to the attorney or the party signing the filing. Frazier v. Cast, 771 F.2d 259, 263-265 (7th Cir.1985).
The second ground for imposing sanctions under Rule 11 is the "improper purpose" clause. Brown, 830 F.2d at 1436. This ground of Rule 11 provides that a motion, pleading, or other document may not be interposed for the purposes of delay, harassment, or increasing the costs of litigation. An objective standard is used to assess whether the party or attorney acted with an improper purpose. Thornton v. Wahl, 787 F.2d 1151 (7th Cir.1986), cert. denied, 479 U.S. 851, 107 S. Ct. 181, 93 L. Ed. 2d 116 (1986).
In a recent opinion, the United States Supreme Court in Pavelic & LeFlore v. Marvel Entertainment Group Div. of Cadence *993 Industries Corp., ___ U.S. ___, 110 S. Ct. 456, 107 L. Ed. 2d 438 (1989) opined in regard to the phrase "person who signed", "as the requirement of signature is imposed upon the individual, we think the recited import and consequences of signature run as to him." Id. 110 S.Ct. at 459. Hence, the Supreme Court held that Rule 11 authorizes the imposition of a sanction only against the individual person or persons signatory, even when the individual signing does so explicitly on behalf of another. In its most recent opinion on Rule 11, Cooter & Gell v. Hartmarx Corp., ___ U.S. ___, 110 S. Ct. 2447, 110 L. Ed. 2d 359 (1990), the Supreme Court stated that:
Rule 11 imposes a duty on attorneys to certify that they have conducted a reasonable inquiry and have determined that any papers filed with the court are wellgrounded in fact, legally tenable and "not interposed for any improper purpose." An attorney who signs the paper without such a substantiated belief "shall" be penalized by "an appropriate sanction." Such a sanction may, but need not, include payment of other parties expenses.
Id. 110 S.Ct. at 2454.
When a sanction is imposed for misconduct, a frequent question arises as to whether the brunt of the sanction should be borne by the litigant or by counsel. Courts allocate sanctions between the attorney and the client according to their relative culpability in violating Rule 11. Chevron, U.S.A., Inc. v. Hand, 763 F.2d 1184, 1187 (10th Cir.1985). Generally, sanctions fall wholly on the client when he has misled his attorney as to the facts or purpose of the proceeding as in Chevron, supra. When an attorney and client share responsibility for litigation strategy and such strategy violates Rule 11, courts can impose joint and several liability. See In re TCI Ltd., 769 F.2d at 446 ("When lawyers yield to the temptation to file baseless pleadings to appease clients, however, they must understand that their adversary's fees become a cost of their business."). The amount (and nature) of sanctions to be imposed is left to the discretion of the Court. Frantz v. U.S. Powerlifting Federation, 836 F.2d 1063, 1066 (7th Cir.1987); Diversified Technologies Corp. v. Jerome Technologies, Inc., 118 F.R.D. 445, 453 (N.D.Ill.1988).
B. THE AUTOMATIC STAY OF SECTION 362
Pursuant to section 362(a)(1), the filing of a petition in bankruptcy operates as an automatic stay of the commencement of any actions to recover a claim against a debtor that arose before the commencement of the case. Subparagraph (a)(3) prohibits any act to obtain possession of or exercise control over property of the estate. Subparagraph (a)(4) further prohibits acts to enforce of any lien against property of the estate. Moreover, subparagraph (a)(6) stays any act to collect any claim against a debtor that arose before the commencement of the case.
Section 362(h) provides that actual damages, including costs and attorneys' fees, may be recovered by an individual for a willful violation of the automatic stay. 11 U.S.C. § 362(h). Willful is defined as a deliberate act done with the knowledge that the act is in violation of the automatic stay. In re Forty-Eight Insulations, Inc., 54 B.R. 905, 909 (Bankr.N.D.Ill. 1985); In re Allen, 83 B.R. 678, 681 (Bankr.E.D.Mo.1988); In re Wagner, 74 B.R. 898, 903 (Bankr.E.D.Penn.1987). A creditor's violation of the stay is willful even if the creditor believed itself justified in taking an action found to be violative of the stay. In re Tel-A-Communications Consultants, Inc., 50 B.R. 250, 254 (Bankr. D.Conn.1985). Attempts to collect a scheduled debt in another forum are impermissible. In re Ellis, 66 B.R. 821, 823 (N.D.Ill. 1986). Creditors who act without court approval do so at their peril and expense. In re AM International, Inc., 53 B.R. 744 (Bankr.M.D.Tenn.1985).
The relief sought references contempt. The damage remedies afforded by section 362(h) are neither sanctions nor based on contempt of court. No order of this Court has been allegedly violated. Consequently, contempt proceedings under *994 Bankruptcy Rule 9020 are inappropriate. This procedural distinction follows earlier Opinions of the Court. See In re Price, 103 B.R. 989 (Bankr.N.D.Ill.1989) and In re Prairie Trunk Railway, 112 B.R. 924 (Bankr.N.D.Ill.1990).
V. DISCUSSION
A. THE RULE 9011 MOTION
The Debtor's plan and disclosure statement violate Bankruptcy Rule 9011 in several particulars. First, and most obvious, they have not been signed by at least one of the Debtor's attorneys of record. The plan and disclosure statement are "other papers" filed in this case on behalf of the Debtor, who is represented by CC & R. The plan and disclosure statement do not fall within the exceptions to those pleadings required to be signed by at least one attorney of record because neither are a list, schedule, statement of financial affairs, statement of executory contracts, statement of intention, Chapter 13 statement or amendments thereto. Second, the plan and disclosure statement fail to fully and accurately reference Judge Norgle's orders purportedly divesting the Debtor of his beneficial interest in the Land Trust. Although the Debtor may dispute, and has appealed the alleged defectiveness of some if not all of those orders, they have, in fact, been entered. The lack of accurate reference in the plan and disclosure statement misrepresents the true nature of the contested status of the beneficial interest in the Land Trust. Although the July 31, 1990 order was referenced in the disclosure statement and was attached as an exhibit, which in turn referenced the July 19 and October 16, 1989 orders, the earlier orders from April and July, 1989 were not referenced. The bases of the Debtor's contentions that the orders were ineffective are not contained in the plan and disclosure statement.
It is not a defense to Rule 9011 for the Debtor to argue an alleged lack of jurisdiction in the district court relative to the post-judgment citation to discover assets proceedings. Those arguments made here are by way of an attempted collateral attack on the validity of Judge Norgle's orders. This Court need not pass on the merits of such contentions for purposes of ruling on either motion at bar. The bankruptcy court is not the appropriate forum for an attempted effective collateral attack on the orders entered by Judge Norgle. See generally In re Chicago, Milwaukee, St. Paul and Pacific Railroad Co., 738 F.2d 209 (7th Cir.1984) (judgment by a court of competent jurisdiction bears a presumption of regularity and is therefore not subject to collateral attack); In re Hammett, 42 B.R. 48 (Bankr.N.D.Miss.1984) (a bankruptcy court will not sustain a collateral attack on a judgment of a court of competent jurisdiction). The bankruptcy court cannot serve as an appellate forum to challenge the validity of orders entered by the district court. Pursuant to 28 U.S.C. § 158(a), the district court has jurisdiction to hear appeals from final judgments, orders and decrees of the bankruptcy court entered in cases and proceedings referred to bankruptcy judges under 28 U.S.C. § 157. The converse does not hold true. The Seventh Circuit Court of Appeals, to which the Debtor has now appealed, is the appropriate forum to challenge those orders and Judge Norgle's jurisdiction. See 28 U.S.C. § 1291.
B. CIT'S SECTION 362(h) MOTION
CIT's actions were deliberately done with knowledge that the bankruptcy case was pending. CIT had knowledge of the pending bankruptcy, thus its actions were willful. CIT does not dispute that its post-petition actions in the district court action were taken to enforce its judgment against the Debtor. It is also undisputed that CIT's actions were taken without a prior modification of the automatic stay. Such actions constitute a violation of the automatic stay. The Court did not allow, nor was it aware of the unauthorized post-petition actions of CIT. CIT should have filed a motion for relief from the automatic stay and received an appropriate order under section 362(d)(1) or (d)(2) before proceeding to further enforce its judgment.
*995 C. APPROPRIATE RELIEF UNDER BOTH MOTIONS
The Debtor's violation of Rule 9011 requires an appropriate sanction which may include as part of the discretion afforded the Court, an order to pay reasonable expenses incurred by the other party, plus a reasonable attorneys' fee. There is no single "right" sanction. Frantz v. U.S. Powerlifting Federation, 836 F.2d at 1066. The plan and disclosure statement were signed only by the Debtor and not by one or more of his attorneys. Furthermore, the disclosure statement has already been held inadequate under section 1125. Accordingly, the appropriate sanction the Court will impose is the striking of the plan and disclosure statement. Although the Court afforded CIT the opportunity to present evidence to support its relief sought, it failed to furnish any evidence of expenses or attorneys' fees incurred in this matter. CIT has waived an opportunity for hearing. The Court is not inclined to expend additional time on this matter, effectively bifurcating same. Consequently, the Court declines to assess any costs or fees against the Debtor. Although CC & R failed to comply with Rule 9011 and sign the plan and disclosure statement, the Court cannot assess sanctions against it in light of the holding in Pavelic & LeFlore.
Similarly, CIT has willfully violated the automatic stay by proceeding against the Debtor with the district court action. Although the Debtor has been put to some trouble and inconvenience by virtue of CIT's conduct, the Debtor waived an evidentiary hearing. The Debtor failed to furnish any evidence of actual damages, costs or attorneys' fees to warrant recovery of same. Absent the showing of liquidated or demonstrable actual damages, the Court declines to assess actual or punitive damages. A party seeking attorneys' fees as a sanction must present a request from which an amount can be computed with reasonable certainty. Failure to submit same justifies a rejection of the request. In re Central Ice Cream Co., 836 F.2d 1068, 1074 (7th Cir.1987).
The Court cannot award damages, costs or fees where none have been clearly proven. Such results obtain, notwithstanding the fact that both Rule 9011 and section 362 have been violated. Damages can only be awarded if there is evidence supporting the award of a definite amount, which may not be predicated upon pure speculation. Once a party has proven that he has been damaged, he needs to show the amount of damages with reasonable certainty. See generally 15 Illinois Law and Practice, Damages, § 14 (1983 and Supp. 1988); Hunter, Federal Trial Handbook 2d, § 80.5 (1984 and Supp.1987). Evidentiary hearings on attorneys' fees are required only if there are disputed factual issues. Hill v. Norfolk & Western Railway Co., 814 F.2d 1192, 1201-1202 (7th Cir.1987); In re TCI Ltd., 769 F.2d at 445.
The Court will not further burden its calendar by bifurcating either motion and setting either matter over for future evidentiary hearings or other proof of the requested damages and fees prayed for by both parties. Enough is enough. One of the unfortunate, but inevitable, side effects of the policy of the rigorous application of Rule 11 in this circuit, as exemplified by both of these matters, is that it sometimes engenders Rule 11 collateral litigation. In this case, a Bankruptcy Rule 9011 motion has spawned a responsive section 362(h) motion. Both of the motions at bar are well taken. Unfortunately, they inherently generate much heat without any light. Bad feelings unnecessarily run among counsel for the opposing litigants. Messrs. Weissman and Chill, in particular, are both experienced and able counsel who should know better than to engage in litigation tactics with this end result. The Court has been compelled to expend a substantial amount of its valuable and scarce time resolving the motions. Unfortunately, the parties' attention to the principal matters before this Court, namely the Debtor's attempted reorganization, have been diverted. The future focus in these proceedings needs to be redirected back to the attempted reorganization of the Debtor.
*996 VI. CONCLUSION
For the foregoing reasons, the Court allows CIT's motion for imposition of sanctions pursuant to Federal Rule of Bankruptcy Procedure 9011 and strikes the Debtor's plan and disclosure statement filed on or about August 2, 1990. The Debtor's motion for relief under section 362(h) will be allowed. However, the Debtor has failed to prove any damages, costs or fees. Accordingly, none will be awarded. Each party shall bear its own costs and attorneys' fees incurred in these matters.
This Opinion is to serve as findings of fact and conclusions of law pursuant to Federal Rule of Bankruptcy Procedure 7052.
NOTES
[1] Copies of the district court docket sheet have been furnished with the pleadings.
[2] On April 17, 1989, an amended minute order dated April 13, 1989, was docketed correcting an erroneous reference in the April 7, 1989 order.
[3] The Debtor's plan proposes to sell the Laflin property to his son who obtained a $900,000 commitment under certain terms and conditions from Oak Brook Bank/Liberty to finance same for payment of all the allowed claims of the creditors.
[4] From the outset, it should be noted that CIT has not alleged an unreasonable investigation of the law. Rather, CIT contends that by listing the beneficial interest in the Land Trust as owned by the Debtor, without fully summarizing Judge Norgle's pre-petition orders in the plan and disclosure statement, it constitutes a misrepresentation of the surrounding facts. Thus, the Court will not discuss the second prong of the first ground.
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391 Pa. Super. 32 (1990)
570 A.2d 86
COMMONWEALTH of Pennsylvania
v.
John ROSS, Appellant.
Supreme Court of Pennsylvania.
Submitted December 4, 1989.
Filed February 12, 1990.
*34 Harvey L. Anderson, Philadelphia, for appellant.
Donna G. Zucker, Asst. Dist. Atty., Philadelphia, for the Com., appellee.
Before CAVANAUGH, BROSKY and WIEAND, JJ.
PER CURIAM:
John Ross was tried nonjury and was found guilty of robbery, a felony of the first degree, in violation of 18 Pa.C.S. § 3701(a)(1)(ii), criminal conspiracy in violation of 18 Pa.C.S. § 903, and possession of an instrument of crime in violation of 18 Pa.C.S. § 907(a). A motion for post-trial relief was denied, and Ross was sentenced to serve a term of imprisonment of not less than five (5) years nor more than ten (10) years for robbery and to concurrent, lesser terms for criminal conspiracy and possessing an instrument of crime. On direct appeal from the judgments of sentence, Ross contends that (1) the evidence was insufficient to show a criminal conspiracy, and (2) the evidence was insufficient to show a robbery which was a felony of the first degree in violation of 18 Pa.C.S. § 3701(a)(1)(ii) and showed no more than a violation of 18 Pa.C.S. § 3701(a)(1)(iv), which is a felony of the second degree. As such, he contends, his offense did not implicate the mandatory sentence provisions of 42 Pa.C.S. § 9713(a), which are applicable to certain enumerated crimes committed "in or near public transportation." Finally, he argues that if the mandatory sentence statute is applicable, it is unconstitutional because it violates due process and equal protection guarantees and also the constitutional proscription against cruel and unusual punishment. We find no merit in these arguments and affirm the several judgments of sentence.
*35 The evidence has been recited fully in the opinion of the learned trial judge, and there is nothing to be gained by repeating it here. Suffice it to say that it was sufficient to show that appellant, by the use of an upraised knife, had threatened his victim with serious bodily injury. This is a felony of the first degree in violation of 18 Pa.C.S. § 3701(a)(1)(ii). The proper focus under this section is the type of bodily harm threatened. We look at the defendant's intent and actions and not necessarily on the subjective state of mind of the victim. Commonwealth v. Thomas, 376 Pa.Super. 455, 460, 546 A.2d 116, 118 (1988) (en banc), allocatur denied, 520 Pa. 616, 554 A.2d 509 (1989). Since the evidence showed that appellant in this case intended to and in fact did threaten his victim by an upraised knife, it is not a defense to a charge under subsection (ii) of the robbery section that only the threatened person's companion, who was assaulted simultaneously by a second robber, actually saw the knife.
