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431 B.R. 193 (2010)
LONGVIEW ALUMINUM, L.L.C., Debtor,
v.
William A. BRANDT, the Chapter 11 Trustee for the estate of Longview Aluminum, L.L.C., Plaintiff-Appellee,
Dominic Forte, Defendant-Appellant.
No. 10 C 254.
United States District Court, N.D. Illinois, Eastern Division.
June 28, 2010.
*194 MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge.
This matter is before the court on Defendant-Appellant Dominic Forte's (Forte) bankruptcy appeal. For the reasons stated below, we affirm the bankruptcy court.
BACKGROUND
This matter is an appeal from Chapter 11 Bankruptcy Proceedings. The following facts are stipulated by the parties and are undisputed. Longview Aluminum, L.L.C. (Longview) is a limited liability company (LLC), organized under the laws of Delaware. Longview was governed by an Amended and Restated Limited Liability Company Agreement (LLC Agreement), which listed five members who made up a Board of Managers (Board): Michael Lynch (Lynch), Michael J. Ochalski (Ochalski), John L. Kolleng (Kolleng), McCall Enterprises, L.L.C. (McCall), and Forte. Under the LLC Agreement, Forte had a 12% interest in Longview. In addition, the LLC Agreement provided that Longview would be managed by the Board *195 and that Longview was required to promptly furnish members of the Board financial data relating to the financial condition of the company. The LLC Agreement also provided members with the right to inspect, audit, check and make copies of the company's books and records.
In 2001 and up to June 2002, Forte made requests to Longview, asking Longview to furnish business records or to permit Forte to inspect Longview's records. All of Forte's requests were denied. In July 2002, Forte sued Lynch, contending that Lynch used his controlling interest in Longview to exclude Forte from management decisions and any review of Longview's business documents. Longview, Great Lakes Processing, LLC, and Michigan Avenue Partners, LLC (collectively referred to, along with Lynch, as "Longview Defendants") moved to intervene in the case and were named as additional defendants in the action brought by Forte. In August 2002, the members of the Board other than Forte, including Ochalski, Lynch, Kolleng and McCall, executed a majority written consent, which formally took away Forte's right to access Longview's information and records. On November 7, 2002, Forte and the Longview Defendants entered into a settlement agreement (Settlement Agreement) under which $400,000, plus attorneys' fees and costs, would be paid to Forte in exchange for Forte's agreement to leave the Board. As part of the settlement, on November 7, 2002, Longview delivered Forte a $200,000 cashiers check as an initial payment. On January 16, 2003, Longview delivered another check to Forte in the amount of $15,000, which represented payment for Forte's attorneys' fees and costs.
On March 4, 2003, Longview filed a Chapter 11 petition for bankruptcy relief (Bankruptcy Petition). Plaintiff-Appellee William A. Brandt (Trustee) was appointed as Trustee in the bankruptcy proceedings for Longview (Bankruptcy Proceedings). The Trustee filed the instant adversary action (Adversary Action) against Forte in the Bankruptcy Proceedings, seeking to avoid the $200,000 and $15,000 settlement payments as preferential transfers. Since the $15,000 transfer was made within three months of the Bankruptcy Petition, Forte conceded that the $15,000 payment was a preferential transfer and returned the funds. Forte, however, contested the Trustee's assertion that the $200,000 payment to Forte constituted a preferential transfer made to an insider within one year of the Bankruptcy Petition. In the Bankruptcy Proceedings, the bankruptcy court allowed the parties to proceed with a trial on the papers based on stipulated facts. The bankruptcy court ruled in favor of the Trustee, finding that Forte was an insider as defined by 11 U.S.C. § 101(31) of the Bankruptcy Code, and that therefore the Trustee could avoid and recover the $200,000 transfer. Forte has appealed the bankruptcy court's ruling in the Adversary Action.
LEGAL STANDARD
A federal district court has jurisdiction, pursuant to 28 U.S.C. § 158, to hear appeals from the rulings of a bankruptcy court. Id. On appeal, the district court reviews the factual findings of the bankruptcy court under the clearly erroneous standard and reviews the bankruptcy court's legal findings under the de novo standard. Wiese v. Community Bank of Cent. Wis., 552 F.3d 584, 588 (7th Cir.2009) (stating that the court "review[s] the bankruptcy court's determinations of law de novo and findings of fact for clear error," but "where the bankruptcy code commits a decision to the discretion of the bankruptcy court, we review that decision only for an abuse of discretion"); see also in re A-1 Paving and Contracting, Inc., 116 F.3d *196 242, 243 (7th Cir.1997) (stating that a "bankruptcy court's findings of fact are upheld unless clearly erroneous and the legal conclusions are reviewed de novo"). Where there are mixed questions of law and fact, the district court conducts a de novo review. Freeland v. Enodis Corp., 540 F.3d 721, 729 (7th Cir.2008).
DISCUSSION
Forte contends that the Bankruptcy Court erred in including a member or manager of a LLC within the definition of an "insider" under 11 U.S.C. § 101(31) and therefore failing to consider whether Forte was actually a person in control of Longview. The determination of whether a person is an insider, as defined by 11 U.S.C. § 101(31) of the Bankruptcy Code, is "properly characterized as a mixed question of law and fact." In re Krehl, 86 F.3d 737, 742 (7th Cir.1996). Thus, we shall conduct a de novo review of the bankruptcy court's ruling. Freeland, 540 F.3d at 729.
Pursuant to 11 U.S.C. § 547(b)(4) (Section 547(b)(4)), with certain exceptions, "the trustee may avoid any transfer of an interest of the debtor in property ... made-on or within 90 days before the date of the filing of the petition; or ... 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...." Id. Pursuant to 11 U.S.C. § 101(31)(B) (Section 101(31)(B)), if "the debtor is a corporation," the term "insider" is deemed to include a: "(i) director of the debtor; (ii) officer of the debtor; (iii) person in control of the debtor; (iv) partnership in which the debtor is a general partner; (v) general partner of the debtor; or (vi) relative of a general partner, director, officer, or person in control of the debtor...." Id.
I. Whether a Member or Manager is Properly Analogized to a "Director"
Forte argues that the bankruptcy court erred in concluding that Forte, as a member of Longview, qualified as an insider under Section 101(31)(B). Pursuant to Section 101(31)(B), a "director" of the debtor is an insider regardless of the degree of control exercised over the debtor. See, e.g., In re Public Access Technology.Com, Inc., 307 B.R. 500, 505 (E.D.Va. 2004); In re Barman, 237 B.R. 342, 349 (Bankr.E.D.Mich.1999). The bankruptcy court concluded that a member or manager should be treated similarly under the statute. The bankruptcy court reasoned that the term "director" in Section 101(31)(B) is merely intended to illustrate the underlying relationship between the individual and the company. The bankruptcy court also found that Forte's position, as one of the five members on the Board of Longview, was a position equivalent to a director's position.
Forte argues that Section 101(31)(B) does not explicitly list a manager or member as one of the categories of insiders, and that therefore a manager or member is not an insider unless he falls under 101(31)(B)(iii) as a person in control of the debtor. However, the Seventh Circuit has indicated that "[l]egislative history suggests that, in addition to the individuals and entities actually named, the term also encompasses anyone with `a sufficiently close relationship with the debtor that his conduct is made subject to closer scrutiny than those dealing at arm's length with the debtor.'" In re Krehl, 86 F.3d at 741-42. In addition, the Seventh Circuit has indicated that the lists in Section 101(31) are "intended to be illustrative rather than exhaustive." Id. (quoting in part S.Rep. No. 989, 95th Cong.2d Sess., 1978 U.S.Code Cong. & Admin.News 5787) (addressing Section 101(31)(A)).
*197 As stated above, Longview is a LLC rather than a corporation. There is nothing in Section 101(31) that specifically deals with the definition of an insider in the case of a LLC. By stating in its preface "[i]f the debtor is a corporation," Section 101(31)(B) on its face indicates that its terms were intended to relate to corporations, not LLCs. Notwithstanding, there is no dispute as to whether Section 101(31)(B) governs the issue in this case. (Appellant 13); (Appellee 6).
Under Delaware law, a corporation generally must "be managed by or under the direction of a board of directors...." 8 Del.C. § 141. Thus, in referencing a director, Section 101(31)(B) was intended to refer to the party that "managed" the debtor corporation. With respect to a limited liability corporation, Delaware law states that "[u]nless otherwise provided in a limited liability company agreement, the management of a limited liability company shall be vested in its members...." 6 Del.C. § 18-402. Thus, pursuant to Delaware law, directors are generally provided with authority for managing the corporation and members are generally provided with authority for managing the limited liability company. The bankruptcy court therefore properly found that a member of a LLC would be an analogous position to a director of a corporation under Delaware law.
In addition, as the bankruptcy court pointed out, the LLC Agreement provided the members with substantial authority, stating that "the authority, power, and responsibility to manage the operations and affairs of the Company shall be vested in the Board of Managers and the Members." (11/24/09 MD 9). Thus, in regard to Longview, a LLC that has allocated substantial authority concerning its business decisions to its members, a member such as Forte would fall within the definition of an "insider" under Section 101(31)(B) without regard to whether he is a person in control of the debtor under Section 101(31)(B)(iii).
In arguing that the bankruptcy court erred in failing to consider whether Forte had actual control over Longview, Forte cites to a variety of non-controlling precedent in which the courts considered the amount of actual control the individual in question exercised over the debtor. See, e.g., In re U.S. Medical, Inc., 531 F.3d at 1279; In re Kids Creek Partners, L.P., 200 B.R. 996, 1000 (Bankr.N.D.Ill.1996); In re Octagon Roofing, 124 B.R. 522, 531 (Bankr.N.D.Ill.1991); In re Hobbick, 2001 WL 34076375, at *2 (Bankr.C.D.Ill.2001); In re Guardian Equipment Corp., 20 B.R. 824, 825 (Bankr.S.D.Fla.1982). The bankruptcy court correctly distinguished the cases cited by Forte, contending that such cases stand for the proposition that, to be an insider, an individual must exercise control over the debtor, but that such a consideration is only relevant if the individual did not have a formal legal relationship with the debtor. (11/24/09 MD 11). The bankruptcy court properly pointed out that under 11 U.S.C. § 101(31)(B) a "director of the debtor," and a "person in control of the debtor," are separately listed as individuals that would qualify as insiders. Thus, if an individual fit under the definition of a "director," it would not be logically necessary to also inquire whether the individual would fit under one of the other listed categories such as a "person in control of the debtor." Based upon the above, the bankruptcy court properly concluded that by virtue of Forte's status as a member of the LLC, Forte was an "insider" under Section 1010(31)(B). Thus, the bankruptcy court did not err in failing to examine Forte's actual control over Longview while Forte effectively remained a managing member.
*198 Forte has attempted to explain that the $200,000 transfer was part of a legitimate settlement in an action that he brought to enforce his rights as a member of the LLC. However, in delineating per se insiders, Section 101(31)(B) creates a bright line rule making certain categories of individuals inherently suspect and thus subject to avoidance for longer than the otherwise applicable three month period prior to the bankruptcy filing. See, e.g., In re Public Access 307 B.R. at 505; In re Barman, 237 B.R. at 349; In re Kunz, 489 F.3d 1072, 1079 (10th Cir.2007) (noting that "a general partner or a relative is an insider per se, without need for showing the specific nature of the relationship with the debtor in a particular case"). Section 101(31)(B) does not provide that such categories of individuals are considered insiders unless they can come up with a good explanation for why a transfer was for legitimate purposes. In addition, Section 547(b)(4), which provides for avoidance of certain transfers made to insiders, does not provide that avoidance is allowed unless the insider can give a good reason why the transfer should be considered part of fair, arms-length dealing. Thus, the fact that Forte has presented facts showing that the transfer to him may have been for legitimate purposes and did not involve insider influence or self-dealing is not relevant to the assessment of whether the $200,000 transfer was subject to avoidance.