Similarly, we rely on the trial court's review of the evidence in determining that it was adequate to show appellant's participation in a conspiracy to rob the two women who were waiting for the Broad Street subway.
Appellant's contention that the mandatory sentence provisions of 42 Pa.C.S. § 9713(a) violate concepts of due process has previously been before the Superior Court, and the constitutionality of the statute has been upheld. See: Commonwealth v. Sargent, 349 Pa.Super. 289, 503 A.2d 3 (1986). See also: Commonwealth v. Wright, 508 Pa. 25, 494 A.2d 354 (1985) (42 Pa.C.S. § 9712, requiring a mandatory sentence where defendant is in visible possession of a firearm, does not violate due process); Commonwealth v. Sanders, 380 Pa.Super. 78, 551 A.2d 239 (1988), allocatur denied, 522 Pa. 575, 559 A.2d 36 (1989) (statute is not vague or overbroad). Similarly, the statute has been held not to violate principles of equal protection. See: Commonwealth v. Jones, 374 Pa.Super. 431, 543 A.2d 548 (1988), allocatur denied, 522 Pa. 574, 559 A.2d 35 (1989).
*36 Finally, appellant makes the bald suggestion he offers no argument and cites no cases that the provisions of 42 Pa.C.S. § 9713(a) serve to impose cruel and unusual punishment. Although this section of the statute has not been reviewed previously to determine whether it violates the constitutional proscription against cruel and unusual punishment, other statutes imposing similar mandatory sentences under other aggravating circumstances have been upheld. See: Commonwealth v. Howard, 373 Pa.Super. 246, 540 A.2d 960 (1988) (mandatory minimum sentence of five years required by 42 Pa.C.S. § 9712 for use of visibly possessed firearm does not constitute cruel and unusual punishment); Commonwealth v. Arnold, 356 Pa.Super. 343, 514 A.2d 890 (1986) (mandatory minimum sentence of five years required by 42 Pa.C.S. § 9718 for rape of child under sixteen (16) years is not cruel and unusual punishment). See also: Commonwealth v. Hernandez, 339 Pa. Super. 32, 488 A.2d 293 (1985) (mandatory sentence provisions of drunk driving law, 75 Pa.C.S. § 3731 et seq., do not impose cruel and unusual punishment). The result in the instant case could not be otherwise. The mandatory minimum sentence required by 42 Pa.C.S. § 9713(a) does not exceed the maximum sentence authorized by 18 Pa.C.S. § 106(b)(2) for all felonies of the first degree.
In view of precedential authority to the contrary, appellant's boilerplate averments of unconstitutionality cannot prevail. The mandatory sentence provisions of 42 Pa.C.S. § 9713(a) are constitutional.
The judgments of sentence are affirmed.
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119 B.R. 749 (1990)
In re Rickey Martin AJOOTIAN and Gail Ajootian, husband and wife, dba Ajootian Properties # 1, dba Vintage Apartments, fdba J & M Mercantile & Paints, Debtors.
Rickey Martin AJOOTIAN, et al., Plaintiffs,
v.
LAMONT LIONS CLUB, etc., et al., Defendants.
Bankruptcy No. 188-00826-A-11, Adv. No. 190-0049.
United States Bankruptcy Court, E.D. California.
September 5, 1990.
*750 Brett L. Price, Bakersfield, Cal., for debtors.
Thomas C. Fallgatter, Bakersfield, Cal., for Lamont Lions Club.
Carol D. Mills, Frandzel & Share, Fresno, Cal., for Resolution Trust Co.
Gary Dyer, Office of the United States Trustee, Fresno, Cal.
MEMORANDUM OPINION
RICHARD T. FORD, Bankruptcy Judge.
INTRODUCTION
On March 7, 1988, Rickey Martin Ajootian and Gail Marie Ajootian, as husband and wife, doing business as Ajootian Properties # 1 and the Vintage Apartments, filed for relief under Chapter 11 of the *751 Bankruptcy Code.[1] On March 6, 1990, Debtors, through their attorney, Brett Price, filed a Complaint to Determine the Validity, Priority and Extent of Liens and Other Interests in Real Property and to Quiet Title. A Summons was issued on the same date and served upon the Defendants, Lamont Lions Club ("Lions Club") and First Federal Savings and Loan of Bakersfield ("First Federal"), on March 8, 1990. The Lions Club, by and through its attorney, Thomas C. Fallgatter, filed its Answer to the Complaint on April 18, 1990. The Resolution Trust Corporation ("RTC"), as conservator for First Federal, by and through its attorney, Carol D. Mills, filed its Answer on April 18, 1990. Subsequent to that date, the RTC amended its Answer on May 2, 1990. The pre-trial in this matter was heard by this Court on July 2, 1990, with a Status Conference continued to July 25, 1990, in Bakersfield. In attendance on July 2, 1990, were Gary Dyer on behalf of the United States Trustee's Office, Brett Price for the Debtors, Carol Mills for the RTC and Karen Dale on behalf of the Lions Club.
On July 20, 1990, the RTC, by and through its attorney, Carol Mills, filed a Notice and Motion for Substitution of Party. The purpose of this Motion was to substitute the RTC as receiver for First Federal as the real party in interest in this action. The Motion came before the Court on August 23, 1990, and there being no opposition, the Court granted the Motion of the RTC to substitute in as the real party in interest.
On August 1, 1990, the RTC filed a Motion for Summary Judgment seeking a determination that the Trust Deed recorded May 30, 1986, in Book 5878, commencing at page 20-21 in the Kern County Recorder's Office constituted a valid, perfected first priority lien against the real property commonly known as 10401 San Diego Street, Lamont, California, in the amount of $1,403,883.10 as of July 20, 1990. The Lions Club contends it conveyed the property to the Debtors in return for the Debtors' promise to perform certain acts. As the Debtors failed to perform, the Lions Club asserts the Debtors must reconvey to them to the exclusion of RTC's lien.
The Motion for Summary Judgment was brought pursuant to Federal Rule of Civil Procedure Rule 56, Bankruptcy Rule 7056, and Local Rule 3, parts A and B. The basis of the Motion was that there was no information in the Kern County Recorder's Office at the time the loan was made to the Debtors by First Federal disclosing any interest of the Lions Club in the subject real property. Further, there was no such information disclosing any interest whatsoever of the Lions Club in the public records until after all loan proceeds had been disbursed. The RTC also contends that the books and records of the failed savings and loan institution disclosed that First Federal had no knowledge of any interest whatsoever of the Lions Club in the subject property. The RTC contends that under both Federal and California state law, any interest claimed by the Lions Club in the subject property is unenforceable and invalid as to the RTC's claim. The RTC states that 12 U.S.C. § 1823(e) defeats any interest whatsoever of the Lions Club. Moreover, under the recording statutes of the State of California, any interest claimed by the Lions Club is junior to that interest held by the RTC as receiver of First Federal.
Oppositions to RTC's Motion for Summary Judgment were filed August 16, 1990, by both the Debtors and the Lions Club. The Lions Club opposed the RTC's Motion for Summary Judgment on the grounds that First Federal had both actual and constructive notice of the agreement between the Debtors and the Club. Additionally, the Lions Club asserts that the D'Oench Doctrine, as statutorily embodied in 12 U.S.C. § 1823(e), is inapplicable in this instance. The Lions Club contends that a triable issue of fact exists respecting First Federal's actual and constructive knowledge of the agreement between the Debtors and the Lions Club.
*752 Debtors' Opposition raised a number of issues. Initially, Debtors assert that the RTC may be without standing to bring the Motion for Summary Judgment. Secondly, Debtors indicate that the Motion itself was premature as discovery was still pending. The primary objection asserted by the Debtors is as to the amount owed under the loan. It is the Debtors' contention that a genuine dispute exists as to the outstanding balance of principal, interest, penalties, and other charges which may be claimed due under the lending agreements; the amount of any set-offs or offsets, payments, and any other credits connected with the loan; and that First Federal, by its refusal to fund the final two phases of the apartment project, breached its lending agreement and should be held accountable in damages to the Debtors.
These matters (the Motion for Substitution of the RTC in as the real party in interest for First Federal; the Motion for Summary Judgment by the RTC and the Oppositions thereto; and the Lions Club's Motion to Continue the Motion for Summary Judgment) came on calendar on August 23, 1990. At this hearing, Brett Price appeared for the Plaintiffs/Debtors, Thomas Fallgatter appeared on behalf of the Defendant Lions Club, and Carol Mills appeared on behalf of the Moving Party, RTC.
The following shall constitute this Court's Findings of Fact and Conclusions of Law. Jurisdiction exists pursuant to 28 U.S.C. § 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(1) and (2). Several issues are in dispute in this matter. The Court will again address the standing issue and the continuance issue and then will look to the issues raised by RTC's Motion for Summary Judgment and the Oppositions thereto.
FACTS SURROUNDING THE TRANSFER OF PROPERTY
The Lions Club entered into an agreement with the Debtors in the fall of 1984 providing for the transfer of the subject property in consideration for the Debtors' commitment to build a club house for the Lions Club on the property. As further consideration for the transfer of this property, the Debtors were to lease the club house to the Lions Club for 99 years at a rate of $1.00 per year and to pay the Club $5,000.00 annually for 10 years. Additionally, Debtors were to build 128 low to moderate income apartments on the property, and under the terms of the agreement, the aforementioned was to be completed within 30 months of the transfer. If the terms of the agreement were not completed within 30 months of the transfer, the agreement called for the reconveyance of the property back to the Lions Club. These terms are set out in unsigned escrow instructions dated November 28, 1984, submitted to the Court as an exhibit to the Declaration of Deryl Stine. One purpose of building the club house on the property, to be called the "Lions Den," was that it would be available for community events. The property was initially deeded to the Lions Club by the Lamont Fall Festival Association and held for the benefit of the Community of Lamont. As indicated in the Stine Declaration, the transfer of property to the Debtors was without advice of counsel and amounted to nothing more in this Court's eye than a handshake and a promise for the Debtors to perform under the agreement. As Stine states, "We felt we were carrying out our obligations to the community because we felt the club house would be a valuable addition to the community." The facts indicate that 30 months came and passed, at which time only the first phase of the apartments were completed, leaving phases two and three to still be constructed. Moreover, the Lions Den was never begun or completed. The Lions Club asserts that the Debtors breached their agreement and that the Lions Club is entitled to a reconveyance of the property. The Debtors claim that First Federal breached its contractual obligation with them by refusing and failing to provide adequate construction loans with which to complete construction of the final two phases of apartments and the Lions Den. It is upon these facts that the Court must make its decision.
*753 ANALYSIS
Summary Judgment is a method for promptly disposing of actions in which no genuine issue of material fact exists. It serves to avoid trial where the Moving Party is entitled to judgment as a matter of law. Bloom v. General Truck Drivers, Office Food and Warehouse Union, Local 952, 783 F.2d 1356, 1358 (9th Cir.1986); IBEW, Local 47 v. Southern California Edison Co., 880 F.2d 104, 105-106 (9th Cir.1989). To prevail, the Moving Party must establish by affidavit, pleadings, or answers to discovery, that no genuine issue as to any material fact exists and that the Moving Party is entitled to a judgment as a matter of law. Federal Rules of Civil Procedure Rule 56, Bankruptcy Rule 7056; see also IBEW, Local 47, supra. In re Tilbury, 74 B.R. 73, 76 (9th Cir.B.A.P.1987); In re Stephens, 51 B.R. 591, 594 (9th Cir.B. A.P.1985). The mission of Summary Judgment procedure is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for a trial. Evidence on Motion for Summary Judgment shall be viewed in a light most favorable to the non-moving party and any doubt as to the existence of genuine issues of fact will be resolved against the Moving Party. IBEW, Local 47, supra; M/V American Queen v. San Diego Marine Construction, 708 F.2d 1483, 1487 (9th Cir. 1983); Arizona Laborers, Etc. v. Conquer Cartage Co., 753 F.2d 1512, 1515 (9th Cir. 1985). Should the Court determine that no genuine issue for trial exists and that the Moving Party is entitled to judgment as a matter of law, Summary Judgment is appropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986).
Debtors preliminarily state that the RTC may not have standing as a proper party to bring the Motion for Summary Judgment. This Court holds that the RTC, as receiver for First Federal, is the real party in interest and therefore entitled to enforce any and all causes of action of the Bank in receivership. First State Bank v. Bank of America, 618 F.2d 603 (9th Cir. 1980). Accordingly, RTC has standing to bring this Motion for Summary Judgment. See Federal Rule of Civil Procedure 17(a).
Respecting the Lions Club Motion to Continue the RTC's Summary Judgment Motion, this Court finds and holds that the Lions Club has failed to specifically state the need to continue this hearing. Under Federal Rule of Civil Procedure 56(f), the Lions Club has not stated reasons by affidavit setting forth "facts essential" to justify a continuance of this Motion. Accordingly, the Motion to Continue the RTC's Motion for Summary Judgment is denied. Orders granting the Motion authorizing the RTC to substitute in as the real party in interest and denying the Motion for Continuance have been signed and are on file with the Court.
Remaining for determination is whether, as a matter of law, any agreement entered into between the Debtors and the Lions Club affects the RTC's interest in or ability to foreclose on the subject property. The RTC contends that any such agreement is unenforceable against them, as receiver, under Federal law as set out in 12 U.S.C. § 1823(e).
12 U.S.C. § 1823(e) states:
"No agreement which tends to diminish or defeat the interest of the corporation in any asset acquired by it under this section or section 1821 of this Title, either as security for a loan or by purchase or as a receiver of any insured depository institution, shall be valid against the corporation unless such agreement (1) is in writing, (2) was executed by the depository institution and any person claiming an adverse interest thereunder, including the obligor, contemporaneously with the acquisition of the asset by the depository institution, (3) was approved by the board of directors of the depository institution, or its loan committee, which approval shall be reflected in the minutes of said board or committee, and (4) has been, continuously, from the time of its execution, an official record of the depository institution.
12 U.S.C. § 1823(e) is the statutory embodiment of D'Oench Duhme and Company v. FDIC, 315 U.S. 447, 62 S. Ct. 676, *754 86 L. Ed. 956 (1942). The D'Oench doctrine protects acquiring corporations against collusive secret deals typically between bank officers and borrowers. It entitles the acquiring corporation, in this instance the RTC, to rely on the bank's loan documents and records essentially as a holder in due course. Signed agreements must strictly comply with the statute; otherwise they are unenforceable. See In re Figge, 94 B.R. 654, 668 (C.D.Cal.1988); citing Langley v. FDIC, 484 U.S. 86, 108 S. Ct. 396, 98 L. Ed. 2d 340 (1987).
One purpose of § 1823(e) is to allow the federal and state bank examiners to rely on bank records in evaluating the worth of the bank's assets. Langley, supra. Such evaluations are necessary when a bank is examined for fiscal soundness by state or federal authorities and when deciding whether to liquidate a failed bank or to provide financing for purchase of its assets and assumption of its liabilities by another bank.
When evaluating whether to liquidate a failed bank or to provide for the purchase of its assets and assumption of its liabilities by another institution, the acquiring corporation (RTC) must do so "with great speed, usually overnight, in order to preserve the going concern value of the failed bank and avoid interruption in banking services." Langley, supra, citing Gunter v. Hutcheson, 674 F.2d 862, 865 (11th Cir.1982).
Clearly, under § 1823(e), no agreement will be valid against the acquiring corporation unless each of the four requirements as set forth in the statute are complied with. In determining the scope of the statute, one first looks at its language. North Dakota v. United States, 460 U.S. 300, 103 S. Ct. 1095, 75 L. Ed. 2d 77 (1983). Where the language is unambiguous, it ordinarily is regarded as conclusive unless there is "a clearly expressed legislative intent to the contrary." Dickerson v. New Banner Institute, Inc., 460 U.S. 103, 103 S. Ct. 986, 74 L. Ed. 2d 845 (1983). Langley, supra, clearly sets forth the legislators' intent that the acquiring corporation be able to act swiftly to take action to preserve the going concern value of the failed bank. Any agreement then tending to diminish or defeat the interest of the corporation must necessarily comply with the requirements set forth under § 1823(e). To determine if Summary Judgment is appropriate in this instance, this Court must examine each of those elements contained within § 1823(e).
The key wording of the statute is: "No agreement which tends to diminish or defeat . . . shall be valid against the corporation unless . . ." The phrase "No agreement" is quite expansive and consistent with the intent to allow the acquiring corporation to take swift action in the best interest of the failed savings and loan institution. This is the clear and unambiguous intent of the statute. Any other interpretation would be contrary to the clear language of the statute and at variance with the expressed legislative intent.
Looking to the first requirement, the Lions Club submitted, attached to the Stine Declaration as evidence, an exhibit dated November 27, 1984, entitled "Buyer's Escrow Instructions." These Escrow Instructions, although unsigned but prepared for signature by the Debtors and the Lions Club, set forth that within 30 months after the date of close of escrow, the buyer/debtor will build and complete a building for use as the Lions Den with a fair market value of not less than $160,000.00 nor more than $175,000.00 at the time of completion. The conveyance of property was not for any dollar sum but, rather, was subject to the terms set forth within the escrow instructions. One term was that should the Debtors fail to complete the specified building, the Debtors would reconvey the property back to the seller/Lions Club. Further, for the record, it is to be noted that Lions Club did not submit into evidence any recorded conveyance of the property to the Debtors setting forth these terms. The evidence also indicates that pursuant to title searches performed prior to issuance of the loan by First Federal, the alleged interest of the Lions Club was not of public record. Although the writing submitted by the Lions Club is unsigned, the Court in viewing evidence most favorable to the *755 nonmoving party in Summary Judgment matters will assume with respect to this requirement that a writing did in fact exist. Accordingly, the first element required to diminish or defeat the interest of the RTC under § 1823(e) has been satisfied.
The second requirement is that the depository institution and any person claiming an adverse interest in the asset, including the obligor, execute contemporaneously with the acquisition of the asset by the depository institution an agreement setting forth such adverse interest therein. As admitted by the Lions Club attorney at oral argument, there was no contemporaneous agreement to this effect executed between First Federal and the Lions Club. The only agreement that existed was the agreement between the Debtors and the Lions Club. For any agreement to diminish or defeat the interest of the RTC in the subject property, that agreement must have been contemporaneously executed between First Federal and the person claiming that adverse interest upon First Federal's acquisition of the asset. Accordingly, respecting the second element under 12 U.S.C. § 1823(e), this Court finds and holds that there exists no agreement contemporaneously executed by and between First Federal and the Lions Club as to the Lions Club's adverse interest in the subject property. As all elements under § 1823(e) are to be read in the conjunctive, Lions Club cannot prevail under this statute.
The Court wishes to point out that the record also reflects that the minutes of First Federal's Board of Directors' meetings are devoid of any mention of the existence of the Lions Club's interest in the property. Nor has there been, continuously, from the time of its execution an official record of the Lions Club's interest in the records of the depository institution. No evidence was submitted indicating compliance with § 1823(e)(3) and (4). These facts clearly show that the requirements needed to defeat the interest of the RTC have not been complied with. Accordingly, the RTC is, as a matter of law, entitled to Summary Judgment.
The Lions Club contends that the D'Oench doctrine codified by 12 U.S.C. § 1823(e) is inapplicable here as it was intended to relate only to side agreements between the failed lending institutions and borrowers. The Court is aware of the decision in Slappey Builders, Inc. v. FDIC, 157 Ga.App. 343, 277 S.E.2d 328, where the Court held that the rigid criteria of 12 U.S.C. § 1823 apply only as to side and/or secret agreements between the debtors and insolvent insured banks and not to any other direct agreements between debtors and the FDIC after having purchased the assets of the failed bank. This is precisely the position the Lions Club asserts respecting their agreement with the Debtors. While recognizing that the majority of case law addresses situations where the agreements at issue were between the depository institution and obligor/debtors, this Court holds such a constricted interpretation of this statute to be inconsistent with the breadth of its language. "No agreement" is, by its nature, very broad. To defeat the acquiring corporation's interest requires a writing executed by the depository institution and any person, including the obligor. The language ". . . and any person, including the obligor . . ." mandates that any person holding an interest that could diminish or defeat the acquiring corporation's interest fulfill all of the requirements set forth in the statute. This applies to any agreement, not just those between the depository institution and the obligor/debtor. This is the clear mandate of the statute. Such an interpretation is also consistent with the legislative intent as set out in Langley, supra, allowing acquiring corporations such as the RTC to make a determination as to the extent and value of a failed lending institution's assets and to move with great speed in order to preserve the going concern value of the failed institution.
The Lions Club also advances several theories under California law supporting their position. First, they assert that First Federal had constructive notice of their agreement by virtue of the documents recorded in 1970 whereby the Lamont Fall Festival Association conveyed the subject *756 real property to the Lions Club for a charitable/public purpose. The Lions Club states that First Federal, under California law, is charged with the responsibility to determine that the "public trust" obligations had been fulfilled as First Federal had notice of the trust.
The Lions Club also asserts that First Federal had actual knowledge of the agreement between the Debtor and the Lions Club. They assert that under California law, First Federal cannot be a bona fide purchaser without notice.
Additionally, Mr. Fallgatter argued, by analogy, that where a mechanic's lien attached to the property, absent compliance with § 1823(e), the workman's lien would be expunged.
While these arguments have a certain sense of appeal and potential merit under state law (but noting that California is a race/notice jurisdiction requiring both notice and recordation to perfect an interest in property), they miss the issue at hand regarding this Federal statute. Although not raised by any party, this case has Constitutional underpinnings.
The import of the Supremacy Clause set out in Article VI of the United States Constitution and the preemption doctrine is that federal law shall be the "supreme law of the land" and shall enjoy legal superiority over any conflicting provision of a State Constitution or law. This Court finds and holds that an actual conflict in this instance exists between a federal statute and state laws, and by virtue of the pre-emption doctrine, the Lions Club's contentions founded on California law are moot in the face of 12 U.S.C. § 1823(e).
Precluding the RTC from exercising its Federal statutory right because of inconsistent state law claims runs against the grain of the pre-emption doctrine and the mandates of the United States Constitution. Accordingly, this Court holds that the state law claims asserted by the Lions Club raise no issue of material fact. Summary Judgment in favor of the RTC against the Lions Club is appropriate as no triable issue of material fact exists, and, as a matter of law, the RTC is entitled to judgment.
Lastly, addressing the issue of the dollar amount owing to the RTC, conflicting information has been submitted to the Court for review. One of the Debtors, on two occasions, has testified to different amounts and potential set-offs. This Court cannot, as a matter of law, determine the amount owing, if any. This Court finds and holds that a triable issue of material fact exists as to the dollar amount owing to the RTC, and, therefore, this matter must be set for further hearing.
CONCLUSION
In part, the legislative intent behind 12 U.S.C. § 1823(e) is to allow the corporation acquiring a failed depository institution to move swiftly to determine the nature and extent of assets and liabilities so as to preserve its going concern value. Because of the swiftness with which the acquiring corporation must move, this Court holds that any agreement that will adversely affect the rights of the acquiring corporation must comply with the strict rules as set forth within 12 U.S.C. § 1823(e). The agreement between the Lions Club and the Debtors would tend to diminish or defeat the RTC's interest, and the failure of that agreement to comply with the mandates under § 1823(e) is fatal to the position of the Lions Club against the RTC.
Moreover, in that potential state law claims might exist which would render the RTC's position ineffective against the Lions Club, these claims are rendered moot as against the RTC under the pre-emption doctrine and the Supremacy Clause of the United States Constitution. To allow them to stand and defeat the RTC's claim under the federal statute would be contrary to the Constitution itself and the doctrine of pre-emption.
The Court will not address the issue of whether the Lions Club has recourse against the Debtors as that issue is not before the Court pursuant to RTC's Motion for Summary Judgment.
*757 Respecting the dollar amount owing to the RTC, this Court holds that a triable issue of fact exists. Evidence exists making this matter most appropriate for further hearing. Accordingly, Summary Judgment with respect to that issue must be denied and the matter set for further hearing to determine the dollar amount owing.
JUDGMENT
Based upon the accompanying Analysis, Findings of Fact, and Conclusions of Law, IT IS ORDERED AS FOLLOWS:
1. That the Resolution Trust Corporation's Motion for Summary Judgment is granted in part determining the Lamont Lions Club's interest in the real property commonly known as 10401 San Diego Street, Lamont, California, to be junior, unenforceable, and invalid as to the Resolution Trust Corporation's interest in the same.
2. Further, that the Resolution Trust Corporation's Motion for Summary Judgment as to the dollar amount owing on its claim by the Debtor is denied as a triable issue of fact exists as to that amount.
3. Further, that Carol D. Mills, counsel for the Resolution Trust Corporation, shall, within fourteen (14) days of service of this Order, contact opposing counsel and determine, and set with this Court for a telephone conference call, a mutually convenient date for a further status hearing on the remaining issues to be tried.
NOTES
[1] All references to the "Code" refer to the Bankruptcy Code as revised by the 1984 revisions unless otherwise noted.
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239 N.J. Super. 51 (1990)
570 A.2d 1012
DONNA CAMARA, PLAINTIFF-APPELLANT,
v.
BOARD OF ADJUSTMENT OF THE TOWNSHIP OF BELLEVILLE, AND BUILDING INSPECTOR OF THE TOWNSHIP OF BELLEVILLE, DEFENDANTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Submitted December 18, 1989.
Decided February 23, 1990.
*52 Before Judges COLEMAN, MUIR and SKILLMAN.
Michael J. Viola, attorney for appellant.
Jon P. Campbell, attorney for respondents.
The opinion of the court was delivered by COLEMAN, J.H., P.J.A.D.
The broad issue posited in this appeal is how to terminate a nonconforming use or structure. The narrow issue is whether the termination of a business may precipitate the extinguishment of a nonconforming use or structure limited to the manner of suspension of a sign used to advertise the prior business.
In this action in lieu of prerogative writs, plaintiff seeks to overturn a decision of the Board of Adjustment of the Township of Belleville (Board of Adjustment) which denied a variance respecting the hanging of a sign advertising a professional office. Plaintiff also sought a determination that her refurbished sign was a continuation of a nonconforming structure and requested a permit to allow the sign to remain. The Board *53 of Adjustment concluded that the termination of the prior business ended the right to display a sign which projected more than six inches beyond the building facade or one of its side walls. The Board of Adjustment denied plaintiff's application for a variance and refused to issue a permit allowing her new sign to remain. The Law Division agreed and we now affirm.
I
For approximately 30 years prior to 1985, Greylock Liquors was a tenant at 564 Union Avenue, Belleville, New Jersey. A projecting illuminated sign was hung to advertise the business. Although the sign was modified in the early 1970's, the sign remained when the liquor store terminated its business apparently in 1984 or early 1985. The sign contained the words "Pepsi" on the top and "Greylock Liquors" on the bottom. The sign was a nonconforming legal structure in the neighborhood retail district in that it projected more than six inches from the building facade or one of its side walls. After the liquor store terminated its use and occupancy of the premises, plaintiff, a chiropractic physician, moved her professional offices into the premises previously occupied by the liquor store. Plaintiff had the liquor store sign removed, refurbished and changed to read "Greylock Chiropractic Clinic." The refurbished sign was rehung in the identical manner as was the liquor store sign without permission from any zoning or construction code official.
There is conflicting evidence as to whether the new sign is identical to the liquor store sign except for the change in the name of the business on the facade of the sign. Plaintiff testified that it is substantially the same. Objectors from the neighborhood testified that the new sign is different in that it contains a different "angle," the lettering was changed from silver aluminum to bronze aluminum, and that it is bigger, brighter and wider. Although the Board of Adjustment did not articulate findings resolving conflicts in the evidence, a remand *54 is unnecessary because our disposition is based on the manner the sign was rehung rather than the changes made to the sign.
On March 12, 1985, the Township's Construction Code officer, who apparently doubled as the zoning officer, advised plaintiff that her sign violated the local zoning "Ordinance # 2027, Article XVIII `Signs'" in that her sign projected more than six inches beyond the building facade. Plaintiff was ordered to remove the sign in ten business days. Before the ten days expired, however, plaintiff advised the Construction Code official on March 21, 1985 that her sign was the same one used by the liquor store except for the change "to reflect the change of business." Apparently relying on the information contained in plaintiff's letter, the Construction Code official issued a permit on March 26, 1985 allowing the sign to remain in place.
The permit, however, was rescinded on August 6, 1985 by the Construction Code official because the Planning Board disagreed with his interpretation of the sign ordinance. Plaintiff was again directed to remove the sign within 10 days. On March 18, 1987, the Construction Code official denied plaintiff's request for a permit "to erect a projected wall mounted sign above [her] existing professional office ..." based on the sign ordinance. Plaintiff was advised that any relief from the sign ordinance should be sought from the Board of Adjustment. According to the transcript of the hearing before the Board of Adjustment, plaintiff sought a variance to create a new nonconforming use or structure or to enlarge or extend a preexisting nonconformity "to erect a projected wall mounted sign above existing professional office at 564 Union Avenue." See N.J.S.A. 40:55D-70d; Burbridge v. Governing Body of Tp. of Mine Hill, 117 N.J. 376, 379, 568 A.2d 527 (1990). By a unanimous vote, the Board of Adjustment denied the application for a variance.
Under Point I of plaintiff's appellate brief, she describes her application for the variance as "a limited extension of a non-conforming use." In support of her position, plaintiff argues that the sign provides a benefit for the neighborhood by its illumination, *55 thereby increasing safety in the neighborhood. She also argues "[t]he property is unique and an exceptional situation certainly does exist since [a] sign [that is] the same or similar to the one plaintiff has currently at the property has been in use for some eleven (11) years, uninterrupted" and that she only changed the name on the facade of the sign. Further, plaintiff contends that the denial of a variance was arbitrary, capricious and unreasonable because the benefits from the illumination substantially outweigh any detriments to the zoning plan. Finally, under Point III, plaintiff appears to argue that a variance was not required because the sign was a lawful nonconforming use or structure which predated the present sign ordinance and as such the nonconforming use or structure was continued by virtue of N.J.S.A. 40:55D-68. We have combined these points for disposition because they are interrelated.
II
We agree that if the nonconforming use or structure the extent to which the sign projected from the building continued following the termination of the liquor store business, there would be no need for a variance. We must therefore first review the controlling law before deciding whether the nonconformity abated when the liquor store business was terminated.