II. Forte's Status as Manager
Forte argues that as early as 2001, he was no longer effectively a managing member of Longview since he was denied access to the books and records of Longview. Forte also points out that in August 2002, before the $200,000 transfer was made, the majority of the Board executed a formal written consent excluding him from Longview records and information. The bankruptcy court indicated that, in spite of those facts, Forte remained a member until he agreed to relinquish his management rights in Longview on condition of full payment of the settlement account. (11/24/09 MD 11). As discussed above, the bankruptcy court concluded that, based on Forte's legal relationship with Longview, his actual control over Longview was not a dispositive factor in determining whether Forte was an insider.
As the bankruptcy court correctly pointed out when addressing the director issue, a court must look beyond mere titles in assessing whether an individual is an insider and examine the legal rights of the individual in question. (11/24/098). The stipulated facts show that in addition to refusing Forte's requests for books and records, the majority of the members on the Board executed a formal written document suspending Forte's authority to access Longview's information and records. (Appellant 15). Specifically, the stipulated facts provide that on August 20, 2002, certain members other than Forte, including Ochalski, Lynch, Kolleng and McCall, executed a majority written consent (Majority Consent) that provided the following:
NOW, THEREFORE, BE RESOLVED, that the undersigned hereby consent to maintaining such records and information in confidence from Dominic Forte until such time as: (1) the Company concludes its investigation of Dominic Forte's improper purpose, (2) the BPA concludes its audit of the Company's account; and, (3) the discovery closes in the litigation between the Company and the United Steelworkers of American (on or about October 30, 2002). The harm to the Company far outweighs any benefit to Domnic Forte of disclosure of such records to Dominic Forte.
(Stip. F. Par. 24). Thus, on August 20, 2002, Forte was effectively stripped of his *199 authority to access information and records from Longview. In this case, there was more than merely a hindrance or prevention of Forte's exercise of authority with respect to the books and records. Certain of Forte's member rights were actually suspended in writing by the Board. That suspension of rights occurred on August of 2002, before the payment to Forte at issue in this case, which was made in November of 2002. As indicated above, pursuant to 11 U.S.C. § 547(b)(4), with certain exceptions, "the trustee may avoid any transfer of an interest of the debtor in property ... made on or within 90 days before the date of the filing of the petition; or ... 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. ..." Id. (emphasis added). Thus, the relevant inquiry is what effect the Majority Consent had on Forte's status as a member.
The stipulated facts do not reflect that there was ever any formal vote or writing to strip Forte of his member status at Longview. While the Majority Consent precluded Forte from accessing information and records from Longview, the authority by Forte to do so was only part of his bundle of rights as a member. The LLC Agreement reflects that a member had more rights than merely accessing Longview's records. For example, members are provided with certain distributional and voting rights. (LLC Agr. Par. 1.1(t)). As the bankruptcy court correctly pointed out, at the time of the transfer of the $200,000, Forte was still a member of Longview. Nothing in the Majority Consent changed that fact. Thus, at the time of the transfer, Forte held a formal position on the Board, and although some of his rights were curtailed by the Majority Consent, his position still placed him in such an intimate association with Longview that he is appropriately considered a per se insider for the purposes of Section 101(31)(B). Therefore, we affirm the bankruptcy court in its ruling in favor of the Trustee.
CONCLUSION
Based on the foregoing analysis, we affirm the bankruptcy court.
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431 B.R. 446 (2010)
In re Bradley William SHIELDS, Amanda Shay Shields Debtors.
No. 08-15198-AJM-13.
United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.
April 15, 2010.
*448 Robert Brothers, Chapter 13 Trustee.
Stacy Wissel, Decker, IN, for Chapter 13 Trustee.
Stephen K. Andrews, Indianapolis, IN, for Citifinancial.
Kevin Michael Weldon, for Debtors.
ORDER ON TRUSTEE'S MOTION FOR INSTRUCTIONS
ANTHONY J. METZ III, Bankruptcy Judge.
BACKGROUND
The Debtors filed their chapter 13 case on December 5, 2008. The Debtors scheduled Citifinancial Services, Inc. ("Citifinancial") as an unsecured creditor with a claim of $7397.00. In their statement of financial affairs, the Debtors in question 4 listed Citifinancial's pre petition lawsuit in the nature of "civil collection" against the Debtors pending in the Monroe Circuit Court (the "State Court"). This chapter 13 case was dismissed on September 8, 2009. Because the Debtors' chapter 13 plan had not been confirmed, the Chapter 13 Trustee (the "Trustee") was holding $3297.26 (the "Funds") which had been paid by the Debtors into their plan. There is no pending claim for administrative expenses under 11 U.S.C. § 503(b). The case was closed on October 14, 2009.
After dismissal of the chapter 13 case but before the Trustee disbursed the Funds and the case was closed, Citifinancial obtained from the State Court and served on the chapter 13 trustee an Order of Attachment which directed the Chapter 13 Trustee to pay the Funds to Citifinancial (the "State Court Order"). The Trustee moved this Court for instructions as to *449 how to dispose of the Funds. The Debtors have not requested that the Funds be paid to them.
This matter was initially heard on December 14, 2009 wherein the Court took the matter under advisement but granted leave for Citifinancial to file a brief within 14 days and the Trustee 14 days thereafter. The Court, on its own motion, held a status conference on the matter on December 22nd, suggesting alternatives how to resolve the matter. At the conclusion of that status conference, the Court extended the deadlines by which briefs were to be submitted. Citifinancial and the Trustee filed their briefs on January 14, 2010 and March 4th respectively.
DISCUSSION
11 U.S.C. § 1326(a)(2)
Conflicting claims to funds held by a chapter 13 trustee in a dismissed case are not a common occurrence, perhaps because judgment creditors do not get around to resuming collection proceedings until after the trustee returns the funds to the debtor. When such a conflict occurs, the Trustee maintains that the unambiguous language of § 1326(a)(2) controls and requires that the funds be returned to the debtor, despite any competing claim to the funds. That section provides:
(2) A payment made under paragraph (1)(A) shall be retained by the trustee until confirmation or denial of confirmation. If a plan is confirmed, the trustee shall distribute any such payment in accordance with the plan as soon as practicable. If a plan is not confirmed, the trustee shall return any such payments not previously paid and not yet due and owing to creditors pursuant to paragraph (3), to the debtor, after deducting any unpaid claim allowed under section 503(b).
This section may not be as unambiguous and absolute as the Trustee contends. A notice of tax levy issued by the Internal Revenue Service and the broad reach of the provisions of the tax code trump a debtor's right to receive the funds under § 1326(a)(2). In re Pruitt, 2008 WL 2079145 (Bkrtcy.M.D.Ala.) (holding, however, that amounts payable to the debtor's attorney under § 503(b) and amounts properly exemptible under the tax code are not subject to the IRS' levy); In re Brown, 280 B.R. 231 (Bankr.E.D.Wis. 2002); In re Pendrick, 20 B.R. 972 (Bankr. N.D.Ohio 1982). Where a state taxing authority lays claim to the funds, the case law varies. Some courts order the funds to be turned over directly to the state tax authority on the basis that § 362 terminates the automatic stay upon dismissal and that nothing in § 1326(a)(2) extends post dismissal protection to the funds since they are no longer property of the estate. In re Steenstra, 307 B.R. 732 (1st Cir. B.A.P. 2004); In re Doherty, 229 B.R. 461 (Bankr.E.D.Wash.1999). One court, satisfied that the state taxing authority would not be prejudiced, ordered return of the funds to the debtor under § 1326(a)(2) because the funds under state law were impressed with a lien which followed the funds into the hands of the debtors. In re Clifford, 182 B.R. 229 (Bankr.N.D.Ill.1995).
Funds are more likely to be returned to the debtor under Section 1326(a)(2) when the competing claimant to the funds is not a state or federal taxing authority but a private creditor who obtained a judgment pre petition. In such cases, some courts have held that the language of § 1326(a)(2) is clear and unambiguous and mandates return of the funds to the debtor after payment of administrative expenses under § 503(b), leaving the garnishing creditor to collect the debt through state court proceedings. In re Inyamah, 378 B.R. 183 (Bankr.S.D.Ohio 2007); In re Bailey, 330 *450 B.R. 775 (Bankr.D.Or.2005); In re Oliver, 222 B.R. 272 (Bankr.E.D.Va.1998).
Given the range of court decisions discussed earlier, the Court is not convinced that § 1326(a)(2) absolutely controls here or that it is clear and unambiguous. Section 1326(a)(2) makes no mention of disposition funds upon dismissal (or, conversion, for that matter) of the case. Yet, when applied literally, the trustee would be required to return funds even when the chapter 13 continues to pend and the debtorhaving been denied confirmation of his planintends to file an amended plan. Because return of the funds is impracticable under such circumstances, this section has been assumed to apply when the case is converted or dismissed. Karen Cordry & Zachary Mosner, Garnishing the Chapter 13 TrusteeWhat's the Plain Meaning of § 1326(a)(2)?, 27-FEB Am. Bankr.Inst. J. 12 (2008).
Assuming that § 1326(a)(2) applies in dismissed cases, it does not, and cannot, provide for every scenario for disposition of funds in a dismissed case with an unconfirmed plan. For example, to whom should funds be returned upon the death of a debtor? Upon incarceration of a debtor? Upon incompetency of a debtor for which a guardian has been appointed? Would the Trustee argue that § 1326(a)(2) directs him to pay the funds to the debtor in such cases? If the funds cannot be returned to the debtor due to the debtor's incarceration, incompetency or death, would the trustee hold the funds indefinitely?
11 U.S.C. § 349(b)(3)
Disposition of property upon dismissal is also discussed in § 349(b)(3) which provides that estate property revests in the entity in which such property was vested immediately before the commencement of the case. Section 349 applies regardless of case chapter and denial or confirmation of a plan. However, this section is not without its own conceptual ambiguity. Assuming that the Funds consist of the Debtors' post petition wages, how can property that did not exist before the commencement of the case "revest" in the Debtors? See, In re Lewis, 346 B.R. 89 (Bankr.E.D.Pa.2006).
I conclude that what § 1326(a)(2) and § 349(b)(3) do unambiguously provide for is the return of the funds to (after payment of § 503(b) expenses) and the revesting of property in the debtor where there are no post dismissal intervening events that challenge the debtor's right to receive the funds or claim the property. However, application of these sections beyond this garden variety scenario, in my opinion, just was not contemplated by Congress. The Trustee does not dispute the validity of the State Court Order here. I do not believe that Congress would have so easily disregarded creditors who, free from the automatic stay, enforce their judgments by obtaining valid state court garnishment orders and levying property that is neither property of the estate nor property needed to pay administrative claims. Had Congress intended to sequester funds from these creditors under these circumstances, it certainly knew how to provide for it and could have added "notwithstanding any challenge after dismissal but before closing of the case" or similar language to § 1326(a)(2) or § 349(b)(3). Nor do I think that returning the Funds to the Debtors and leaving Citifinancial to fend for itself in state court is an attractive outcome.
Rather, I follow the lead of the Steenstra and Doherty cases and conclude that, § 362 controls here. As stated in those cases, dismissal of a case terminates the automatic stay and the bankruptcy estate. What was formerly property of the estate revests in the entity in which it *451 was vested prior to the commencement of the case under § 349(b)(3) and is no longer property of the estate. Such property loses the protection of the automatic stay upon dismissal under § 362(c)(1) and nothing in § 362, § 349, or § 1326 expressly shields from levy funds that are not needed to pay § 503(b) claims. Since the funds are not protected, they are subject to levy and the trustee is like any other third party holding funds owed to a debtor against which a judgment creditor has levied. See, In re Schlapper, 195 B.R. 805, 806 (Bankr.M.D.Fla.1996); Steenstra, 307 B.R. at 740.
The Trustee contends that return of the Funds to the Debtors accomplishes three important statutory goals in that it (1) fosters the policy of encouraging chapter 13 filings; (2) allows a prompt closing of the estate, discouraging a race among creditors to the trustee; and (3) restores parties to their original pre petition positions by revesting the property to the debtors. This Court does not agree that return of the funds in a dismissed chapter 13 case encourages chapter 13 filings over chapter 7 filings. Rather, it unjustly rewards debtors who neither pay their creditors through a confirmed chapter nor opt to pay them through conversion to another bankruptcy chapter. And, "it is unlikely that Congress would supply that incentive to one who may have decided to forego the responsibilities to one's creditor's contained in the Bankruptcy Code". Doherty, 229 B.R. at 466.
Payment of the funds to the debtor does not foster a prompt closing of the estate and discourage a race among creditors. The trustee's only concern is to whom the funds should be paid, whether it's the creditor, the debtor or the state court. The Court can appreciate the fact that the Trustee here seeks guidance as this issue of one of first impression in this District. However, once this Court establishes its position and the Trustee receives guidance for future cases pending in this Court, payment to the creditor or the state court will not delay the closing of the estate any more than payment of the funds to the debtors.
The Trustee argues that return of the Funds to the Debtors will restore the parties to there pre-petition status, apparently as suggested by § 349(b)(3). Aside from the conceptual difficulty that the Funds here which were not in existence pre petition somehow now revest in the Debtors, I nonetheless reiterate my opinion that § 349(b)(3) as written, like § 1326(a)(2), was not intended to cover situations where a debtor's post dismissal right to property is challenged.
Preemption
Nor is the State Court preempted from enforcing the State Court Order by the "mandate" of § 1326(a)(2). The Supremacy Clause invalidates state statutes to the extent they are inconsistent with or contrary to the purposes or objectives of federal law. Sheehan v. Peveich, 574 F.3d 248 (4th Cir.2009). The objective of chapter 13 is to financially rehabilitate debtors through the repayment of debt pursuant to a confirmed plan. When the chapter 13 case is dismissed, the debtor no longer seeks financial rehabilitation from the bankruptcy court and the only objective remaining is to proceed to closing. That objective is accomplished by the trustee's administrative acts of disbursing funds and filing a final report, neither of which involves the debtors' financial rehabilitation. The State Court Order which seeks payment of the Funds is neither contrary to nor inconsistent with the remaining objective of performing the necessary administrative tasks needed to close the case.
*452 The Barton Doctrine
Finally, the Trustee argues that he should be "insulated from state court orders of attachment while performing his appointed duties" under the Barton Doctrine. Trustee's Memorandum of Law Regarding Preemption at 5. The Barton Doctrine discourages lawsuits brought in nonbankruptcy forums against bankruptcy trustees by requiring the party suing to first obtain leave of the bankruptcy court. Barton v. Barbour, 104 U.S. 126, 128-29, 26 L. Ed. 672 (1881) ("an equity receiver could not be sued without leave of the court that appointed him"). There is a legitimate concern that allowing a trustee to be sued without leave of court would divert the trustee's attention from administering the case. See, In re Linton, 136 F.3d 544, 545 (7th Cir.1998). The "integrity of bankruptcy jurisdiction" justifies the expansion of the Barton Doctrine to suits filed against trustees post closing, even though the trustee no longer "administers" the case. Id. at 545.
The Court is well aware that the Trustee carries a heavy chapter 13 caseload. The Trustee executes his duties superbly. The Court does not want this level of performance compromised by state court proceedings that divert the Trustee's attention. The Trustee should not be required to defend against or otherwise appear in state court each time he is served with a garnishment order. For that reason, the Court will order the Trustee to issue a check made payable to the Debtors in an amount equal to the Funds, less any allowed § 503(b) expenses (the "Check"). The Court will further order the Trustee to send the Check, properly identified with the State Court case number, to the State Court, at which point Citifinancial can resume its collection proceedings there. By ordering the Trustee to issue the Check payable to the Debtors and to send it to the State Court, the Trustee's concerns with § 1326(a)(2)'s "mandate" are allayed and the Court preserves a source of recovery for Citifinancial. The Debtors will also have an opportunity in State Court to challenge Citifinancial's claim to the Check and assert any available exemptions to which they may be entitled. The Court believes this is the most practical method by which to deal with state court garnishment orders. If the State Court determines that Citifinancial is entitled to all of the Check proceeds, it can order the Debtors to negotiate the Check payable to Citifinancial, or, if the Debtors refuse, it can appoint a person to do so under Ind. R. Tr. P. 70. If the Court finds that Citifinancial is entitled to a portion of the Check proceeds, it can order the Debtors to issue another check payable to Citifinancial in the appropriate amount.
Accordingly, the Court now ORDERS that the Trustee issue a check made payable to the Debtors in an amount equal to the Funds, less any allowed § 503(b) expenses. It is FURTHER ORDERED that Trustee send the Check, properly identified, to the State Court. The Trustee and Citifinancial's counsel are in the best position to coordinate their efforts in completing these events, and therefore the Court will not set a deadline by which they should be done. However, should additional matters arise with respect to the Check while it is in the Trustee's possession, either party may request an emergency hearing at which time the Court will set at its earliest convenience.
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901 F. Supp. 971 (1995)
Wilbert COOK, Jr.
v.
Shirley S. CHATER,[1] Commissioner of Social Security.
Civ. A. No. N-94-2326.
United States District Court, D. Maryland.
May 30, 1995.
*972 Allen F. Loucks, Asst. U.S. Atty., Lori Karimoto, Social Security Administration, Baltimore, MD, for defendant.
Robert M. Hyman, Counsel for Wilbert Cook, Jr.,
*973 MEMORANDUM OPINION
SCHULZE, United States Magistrate Judge.
Plaintiff Wilbert Cook, Jr. brought this action pursuant to 42 U.S.C. § 405(g) (Supp. 1995) for review of a final decision of the Commissioner of Social Security (Commissioner) denying his claim for Disability Insurance Benefits (DIB) under Title II of the Social Security Act, 42 U.S.C. §§ 401-433. The parties consented to referral to a United States Magistrate Judge for all proceedings and final disposition. Both parties have filed motions for summary judgment which are ready for resolution. No hearing is deemed necessary. For the reasons set forth below, the decision of the Commissioner is affirmed.
1. Background.
Mr. Cook applied for Supplemental Security Income (SSI) on April 1, 1992, and for DIB on May 13, 1992, alleging an inability to work since September 4, 1980. His date last insured was March 31, 1985. Both applications were denied initially and upon reconsideration. An Administrative Law Judge (ALJ) heard the case de novo and, on April 19, 1994, found that Mr. Cook was presently disabled but was not disabled prior to April 1, 1992. Thus, Mr. Cook was awarded SSI from April 1, 1992, and was denied DIB. On June 2, 1994, the Appeals Council denied Mr. Cook's request for review, thus making the ALJ's determination the Commissioner's final decision.
2. Medical, Vocational and Other Evidence.
Mr. Cook alleged disability since September 4, 1980 due to back and leg problems which resulted from an injury at work. As his insured status expired on March 31, 1985, his condition as of that date controls his eligibility for DIB. At that time, he was 42 years old, with a high school education and past work experience as an unskilled laborer.
On September 5, 1980, Mr. Cook sought treatment for a work related back injury at Peninsula General Hospital Medical Center. An x-ray of his back was normal, and the examining physician diagnosed him with acute lumbar back strain.
On January 26, 1981, Mr. Cook began treatment with Lawrence F. Honick, M.D., complaining of severe, constant low back pain that radiated down the left hip and leg, with occasional numbness, tingling and weakness. Dr. Honick noted that Mr. Cook seemed to have considerable pain and discomfort when he rose from a sitting position. He stood with his spine somewhat flexed, walked with a limp on the left side, and had difficulty getting onto the examining table. The examination revealed considerable diminution in normal lumbar lordotic curve, approximately 75% restriction of spinal motion in all planes, no curvature reversal on forward flexion, severe tenderness in the left lumbar, left gluteal and left posterior thigh regions, and a tight musculature. His straight leg raising test was positive at twenty-five degrees on the left. Deep tendon reflexes were 1 + to the right knee, absent at the left knee, 1 + at the right ankle, and a trace at the left ankle. There was some decreased sensitivity over the lateral and posterior aspects of the calf radiating down into the plantar aspect of the foot. He also had tenderness over the greater trochanter[2] of the left hip.
X-rays of the lumbar spine were normal; x-rays of the pelvis showed a possible fracture or non-united ossification center. Dr. Honick opined that that Mr. Cook had a compression lesion of the lumbar spine and a herniated disc or a healing fracture, and recommended lumbar exploration. In a letter to Mr. Cook's attorney dated February 23, 1981, Dr. Honick opined that Mr. Cook could not return to work.
Dr. Honick re-evaluated Mr. Cook on June 23, 1981, after an L-4/5 and L-5/S-1 hemilaminectomy. Dr. Honick noted that the operation gave Mr. Cook no relief. X-rays revealed no changes in his back condition. Dr. Honick concluded that Mr. Cook had a temporary total disability of the back. On *974 July 17, 1981, Dr. James Spence stated that Mr. Cook could return to work on August 4, 1981.
On October 16, 1981, Thomas B. Ducker, M.D., evaluated Mr. Cook and recommended a full orthopedic and neurological work-up, which was completed during a six day stay at the University of Maryland Hospital. The neurological examination was within normal limits on all but one day, when Mr. Cook had a depression of the reflexes. Plain and special x-rays of the spine, myelography of the spinal nerve roots, tomography, and electromyographic nerve conduction studies were all within normal limits.
As a result of these studies, Dr. Ducker concluded that Mr. Cook had a lumbosacral tearing problem which gave him pain, but did not have a consistent neurologic deficit. He recommended that Mr. Cook either try to return to a modified work schedule or apply for Workers' Compensation due to a twenty-five to thirty percent disability.
Dr. Alan Levine evaluated Mr. Cook on May 27, 1982. Mr. Cook moved extremely slowly around the examining room and was unable to come to a full straight position when rising from his chair. He had complete loss of normal lumbar curvature with spasm, was unable to stand and balance on one foot, and had markedly positive straight leg raising, more on the left, at about forty-five degrees. He had no weakness in his motor strength or in his lower extremity muscles and had decreased sensation on the lateral aspect of the left leg. Examination of his deep tendon reflexes indicated an absent left knee jerk, positive normal right knee jerk and symmetrical ankle jerks. He had some tenderness to palpation over the lower part of his lumbar spine, mostly from spasm. X-rays of the lumbar spine indicated no gross pathology but possible increased sclerosis at L-5/S-1 in the facet joints. Dr. Levine recommended additional testing and treatment through facet joint injections and, if the injections provided him with relief, a cast immobilization trial.
Dr. Levine re-evaluated Mr. Cook on September 21, 1982, one month after he received facet injections. Because the injections helped him for about three weeks, Dr. Levine suggested that Mr. Cook's pain originated in the facet joints. Dr. Levine recommended that Mr. Cook be placed in a cast to determine whether immobilization would provide him with relief. Dr. Levine wrote that Mr. Cook was somewhat improved since his initial visit but was not capable of returning to work.
Dr. Levine placed Mr. Cook in a cast for three weeks, which improved his symptoms. Dr. Levine performed a Harrington compression fusion from L-4/5 and L-5/S-1 on the left side. On March 22, 1983, Dr. Levine reported that Mr. Cook wore a jacket and was comfortable. After his leg was taken out of the cast on April 28, 1983, Mr. Cook indicated significant improvement in his back with some intermittent left thigh symptoms. On May 24, 1983, Mr. Cook reported that his back pain was resolved and that he was walking one and one-half miles per day. A myelogram and CT scan taken during a two day hospital stay in November, 1983, indicated no defects.