Our analysis begins with the well stated proposition that nonconforming uses and structures are disfavored in that they are inconsistent with the objective of uniform zoning. "[T]hey should be reduced to conformity as quickly as is compatible with justice." Belleville v. Parrillo's, Inc., 83 N.J. 309, 315, 416 A.2d 388 (1980); Hantman v. Randolph Tp., 58 N.J. Super. 127, 137, 155 A.2d 554 (App.Div. 1959), certif. den. 31 N.J. 550, 158 A.2d 451 (1960); Heagen v. Allendale, 42 N.J. Super. 472, 478, 127 A.2d 181 (App.Div. 1956). Municipalities are permitted to enact zoning ordinances which impose limitations upon nonconforming uses and structures. Parrillo's, Inc., 83 N.J. at 315, 416 A.2d 388.
*56 N.J.S.A. 40:55D-68, which was previously N.J.S.A. 40:55-48, provides that "[a]ny nonconforming use or structure existing at the time of the passage of an ordinance may be continued upon the lot or in the structure so occupied...." But the Legislature did not intend to continue every nonconforming use or structure forever. Indeed, the statute directs that a nonconforming structure may be restored or repaired only "in the event of partial destruction thereof." Ibid. This statutory language has led our courts to conclude that a totally destroyed nonconforming structure may not be restored. See Avalon Home & Land Owners v. Bor. of Avalon, 111 N.J. 205, 211-212, 543 A.2d 950 (1988); Hay v. Bd. of Adj. of Bor. of Ft. Lee, 37 N.J. Super. 461, 465, 117 A.2d 650 (App.Div. 1955). Total destruction has been judicially defined to mean "substantially totally destroyed." Lacey Tp. v. Mahr, 119 N.J. Super. 135, 138, 290 A.2d 450 (App.Div. 1972). See also Krul v. Bayonne Bd. of Adj., 122 N.J. Super. 18, 25-29, 298 A.2d 308 (Law Div. 1972), aff'd 126 N.J. Super. 150, 313 A.2d 220 (App.Div. 1973).
Although the present case does not involve destruction of the building to which the sign is attached, it does involve another form of termination of the nonconforming structure or use, namely the demise of the liquor store business to which the nonconformity related. Our Supreme Court has acknowledged that the duration of nonconforming uses or structures may be limited by abandonment or discontinuance. Belleville v. Parrillo's Inc., 83 N.J. at 315, 416 A.2d 388. Ordinarily, abandonment of a nonconforming use or structure requires "the concurrence of two factors: one, an intention to abandon; and two, some overt act, or some failure to act, which carries a sufficient implication `that the owner neither claims nor retains any interest in the subject matter of the abandonment.'" Saddle River v. Bobinski, 108 N.J. Super. 6, 16-17, 259 A.2d 727 (Ch.Div. 1969).
Further, in zoning law discontinuance is synonymous with abandonment. "It connotes a voluntary, affirmative, completed *57 act." State ex rel. Schaetz v. Manders, 206 Wis. 121, 124, 238 N.W. 835, 837 (Sup.Ct. 1931). See also Navin v. Early, 56 N.Y.S.2d 346, 347 (Sup.Ct. 1945). Webster's Third New International Dictionary, p. 646, defines discontinuance to include termination, breaking off, giving up and abandoning. But as the Connecticut Supreme Court recognized recently, a nonconforming use or structure may be terminated based on cessation of use independent of any intent to abandon the nonconforming use or structure. Essex Leasing, Inc. v. Essex Zoning Bd. of Appeals, 206 Conn. 595, 599-603, 539 A.2d 101, 104-105 (Sup. Ct. 1988).
III
We now apply the foregoing legal principles to the facts of this case. The pertinent sections of the Township of Belleville Ordinance No. 2027, codified as Belleville, N.J., Rev. Ord. § 23-18.1 et seq. (Supp. 1984), provide:
§ 23-18 SIGNS
§ 23-18.1 General Provisions
f. At the termination of a business, commercial or industrial enterprise, all signs pertaining thereto shall forthwith be removed from the public view. Responsibility for violation shall reside with the property owner, according to the latest official tax rolls listing.
* * * * * * * *
§ 23-18.3 Signs in the Business and Industrial Districts.
The following types of signs shall be permitted in Business or Industrial Districts: Commercial
a. Flat signs which shall not project more than six inches beyond the building facade and/or one side wall thereof;
Both the Board of Adjustment and the Law Division considered the sign ordinance and concluded that the nonconforming use or structure the manner in which the Greylock Liquors sign was hung terminated when the liquor business went out of existence. The judge below observed:
What we have here is an ordinance which says that when you got a business that has a sign and that sign is a non-conforming use, that sign is protected as *58 long as the business continues. When the business stops, then the non-conforming use also stops.
* * * * * * * *
... Now, the part of the business that this was, was the business of a liquor dealer of some kind and this business went and no longer existed. It went out. So the sign served no function and that's what the ordinance says.
Now, when somebody goes out of business, the sign has no function. Start anew. You start the conformity with the requirements of the local ordinances.
An ordinance which provides that signs used in connection with a business must be removed when that business is terminated is reasonable legislation regulating signs and terminating nonconforming signs based on the manner in which the signs are hung. After all, a "business sign is in actuality a part of the business itself, just as the structure housing the business is a part of it, and the authority to conduct the business in a district carries with it the right to maintain a business sign on the premises subject to reasonable regulations...." United Advertising Corp. v. Raritan, 11 N.J. 144, 150, 93 A.2d 362 (1952).
We read the Belleville Rev. Ord. § 23-18.1f and § 23-18.3a to evince a clear intent for cessation of the nonconforming manner in which the liquor store sign was hung upon termination of the liquor store business. The ordinance calls for extinguishment of the prior nonconformity based on the objective conduct of terminating the business to which the sign pertains. The ordinance is presumptively valid, Zilinsky v. Verona Zoning Bd. of Adj. of Verona, 105 N.J. 363, 368-369, 521 A.2d 841 (1987), and represents a reasonable legislative attempt to reduce nonconformity in a manner that is compatible with justice.
The criterion of determination is the use of the property to which the sign was an integral part at the time the new zoning ordinance was enacted. The new sign ordinance clearly has not attempted to preclude a continuance of the nonconformity during the lifetime of the business to which the sign related. To the contrary, the ordinance merely enables the municipality to seize upon the failure of the liquor store to continue in business. *59 The practical effect of § 23-18.1f is to render termination of the liquor store business as synonymous with abandonment of the nonconformity. In this context, the abandonment is based on the objective conduct of terminating the liquor store business to which the sign related. The propitious event of ending the liquor store business manifests an intent to relinquish, discontinue and abandon the nonconformity related to the liquor store sign. It bears repeating that the nonconformity associated with both the liquor store sign and plaintiff's new sign is based on the fact that each was suspended so as to project more than six inches beyond the building facade. Plaintiff is permitted to hang a refurbished sign in the manner prescribed in § 23-18.3a.
Once the nonconformity was extinguished on the day the liquor store business was terminated, plaintiff could not reestablish the prior nonconformity by hanging her newly refurbished sign in a manner so that it projected "more than six inches beyond the building facade and/or one side wall thereof." The cessation of the liquor store business to which the "business sign [was] in actuality a part of" was tantamount to termination of a nonconforming structure through total destruction. Where, as here, the prior nonconformity has been terminated properly, N.J.S.A. 40:55D-68 precludes rebuilding or reestablishing an extinguished nonconforming use or structure. Avalon Home & Land Owners v. Bor. of Avalon, 111 N.J. at 211, 543 A.2d 950.
We reject plaintiff's contention that she was entitled to a "limited extension of a non-conforming use." The law rearticulated in Parrillo's, Inc. respecting the methodology of limiting nonconforming uses and structures by precluding substantial increases or changes in the nonconformity, which the dissent has employed, is not controlling in light of our determination that the prior nonconformity has been abated. As noted above, when abatement occurs, the prior nonconformity no longer exists and thus there is no nonconformity to extend or increase. Suffice it to say that the dissent reads our opinion too broadly *60 when it asserts that if a nonconforming structure housed multiple businesses and one of them ceased to exist, we would require removal of a sign that related to unaffected businesses. Such a suggestion is unwarranted. Our holding today is very narrow and is fact sensitive. See Burbridge, supra, 117 N.J. at 379, 568 A.2d 527.
That brings us to the denial of the variance. Plaintiff sought a variance to create a new nonconforming use or structure in the form of a sign which projected more than six inches beyond the building facade or side wall. Plaintiff, however, labeled her request as a "limited extension for an existing non-conforming use." See Grundlehner v. Dangler, 29 N.J. 256, 269, 148 A.2d 806 (1959). It is well established that the local officials are best equipped to pass on variance applications because of their peculiar knowledge. Kramer v. Sea Girt Bd. of Adj., 45 N.J. 268, 296, 212 A.2d 153 (1965). "Variances to allow new nonconforming uses should be granted only sparingly and with great caution since they tend to impair sound zoning." Kohl v. Mayor of Fair Lawn, 50 N.J. 268, 275, 234 A.2d 385 (1967); Burbridge, supra. Furthermore, the Board of Adjustment's denial of the variance is entitled to a presumption of validity. Kramer, 45 N.J. at 296, 212 A.2d 153.
Our careful study of the resolution of the Board of Adjustment in light of the record, persuades us to conclude that its decision was not arbitrary, capricious or unreasonable. A new nonconforming use or structure in this nonhardship case would not advance the cause of the new sign ordinance designed to reduce nonconformity "as quickly as is compatible with justice." The Board of Adjustment sought "to effectuate the goals of the community as expressed through its zoning ... ordinances." Kaufmann v. Warren Tp. Planning Bd., 110 N.J. 551, 564, 542 A.2d 457 (1988). The illumination of the area by the sign which was hung in a nonconforming manner did not outweigh the detriment to the neighborhood retail district. Moreover, hanging the sign in accordance with § 23-18.3a *61 would also provide illumination. To be sure, the Board of Adjustment utilized its peculiar knowledge of the local conditions in denying the variance and we must accord deference to its exercise of discretion. Burbridge, supra; Medici v. BPR Co., 107 N.J. 1, 23, 526 A.2d 109 (1987).
We have considered the remaining contentions raised and find they are clearly without merit. R. 2:11-3(e)(1)(D) and (E). We add, however, that the permit was issued by the Construction Code official after plaintiff's sign had been erected and that fact precludes any detrimental reliance. Hence, there is no basis to apply estoppel. O'Malley v. Dept. of Energy, 109 N.J. 309, 316, 537 A.2d 647 (1987); Mahwah Tp. v. Landscaping Techs., Inc., 230 N.J. Super. 106, 552 A.2d 1021 (App.Div. 1989); Freeman v. Hague, 106 N.J.L. 137, 140-141, 147 A. 553 (E. & A. 1929). See also Ianieri v. East Brunswick Zoning Bd. of Adj., 192 N.J. Super. 15, 24-25, 468 A.2d 1072 (Law Div. 1983). Finally, there was no evidence that Alois E. Schmitt, who was a member of both the Planning Board and the Board of Adjustment, was personally disqualified by virtue of N.J.S.A. 40:55D-69 from voting on plaintiff's application.
The judgment of the Law Division dismissing the complaint is affirmed.
SKILLMAN, J.A.D., dissenting.
I am unable to agree with the majority's conclusion that a municipality may compel the elimination of a nonconforming sign simply because there has been a change in the use of the property which necessitates a change in the lettering on the sign. Accordingly, I dissent.
At the outset, it is important to identify the limited respect in which plaintiff's premises fail to conform with Belleville's zoning ordinance. It is undisputed that professional offices are a permitted use in the zone where plaintiff's chiropractic office is *62 located.[1] Consequently, this is not a nonconforming use case. The nonconformity of plaintiff's premises is limited to a sign which conflicts with a recently adopted zoning ordinance providing that flat signs may not project more than 6 inches beyond the building facade. See 4 Rathkopf, The Law of Zoning and Planning, § 51.01[2] at 51-10 (4th ed. 1988) ("uses which do not conform to the provisions of the ordinance are ... viewed more seriously than noncompliance with nonuse restrictions, i.e., regulations affecting lot size and building bulk, height, and location.") Therefore, the question presented by this appeal is whether a property owner's right under N.J.S.A. 40:55D-68 to continue the use of a nonconforming structure, in this instance a sign, is lost simply because there has been a change in the business conducted on the premises and a consequent change in the lettering on the sign.
I recognize that Belleville's sign ordinance may be interpreted to require the removal of any preexisting sign upon a change in the business conducted on the premises. However, I am convinced that Belleville's ordinance, thus interpreted, would be contrary to N.J.S.A. 40:55D-68 and hence invalid.
It is clear that the right to continue the use of a nonconforming sign is within the protection which N.J.S.A. 40:55D-68 affords nonconforming uses and structures. See United Advertising Corp. v. Bor. of Raritan, 11 N.J. 144, 152-153, 93 A.2d 362 (1952); see also Ackerman Fuel Co. v. Paramus Bd. of Adjustment, 136 N.J.L. 93, 54 A.2d 661 (Sup.Ct. 1947). Moreover, any municipal ordinance regulating the continuation or termination of nonconforming uses or structures must be consistent with the Municipal Land Use Law. Avalon Home & Land Owners Ass'n v. Bor. of Avalon, 111 N.J. 205, 543 A.2d 950 (1988). Thus, "[i]t is beyond the power of a municipality to *63 limit by zoning ordinance the right expressly given the owner by... statute indefinitely to continue a nonconforming use." United Advertising Corp. v. Bor. of Raritan, supra, 11 N.J. at 152-153, 93 A.2d 362; see also State v. Accera, 36 N.J. Super. 420, 116 A.2d 203 (App.Div. 1955). Furthermore, a mere change in the ownership or tenancy of a property does not terminate the right to continue a nonconforming use or structure. Arkam Machine & Tool Co. v. Lyndhurst Tp., 73 N.J. Super. 528, 533, 180 A.2d 348 (App.Div. 1962).
Therefore, if plaintiff had continued to operate a liquor store on the premises, she unquestionably could have continued to use the nonconforming sign. Moreover, as I read the majority's opinion, it would recognize plaintiff's right to change the lettering on the sign to read "Camara Liquors" instead of "Greylock Liquors." Yet the majority concludes that plaintiff lost the right to continue the use of the nonconforming sign because she changed the lettering to read "Greylock Chiropractic Clinic," thus reflecting a change in the use of the property.
If liquor stores and chiropractic offices were both prohibited uses in the zone, I would have little hesitancy in concluding that plaintiff's use of the property for a chiropractic office would constitute a substantial change in its prior nonconforming use as a liquor store and therefore would be prohibited. However, neither the prior nor the current use of the property violates the zoning ordinance. Therefore, it seems to me that the only issue in this case is whether the change from one permitted use to another permitted use resulted in any substantial change in the nonconforming structure. It also seems to me that if we accept plaintiff's testimony that the sign is the same size and shape and uses the same method of suspension and illumination as when it said "Greylock Liquors," we must conclude that there has been no substantial change. Whatever inconsistency may have existed between the municipality's present sign restrictions and the "Greylock Liquors" sign remains the same *64 despite the change in the lettering to read "Greylock Chiropractic Clinic."[2]
The majority's theory would have significant implications in other situations involving a property owner's right to maintain a nonconforming structure upon a change in a permitted use. For example, there are frequently freestanding signs adjoining shopping malls which identify the businesses conducted therein. As I read the majority opinion, if a municipality were to adopt an ordinance prohibiting such signs or limiting their size, it could require existing signs enjoying the status of nonconforming structures to be removed whenever there was a change in one of the businesses conducted on the premises. Indeed, if a municipality amended its zoning ordinance to impose more stringent setback requirements upon commercial structures, the majority's theory could be applied to authorize a municipality to impose those requirements with respect to an existing building simply upon a change in the kind of business conducted therein. In my view, N.J.S.A. 40:55D-68 preserves a property owner's right to maintain a nonconforming structure under such circumstances.