On February 1, 1984, Mr. Cook visited Stanley Friedler, M.D., and complained of low back pain. Dr. Friedler noted that Mr. Cook walked with a cane, used a TENS unit which helped him sleep, and received physical therapy. Dr. Friedler noted that Mr. Cook was in no acute distress but appeared uncomfortable, especially when standing. Examination of the cervical spine revealed no muscle spasm or tightness to palpation of the paracervical muscles. He had no tenderness to palpation of the trapezius or rhomboid muscles, full range of motion without pain, and intact sensation and motor strength. Examination of the lumbosacral spine revealed mildly restricted range of motion with discomfort at sixty degrees of forward flexion and with extension and lateral bending. He stood on his heels without demonstrable weakness. Quadriceps reflexes were 2+ on the right and 1+ on the left. Sensation and motor strength were intact. Straight leg raising was negative for pain in the low back. X-rays of the lumbosacral spine indicated solid fusion. Dr. Friedler opined that Mr. Cook had a thirty-five percent partial impairment of the lumbosacral spine and could not "resume working as a laborer. He will need *975 some type of training." He recommended three to four more weeks of physical therapy, but opined that Mr. Cook had probably reached his maximum improvement.
On January 18, 1985, Mr. Cook received emergency room treatment after a car accident. X-rays of his cervical spine indicated no evidence of fracture or dislocation. X-rays of his lumbosacral spine showed intact disc space and no evidence of fracture. X-rays of his chest and sternum were normal.
Dr. Honick examined Mr. Cook on April 18, 1985, for his complaints of pain in his neck, jaw, upper back, and chest as a result of the car accident. X-rays of his cervical spine indicated slight degenerative changes at C5/6/7. X-rays of his thoracic spine showed no abnormalities. Dr. Honick's impression was residual symptoms secondary to contusion of the neck and back. He did not recommend any treatment.
The record contains no medical evidence from April 18, 1985 until November 12, 1991, when Mr. Cook was seen at Peninsula General Hospital for low back pain that began when he carried groceries upstairs. On August 5, 1992, Mr. Cook was referred to Dr. Peter R. Sebastian, who evaluated him on February 5, 1993. The Commissioner also referred Mr. Cook for a number of consultive examinations, including an internal medical evaluation, a psychological examination, an audiological examination, and another medical examination.
At the hearing, Mr. Cook, who was represented by an attorney, testified that he hurt his back while working; he was cleaning a machine when a pressure hose threw him off balance onto a blade. He stated that after his first operation in 1981 he went back to work for three months but could not perform his duties and was fired.
Mr. Cook stated that he stopped seeking treatment for his back after 1985 because Dr. Spence moved to Florida and he could not find a doctor who would accept his company's payments. He testified that although he did not seek treatment from 1985 until 1991, his back condition was not getting better. He said that "someone would give me pain pills" which did not help, and "one day it hit me so hard, I ... had to go to the doctor." During those five years, he would watch television, read, lie in bed, and walk about a mile.
3. ALJ's Decision.
The ALJ evaluated Mr. Cook's claim for DIB using the five-step sequential process set forth in 20 C.F.R. § 404.1520 (1994). At the first step, the ALJ determined that Mr. Cook had not engaged in substantial gainful activity since September 4, 1980. At step two, the ALJ determined that Mr. Cook's lumbar condition was a severe impairment, but, at step three, that it did not meet or equal the level of severity found in the "Listing of Impairments" set forth in 20 C.F.R. Pt. 404, Subpt. P, App. 1.
At the fourth step, the ALJ determined that Mr. Cook had the residual functional capacity[3] to perform a full range of sedentary level work activity on or before March 31, 1985. The ALJ found that because Mr. Cook's past relevant work required greater than sedentary exertional activity, he was unable to return to his past work on or before March 31, 1985. At the fifth step, the ALJ recognized that the burden switched to the Commissioner to demonstrate that a significant number of jobs existed in the national economy that Mr. Cook could perform based on his age, education, work experience, and residual functional capacity. The ALJ applied the grids in 20 C.F.R. Pt. 404, Subpt. P, App. 2, § 201.27, and found that Mr. Cook was not disabled on or before March 31, 1985, but was disabled as of April 1, 1992.
4. Standard of Review.
The role of this court on review is to determine whether substantial evidence supports the Commissioner's decision and whether the Commissioner applied the correct legal standards. 42 U.S.C. § 405(g); Hays v. Sullivan, 907 F.2d 1453, 1456 (4th Cir.1990); Coffman v. Bowen, 829 F.2d 514, 517 (4th Cir.1987). Substantial evidence is *976 "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Richardson v. Perales, 402 U.S. 389, 401, 91 S. Ct. 1420, 1427, 28 L. Ed. 2d 842 (1971), quoting, Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S. Ct. 206, 217, 83 L. Ed. 126 (1938). It is more than a scintilla, but less than a preponderance, of the evidence presented. Shively v. Heckler, 739 F.2d 987, 989 (4th Cir.1984). It is such evidence that a reasonable mind might accept to support a conclusion, and must be sufficient to justify a refusal to direct a verdict if the case were before a jury. Hays, 907 F.2d at 1456. This court cannot try the case de novo or resolve evidentiary conflicts, but rather must affirm a decision supported by substantial evidence. Id.
5. Discussion.
Mr. Cook challenges the finding that he was not continuously disabled from September 4, 1980. He first claims that he was "pretty much incapacitated within the meaning of [Section] 1.03" of the Listing of Impairments, 20 C.F.R. Pt. 404, Subpt. P, App. 1, on or before March 31, 1985. Section 1.03 of the Listing of Impairments relates to arthritis of a major weight-bearing joint (due to any cause) and requires:
... history of persistent joint pain and stiffness with signs of marked limitation of motion or abnormal motion of the affected joint on current physical examination. With:
A. Gross anatomical deformity of hip or knee (e.g. subluxation, contracture, bony or fibrous ankylosis, instability) supported by X-ray evidence of either significant joint space narrowing or significant bony destruction and markedly limiting ability to walk and stand; or
B. Reconstructive surgery or surgical arthrodesis of a major weight-bearing joint and return to full weight-bearing status did not occur, or is not expected to occur, within 12 months of onset.
20 C.F.R. Pt. 404, Subpt. P, App. 1, § 1.03. A "major joint" refers to the hip, knee, ankle, shoulder, elbow, or wrist and hand. 20 C.F.R. Pt. 404, Subpt. P, App. 1, § 1.00(D).
Mr. Cook had the burden of proving that his back impairment met or equaled this listing on or before March 31, 1985. Hunter v. Sullivan, 993 F.2d 31, 35 (4th Cir.1992). Although the record contains many x-rays, none shows a gross deformity of the knee or hip. Nor did Mr. Cook produce evidence that he had reconstructive surgery or surgical arthrodesis of his hip, knee, ankle, shoulder, elbow, or wrist and hand. Thus, substantial evidence supports the ALJ's finding that Mr. Cook was not disabled at step three of the analysis.
Mr. Cook next alleges that "common sense" dictates that if he was disabled in 1992, he must also have been disabled in 1985. This logic is not persuasive, but in any event the question for this court is whether substantial evidence supports the finding that Mr. Cook could perform sedentary work on or before March 31, 1985. The court finds that it does.
After Mr. Cook's work accident on February 4, 1980, x-rays of his spinal area were essentially normal, except one of the pelvis which showed a possible fracture or non-united ossification center. Although Mr. Cook still had pain after his first back surgery in 1981, the surgery revealed nothing abnormal and x-rays showed no changes. A full orthopedic and neurological work-up in 1982 was essentially normal; the doctor opined that Mr. Cook had a lumbosacral tearing problem with no consistent neurologic deficit. A spinal fusion performed on January 13, 1983, markedly decreased Mr. Cook's back pain. More than a year after his surgery, Mr. Cook's spine maintained solid fusion and a physical examination showed improvement. X-rays taken on January 18, 1985, and on April 18, 1985, were again essentially normal except for slight degenerative changes in his cervical spine; no further treatment was recommended.
Medical reports dated August, 1981, January, 1982, and February, 1994, indicated that Mr. Cook could return to work. Two other reports dated February, 1981, and September, 1992, indicated that Mr. Cook could not return to work. No doctor said that Mr. *977 Cook could not perform any work.[4] In finding that Mr. Cook could do only sedentary work, the ALJ gave him the benefit of every doubt in the medical records.
The record contains no medical evidence from April, 1985 through November, 1991. Mr. Cook testified that his back still hurt during this period, but he did not see a doctor because he could not find one who would accept his company's payments.
The ALJ also considered Mr. Cook's testimony, finding it not sufficiently credible to support a finding of continuous disability since September, 1980. As the ALJ noted, six years is a significant amount of time to go without treatment for a condition that is alleged to be disabling. The ALJ's assessment of a claimant's credibility is given great weight where, as here, it is supported by the record. Shively v. Heckler, 739 F.2d 987, 989 (4th Cir.1984).
Sedentary work is defined as:
[L]ifting no more than 10 pounds at a time and occasionally lifting or carrying articles like docket files, ledgers, and small tools. Although a sedentary job is defined as one which involves sitting, a certain amount of walking and standing is often necessary in carrying out job duties. Jobs are sedentary if walking and standing are required occasionally and other sedentary criteria are met.
20 C.F.R. § 404.1567(a). Substantial medical evidence, coupled with Mr. Cook's lack of credibility, supports the finding that Mr. Cook could perform such duties prior to, and on, March 31, 1985.
There is no merit to the claim that the ALJ failed to specify the reasons for his decision that Mr. Cook retained the ability to do sedentary work as of 1985. The ALJ specifically referenced the fact that none of Mr. Cook's treating physicians stated that he could not do other, less strenuous work. As noted, the ALJ also assessed Mr. Cook's subjective complaints of pain. While these complaints cannot be rejected simply because objective medical evidence does not prove their severity, Mickles v. Shalala, 29 F.3d 918, 919-20 (4th Cir.1994); Hyatt v. Sullivan, 899 F.2d 329, 336-37 (4th Cir.1990), here, the ALJ cited specific reasons for finding that Mr. Cook's testimony in this regard was not credible. Cf. Hammond v. Heckler, 765 F.2d 424, 426 (4th Cir.1985) (ALJ's credibility decision should refer specifically to the evidence that formed the ALJ's conclusion).
Mr. Cook is also incorrect in asserting that the Commissioner failed to meet her burden of identifying the types of jobs that he could perform. After determining that Mr. Cook retained the ability to perform sedentary work, the ALJ then considered that Mr. Cook was a younger individual, 20 C.F.R. § 404.1563(b), with a high school education, 20 C.F.R. § 404.1564(b)(4), and past work experience as an unskilled laborer, 20 C.F.R. § 404.1568(a), and applied Rule 201.27 of the grids, which directs a finding of not disabled for such an individual. 20 C.F.R. Pt. 404, Subpt. P, App. 2. These grids take administrative notice that jobs exist in the national economy for claimants with certain age, education, previous work experience, and residual functional capacity. Grant v. Schweiker, 699 F.2d 189, 191-92 (4th Cir.1983).
The Commissioner may rely on the grids to sustain her burden of proving the existence of jobs that the claimant can perform, subject to two exceptions: 1) where the claimant's impairment restricts him from performing the full range of activity covered by a work category, or 2) where the claimant suffers from a non-exertional impairment that affects his ability to perform work of which he is exertionally capable. Id. at 192; Hammond, 765 F.2d at 425-26; Smith v. Schweiker, 719 F.2d 723, 725 (4th Cir.1984). Mr. Cook does not fit into either exception. He could perform a full range of sedentary work on and before March 31, 1985, and his pain did not affect his ability to perform sedentary work. Thus, the ALJ properly applied the grids to find that a significant *978 number of jobs existed in the national economy that Mr. Cook could have performed.
Finally, Mr. Cook raises issues he calls "constitutional." First, he believes that the Commissioner should "make known" to him or his counsel the credentials of the ALJ. He then proceeds with a generalized attack on ALJs, without specifying whether he is attacking the ALJ who heard his case or all ALJs. As this issue was not raised at the agency level, it is not before this court. Pleasant Valley Hospital, Inc. v. Shalala, 32 F.3d 67, 70 (4th Cir.1994). In any event, the failure to raise this issue at the administrative level means that it lacks factual support; Mr. Cook relies instead on counsel's opinions. Finally, Mr. Cook cites no constitutional provision or ruling to support this claim and the court knows of none.
Second, Mr. Cook questions whether the Department of Justice is the proper agency to represent the Commissioner in federal court. Again, Mr. Cook, though represented by counsel, fails to provide the court with any legal basis to support this novel assertion. There is, however, readily available authority to refute it. Congress has provided that, unless otherwise authorized by law, the officers of the Department of Justice, under the direction of the Attorney General, are responsible for the conduct of litigation in which the United States, an agency or officer thereof is a party. 28 U.S.C. § 516 (1995).
Mr. Cook further asserts that the Department of Justice should not be allowed to submit briefs that go beyond the scope of the ALJ's decision. However, judicial review of an ALJ's decision is based on the record as a whole. Blalock v. Richardson, 483 F.2d 773, 775 n. 4 (4th Cir.1972). Finally, the court respectfully declines Mr. Cook's invitation to step outside its jurisdiction to issue "guidelines" to an Executive agency.
6. Conclusion.
Substantial evidence supports the ALJ's finding that Mr. Cook was not disabled from September, 1980, to April, 1992. Accordingly, the Commissioner's decision is affirmed. By separate order, Plaintiff's motion for summary judgment is denied and Defendant's motion for summary judgment is granted.
NOTES
[1] On March 31, 1995, the Social Security Administration became an independent agency, separating from the Department of Health and Human Services. Under section 106(d)(2) of the Social Security Independence and Program Improvement Act, Pub.L. No. 103-296, 108 Stat. 1464, 1477, and Fed.R.Civ.P. 25(d)(1), Shirley S. Chater, Commissioner of Social Security, is substituted for Donna E. Shalala, Secretary of Health and Human Services.
[2] The greater trochanter is a broad, flat process at the upper end of the lateral surface of the femur to which several muscles are attached. Dorland's Illustrated Medical Dictionary 1748 (28th ed. 1994).
[3] Residual functional capacity is what the claimant can do despite his limitations. 20 C.F.R. §§ 404.1545(a).
[4] Mr. Cook had been hurt on the job and was represented by counsel; his medical bills were being paid by his employer. With the exception of the February, 1994 report, every report was addressed to an attorney or an insurance company; one doctor suggested that he apply for Worker's Compensation benefits. Under these circumstances, it is clear that the doctors were addressing the question whether Mr. Cook could return to his former job.
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619 S.W.2d 730 (1981)
Dessie J. GUNDY, Appellant,
v.
Daryl PAULEY, Appellee.
Court of Appeals of Kentucky.
August 21, 1981.
*731 Jack E. Farley, Public Advocate, William M. Radigan, Asst. Public Advocate, Frankfort, for appellant.
Steven L. Beshear, Atty. Gen., Frankfort, David Marye, Asst. Commonwealth Atty., Lexington, for appellee.
Before WILHOIT, McDONALD and VANCE, JJ.
VANCE, Judge.
The question is whether a person involuntarily admitted to a state mental hospital for treatment, but who has not been adjudicated to be an incompetent person, may be required to submit, against his will, to electroshock therapy?
The trial court ordered appellant to submit to electroshock therapy upon testimony that such therapy provided the patient with the optimal opportunity to benefit from treatment at the hospital and would be in the best interest of the patient. The patient had refused to submit voluntarily to the therapy.
The issue presented here has been considerably narrowed by appellant's concession at oral argument that the opinion be limited to the question of the right to administer involuntarily electroshock treatment to patients who refuse to submit to it voluntarily and who have not been declared incompetent.
KRS 202A.180 provides that the Secretary of the Department for Human Resources shall adopt rules and regulations for the enforcement of the chapter, such rules and regulations to include, but not be limited to:
* * * * * *
(7) rights of patients to refuse intrusive treatments, including electroshock therapy or psychosurgery; . . .
Pursuant to the statute the following regulation was adopted:
Section 8. Right to refuse intrusive treatment. All patients shall have the right to refuse intrusive treatments including electroshock therapy or psychosurgery, subject to the following limitations:
(1) Any patients committed on an involuntary basis or who are minors may be provided electroshock therapy or psychosurgery pursuant to a court order with a determination that such treatment is in the best interest of the patient as providing him the optimal opportunity to reasonably benefit from care and treatment in the hospital or residential treatment center. . . . 902 KAR 12:020 § 8.
The appellant contends that the administrative regulation, insofar as it places limitations upon the right of a patient to refuse electroshock therapy, exceeds the authority granted by the statute because the statute confers an absolute right to a patient to refuse such treatment. It is also contended that required submission to such treatment is unconstitutional.
This is a matter of first impression in Kentucky, but it has received attention in a number of other states. Generally, it has been held that a person has a constitutionally protected right to decide for himself whether to submit to serious and potentially harmful medical treatment. Rennie v. Klein, 462 F. Supp. 1131 (D.C.N.J.1978); Rogers v. Okin, 634 F.2d 650 (1st Cir., 1980); In re K.K.B., 609 P.2d 747 (Okl., 1980).
The right to refuse such treatment is not absolute, however, but is subject to the police power of a state to control persons who are an immediate danger to others and to the interest of the state under the parens patriae doctrine in caring for persons who are incompetent or unable to care for themselves.
It is conceded here that appellant does not constitute an immediate threat to others or to herself and that she has not been declared incompetent.
We hold that in the absence of a judicial declaration of incompetence, or an emergency which poses an immediate danger of harm to others or to the patient, a patient who has been involuntarily committed to a mental hospital for treatment cannot be compelled to undergo electroshock therapy against his will simply because it is considered *732 to be in the best interest of the patient.
Electroshock therapy has been shown to be effective in approximately 80% of the cases in which it was used. It induces an epileptic seizure which affects the electrical pattern of the brain cells, but medical science has no definitive explanation of how or why it works in 80% of the cases or fails in the other 20%. It has potentially harmful side effects.
Under these circumstances the constitution protects the right of a person, who is not otherwise incompetent to do so, to decide for himself whether to submit to electroshock therapy.
The judgment is reversed.
WILHOIT, J., concurs.
McDONALD, J., concurs by Separate Opinion.
McDONALD, Judge, concurring:
I totally agree with the majority opinion. I write separately to add emphasis to the majority's position. The usefulness of electric-convulsive therapy (ECT) in treating certain types of psychological disorders has been demonstrated, and in recent years, the techniques of administration have been refined so as to avoid some of the horrors associated with earlier treatments. Nevertheless, due to the intrusive nature of ECT, this is one procedure which courts should not order to be performed against the will of a patient under the circumstances presented here.
Lack of consent may be overridden by court order for the taking of blood samples, emptying the contents of the stomach, giving blood transfusions and for performing lifesaving surgery. Whether implicitly or explicitly, the courts in these situations weigh the physical harm to the person against the benefit to be gained by society or the patient by the medical procedure. For example, the needle prick for drawing blood is a slight intrusion and evidence of drugs or intoxicants in the bloodstream will dissipate quickly; therefore, on the basis of relative burden and benefit, the courts have ordered the procedure over the person's objection. The greater the intrusion and assault on the person, however, the greater must be the countervailing need for the procedure. Otherwise, the consent of the person will be required.
To gain a clearer understanding of ECT, I have consulted a recognized medical school text on the topic. 3 Kaplan, Freedman and Sadock eds., Comprehensive Textbook of Psychiatry, Chapter 31.5 (1980). I can envision no greater insult to the person as a whole than the involuntary administration of ECT when the patient is neither suicidal nor dangerous to others. As a preliminary measure, premedication by barbiturates and muscle relaxants is used to prevent fractures which occur frequently in the dorsal spine, humerus and femur due to the severe muscular contraction during the convulsion. Then, via electrodes placed at the temples, the patient receives 70-130 volts of electrical current for .1-.5 seconds. He undergoes a loss of consciousness, followed by a convulsion lasting nearly a minute. After the convulsion, oxygen must be applied until the patient resumes breathing on his own.
Although the patient soon regains consciousness, the first half hour is usually clouded. Frequently, he suffers from headache, nausea, and neck and jaw pains. Other common side effects include confusion and memory impairment for up to several weeks after the treatment. There may be associated cardiovascular and pulmonary complications from the anesthesia. The patient often manifests overall dulling of the emotions. Another common reaction is an overwhelming fear and dread of the treatment. Researchers claim that it is the panic from the temporary confusion and amnesia immediately following the treatment, not fear of the actual procedures, which causes this aversion. Perhaps researchers would say that the appellant merely exhibits one of the predictable side effects of the treatment.
I cannot take the risk of making such a judgment. Nor can I conclude that the *733 treatment facility's interest in efficiency and convenience outweighs an individual's right to refuse a medical procedure which is potentially harmful and certainly disruptive of both body and psyche. There is no doubt in my mind that the individual's right to the integrity of his person must prevail. Absent appellant's consent or a showing of a risk of harm to self or others, a court should not order the treatment.
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901 F. Supp. 588 (1995)
Cheryl D. PICOTTE, Plaintiff,
v.
The COMMUNITY CHILD CARE CENTER OF THE THIRD WARD, INC., Defendant.
No. 95-CV-6065L.
United States District Court, W.D. New York.
October 12, 1995.
*589 *590 Nira T. Kermisch, Rochester, NY, for plaintiff.
Matthew J. Fusco, Chamberlain, D'Amanda, Oppenheimer & Greenfield, Rochester, NY, for defendant.
DECISION AND ORDER
LARIMER, District Judge.
This is a Title VII action brought for alleged race discrimination. The plaintiff ("Picotte") alleges that defendant Community Child Care Center of the Third Ward (the "Center") subjected her to a course of harassment, ridicule and discrimination on the basis of her race and color. Presently before the Court is the Center's motion to dismiss the amended complaint[1] (which has been converted to a motion for summary judgment) and Picotte's cross-motion for partial summary judgment and for leave to file a supplemental complaint. For the reasons stated below, Picotte's cross-motion for leave to file a supplemental complaint is granted, and the Center's motion for summary judgment is granted as to all claims set forth in Picotte's amended complaint, and perforce to all claims in the proposed supplemental complaint, except that claim or claims arising from Picotte's allegation that she was terminated "by the defendant because of her race and in retaliation for bring [sic] this Title VII complaint against her employer." Picotte's cross-motion for partial summary judgment is denied.
FACTS
The relevant facts are essentially undisputed. Picotte is a caucasian female. The Center is a not-for-profit corporation formed in 1967 by citizens who were concerned about the absence of child care facilities in predominantly African-American neighborhoods. The Center is open to children of all races and nationalities but, probably because of its location, it receives applications from fewer caucasian families than families of other racial and ethnic backgrounds. The Center's Board consists of fifteen persons, the majority of whom are caucasian.
*591 At the time the complaint was filed in February 1995, Picotte was the Executive Director of the Center. She had been hired in June 1994 by vote of the Center's Board of Directors. As Executive Director, Picotte's office was at the Center, where she supervised all employees and all daily activities. No Board member maintains an office at the Center. The only Board members who frequent the Center during the business day are two officers, the President and Secretary, who come twice a week for the purpose of signing payroll checks. The Board meets monthly at a location or locations undisclosed to the Court.