Accordingly, I would reverse the judgment of the trial court and remand the matter to the Board of Adjustment to make specific findings as to whether plaintiff's sign is essentially the same sign previously used by the liquor store or is substantially altered in size, shape, illumination or in any other respect pertinent to the aesthetic considerations on which the municipality's sign restrictions are based. Cf. Belleville v. Parillo's *65 Inc., 83 N.J. 309, 314, 416 A.2d 388 (1980) ("the focus in cases such as this must be on the quality, character and intensity of the use, viewed in their totality and with regard to their overall effect on the neighborhood and the zoning plan.").
NOTES
[1] The property is located in a neighborhood retail district. The Board of Adjustment's attorney advised the Board that plaintiff needed only a bulk variance under N.J.S.A. 40:55D-70(c) for the sign, thus indicating that her use of the property for a chiropractic office was a permitted use.
[2] The majority implies that plaintiff could bring her sign into conformity with the new ordinance by simply rehanging it within 6 inches of the building facade. However, plaintiff testified that the present sign could not be rehung in conformity with the new ordinance, and that she would have to expend $2,500 to $3,000 to remove the sign and erect a new one. In any event, the right to maintain a nonconforming structure pursuant to N.J.S.A. 40:55D-68 is not dependent upon the amount of money which would have to be expended in order to remove or relocate the structure to conform with the new zoning ordinance.
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570 A.2d 1203 (1990)
Deborah HOWE
v.
Robert STUBBS, et al.
Supreme Judicial Court of Maine.
Argued January 16, 1990.
Decided February 26, 1990.
William N. Ferm (orally), Ferm & McSweeney, Ellsworth, for plaintiff.
Paul F. Macri (orally), Steven D. Silin, Berman, Simmons & Goldberg, Lewiston, for Robert and Sharon Stubbs.
William C. Nugent (orally), Hunt, Thompson & Bowie, Portland, for Kennebec Wine & Cheese Shop.
Before ROBERTS, WATHEN, GLASSMAN, HORNBY and COLLINS, JJ.
ROBERTS, Justice.
The plaintiff, Deborah Howe, appeals from a grant of summary judgment (Kennebec County, Brody J.) to defendants Kennebec Wine and Cheese Co. and Robert and Sharon Stubbs in an action for their negligent failure to protect Howe, a customer at Kennebec Wine and Cheese, from a vehicle that crashed into the store and for their failure to warn her of the risk of injury from such accidents. We affirm.
Howe was seriously injured in July 1981 in Hallowell while she stood just inside the entrance to a building owned by the Stubbs, part of which was leased by Kennebec Wine and Cheese. A motorist's brakes failed on a hill opposite the store. The vehicle came down the hill, across the street and crashed into the granite steps and the foyer where Howe was standing. Three similar accidents had occurred over the last twenty-five years at this location.
Whether the defendants had a duty to warn Howe of the possibility of such an accident or to provide barriers to protect her is a matter of law. See Joy v. Eastern Maine Medical Center, 529 A.2d 1364, 1365 (Me.1987). Duty has been defined as "an obligation, to which the law will give recognition and effect, to conform to a particular manner of conduct toward another." Prosser and Keaton on Torts § 53, at 356 (5th ed. 1984). We recognize the general duty of a business proprietor to exercise reasonable care to prevent injury to business invitees. Restatement (Second) of Torts Section 314A(3) (1965). In certain circumstances that duty may extend to warning of or protection from a danger that originates from third persons outside the business premises. Id. Section 344. We conclude, however, that the circumstances in the present case did not impose on these defendants a duty either to *1204 warn of or to protect from the errant vehicle that injured Howe.
The entry is:
Judgment affirmed.
All concurring.
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549 S.W.2d 181 (1977)
Cleophas CONAWAY, Appellant,
v.
The STATE of Texas, Appellee.
No. 53035.
Court of Criminal Appeals of Texas.
April 13, 1977.
*182 Stuart Kinard, Houston, for appellant.
Jerry A. Sandel, Dist. Atty., Huntsville, Jim D. Vollers, State's Atty., and David S. McAngus, Asst. State's Atty., Austin, for the State.
OPINION
GREEN, Commissioner.
In a trial before a jury, appellant was convicted of murder with malice. See Arts. 1256, 1257(b), V.A.P.C. Punishment was assessed by the court at seven years.
The record reflects that the verdict of guilty was returned by the jury on October 4, 1974. A request having been duly made by appellant that punishment be assessed by the court, a hearing on punishment was postponed pending a pre-sentencing investigation. Thereafter, the pre-sentencing report having been received by the court,[1] the punishment hearing was conducted on September 15, 1975. After evidence was introduced and counsel for the State and for appellant had addressed the court, the following proceedings are reflected:
"BY THE COURT:
"Okay, Cleophas Conaway, your having previously been found guilty of the offense of Murder with Malice by a jury
"BY THE DEFENDANT:
"Yes, sir.
"BY THE COURT:
"And after hearing the testimony, I am trying to take into consideration your medical history, and your physical condition, andbut it's also my duty to take into consideration yourthe crime that was committed by you, and it is the sentence of this Court that you be taken by the Sheriff of Walker County, Texas, to someone authorized to receive you at the Texas Department of Corrections, and there you are to serve not less than five nor more than seven years. Do you want to give Notice of Appeal?
"BY MR. MALONE:
"To which we give Notice of Appeal.
"BY THE COURT:
"Okay, that's all.
"BY THE COURT:
"Excuse me, Mr. Conaway, would you come back just a minute, that's under the old law
"BY MR. SANDEL:
"It was September the second, 1973, Judge.
"BY THE COURT:
"Your sentence is amended to read not less than two nor more than seven years rather than five to seven."
The term "conviction" as used in Art. 40.05, V.A.C.C.P., relating to motions for new trials and Art. 41.01, V.A.C.C.P., relating to motions in arrest of judgment includes both an adjudication of guilt plus an assessment of punishment. Woods v. State, Tex.Cr.App., 532 S.W.2d 608; Faurie v. State, Tex.Cr.App., 528 S.W.2d 263. The judgment following a finding of guilt must contain, among the other elements mentioned in Art. 42.01, V.A.C.C.P., "10. That the defendant be punished as has been determined." The sentence must be based on a valid judgment, for without a valid judgment the court is not authorized to sentence the defendant. Morgan v. State, Tex.Cr. App., 515 S.W.2d 278; Scott v. State, Tex. Cr.App., 461 S.W.2d 619.
Although the "declaration of the court entered of record" (See Art. 42.01, V.A.C.C.P.) purporting to be the judgment in the case and bearing date of October 4, 1974, reflects the punishment as having been assessed at seven years, the proceedings had at the punishment hearing on September 15, 1975, establish that no punishment was "determined" prior to the court's pronouncement of sentence on that date. *183 As shown in the above quotation from those proceedings, the record affirmatively establishes that no punishment had been assessed, and no valid judgment entered, prior to the oral sentencing of appellant on September 15, 1975. Instead of making the pronouncement of the punishment of the appellant whose guilt had been adjudged by the jury and then proceeding as provided in Art. 42.03, Sec. 1,[2] V.A.C.C.P., the court, at the close of argument of counsel, without having announced any determination of punishment, immediately sentenced appellant to serve "not less than five[3] nor more than seven years" and asked whether he wished to give notice of appeal. As stated in Scott v. State, supra, "A `judgment' (Article 42.01, V.A.C.C.P.) and a `sentence' (Article 42.02, V.A.C.C.P.) are not the same thing but distinct and independent." Punishment of appellant, a necessary element of the judgment, was first determined and announced during the sentencing of appellant, and no valid judgment was ever announced.
Furthermore, even if a valid judgment had been properly rendered, the record fails to reflect that appellant waived time in which to file a motion for new trial or in arrest of judgment. See Art. 42.03, Sec. 1, V.A.C.C.P.; Woods v. State, supra; Faurie v. State, supra. In fact, the record affirmatively reflects no waiver, as shown in the quotation from the sentencing proceedings. The written sentence which appears in the transcript is dated September 15, 1975, the date of the punishment hearing. It is silent on the matter of waiver of the ten day waiting time for filing a motion for new trial (Art. 40.05, V.A.C.C.P.) or in arrest of judgment (Art. 41.01, V.A.C.C.P.). A sentence imposed on the same day that punishment is assessed without a waiver of the ten day waiting period provided in Art. 42.03, V.A.C.C.P., being affirmatively shown is premature and invalid, and fails to give this Court jurisdiction to entertain the appeal. Woods v. State, supra; Faurie v. State, supra.
The appeal is dismissed. Upon receipt of the mandate from this Court, the trial court is directed to conduct a hearing with appellant and counsel present, and to assess punishment and render judgment, and next proceed in compliance with the provisions of Arts. 42.03 and 40.09, V.A.C.C.P., and as stated in the concluding paragraphs in Woods v. State, supra.
Opinion approved by the Court.
NOTES
[1] See the opinion of Justice Stevens in Gardner v. Florida, U.S.Sup.Ct., March 23, 1977 (See The Criminal Law Reporter, Vol. 20, page 24), in which a plurality of Justices Stevens, Stewart and Powell conclude that due process is denied the defendant where information contained in a pre-sentence report, supplied by witnesses whom the defendant could not confront or cross-examine, is withheld and denied the defendant.
[2] Section 1. "If a new trial is not granted, nor judgment arrested in felony and misdemeanor cases, the sentence shall be pronounced in the presence of the defendant except when his presence is not required by Article 42.02 at any time after the expiration of the time allowed for making the motion for a new trial or the motion in arrest of judgment."
The exception in Article 42.02 applies only in misdemeanor cases where the maximum possible punishment is by fine only.
[3] The minimum was later reduced to two years.
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391 Pa. Super. 219 (1990)
570 A.2d 1062
Joseph J. LICIARDELLO, Sr., Appellant,
v.
Concetta P. Valinoto LICIARDELLO, Appellee.
Supreme Court of Pennsylvania.
Argued January 10, 1990.
Filed February 27, 1990.
*220 Joseph L. Ditomo, Philadelphia, for appellant.
Mary C. Doherty, Norristown, for appellee.
Before DEL SOLE, MONTEMURO and TAMILIA, JJ.
*221 MONTEMURO, Judge:
This is an appeal from a final decree which divorces the parties, distributes their marital property equally between them, and awards court costs to appellee.
The parties to this case, both 51 years old at the time of hearing, were married in 1955 and separated in 1979. All four of their children are emancipated. Appellant is a Captain of the Philadelphia Police, and operates an auto tag business as well. Appellee has, since a year following separation, been employed as a registered nurse. At the time on the Master's hearing, both parties produced approximately equivalent earnings, appellant's being $37,000 and appellee's $36,000 per year, although in appellant's case, the figures were based on his former rank of Lieutenant.[1] Appellant apparently enjoys good health, although he is undergoing treatment for hypertension; appellee is subject to anemia and both cardiac and gynecological problems which have periodically compelled her absence from work.
The parties jointly own several pieces of real estate. Of the two residential parcels, one has since separation been in the exclusive possession of appellant. This property, located at 7028 Elmwood Ave., contains two stories, the bottom of which houses appellant's auto tag business, and the second appellant's living quarters. Appellee occupies another residential property at 6549 Grays Avenue, herself living in the ground floor unit, and renting the second floor to a tenant whose rent is remitted to appellant. Both properties are covered by a single blanket mortgage payment of $397 per month paid by appellant, who also pays for water and sewer service to appellee's residence. Neither party pays the other rent.
It is the valuation of these properties, and the credit given for appellant's expenditures on their behalf, which are now contested by appellant. In addition he challenges the *222 inclusion among marital assets of a property in Brigantine, New Jersey purchased by the parties in 1976. As originally acquired, the New Jersey property consisted of a house and a lot, the latter of which was purchased in the name of the parties' son, Joseph Jr. The house was sold in 1979, and after sustained litigation, a variance to allow construction on the lot, which was undersized, was obtained. During the course of the legal process, Joseph Jr. conveyed the property to appellant for $1; appellant was eventually granted the desired building permit, and erected a house on the lot. He now argues that the value assigned to this property by the court was erroneous.
Appellant also presents us with claims of error as to the methods of valuation and of distribution of his pension, and the award of court costs to appellee. We will address all of his claims seriatim.
We preface our treatment of appellant's claims by reiterating the applicable standard of review.
In assessing the propriety of a marital property distribution scheme, our standard of review is whether the trial court, by misapplication of the law, or failure to follow proper legal procedure, abused its discretion. Johnson v. Johnson, 365 Pa.Super. 409, 529 A.2d 1123 (1987); Thomson v. Thomson, 359 Pa.Super. 540, 519 A.2d 483 (1986); Ganong v. Ganong, 355 Pa.Super. 483, 513 A.2d 1024 (1986); Sergi v. Sergi, 351 Pa.Super. 588, 506 A.2d 928 (1986); King v. King, 332 Pa.Super. 526, 481 A.2d 913 (1984). Moreover, "an abuse of discretion is not found lightly, but only upon a showing of clear and convincing evidence." Sergi, supra, 351 Pa.Super at 591, 506 A.2d 930, citing Braderman v. Braderman, 339 Pa.Super. 185, 190, 488 A.2d 613, 615 (1985). Specifically, we measure the circumstances of the case, and the conclusions drawn by the trial court therefrom. against the provisions of 23 P.S. § 401(d), and the avowed objectives of the Divorce Code, that is, to "effectuate economic justice between [the] parties . . . and insure a fair and just *223 determination of their property rights." 23 P.S. § 102(a)(6).
Hutnik v. Hutnik, 369 Pa.Super. 263, 266-7, 535 A.2d 151, 152 (1987).
Appellant claims that the trial court erred in including the Brigantine realty among those items termed marital assets, arguing that the property was a gift for the use of the parties' sons, a purpose demonstrated by its having been titled in the name of Joseph Jr. The trial court found that Joseph Jr. was in fact a straw party, and that the purchase by and conveyance to appellant of the lot was simply the culmination of what had originally been intended when the property was acquired, defining it as a marital asset despite the title. In so concluding, the court relied on Wolf v. Wolf, 356 Pa.Super. 365, 514 A.2d 901 (1986). There a panel of this court found that under the doctrine of resulting trusts, a wife in a divorce action was not precluded from a claim on property purchased with marital funds for the benefit of the parties but titled in the names of her in-laws. Appellee herein testified that although she had no knowledge of why the title to the property was split, she had understood from the outset that the lot had been purchased for the use of herself and appellant, not the children. Since the court found appellee's testimony credible, the analogue to Wolf is both obvious and dispositive.
Appellant also argues that the values assigned by the court to all of the realty at issue between the parties, including the Brigantine property, were erroneous. His claim is grounded on the theory that since Sutliff v. Sutliff, 518 Pa. 378, 543 A.2d 534 (1988), which requires property valuation as of distribution rather than as of separation, was dated subsequent to the filing of his brief, its principles are inapplicable.