Picotte alleges that she had no problem performing her duties until August 9, 1994, when one of the members of the Board, Katheryn Terrell ("Terrell"), scheduled a private meeting with her. Terrell was and is a Board member but not an officer of the Board. She had not participated in the Board's June decision to hire Picotte because she had been convalescing following surgery. Terrell had just returned to her Board activities in August.
At their meeting, Terrell told Picotte that the Executive Director of the Center should be an African-American. Terrell, who is African-American, indicated that because the Center was an African-American community institution serving primarily African-American children, an African-American Executive Director would provide a positive role model. Terrell never stated that her opinions were the opinions of the Board. Terrell told Picotte that she had no criticism of Picotte personally or of her work performance. This meeting greatly upset Picotte.
Several days later Terrell and Picotte had a telephone conversation during which Terrell questioned Picotte's attempts to seek funds from the City of Rochester. During this conversation Terrell reiterated her opinion that the Executive Director of the Center should be an African-American but that she did not have any criticism of Picotte's job performance.
On or about August 17th, at a meeting of the Board of Directors, a new member of the Board, Ruby Lockhart ("Lockhart"), also an African-American, stated that she was disappointed that the Board had chosen a caucasian person and not an African-American as its Executive Director. That Picotte was doing a fine job and was a fine person was readily admitted by Lockhart. Other members of the Board defended their choice by indicating that no qualified African-American applied for the position. Lockhart did not request any Board action, and none was taken.
Like Terrell, Lockhart was not an officer of the Board and she did not participate in the Board's June decision to hire Picotte (because she was not yet a member).
On August 22nd, Picotte telephoned Terrell about Terrell's concerns. During their conversation, Terrell repeated her views that the Director should be an African-American, though she had nothing against Picotte personally. On this same date, Picotte wrote a grievance letter to the Board, detailing these events and complaining that Lockhart and Terrell practiced racism and bigotry. She requested that they be removed from the Board but indicated that she remained committed to her job and the well-being of the children.
On September 30th, Picotte sent a memo to the Board stating that, until her grievance was addressed and resolved to her satisfaction she would be out of work on disability. In her memo, Picotte indicated that the events set forth in her grievance had affected her physically, mentally and emotionally and that "under doctors orders," she could no longer work.
The Board held a special meeting on October 5th during which Picotte's grievance was specifically addressed and Picotte was asked to express her views. At this meeting the Board issued "guidelines" as follows:
The Community Child Care Center's Board can not function properly if members take actions contrary to the best interest of the Center and its workers. Therefore, (1) All grievances should be brought before the [Center's] Board of [sic] discussion and approval of action; (2) Board members should accept the Board's final decision; and (3) if any member can *592 not or will not do this, then that member should not be on the Board.
At this October 5th meeting, the Board decided to conduct another session to investigate Picotte's grievances. At this meeting, which was on October 10th, Terrell and Lockhart were separately questioned. At Terrell and Lockhart's request, an independent third party was permitted to attend these sessions.
As a result of its investigation, the Board concluded that the Center had not engaged in intentional discrimination against Picotte. While individual Board members may have agreed or disagreed with their comments, the Board determined that the sentiments expressed by Lockhart and Terrell were not reflective of the policy of the Board, nor discriminatory. The Board issued a Resolution stating its findings and mandating the following steps:
1. The Community Child Care Center of the Third Ward hereby confirms its commitment to equal employment opportunity and will distribute to each Board member a copy of its non-discrimination policy.
2. All direction or communication from the Board to the Executive Director will be made by the current Officers of the Board.
3. All direction or communication from the Board to the Staff and/or Teachers will be through the Executive Director or the President of the Board.
Picotte returned to her duties as Executive Director in December 1994.
About two months later, on February 1, 1995, Picotte sued the Center alleging unlawful discrimination in violation of Title VII of the Civil Rights Act, 42 U.S.C. § 2000e-2a, and New York Human Rights Law § 296. On March 31st, the Center filed its motion to dismiss. On April 19th, Picotte's employment with the Center was terminated by the Board.
THE CENTER'S MOTION FOR SUMMARY JUDGMENT
By its March 31, 1995 motion, the Center seeks an order granting it summary judgment and dismissing the amended complaint in its entirety for failure to state a cause of action. Although styled as a motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(6), the Center has submitted affidavits and documents in support of its motion and requests that the Court treat the motion as one for summary judgment pursuant to Fed.R.Civ.P. 56. See Fed.R.Civ.P. 12.
A. Propriety of Summary Judgment in Title VII Actions
Fed.R.Civ.P. 56(c) provides that a motion for summary judgment shall be granted if the pleadings and supplemental evidentiary materials "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." Under the rule, the burden is on the moving party to inform the court of the basis for its motion and to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). After the moving party has carried its burden, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348, 1355, 89 L. Ed. 2d 538 (1986). "[T]he non-moving party must come forward with `specific facts showing that there is a genuine issue for trial.'" Id. at 587, 106 S.Ct. at 1356 (quoting Fed.R.Civ.P. 56(e) (alteration in original)). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Id. at 587, 106 S.Ct. at 1356. However, at the summary judgment stage, when perusing the record to determine whether a rational fact-finder could find for the non-moving party, all reasonable inferences must be drawn in favor of the non-moving party. See Murray v. National Broadcasting Co., 844 F.2d 988, 992 (2d Cir.), cert. denied, 488 U.S. 955, 109 S. Ct. 391, 102 L. Ed. 2d 380 (1988).
The general principles underlying a motion for summary judgment apply no less to this action simply because it is brought *593 under Title VII. Although courts are generally reluctant to grant summary judgment in cases where motive, intent or state of mind are at issue, Dister v. Continental Group, Inc., 859 F.2d 1108, 1114 (2d Cir.1988) (where such is at issue summary judgment should be used sparingly); accord Montana v. First Federal Savings and Loan Association of Rochester, 869 F.2d 100, 103 (2d Cir.1989) (summary judgment is ordinarily inappropriate where intent is at issue), "the salutary purposes of summary judgment avoiding protracted, expensive and harassing trials apply no less to discrimination cases than to commercial or other areas of litigation." Meiri v. Dacon, 759 F.2d 989, 998 (2d Cir.), cert. denied, 474 U.S. 829, 106 S. Ct. 91, 88 L. Ed. 2d 74 (1985) (the summary judgment rule would be rendered sterile if the mere incantation of intent or state of mind would act as a talisman to defeat an otherwise valid motion). Consequently, once the moving party has met its burden, the non-moving party in a Title VII action must come forward with evidence upon which a rational fact-finder could return a verdict in his favor.
In this case, the Center does not dispute Picotte's allegations. Rather, the Center contends that, assuming they are true, such allegations simply do not constitute a Title VII violation. In other words, Picotte has failed to establish an actionable Title VII claim. I agree. On these facts, summary judgment will be granted and the amended complaint dismissed.
Title VII provides that an employer may not "discriminate against any individual with respect to ... terms, conditions or privileges of employment, because of such individual's race [or] color." 42 U.S.C. 2000e-2(a)(1). In this case, Picotte claims that the Center "subjected her to a course of harassment, ridicule and discrimination on the basis of her race and color." Amended Complaint at ¶ 27. As recognized in Snell v. Suffolk County, 782 F.2d 1094, 1103 (2d Cir.1986), "`a discriminatory and offensive work environment so heavily polluted with discrimination as to destroy completely the emotional and psychological stability of minority group workers' may constitute a violation of Title VII." (citing Vaughn v. Pool Offshore Co., 683 F.2d 922, 924 (5th Cir.1982.)
To establish a hostile environment, a plaintiff "must prove more than a few isolated incidents of racial enmity." Snell, supra, at 1103. "Casual comments, or accidental or sporadic conversation, will not trigger equitable relief pursuant to the statute. * * * [T]he alleged harassment `must be sufficiently pervasive ... to ... create an abusive working environment. * * * Whether racial acrimony in a particular institution is `sufficiently pervasive' to constitute a Title VII violation is to be determined from the totality of the circumstances." Id. (citations omitted).
The standard is an objective one. "Conduct that is not severe or pervasive enough to create an objectively hostile or abusive work environment an environment that a reasonable person would find hostile or abusive is beyond Title VII's purview." Harris v. Forklift Systems, Inc., ___ U.S. ___, ___, 114 S. Ct. 367, 370, 126 L. Ed. 2d 295 (1993).[2] Factors to be considered when determining whether an environment is hostile or abusive include "the frequency of the discriminatory conduct; its severity; whether it is physically threatening or humiliating, or a mere offensive utterance; and whether it unreasonably interferes with an employee's work performance." Id. at ___, 114 S.Ct. at 371.
In this case, the undisputed comments about which Picotte complains occurred on four occasions: during the August 9th meeting with Terrell; during the telephone conversation with Terrell occurring several days later; during the August 17th Board meeting; and during a telephone conversation with Terrell on August 22nd. There is no evidence that additional comments of a like nature were made after August 22nd. To the extent Picotte complains *594 that Lockhart continued to be critical of her in Board meetings, there is no description of specific statements and, in any event, no suggestion that the criticism was racial or racially based.
The comments made by Terrell and Lockhart were of a slightly different nature than is usually the case in a Title VII action. These comments were not racial epithets or slurs in the typical sense. They were not racially-based personal insults against Picotte, but rather criticism of the Board for hiring a caucasian person rather than an African-American. Terrell and Lockhart told Picotte that they had "nothing against her personally;" they just disagreed with the Board's hiring decision.
Neither Terrell nor Lockhart supervised Picotte. Neither woman was at the Center during business hours. Picotte herself supervised all the employees and all the daily activities that occurred at the Center. It appears that Picotte, as Executive Director, answered only to the Board as a whole (or in some instances to committees thereof). Acting individually, neither Terrell nor Lockhart had any control over Picotte's immediate job responsibilities or her job security. Neither professed to be acting or speaking on behalf of the Board. Each made it clear that they did not criticize Picotte personally but simply had a philosophical objection to her being hired due to her race.
These comments objectively may be viewed as insensitive and confrontational. Indeed, a reasonable person might be upset and annoyed by such statements. However, given the type of statements, the limited number of occasions on which they were made, the circumstances in which they were made, and the respective roles of Picotte, Terrell, and Lockhart, I do not believe that they created a workplace "permeated with discriminatory intimidation, ridicule, and insult ... that [was] sufficiently severe or pervasive to alter the condition of [Picotte's] employment and create an abusive working environment." Harris, ___ U.S. at ___, 114 S.Ct. at 370 (citations and internal quotes omitted); see also Lopez v. S.B. Thomas, Inc., 831 F.2d 1184 (2d Cir.1987) ("[T]o demonstrate a hostile work environment more than an episodic pattern of racial antipathy must be proven ...");[3]Bennett v. New York City Dep't of Corrections, 705 F. Supp. 979 (S.D.N.Y.1989) ("[Plaintiff] must prove more than a few isolated instances of racial friction. * * * [T]he incidents of harassment [must] occur either in concert or with a regularity that can reasonably be termed pervasive.") (citations omitted).
This is not a situation where the plaintiff has been subjected to vicious racial epithets or physically threatening or humiliating actions, or a pattern of such behavior over an extended period of time. See, e.g., Amirmokri v. Baltimore Gas & Elec. Co, 60 F.3d 1126 (4th Cir.1995) (Title VII claim properly sustained where for six months plaintiff subjected to daily "national origin" epithets and name-calling, and asked to perform objectively impossible tasks); Gary v. Long, 59 F.3d 1391 (D.C.Cir.1995) (in sex harassment case, repeated verbal and physical harassment, culminating in rape, plainly sufficient to state a "hostile environment" claim); Erebia v. Chrysler Plastic Products Corp., 772 F.2d 1250 (6th Cir.1985), cert. denied, 475 U.S. 1015, 106 S. Ct. 1197, 89 L. Ed. 2d 311 (1986) (plaintiff subjected to racial slurs for five years); Currie v. Kowalewski, 842 F. Supp. 57 (N.D.N.Y1994), aff'd, 40 F.3d 1236 (2d Cir.1994) (employer created a hostile environment where he continually hugged plaintiff and otherwise touched her in an unwelcome manner, along with making sexual innuendos, sexual advances, and sexual talk, over an eleven month period). Rather, the comments were few in number, they were not racial insults or epithets directed at Picotte personally, and they were made by two disgruntled Board members who individually had no supervisory or other control over Picotte. Thus, while Picotte may have found Terrell and Lockhart's comments subjectively distressing, they do not separately or together create a hostile or abusive work environment *595 and cannot form the basis of a Title VII claim.[4]
In her effort to defeat summary judgment, Picotte raises the following factual disputes. Picotte disputes whether, during the August 22nd telephone conversation between Picotte and Terrell, Picotte affirmatively asked Terrell to "repeat her statements." Plaintiff's Response to Statement of Undisputed Facts. The Court finds this to be immaterial: the relevant issue is what Terrell said or did not say, and not whether Picotte specifically solicited such comments.
Picotte further disputes the Center's assertion that neither Lockhart nor Terrell could decide her job performance. As noted above, the Court finds as a matter of law that, as individual members of the Board, neither Lockhart nor Terrell had the power to terminate or demote Picotte. And importantly, neither affirmatively represented that their comments and opinions were those of the Board.
Picotte's only other factual disputes have to do with the Center's assertions that "Plaintiff has suffered no change in her job responsibilities" and "there have been no changes in the terms and conditions of Plaintiff's employment." Center's Statement of Material Facts at ¶¶ 19, 24. Picotte's employment was terminated on April 19, 1995, roughly three weeks after the Center filed its motion. Presumably the Center no longer contends that these statements are true. However, the issue of Picotte's termination relates more specifically to her motion for leave to supplement, and thus is not relevant to the present motion. (See discussion below.)
Nor does plaintiff come forward elsewhere in her opposing papers with any genuine dispute over the facts. Indeed, Picotte provided still further factual information about her allegations, which information is not disputed by the Center and does not alter the Court's conclusion.
Thus, the Court finds that Picotte has failed to come forward with specific facts showing that there is a genuine issue for trial. Therefore, the Center's motion for summary judgment is granted and Picotte's amended complaint is dismissed in its entirety.[5]
PICOTTE'S MOTION FOR LEAVE TO FILE A SUPPLEMENTAL COMPLAINT[6]
By way of opposing the Center's motion for summary judgment, Picotte seeks leave to serve a supplemental complaint. Specifically, she seeks to add the allegation that "On April 19, 1995, Plaintiff was terminated by the Defendant because of her race *596 and in retaliation for bring [sic] this Title VII complaint against her employer." Supplemental Complaint at ¶¶ 25, 31 and 38.
Under Fed.R.Civ.P. 15(a) the Court has discretion to grant a plaintiff leave to amend his pleadings. Evans v. Syracuse City School District, 704 F.2d 44 (2d Cir. 1983). Leave to amend "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). "[J]ustice does so require unless the plaintiff is guilty of undue delay or bad faith or unless permission to amend would unduly prejudice the opposing party." S.S. Silberblatt, Inc. v. East Harlem Pilot Block-Bldg. 1 Hous. Dev. Fund Co., 608 F.2d 28, 42 (2d Cir.1979).
A court may also deny leave to amend where the amended pleading is considered futile. Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962). "In this Circuit, an amendment is considered futile if the amended pleading fails to state a claim." Tri-State Judicial Services, Inc. v. Markowitz, 624 F. Supp. 925, 926 (E.D.N.Y.1985). Thus, when analyzing a motion for leave to amend, the court must determine whether any facts exist under which a cause of action for retaliation could be sustained.
In this instance, Picotte is not guilty of undue delay or bad faith. She moved for leave to supplement within eight days of her employment termination. Nor can this supplement be deemed unduly prejudicial to the Center: the lawsuit was initiated only two months prior to the motion for leave to supplement; no discovery has occurred; no trial date has been set; and the Center has not yet even answered.
Nor can the supplemental complaint be deemed futile. As set forth below, the Center has not demonstrated that there are no circumstances under which Picotte's claim can be sustained.
Title VII prevents employers from firing an employee in retaliation for his opposition to a discriminatory employment practice. 42 U.S.C. 2000e-3(a). To establish a prima facie case of retaliation under Title VII, a plaintiff must show: (1) participation in protected activity, of which the alleged retaliator was aware; (2) a disadvantageous employment action taken against him/her; and (3) a causal connection between the protected activity and the disadvantageous employment action. DeCintio v. Westchester County Medical Center, 821 F.2d 111, 115 (2d. Cir.) (citations omitted), cert. denied, 484 U.S. 965, 108 S. Ct. 455, 98 L. Ed. 2d 395 (1987) "Proof of a causal connection can be established indirectly by showing that the protected activity was followed closely by discriminatory treatment, ..." Id.
Here, Picotte participated in protected activity by filing her Title VII lawsuit (which is obviously known to the Center). And her termination is undeniably a "disadvantageous employment action taken against her." Finally, because Picotte was terminated approximately two and one half months after bringing this Title VII action, she has adequately pled a causal relationship between her protected activity and the adverse employment action. See Manoharan v. Columbia U. Col. of Phys. & Surgeons, 842 F.2d 590, 593 (2d Cir.1988) ("Proof of the causal connection can be established indirectly by showing that the protected activity was closely followed in time by the adverse action.") (citations omitted). Thus, Picotte has set forth a prima facie case of retaliatory discharge. It cannot be said that there are no circumstances under which her claim could not be sustained.[7]
Accordingly, this Court grants Picotte's leave to serve a supplemental complaint. Although Picotte's amended complaint fails to state a claim upon which relief can be granted, only that part of the supplemental complaint asserting that she was terminated "because of her race and in retaliation for bringing this Title VII complaint against her employer" is sustained. Fed.R.Civ.P. 15(c). Plaintiff is granted leave to file her supplemental *597 complaint within ten (10) days of entry of this decision.
CONCLUSION
For all the above reasons, Picotte's cross-motion for leave to file a supplemental complaint (Docket # 10) is granted. The Center's motion for summary judgment (Docket # 8) is granted as to all claims set forth in Picotte's amended complaint and the amended complaint is dismissed. Picotte's cross-motion for partial summary judgment (Docket # 10) is denied.
IT IS SO ORDERED.
NOTES
[1] Picotte's original complaint was filed on February 1, 1995. On February 23, 1995, prior to any response by the Center, Picotte filed an amended complaint. It is the amended complaint against which the Center moves.
[2] It is also necessary that the victim subjectively views the environment as being abusive, because otherwise the conditions of the victim's employment have not been altered in violation of Title VII. Harris, supra, at ___, 114 S.Ct. at 370. In this case Picotte clearly found the environment to be a hostile one.
[3] Lopez v. S.B. Thomas, Inc., involved claims brought pursuant to 42 U.S.C. § 1981, the use of which has since been limited. See Patterson v. McLean Credit Union, 491 U.S. 164, 109 S. Ct. 2363, 105 L. Ed. 2d 132 (1989). The analysis, under Title VII, remains the same.
[4] Because the Court finds that the complained of actions do not constitute a Title VII violation, it is not necessary to analyze the liability, vel non, of the Center for the actions of its Board members. See e.g. Karibian v. Columbia University, 14 F.3d 773 (2d Cir.1994), cert. denied, ___ U.S. ___, 114 S. Ct. 2693, 129 L. Ed. 2d 824 (1994), ("an employer is liable for the discriminatory abusive work environment created by a supervisor if the supervisor uses his actual or apparent authority to further the harassment, or if he was otherwise aided in accomplishing the harassment by the existence of the agency relationship"); and Kotcher v. Rosa and Sullivan Appliance Center, Inc., 957 F.2d 59 (2d Cir.1992) ("where a low-level supervisor does not rely on his supervisory authority to carry out the harassment, the situation will generally be indistinguishable from cases in which the harassment is perpetrated by co-workers; consequently the employer will not be liable unless the employer either provided no reasonable avenue for complaint or knew of the harassment but did nothing about it"); see also Tomka v. The Seiler Corporation, et al, 66 F.3d 1295 (2d Cir.1995).
[5] In addition to her Title VII claim, Picotte's state law claim, brought pursuant to New York Human Rights Law § 296 is dismissed as well. See United Mine Workers v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 1139, 16 L. Ed. 2d 218 (1966); Girard v. 94th & Fifth Ave. Corp., 530 F.2d 66, 72 (2d Cir.), cert. denied, 425 U.S. 974, 96 S. Ct. 2173, 48 L. Ed. 2d 798 (1976).
[6] Picotte's request is one for leave to "serve a supplemental complaint", presumably made pursuant to Fed.R.Civ.P 15(d). The legal standards applied to such request are no different than those applied to a motion for leave to "amend" pursuant to subpart (a) of Rule 15. See Soler v. G & V, Inc., 103 F.R.D. 69, 73 (S.D.N.Y.1984) ("Rule 15(d) motions should be viewed with the same liberal principles applicable to Rule 15(a) motions"); See also United States v. International Business Machines Corp., 66 F.R.D. 223 (S.D.N.Y.1975).
[7] The Center opposes Picotte's motion to amend with additional affidavits and supporting evidence setting forth the Center's alleged basis for terminating Picotte. Because the legal standard for determining the validity of this motion to amend is "futility", the Court does not now weigh the Center's supporting evidence.
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619 S.W.2d 894 (1981)
Thomas H. FAMULINER, III, Plaintiff-Appellant,
v.
FARMERS INSURANCE COMPANY, INC., Defendant-Respondent.
No. WD 31634.
Missouri Court of Appeals, Western District.
July 21, 1981.
*895 Joseph A. Hamilton, Pleasant Hill, for plaintiff-appellant.
Richard H. Heilbron, Kansas City, for defendant-respondent.
Before PRITCHARD, P. J., and TURNAGE and CLARK, JJ.
CLARK, Judge.
Thomas H. Famuliner, III appeals from summary judgment entered in favor of *896 Farmers Insurance Company on Famuliner's action to recover uninsured motorist benefits. The appeal poses the question of whether, under § 379.203, RSMo 1978,[1] the insurance contract may limit the potential scope of uninsured motorist coverage by a restrictive definition of persons insured under the policy. In this limited context, the question is one of first impression in Missouri.
Famuliner, a resident of the same household with his mother and father, was the owner of a motorcycle and an automobile, each insured by Farmers. Famuliner's parents each owned an automobile separately insured, also by Farmers. On May 18, 1977, Famuliner was operating his motorcycle when he collided with another motorcycle and sustained injuries. Neither the second motorcycle nor its operator was covered by liability insurance. For purposes here, it is assumed that the second motorcycle was an uninsured motor vehicle, as statutorily defined, and that Famuliner was entitled to recover damages from the operator.
Farmers accepted and paid Famuliner's claim pursuant to the uninsured motorist coverage of two policies, one on his automobile and one on the motorcycle, and paid Famuliner a total amount of $20,000. Famuliner, however, also made claim pursuant to the uninsured motorist coverages of his parents' policies contending that by the policy language, coverage extended to Famuliner because he was a relative of each named insured and was resident in the same household.
Under Famuliner's interpretation of the policies, he was entitled to "stack" four policy amounts and recover a total of $40,000. Although it is reasonably apparent from the policy language that Famuliner was not insured under the policies of his mother and father when driving a motor vehicle not insured under either policy, it is his argument that a limitation as to omnibus coverage for uninsured motorist protection is void because contrary to public policy expressed in § 379.203.
Paraphrased, § 379.203 provides that no automobile liability insurance shall be issued unless coverage is provided for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles. It is undisputed here that the Farmers' policies at issue did provide uninsured motorist protection, the question being whether Famuliner was an insured entitled to that protection under his parents' policies which did not expressly name him as an insured.