Even were appellant's arguments as to retroactivity more cogent, he fails to persuade. The law current at the time appellant filed his brief was clearly stated by this court in Diamond v. Diamond, 360 Pa.Super. 101, 519 A.2d 1012 *224 (1987), allocatur denied, 516 Pa. 633, 533 A.2d 92 (1987), which left to the trial court's discretion the choice of a valuation date, specifically so that economic justice, which is the objective of the Divorce Code, could be achieved. Because of the two year hiatus between the Master's hearing and review by the trial court, submission of new appraisals of the contested property was requested within 45 days by order dated April 22, 1988. Appellant neither complied with the order, nor protested its entry. Sutliff, as appellant accurately points out, was filed June 1, 1988, before the due date of the order. By his inaction,[2] appellant therefore not only intentionally failed to respond to the requirements of law either actually or arguably contemporary with his case, but in the process waived his right to argue now that the trial court erred in following that law.[3]
The valuation and mode of distribution of appellant's pension provides another grounds for complaint, and here too appellant seems determined to disregard the applicable case law. Appellant is adamant that his pension must be valued at time of separation for purposes of equitable distribution, and having failed to select this date, the trial court erred in the figure it placed upon appellant's pension. While appellant is in general correct, Braderman v. Braderman, supra, there is an exception to the blanket rule he would have us apply. In Morschhauser v. Morschhauser, 357 Pa.Super. 339, 516 A.2d 10 (1986), we held that "where a plan has vested and value increases aside from contribution of the parties, beyond the date of separation," id., 357 Pa.Superior Ct. at 334-5, 516 A.2d 12-13, the increase is *225 marital property. See, Hutnik v. Hutnik, 369 Pa.Super. 263, 269, 535 A.2d 151, 154 (1987). There is no argument that appellant's plan is in fact vested. The Braderman court itself noted that "the vast majority of jurisdictions hold that vested, unmatured retirement benefits are marital property," id., 339 Pa.Superior Ct. at 193, 488 A.2d 616, and Pennsylvania does not dissent from this view. The trial court was therefore correct in its choice of both the time of evaluation of appellant's pension, and the value assigned.
Appellant's claim that the trial court erred in selecting the immediate offset method of distribution is grounded on the assertion that he does not have the cash available to make the initial $21,000 payment offsetting his share of the pension. The trial court found appellant's plea of impecuniousness unpersuasive as he had a larger sum of cash than the offset readily available for other purposes ($64,000 to build the house at Brigantine), and the balance of the offset, $50,000, is deferred, to be paid in installments over a fifteen year period. We see no reason to fault the court's conclusion. See generally, Hutnik v. Hutnik, supra.
It is also argued that the court erred when it denied appellant credit for one half the mortgage payments made on the residential properties between separation and entry of the decree. Here again the trial court was unimpressed by appellant's credibility. Although appellant was willing to concede that the supposed credits should be reduced by the rents he received from the rental unit in the Gray's Avenue property, he never reported the rental payments, which he now claims to have been $12,000 for a ten year period, on his income tax. The amount thus received, which appellant conceded and the trial court found to have been less than a normal rental value, was nevertheless approximately sufficient to cover the mortgage portion attributable to that property. Moreover, appellant took all of the available mortgage interest deduction. Further, at the time of separation, when there was great disparity between the parties' incomes, since appellee was a full-time nursing student, appellant apparently agreed to forego rental payments *226 from appellee in exchange for her agreement not to seek spousal support. Under these circumstances, we can perceive no error in the court's decision as to what credits appellant should now receive.
Finally, appellant contends that court costs should not have been awarded to appellee based on what he claims is appellee's higher income, and his own sacrifices in paying the mortgage and declining to insist that appellee pay rent. We have stated that the award of fees and costs will be reversed only for abuse of the trial court's discretion. Campbell v. Campbell, 357 Pa.Super. 483, 516 A.2d 363 (1986), allocatur denied 515 Pa. 598, 528 A.2d 955 (1987). Herein the court concluded that because appellant had already deposited the required sum, and therefore need not make any new expenditures, and because appellee's economic parity was of relatively recent vintage and derived not at all from appellant's assistance, she was due greater consideration. As counsel fees were not included in this award, we agree with the trial court's determination.
Decree affirmed.
NOTES
[1] There was no specific value assigned to appellant's business, his second source of income. At hearing appellant testified that his earning from the auto tag concern was between $4,000 and $5,000 for the year 1985.
[2] Appellant's substantive arguments are similarly without merit. For example, he states in his brief that the Elmwood property has lost value because it is in a declining commercial district, and his hearing testimony indicated that the property was worthless. However, both the report submitted jointly by the parties at the time of the Master's hearing, and the updated appraisal submitted by appellee indicate exactly the opposite: that the area is stable, and actually increasing in value due to the advent of a shopping center less than one block from appellant's premises.
[3] We note that following Diamond, the trial court excluded appellant's post separation improvements to the property from its assigned valuation.
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549 S.W.2d 366 (1977)
Lawrence A. KYTE, Plaintiff-Respondent,
v.
FIREMAN'S FUND AMERICAN INSURANCE COMPANIES, Defendant-Appellant.
No. 10059.
Missouri Court of Appeals, Springfield District.
March 28, 1977.
William C. Crawford, Frieze, Crandall & Crawford, Carthage, for plaintiff-respondent.
John R. Martin, Blanchard, Van Fleet, Martin, Robertson & Dermott, Joplin, for defendant-appellant.
PER CURIAM.
Plaintiff Lawrence Kyte sued for benefits allegedly due him under a group disability insurance policy issued by defendant Fireman's Fund. Plaintiff claimed defendant had paid some benefits but wrongfully refused to make further payments due under the policy. Defendant denied liability for additional benefits and counterclaimed *367 for recovery of monies it alleged were overpaid plaintiff because of his receipt of benefits under another disability policy. The Circuit Court of Jasper County, sitting without a jury, found for plaintiff on his petition and on defendant's counterclaim, and entered judgment for plaintiff. We affirm.
The sole issue on appeal concerns the applicability of Part XV of the Fireman's Fund group policy which covered plaintiff as an employee of Foremost-McKesson, Incorporated. This clause, entitled "Reduction In Indemnity For Other Disability Insurance Benefits," provides as follows:
The amount of any Indemnity or expense payable under this policy shall be reduced by any benefits paid or payable under any other Disability Policies, or any plan, negotiated by or through any employer or sponsoring entity.
It was stipulated that plaintiff became disabled in 1971 and during June of that year began to receive monthly disability benefits under a policy with the Travelers Insurance Company. Defendant contends this policy with Travelers was "negotiated by or through" plaintiff's employer within the meaning of the above-quoted Part XV of his group policy with Fireman's Fund. It claims the benefits received by plaintiff from Travelers must be deducted from the amounts otherwise payable under its own policy.
The case was tried upon a stipulation of facts, documentary evidence, and the brief testimony of plaintiff. Plaintiff was employed by Foremost-McKesson from 1934 until he became disabled on June 30, 1971. In June 1958, Burt Barkus, an independent insurance agent, and Roy Wharton, a field supervisor for the Travelers Insurance Company, advised certain division officers of Foremost-McKesson that Travelers had a "franchise plan" for key employees. The plan would provide supplemental income in case of disability by illness. Under this plan the company employer had to agree to furnish a list of key employees, permit solicitation of employees on company premises, and make payroll deductions for premiums. If the company agreed to these conditions and at least five employees signed for the plan, it would become effective. After several letters and other communications between plaintiff's employer and representatives of Travelers, the officers of Foremost-McKesson agreed to the plan and the required number of employees applied for policies. Plaintiff Lawrence Kyte executed an application on July 7, 1958, and on October 1, 1958, Travelers issued to him the disability policy under which he began to receive benefits in 1971.
The Travelers "franchise plan" was not group insurance; each policy was individually applied for, and if the application was accepted Travelers issued an individual policy. In the event a policyholder under the plan left the employ of Foremost-McKesson, he could arrange directly with Travelers for a continuation of the policy. The premium costs were borne entirely by the employee policyholders, and the company employer's sole participation was to make payroll deductions for the premiums and forward the total amount to Travelers. In case the employer exercised its reserved right to cancel the payroll deductions, the franchise plan would be terminated.
Fireman's Fund contends that because the "franchise plan" under which plaintiff obtained his disability policy with Travelers required the approval and cooperation of his employer, the Travelers policy was "negotiated by or through" his employer within the meaning of Part XV of the Fireman's Fund group policy. It asserts that without the negotiations between Foremost-McKesson and Travelers plaintiff could not have obtained his disability policy with Travelers.
The principles applicable to the construction of insurance policies are well established. In general, plain and unambiguous language will be given its ordinary meaning and effect. Resort to construction is had only when an ambiguity exists. Gossett v. Larson, 457 S.W.2d 709, 712-713 (Mo.1970); State ex rel. State Department of Public Health and Welfare v. Hanover Insurance Co., 431 S.W.2d 141, 143 (Mo. 1968); Packard Manufacturing Co. v. Indiana *368 Lumbermens Mutual Insurance Co., 356 Mo. 687, 203 S.W.2d 415, 416 (banc 1947); Bennett v. American Life & Accident Insurance Co., 495 S.W.2d 753, 757 (Mo.App. 1973). An ambiguity exists where the language used is reasonably susceptible of two interpretations. English v. Old American Insurance Co., 426 S.W.2d 33, 36 (Mo.1968); Brugioni v. Maryland Casualty Co., 382 S.W.2d 707, 710-711 (Mo.1964). If the language employed is found to be ambiguous, it will be strictly construed against the insurer and in favor of the insured. This is especially true when the clause in question attempts to limit or exclude coverage under the policy. Aetna Casualty & Surety Co. v. Haas, 422 S.W.2d 316, 321 (Mo.1968); Meyer Jewelry Co. v. General Insurance Co. of America, 422 S.W.2d 617, 623 (Mo.1968).
Considering these principles, we believe Part XV of the Fireman's Fund policy, as applied to the facts of this case, is ambiguous and must therefore be construed in favor of the insured. That clause refers to benefits received "under any other Disability Policies, or any plan, negotiated by or through any employer or sponsoring entity." The policy under which plaintiff was covered was negotiated solely between him and Travelers; he completed an individual application and was issued an individual disability policy. Fireman's Fund argues we should not look solely at the individual policy between plaintiff and Travelers but must also consider the overall "franchise plan" agreed to between Travelers and plaintiff's employer and without which the individual policy would not have been executed. We resolve this ambiguity by applying the language of Part XV to the individual policy of insurance between plaintiff and Travelers. It is, after all, the insurance policy itself and not the so-called "franchise plan" which afforded plaintiff coverage and the payment of disability benefits.
An additional reason exists for finding that Part XV of the Fireman's Fund policy does not encompass plaintiff's policy with Travelers. The Fireman's Fund policy was group insurance and the policy and certificate of coverage were so entitled. The reference in Part XV to other disability policies can be interpreted to mean other group policies, especially when the words "negotiated by or through any employer or sponsoring entity" are considered (our emphasis). Reading the policy as a whole [First National Bank of Malden v. Farmers New World Life Insurance Co., 455 S.W.2d 517, 523 (Mo.App.1970); 13 Appleman Insurance Law and Practice § 7383, at 43-45 (1976)], the language is reasonably susceptible to this interpretation. The Travelers policy, being individual and not group insurance, would thus not fall under this reduction of benefits clause.
We recognize that so-called "coordination of benefits clauses" or "antiduplication clauses" in group insurance contracts, requiring that benefits be reduced by payments from other sources, have been upheld when expressed in unambiguous terms and where such clauses clearly applied to the particular facts.[1] In this instance, however, Part XV of the Fireman's Fund group policy does not fall within that category of cases.
The judgment is affirmed.
All concur.
NOTES
[1] The following cases discuss such clauses, although none involve language similar to that used in Part XV of the Fireman's Fund policy: Barker v. Coastal States Life Ins. Co., 138 Ga. App. 164, 225 S.E.2d 924 (1976); Elmer v. Washington Nat'l Ins. Co., 308 So. 2d 312 (La. App. 1975), cert. denied, 312 So. 2d 340 (La. 1975); Steele v. Gen. American Life Ins. Co., 217 Kan. 24, 535 P.2d 948 (1975); Gibson v. Metropolitan Life Ins. Co., 213 Kan. 764, 518 P.2d 422 (1974); Renslow v. Standard Life & Accident Ins. Co., 517 S.W.2d 1 (Tenn.1974); Blue Cross-Blue Shield of Tennessee v. Eddins, 516 S.W.2d 76 (Tenn.1974); Union Labor Life Ins. Co. v. Rudd, 502 S.W.2d 892 (Tex.Civ.App. 1973); Millstead v. Life Ins. Co. of Virginia, 256 S.C. 449, 182 S.E.2d 867 (1971); Dina v. Aetna Life Ins. Co., Hartford, Connecticut, 65 Misc. 2d 97, 316 N.Y.S.2d 654 (1970); Blue Cross of Northeastern New York, Inc. v. Ayotte, 35 A.D.2d 258, 315 N.Y.S.2d 998 (1970); McKay v. Equitable Life Assurance Society of the United States, 421 P.2d 166 (Wyo.1966); Metropolitan Life Ins. Co. v. Smith, 3 Conn.Cir. 169, 209 A.2d 693 (1965).
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549 S.W.2d 648 (1977)
STATE of Missouri, Respondent,
v.
Ronald C. STOCKBRIDGE, Appellant.
No. 28704.
Missouri Court of Appeals, Kansas City District.
April 4, 1977.
Robert G. Duncan, David W. Russell, Robert E. Hart, Duncan & Russell, Donald J. Quinn, Kansas City, for appellant.
*649 John C. Danforth, Atty. Gen., J. Michael Davis, Asst. Atty. Gen., Jefferson City, for respondent.
Before SWOFFORD, P. J., PRITCHARD, C. J., and DIXON, J.
SWOFFORD, Presiding Judge.
Appellant (defendant) was convicted by a jury of the offense of a felonious assault upon a police officer and sentenced to two (2) years imprisonment. After an unavailing motion for a new trial, he brings this appeal, raising three points upon which he seeks reversal. These do not include any claim as to the sufficiency of the evidence so the facts forming the basis of the conviction need only be summarized.
At approximately 4:45 a. m. on July 7, 1975, Robert L. Page, a police officer employed by the Gladstone Public Safety Department, Clay County, Missouri, was on duty, in uniform, when he received a radio dispatch to investigate a prowler in the parking area of the French Riviera Apartment complex. Upon arrival at that location at about 5:10 a. m., he alighted from his vehicle and began investigating the parking area. At one corner of the parking lot he heard a "clicking sound like someone was trying to start an engine * * * just like the solenoid was clicking over". Thereafter, he observed a large white male who was dressed in dark trousers, blue corduroy coat, wearing black gloves and carrying a bag on his right shoulder, from which several tools were visible. The officer confronted this individual and attempted to conduct a search; the man failed to assume a search position; a struggle ensued during which the man dropped the tool bag and attempted to flee; the officer grabbed him by the back coat collar; and the man struck the officer with his right elbow in the solar plexus and broke loose from the officer's grasp and fled. During this struggle Officer Page had radioed for back-up assistance, and Officer Rhoad arrived at the parking lot in time to observe the suspect in flight. The man ran toward the Rhoad vehicle through the headlight beams over the car's fender or hood and disappeared.
The record is not clear as to the events leading to the defendant's arrest but he was indicted September 24, 1975, and learned from his parents on September 27, 1975 that the Kansas City police were looking for him, and turned himself in on that day.
Both Officers Page and Rhoad made positive in-court identification of the defendant as the suspect encountered in the parking lot and, while this identification was strongly and somewhat effectively challenged during the trial, the dispute was properly for the jury's determination.
The state also relies upon the testimony of one Chris Barker, an acquaintance of the defendant, who testified that on July 13, 1975, over a cup of coffee in a restaurant in Kansas City, the defendant told him he had "almost got caught" stealing a car in Clay County about a week before and had struck a policeman or security guard with his elbow and escaped. At the time of his testimony, Barker was under a conviction on a guilty plea to auto theft in Kansas City and a similar charge was pending against him in Clay County. He denied any plea bargain on the Clay County matter involving his testimony against the defendant.
The state showed that a stolen motor vehicle was found in the apartment parking area following the incidents of the early morning of July 7, 1975, but no direct evidence was proffered that the defendant had any connection with such automobile.
The defendant testified in his own behalf on February 24, 1976 and denied that he was the person involved in the assault upon Officer Page or had any knowledge of it until September 27, 1975, when he heard of the police looking for him and voluntarily turned himself in to the authorities. He could not remember his activities or whereabouts on July 7, 1975. He categorically denied the conversation testified to by state's witness Barker. He testified he was 20 years of age, regularly employed, lived with his parents, and has never been convicted of a crime. Both of his parents also testified for the defendant.
*650 The defendant asserted in his Motion for a New Trial and as his first point on this appeal a matter of great and dispositive concern. He argues that because of the highly inflammatory and prejudicial comments of the assistant prosecuting attorney in his closing arguments to the jury he was denied his constitutional right to a fair and impartial trial. His counsel convincingly asserts that, even though these arguments were not the subject of objection by his trial counsel (not his counsel on this appeal) the point should be considered as plain error affecting substantial rights under Rule 27.20(c), Rules of Criminal Procedure.
The arguments of the assistant prosecuting attorney, set out below, must be considered against the background of the trial record. The only reference contained in the entire record concerning the defendant's prior criminal record came in his direct examination, as follows:
"Q. Have you ever been convicted of a crime?
A. No, sir, I have not.
Q. Have you ever stolen a car?
A. No, sir, I have not."
No attempt was made by the state either in cross-examination or by means of other evidence to refute this categorical denial of any past offenses.
The state relies upon two items of evidence in an attempt to justify the prosecutor's arguments. Officer Page testified that after the suspect had fled, he went back to the lot and retrieved the shoulder bag and "the car that he was supposed to have driven up in"; ran a check on it and learned it had been stolen from Columbia, Missouri on June 26, 1975. There was no direct proof that the suspect had driven up in this car or had any connection with it. Neither was there any direct evidence linking the defendant to the bag of tools nor were these tools introduced into evidence. The state's case rests solely upon the identification of the defendant by the policemen as the man in the parking lot.
The state justifies the argument upon the basis of the testimony of Officer Page in recounting his attempt to search and question the suspect. He stated:
"Q. Did you have reasonable belief that he had committed a crime?
A. Yes, sir.
Q. What was the crime?
A. Tampering with a motor vehicle.
Q. Did you ever ask him if he had been tampering with a motor vehicle?
A. He never gave me the chance. * * *"
Obviously, this was a reflection of the officer's thoughts or suspicions at the time (not of past events), unsupported by any fact in evidence. He admitted that he was attempting to apprehend the suspect for interrogation; that he had no intention then to place him under arrest; that he proposed to search for weapons or "frisk" him for the officer's personal protection; and, that at no time did he see the suspect even touch any of the cars in the parking lot.
There is not a shred of testimony or documentary evidence that the defendant had any past criminal record of any kind.
Against this background, the assistant prosecuting attorney in his closing argument stated:
"Now, let's look at the scene of the crime first for our evidence. First, whoever the individual was that was there was a professional. It wasn't a run of the mill `Let's rip off a car' type operation. The evidence clearly shows * * that whoever was there * * * was prepared to steal cars. * * * whoever was there was a professional; they knew what they were doing. They came to steal cars. * * *
* * * * * *
* * * Of course there weren't any fingerprints. That's a calling card. You don't do that when you're stealing cars * * *" (Emphasis supplied)
Continuing, the prosecutor dropped the use of the plural pronoun "they" and declaimed to the jury, in direct reference to the defendant:
"* * * Why did he drop his mechanic's bag? Because he's a car thief; because *651 he was armed; because he was dangerous; because he could be identified and he wanted to get away. That's what you're dealing with. * * * It does not change the fact that this individual identified by the police officers was north of the river, attempting to steal cars, got caught and assaulted the police officer. * * *" (Emphasis supplied)
Warming to his theme, the assistant prosecutor stated in his closing argument to the jury:
"* * * This man is a car thief, a professional thief. * * *
* * * * * *
* * * A professional car thief attempting to evade or otherwise avoid being detected or identified. * * *
* * * * * *
* * * He's a pro. He's avoiding trouble, staying out of prison. * * *" (Emphasis supplied)
The courts have long recognized that in the trial of a criminal case the prosecutor occupies a quasi-judicial position and is, at once, charged with the duty to thoroughly and vigorously present the state's evidence, on the one hand, and on the other hand, conduct these duties in such a manner as will afford the defendant a fair and impartial trial. He shares this latter responsibility with the trial court. State v. Tiedt, 357 Mo. 115, 206 S.W.2d 524, 526[1, 2] (Banc 1947); State v. Allen, 363 Mo. 467, 251 S.W.2d 659, 662[4] (1952); State v. Selle, 367 S.W.2d 522, 530[22] (Mo. 1963); State v. Heinrich, 492 S.W.2d 109, 114[8] (Mo.App.1973); State v. Thomas, 535 S.W.2d 138, 140[2] (Mo.App.1976); State v. Hicks, 535 S.W.2d 308, 311[2] (Mo.App. 1976).
As a natural result of these duties a prosecutor should scrupulously refrain from making statements calculated to engender prejudice or excite passion against the defendant. He should refrain from injecting into the trial matters not properly before the jury which would tend to add to the onus under which the defendant necessarily labors by reason of the charge upon which he is standing trial. State v. Selle, supra, at l.c. 530[22, 23]; State v. Hicks, supra, at l.c. 311[2, 3].
As a natural concomitant of this rule, a prosecutor "should never be permitted to apply unbecoming names or epithets to the defendant, or refer to the defendant or his alleged accomplice, as a criminal of any class or kind. * * *" (Emphasis supplied). State v. Taylor, 320 Mo. 417, 8 S.W.2d 29, 37[25] (Mo.1928). See also: State v. Leonard, 182 S.W.2d 548, 551[5] (Mo.1944); State v. Stroud, 362 Mo. 124, 240 S.W.2d 111, 113[9] (1951); Cf. State v. Harris, 351 S.W.2d 713, 715-716[1-4] (Mo.1961); State v. Turnbull, 403 S.W.2d 570, 572-573[5] (Mo.1966).
The arguments of the prosecuting attorney in this case far exceeded propriety and the rules of restraint properly imposed upon him by reason of his quasi-judicial position under the above-stated principles.
The defendant was charged with assaulting an officer, not with car theft; no prior criminal conviction was shown, and yet in his arguments the prosecutor referred to him as a "professional", a "pro", a "professional car thief" and as engaged in "stealing cars", and thus branded him with being a "criminal" of "that class or kind". Nothing in this record would justify the application of those names or epithets to this defendant nor were these arguments in reply to any argument or statements of defense counsel. It is apparent that these arguments constituted inflammatory appeals to arouse the jurors to personal hostility toward the defendant as a hardened criminal.
While no objection was made to these arguments during the trial, the matter was raised in the motion for a new trial. The cumulative effect of these arguments, the very lack of objection, the failure of the trial court to take any action even in the absence of objection, resulted in a prejudicial and inflammatory trial atmosphere, deprived the defendant of his right to a fair and impartial trial, resulted in manifest injustice cognizable under Rule 27.20(c), Rules of Criminal Procedure, as plain error, and *652 requires the granting of a new trial. State v. Heinrich, supra.
This conclusion makes it unnecessary to decide the defendant's second and third points asserting error in the trial court's ruling excluding alibi witnesses under the provisions of Rule 25.31 and Rule 25.34, Rules of Criminal Procedure, and calling into question the constitutionality of Rule 25.34. The matters will doubtless not arise upon a new trial.
Reversed and remanded for a new trial.
All concur.
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01-03-2023
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10-30-2013
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239 N.J. Super. 235 (1990)
570 A.2d 1301
VILLAGE BRIDGE APARTMENTS, PLAINTIFF-RESPONDENT,
v.
CAROL MAMMUCARI, DEFENDANT-APPELLANT.
Superior Court of New Jersey, Appellate Division.
Argued February 14, 1990.
Decided March 14, 1990.
*236 Before Judges DREIGHAN and R.S. COHEN.
Justin T. Loughry argued the cause for appellant (Tomar, Simonoff, Adourian & O'Brien, attorneys).
*237 Randolph I. Conn argued the cause for respondent (Greenblatt & Lieberman, attorneys).
The opinion of the court was delivered by R.S. COHEN, J.A.D.
Defendant has rented an apartment in plaintiff's complex for some 16 years. In October 1988 plaintiff presented defendant a new lease for her signature. She did not sign it. Because defendant failed to sign the new lease, plaintiff filed this summary dispossess action. From the resulting judgment for possession and the denial of a motion to reconsider, defendant appeals; we reverse.
Almost all of the summary dispossess trial testimony addressed the disputed question whether defendant had received the new lease and plaintiff's written communications about it. The Special Civil Part judge found, contrary to defendant's testimony, that she had received the lease and the communications. Because that finding was based on substantial credible evidence we accept it.
The new lease was presented to plaintiff on October 20, 1988, with a demand that it be signed in five days if defendant wished to remain a tenant. The new lease is not reproduced in the record, but we are told that it deletes a 1984 lease addendum which granted plaintiff exclusive use of two on-site parking spaces, apparently leaving her to compete with other tenants for available spaces. Every other lease term, with the possible exception of permissible rent increases, remained the same. Defendant did not respond to plaintiff's submission of a new lease or reminders about it.
In its complaint, plaintiff alleged that defendant was a residential tenant, that on October 20 she was given a new lease and five days to sign it, and she was told that if she failed to sign it, she had to vacate by November 30. The complaint alleged that on December 5 the unresponsive defendant was told she had to vacate by January 4, and that she failed to do *238 so. The complaint and plaintiff's trial evidence did not mention the change in a lease provision, or allege its reasonability.
The lease reproduced in defendant's appendix has a one-year term from July 1, 1983, to June 30, 1984. It was periodically renewed, it appears, in such a way as to give defendant a month-to-month tenancy on the same terms, except for rent increases. The lease has the following provision:
The Landlord may offer the Tenant a new lease to take effect at the end of this Lease. The new lease may include reasonable changes. The tenant will be notified of any proposed new lease at least 60 days before the end of the present Lease. If no changes are made, the Tenant may continue to rent the Apartment on a month to month basis (with the rest of the lease remaining the same). In either case the Tenant must notify the Landlord of the Tenant's decision to stay or leave at least 60 days before the end of the term. Otherwise, the Tenant will be responsible under the terms of the new lease.
The quoted provision has two consequential features. The first is that plaintiff has to give defendant 60 days' notice of any reasonable lease changes. Because termination was to be November 30, the date chosen by plaintiff, the October 20 notice did not comply. The second feature is that if defendant fails to notify plaintiff whether she will stay or leave, "the Tenant will be responsible under the terms of the new lease." The effect therefore of a tenant's failure to accept or refuse the new lease is not to abort it, but rather to put its terms into effect.[1]
Thus, the old lease contemplates the situation that arose, and resolves it with an automatic renewal under the new terms. And, plaintiff does not allege that defendant has violated any of those terms. But, plaintiff argues that it is entitled to a signature on the new lease. The answer is that plaintiff itself decided the contrary when it offered defendant the old lease which creates a renewal without defendant's signature. The renewal binds both parties.
*239 Defendant makes another argument. It is that plaintiff's failure to plead and prove the reasonability of the change in the new lease is fatal to the judgment for possession. We agree. N.J.S.A. 2A:18-61.1 requires a landlord to show good cause for the removal of a residential tenant and furnishes a lengthy list of good causes. The only relevant one is 61.1i:
The landlord or owner proposes, at the termination of a lease, reasonable changes of substance in the terms and conditions of the lease ... which the tenant, after written notice, refuses to accept; provided that in cases where a tenant has received a notice of termination pursuant to section 3g. of P.L. 1974, c. 49 (C. 2A:18-61.2), or has a protected tenancy status pursuant to section 9 of the "Senior Citizens and Disabled Protected Tenancy Act," P.L. 1981, c. 226 (C. 2A:18-61.30) the landlord or owner shall have the burden of proving that any change in the terms and conditions of the lease, rental or regulations both is reasonable and does not substantially reduce the rights and privileges to which the tenant was entitled prior to the conversion;
The proviso dealing with burden of proof applies to tenants of premises undergoing conversion to condominium, cooperative or like ownership. As to such tenants, the landlord must prove that new lease terms are not only reasonable but do not substantially reduce the tenants' rights and privileges. The language points up the fact that "reasonable" and "substantially reduce" are two separate standards. Tenants endangered by conversions are given special protection against lease changes which are proposed by landlords anxious to be rid of them, and which must therefore satisfy both standards.
The provision also speaks to the rights of tenants in non-conversion situations. It states only that changes in their leases must be reasonable, and thus suggests that some changes can be reasonable even though substantially reducing tenants' rights and privileges. See e.g., Courts v. Sgambati, 163 N.J. Super. 218, 394 A.2d 416 (Dist.Ct. 1978), aff'd o.b. 170 N.J. Super. 477, 406 A.2d 1330 (App.Div. 1979) (new clause prohibiting pets). The provision does not, however, state clearly whether landlord or tenant has the burden of proof with regard to the reasonability of any lease changes. We hold that the burden rests with the landlord.
*240 In summary dispossess proceedings, the landlord has the burden to prove every element of the claim by the greater weight of the credible evidence.[2] A landlord may not evict a residential tenant "except upon establishment of one of the following grounds as good cause:" N.J.S.A. 2A:18-61.1. The quoted language places the burden of proof on the landlord to established the existence of good cause. 447 Associates v. Miranda, 115 N.J. 522, 531, 559 A.2d 1362 (1989). It places no burden on the residential tenant, a person who ordinarily is not represented at trial, who is not in the business of renting apartments and is not as likely to know the law, and who does not have access to the landlord's records.
The court's jurisdiction in summary dispossess proceedings depends upon proof of the elements of the claim, and that includes the elements of good cause under N.J.S.A. 2A:18-61.1. Jurisdiction exists where there is evidence from which the court could find a statutory basis for removal. Vineland Shopping Center, Inc. v. De Marco, 35 N.J. 459, 464, 173 A.2d 270 (1961). In the circumstances, it is appropriate to require an evicting landlord to prove good cause under N.J.S.A. 2A:18-61.1 whether or not an objecting tenant demands such proof or raises the specific legal objection. Here, plaintiff failed to satisfy its burden to identify the change in the proposed new lease and establish its reasonability.
Finally, defendant argues that she asked to sign plaintiff's proposed new lease at the summary dispossess hearing; if guilty of any lease violation that subjected her to eviction, she argues, she should have been permitted to cure. We agree that an opportunity to sign the lease should have been afforded upon a finding that failure to sign warranted eviction. In *241 Courts v. Sgambati, 163 N.J. Super. 218, 224, 394 A.2d 416 (Dist.Ct. 1978), aff'd o.b. 170 N.J. Super. 477, 406 A.2d 1330 (App.Div. 1979), we affirmed Judge Huot's decision which held that, although a proposed lease change was reasonable, eviction should be delayed for a period of time after judgment, in part to give the tenant an opportunity to reconsider the landlord's offer of the lease containing the disputed term. See also Edgemere at Somerset v. Johnson, 143 N.J. Super. 222, 362 A.2d 1250 (Dist.Ct. 1976), where tenants unsuccessfully challenged rent increases as unconscionable, and were given 30 days after judgment to pay the disputed amount. N.J.S.A. 2A:18-55 permits non-paying tenants to cure their rent defaults by payment before entry of final judgment. See Stanger v. Ridgway, 171 N.J. Super. 466, 410 A.2d 59 (Dist.Ct. 1979). The defense of summary dispossess proceedings need not put tenants to the significant risk of lease forfeiture if their good faith defenses do not prevail.
Reversed.
NOTES
[1] Such a lease created by tenant's failure to object may or may not be enforceable in all its terms, but neither plaintiff nor defendant raises that objection.
[2] Hill Manor Apartments v. Brome, 164 N.J. Super. 295, 309, 395 A.2d 1307 (Dist.Ct. 1978). There, Judge David Baime applied that burden to the issue of unconscionability created by N.J.S.A. 2A:18-61.1f, which permits eviction for failure to pay a rent rise which is not unconscionable. Contra see Marine View Housing Co. v. Benoit, 188 N.J.Super 539, 457 A.2d 1241 (Law Div. 1982); Calhabeu v. Rivera, 217 N.J. Super. 552, 526 A.2d 295 (Law Div. 1987).
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01-03-2023
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10-30-2013
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Mr. Justice Dyer
delivered the opinion of the Court.
In this opinion the parties will be referred to as in the Trial Court. That is, Mrs. Joy Bailey Kemp the surviving widow of Julian Albert Kemp, deceased, as plaintiff and Town of Lebanon, a municipal corporation, as defendant.
This is a wrongful death action, by the surviving widow, wherein the Trial Judge has sustained the demurrer of defendant and dismissed the suit. Plaintiff appeals.
The material parts of the declaration necessary to this opinion are as follows:
*120“That on or about August 2, 1961, about 11:15 a. m., the plaintiff’s intestate, who was employed by Harold W. Moore & Son, painting contractors, was engaged in the painting of the gymnasium building at the Lebanon Junior High School,, along with one, Lyman Langford; and that the electricity to said Lebanon Junior High School is furnished by the Town of Lebanon, a municipal corporation, oh a proprietary basis, that is, for a rate of charge.
.“That as plaintiff’s intestate was in the act of painting-said gymnasium building- in the exercise of ordinary care, he and his fellow worker, Lyman Langford, were using a tall metal scaffold, necessary to use in order to reach points on the outside surface of the building near the top of the building. That the defendant, the Town of Lebanon, had negligently and carelessly placed some high voltage electric wire near the top of the said building, knowing that workers were likely to be in, at and near the said high voltage line, without having-said electric lines properly protected, and to have them located in such a manner that they could not be touched by a scaffold of any other object that it might be reasonably anticipated would' come in' contact. That the said defendant' likewise failed to give any warning to persons who might' come; in' contact with the said wires. That the plaintiff’s intestate was not advised about the .presence of any, uninsulated high voltage wires near or at the top. of said building.
“That as a direct and proximate result of the aforesaid negligence and carelessness of the defendant in failing to exercise ■ that degree of care required of it by the law under the circumstances, the metal, scaffold with which plaintiff’s intestate was working came in contact *121with the high, voltage wire, causing.plaintiff’s intestate to he hadly burned and electrocutéd, as a result of which he suffered great pain and mental anguish, and died, leaving surviving him, as a foresaid, as his heirs .at law and next of kin, the plaintiff and their three minor children, heretofore named, for all of whose use and benefit this suit is brought.”
The demurrer is as follows:
“(1) Because the declaration discloses the fact that the Plaintiff was fully aware of the presence of any uninsulated high voltage wires at or near the top of said building and dangers of the situation and appreciated the same and, therefore assumed the risk of ■ injury.
“(2) Because the declaration discloses the fact that Plaintiff was guilty of gross contributory negligence.
“(3) Because the declaration does not contain any averments that the Defendant, Town of Lebanon, has been guilty of any negligent act, or any breach of duty owing by it to Plaintiff’s intestate, or which contributed proximately to the injuries or damages averred by the Plaintiff.
“ (4) Because the declaration discloses the fact that if the Defendant, Town of Lebanon, was negligent in constructing or maintaining an uninsulated high voltage wire at or near the top of the school building, that likewise, Plaintiff’s intestate was guilty of the same degree of negligence by going near it.
“(5) Because the Plaintiff fails to disclose any relation between her intestate and Defendant, Town of Lebanon, which imposes upon defendant, Town of Leb*122anon, any duty owing by the Defendant, Town of Lebanon, toward Plaintiff’s intestate at the time.”
This demurrer raises two questions, to-wit: (1) Does the allegations of the declaration charge any actionable negligence on the part of the defendant, and (2) under the allegations of the declaration was the decedent, as a matter of law, guilty of contributory negligence.
Plaintiff relies on the case of Kingsport Utilities, Inc. v. Brown, 201 Tenn. 393, 299 S.W.2d 656, 69 A.L.R.2d 87. This utility had constructed and maintained a three-phase electric power line carrying 12,000 volts in an alley which, at the time of the accident, was in the business district of Kingsport. The wires at the point of the accident were 25 feet from the surface of the alley, and out in the open where they were visible. Several business buildings back up to this alley one of them being a machine shop. On the day of the accident the fixtures and machinery of this machine shop were being moved to another location, which was 53 feet across this alley, and in this moving a large crane, at full height 35 feet, was being used. In the process of this moving the cable on this crane either arced or came in contact with this power line causing injuries to the plaintiffs. This Court in an opinion by the late Mr. Justice Swepston denying the petition for certiorari said:
“The negligence alleged against the Utilities was (a) failure to insulate these high-powered lines, (b) to have them a sufficient height above the surface of the alley so that it would not come in contact with or close to the machinery or equipment that was likely to be used along said alley for moving machinery or other purposes, (c) failure to give warning of the dangerous nature of the wires, and (d) that the Utility had rea*123sonable grounds to anticipate that persons might be working around or with machinery or doing work in the alley which might, or was likly to place them near or in contact with the dangerous wires.”
“The majority opinion rejected the defense of independent intervening efficient cause and held that by reason of the fact that the area where plaintiffs were injured was an expanding business section and that from the numerous cases involving the use of booms, heavy machinery, etc., the defendant knew or should have known that with its wires uninsulated an accident similar to the one in question might result and that the jury might have found this defendant should have therefore foreseen the probability of such an accident happening, and that the case was properly submitted to the jury.”
“It does seem, therefore, that it is at least a question of fact about which the minds of reasonable men might differ as to whether a utility is negligent in having such high-powered voltage in lines uninsulated, running through the business section of towns. Of course the law does not require that all lines be insulated at any particular place but only where persons are likely to be and have a right to be, for business, pleasure or otherwise.” 201 Tenn. 393, 299 S.W.2d 659.
We are of the opinion the issue of defendant’s negligence is controlled by the case of Kingsport Utilities, Inc. v. Brown, supra. Whether defendant, under the circumstance alleged, should have foreseen workmen might at times be in and upon this building is a question upon which the minds of reasonable men might differ.
The question of contributory negligence, as well as actionable negligence, is ordinarily an issue for the *124jury. Philip Carey Roofing & Mfg. Co. v. Black, 129 Tenn. 30, 164 S.W. 1183, 51 L.R.A.,N.S., 340; Osborn et al. v. City of Nashville, 182 Tenn. 197, 185 S.W.2d 510; Schindler v. Southern Coach Lines, 188 Tenn. 169, 217 S.W.2d 775; and Tennessee Electric Power Co. v. Hanson, 18 Tenn.App. 542, 79 S.W.2d 818. The court in the Hanson casé declared:
"The question of contributory negligence, as well as the question of negligence, is ordinarily for the jury. Even though the facts be undisputed, if intelligent minds might draw different conclusions as to whether, under circumstances conceded, the conduct of a plaintiff was that of an ordinarily prudent man, the matter should be .left to the jury. The court should draw no inference when in doubt, but only in those cases where the evidence is without material conflict, and such that all reasonable men must reach the same conclusion therefrom. It is only in cases where the evidence is susceptible of no.other fair inference that the court is justified in instructing the jury, as a matter of law, that the plaintiff has been guilty of contributory negligence which would bar his recovery.” 18 Tenn.App. 542, 549-550, 79. S.W.2d 822.
"Demurrers are not favored, and will be' overruled if, by any fair and reasonable intendment, the pleading to which they are filed stated a good cause of action or defense, however inartificial or imperfect the statement may be.” Caruthers, History of a Lawsuit, Sec. 193 (8th ed.). Applying this principle to the instant case it cannot be determined, as a matter of law, absent an investigation into the facts surrounding the accident, that the decedent was contributorily negligent, or that he assumed the risk.
*125Defendant in support of their position cite the cases of: Talley v. Curtis, 23 Tenn.App. 181, 129 S.W.2d 1099; City of Chattanooga v. Shackleford, 41 Tenn.App. 734, 298 S.W.2d 743; and Johnson v. Johnson City, 41 Tenn. App. 148, 292 S.W.2d 794. These three cases were brought before this' Court on a motion for a directed verdict in the trial court. Therefore in these cases the trial judge had before him all the evidence, from which to determine, if all reasonable men must reach the same conclusion. Such is not the case in the suit at bar here on demurrer.
Defendant cites the case of Ashworth v. Carnation Company, 190 Tenn. 274, 229 S.W.2d 337. This case did come to this court upon demurrer. In the Ashworth case the declaration on its face disclosed the plaintiff was fully aware of the absence of a guard rail and due to a dizzy spell fell from a platform causing his injuries. Thus in the Ashworth case contributory negligence was patently obvious from the declaration. In the case at bar it is not alleged plaintiff knew of the dangerous condition, that is, the presence of the uninsulated wire; plaintiff specifically avers he, “was not advised about the presence of any wires near or at the top of said building. ’ ’ Thus the Ashworth case is distinguishable on the facts from the case at bar.
Defendant cites McCampbell v. Central of Georgia Ry. Co., 194 Tenn. 594, 253 S.W.2d 763. The trial court in this case sustained a demurrer to the declaration on the ground of contributory negligence and this court affirmed. In this case the declaration alleged deceased had driven his automobile into the side of a train as it was passing over a crossing. The declaration failed to plead other facts sufficient to rebut the inference of contributory negligence. In the case at bar, under the allegations of *126the declaration, we cannot determine whether or not the decedent did see or should have seen these wires and cannot rule, as a matter of law, plaintiff was guilty of contributory negligence.
The defendant cites other authority, which we have examined, but do not find controlling.
The judgment of the Trial Judge is reversed and the cause' remanded.
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01-03-2023
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10-17-2022
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221 F.Supp. 422 (1963)
Hector R. GRAS, Plaintiff,
v.
Charles J. BEECHIE, District Director, and Horace C. Harris, Officer in Charge, Immigration and Naturalization Service, Defendants.
Civ. A. No. 14359.
United States District Court S. D. Texas, Houston Division.
March 11, 1963.
*423 Sam Williamson, Houston, Tex., for plaintiff.
Woodrow Seals, U. S. Atty., and Morton L. Susman, Asst. U. S. Atty., Houston, Tex., for defendants.
INGRAHAM, District Judge.
The case is before the court on defendants' motion for summary judgment. Plaintiff, an Argentine citizen, entered this country as an Exchange Visitor on February 28, 1958. His entry was conditioned on his return, for a period of two years, to his home country or another country participating in the exchange program. Title 8 U.S.C.A. § 1182(e), as amended July 18, 1956, and subsequently, allows for a waiver of this condition upon a finding by the Immigration and Naturalization Service, concurred in by the Secretary of State and Attorney General, that the alien's departure would impose "exceptional hardship" on his spouse or children if they are American citizens or resident aliens. Plaintiff brings this action to review the defendants' finding of April 12, 1961, that his deportation would not cause such hardship to his resident alien wife and two citizen children.
*424 Essentially the administrative finding was that the continued presence of plaintiff's children in the United States was necessary because their physical condition called for expert medical attention not available elsewhere, but that the children's mother is a biochemist who could readily find employment in the United States allowing sufficient remuneration, when supplemented by the plaintiff's probable salary in Argentina as a highly trained anesthetist, to allow her and the children to remain in this country. This being true the hardship alleged is enforced separation of the plaintiff from his family and not ground for a waiver under Section 1182(e). In this court the administrative action is challenged as arbitrary, unsupported by substantial evidence, arrived at by the use of material that made the proceedings inconsistent with the commands of the Immigration Laws and the Administrative Procedure Act, and finally that the constitutional rights of the children have been infringed.
There is no dispute about the historical facts which form the basis of the administrative decision. It is true that the plaintiff by affidavit has stressed the financial difficulties that his family would have, but there is no challenge of the finding that the wife and children would be able to stay in the United States even if the plaintiff must leave. Thus the real issue here is the application of the standard "exceptional hardship" to the facts as found. The application of such a broad standard is at the very borderline of fact and law. See Jaffe Judicial Review: Questions of Law, 69 Harv.L.Rev. 239, 246. As such it is in an area where the courts are reluctant to substitute their discretion for that of the administrative officials entrusted with the implementation of the immigration laws by Congress. In the case at bar it is far from clear that the defendants have acted arbitrarily.
Sec. 1182(e), supra, itself shows an attempt to balance the interests of the resident alien spouse and citizen children against those of the government in instituting the program which brought plaintiff to this country in the first place and the meaning to be given "exceptional hardship" can only be understood in this context. Thus it seems that the defendants reasoned that possible permanent physical harm to the children would be "exceptional" while the fact of separation, unfortunate though it is, is of a sufficiently lower order of hardship to take it out of the standard set up by Congress. The legislative history of Sec. 1182(e) which indicates that voluntary separation is not a fact to be considered in assessing the degree of hardship, see House Report 721, July 17, 1961, argues persuasively that the question before the court now is the type of borderline matter that Congress entrusted an administrative official to handle in his discretion. The history related in H.R. 721, supra, also points to the conclusion that the burden of proof on the plaintiff was to be a very high one. In light of this it cannot be said that the defendants' conclusion that the plaintiff did not meet that burden was arbitrary. Further evidentiary support for his conclusion can be found in the following facts: the plaintiff's wife had worked full time while he was still in this country; the more seriously ill of plaintiff's two children has already had the operation he required, his doctor has stated that he required a year of post operative care, that year will be up in April 1963; in May 1962 the plaintiff was given a stay of deportation until the end of February 1963, this covered the temporary condition of the child, during this period no further evidence has been presented to the defendants to show any change in conditions that argues for a further stay or final waiver of Sec. 1182(e).
Turning briefly to the plaintiff's other contentions: (1) it is clear that the defendants in assessing the weight to be given plaintiff's evidence could consider the policies Congress sought to have implemented. See United States ex rel. Hintopoulos v. Shaughnessy, 353 U.S. 72, 77 S.Ct. 618, 1 L.Ed. 2d 652; (2) the plaintiff mistakes the *425 thrust of 5 U.S.C.A. § 1002(a) (3), there is no requirement that regulations be issued construing every general standard administered by an agency, only that if issued they be published; (3) none of the children's constitutional rights have been infringed by the defendants.
Defendants' actions are supported by substantial evidence and their motion for summary judgment will be granted. The clerk will notify counsel to draft and submit judgment accordingly.
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01-03-2023
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10-30-2013
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