The relevant policy language is that which defines the word "insured" and that which defines the term "relative." Part II of the policy, the section dealing with uninsured motorist coverage, states as follows:
"Insured means (1) the named insured or a relative * * *"
Part II does not define the term "relative" but recites that certain definitions in Part I, including the definition of "Relative," apply to Part II. The Part I definition states:
"Relative means a relative of the named insured who is a resident of the same household, provided neither such relative nor his spouse owns an automobile."
While it is undisputed that Famuliner otherwise qualified as an additional insured under his parents' policies because he was their son and resided in their household, his ownership of his own car and motorcycle disqualified him by the plain language in the policy. The issue therefore posed is whether § 379.203 requires, as a matter of public policy, that resident family members be provided uninsured motorist coverage on vehicles other than those primarily insured irrespective of whether such family members own their own cars with or without their own insurance protection. We conclude that the statute imposes no such requirement.
The concept of mandatory uninsured motorist coverage comprehends that those who purchase automobile liability insurance *897 should be afforded minimum protection as required by the financial responsibility law regardless of whether the offending vehicle is driven by an insured or uninsured operator. Otto v. Farmers Insurance Co., 558 S.W.2d 713 (Mo.App.1977); Webb v. State Farm Mutual Automobile Insurance Co., 479 S.W.2d 148 (Mo.App. 1972). In situations of multiple insured vehicles and insured persons, it is assumed that premiums charged are calculated in accordance with increased exposure and, thus, an insured who suffers damages in an accident with an uninsured motorist is entitled to "stack" all policies under which he is insured and collect the benefit under each. Policy restrictions designed to limit uninsured motorist coverage in this respect are unenforceable because against public policy. Cameron Mutual Insurance Co. v. Madden, 533 S.W.2d 538 (Mo. banc 1976).
While interpretation of mandatory uninsured motorist protection has been liberal, in keeping with the perceived public policy of the statute, Missouri courts have declined to create coverage where none was applicable. Harrison v. MFA Mutual Insurance Co., 607 S.W.2d 137, 147 (Mo. banc 1980) and examples there cited. It remains the rule in this state that parties to an insurance contract are free to place such limitations or restrictions on an insurer's liability as they may agree, provided that the limitation violates neither public policy nor statutory obligation. Douthet v. State Farm Mutual Automobile Insurance Co., 546 S.W.2d 156 (Mo. banc 1977); Steinhaeufel v. Reliance Insurance Companies, 495 S.W.2d 463 (Mo.App.1973); Webb v. State Farm Mutual Automobile Insurance Co., supra at 150.
By the definitions in the subject policies, Farmers' contract undertook to insure, in addition to the named insureds, a limited group of persons. Relatives resident in the same household were provided coverage generally to the same extent as the named insureds, but only if such persons and their spouses had no automobiles of their own. Entitlement of resident relatives to benefits under the Farmers' policy was not limited to uninsured motorist protection alone, but extended to all features of the liability insuring agreements. Conversely, relatives who were themselves motor vehicle owners had no protection under the policy. The obvious instruction of the policy conditions is that vehicle owners, including relatives of the named insured, should look to their own insurance as to events associated with ownership and use of their machine. The limitation which Famuliner contends is an assault upon required uninsured motorist coverage is no more repugnant to public policy than any other insurance contract provision required for identification of those who are insured and entitled to benefits.
Section 379.203 contains no requirement that automobile insurance policies provide uninsured motorist protection to any particular class or group of persons whether they be residents of the same household or family members. The statute does require, however, that all policies of liability insurance must also include uninsured motorist coverage to "persons insured thereunder." There is no violation of the statute unless a policy condition limits uninsured motorist protection as to persons who otherwise qualify as insureds for liability purposes. Famuliner was not an insured under his parents' policies and the policy conditions of which he complains do not offend the mandate of § 379.203.[2]
While no Missouri case has considered this question, the issue has been litigated in other states having statutes using the same terminology as § 379.203. The results have been consistent and uniform in reaching the conclusion here expressed.
*898 In Farmers Insurance Company of Washington v. Miller, 87 Wash.2d 70, 549 P.2d 9 (1976), the applicable statute required extension of uninsured motorist protection by policies to "persons insured thereunder," the same language which appears in the Missouri statute. Policy language was identical to that in the subject case. The court held that the public policy expressed in the statute did not mandate any particular scope for the definition of who is an insured in a particular automobile policy and denied the contention that a relative who owned his own car and resided in the policyholder's household was obligatorily included for uninsured motorist protection.
To the same effect was Washington v. Travelers Insurance Co., 92 Mich.App. 151, 284 N.W.2d 754 (1979), in which the court explained that the statutory requirement for mandatory uninsured motorist coverage for protection of "persons insured thereunder" means persons insured under the liability coverage portion of the policy. The argument there, as here, was to the effect that if the policy extends uninsured motorist coverage to some relatives domiciled in the household, it must extend also to all relatives so domiciled. The contention was rejected as unsupported by any rule of law.
In France v. Liberty Mutual Insurance Co., 380 So. 2d 1155 (Fla. 3d DCA 1980), plaintiff resided with her parents who owned two automobiles insured by Liberty Mutual. Plaintiff owned her own car. She was injured while riding in a friend's car and after settling for the policy limit of the adverse driver, she claimed under the uninsured motorist coverage of her parents' policies. Policy restrictions as to coverage included relatives living in the same household but excluded plaintiff because she owned her own car. The court affirmed dismissal of plaintiff's uninsured motorist claim stating:
"We decline to extend the public policy as France urges so as to allow a member of a family to purchase one liability policy and claim total coverage thereunder for the entire family while vastly increasing the risk to his or her insurer by knowingly owning and operating a fleet of uninsured vehicles upon the highways."
Under Indiana law, Ind.Code 27-7-5-1, the insurer must provide uninsured motorist protection within the liability policy for all persons insured thereunder. In Lewis v. American Family Insurance Group, 555 S.W.2d 579 (Ky.1977), the Kentucky court was required to apply Indiana law in a case where the claimants were injured while occupying a car owned by one of them and on which the insurance coverage had lapsed. The assertion was made that uninsured motorist protection through the policy of an uncle with whom they lived was applicable although that policy insured only the uncle's car. The court held that the claimants were not insureds under the uncle's policy and that Indiana law, while requiring that those insured must be provided uninsured motorist coverage, does not expand the class of persons that must be considered insureds.
Robertson v. Cumis Insurance Company, 355 So. 2d 1371 (La.App. 3 Cir. 1978) was a case, again on almost identical facts, where the injured claimant, the son of and a household resident with the defendant's policyholder, was also the owner of his own automobile. Upholding exclusion of the son from policy coverage, the court stated:
"Under the plain provisions of the policy an omnibus insured with respect to a non-owned automobile as a relative of the named insured, who as a resident of the same household, provided such relative is not the owner of a private passenger automobile. These terms are clear and unambiguous and lead to no absurd consequences and must be given effect as written since a contract of insurance like any other contract, is the law between the parties."
The statute in New Hampshire contains the same language, particularly the words "for the protection of persons insured thereunder" (N.H.Rev.Stat. Ann. 268:15-a, subd. 1), as appears in Missouri's § 379.203. In Beliveau v. Norfolk & Dedham Mutual Fire Insurance Company, 120 N.H. 73, 411 A.2d *899 1101 (1980), the injured claimant contended that the phrase "persons insured thereunder" encompasses relatives of the named insured who reside in the household and that the statute mandates uninsured motorist coverage irrespective of the insured's proprietary interest in the vehicle being driven. The court disagreed noting that the legislature had not defined "insured" to include resident relatives, only the persons specified in the insurance policy. Where coverage is to be mandated for a specific class of persons, the legislature must express its intent explicitly.
Independent research has disclosed only two cases which reach results not consistent with the rule exemplified by the foregoing authorities. Explanation of these decisions upholding claims by resident family members under uninsured motorist omnibus coverage is, however, readily found in the distinguishing features of the applicable statutes.
In California, compulsory uninsured motorist insurance coverage fixed by statute (Cal.Ins.Code, § 11580.2) requires that every automobile liability policy cover the insured for damages he is entitled to recover from the owner or operator of an uninsured vehicle. The statute further defines "insured" as the named insured, his spouse and relatives of either while residents of the same household. Thus, in Lopez v. State Farm Fire and Casualty Company, 250 Cal. App. 2d 210, 58 Cal. Rptr. 243 (1967), the court held to be invalid a policy clause excluding from uninsured motorist protection a resident relative who owned an automobile. It was there noted that the terms of the policy were required to conform to the legislative mandate expressing public policy obligating insurance contracts to cover family members whether vehicle owners or not.
In Anderson v. Illinois Farmers Insurance Company, 269 N.W.2d 702 (Minn.1978), a case which cites Lopez, the Minnesota statute was held to express similar public policy, the mandatory extension of uninsured motorist coverage to resident relatives. Under Minnesota law then applicable, relatives as a class could not be excluded from the liability coverage of an automobile policy. Because uninsured motorist protection was required to be furnished to persons insured under the automobile policy and because relatives were obligatorily insured generally, the court reasoned that the statutory purpose to include relatives as to all coverages, including uninsured motorists, was manifest. The opinion also noted, however, that the statute dealt only with class designations and that any persons could be specifically excluded from coverage if identified by name.
No authority supports Famuliner's contention that coverage be mandatorily extended to him under his parents' policies as a matter of public policy for hazards associated with operation of his own vehicle. To the contrary, settled law in other states having comparable statutory provisions approves insurance contract language excluding from omnibus policy coverage resident family members who own their vehicles. Famuliner's point is without merit.
In additional sub-points, Famuliner contends that the language of the Farmers' policies, apparently standard throughout the policies issued to him and to his parents, is ambiguous in the definition of "relative" and should be construed to favor coverage of his claims. He also argues that a question of fact remained in the case and that summary judgment was therefore inappropriate. The fact issue advanced, which he says was not decided, is whether the premium charged by Farmers contemplated the reduced risk which enforcement of the policy condition as to vehicle ownership by relatives entailed.
As we have previously observed, the policy clauses here in issue are plainly expressed and are readily understood. Moreover, as evidenced by the opinions in the cases cited from a number of other states, this contract language is in common usage. Famuliner cites no case and independent research has disclosed none in which the intent and meaning of these provisions were ever in doubt. There is no basis to seek resolution of conflict in Famuliner's favor because no ambiguity appears.
*900 The insurance premium question arises, according to Famuliner, because Farmers, as movant for summary judgment, had the burden of proof on fact issues. Among these, he claims, was a burden to prove that policy premiums were charged in conformity with the reduced risk which enforcement of the policy terms afforded. In Famuliner's view, Farmers was obligated to prove that premiums it received were not disproportionate to the coverage of its automobile insurance contracts.
The question of Farmers' premium charges is presented by Famuliner for the first time on appeal. No pleading filed in the case contended that Farmers had charged a premium for coverage to Famuliner which was not provided and the case is therefore distinguishable from Cameron Mutual Insurance Co. v. Madden, supra, which Famuliner cites. Farmers' position in this case has consistently been that omnibus coverage for liability under its policy is available only to non-owners of motor vehicles. Quite obviously, the policy risk would be substantially enlarged if this restriction did not prevail. Absent a contention to the contrary, the assumption obtains that Farmers charged a premium consistent with risks which the insurance contract assumed and that the premium would increase if coverage were broadened by the public policy doctrine Famuliner advocates. There is no rational basis to argue that Farmers must prove it charged no premium for risks excluded under the policy when the case presents no issue of excess or windfall premium collections. Famuliner's sub-points present no ground warranting remand of the case.
The summary judgment is affirmed.
All concur.
NOTES
[1] All statutory references are to RSMo 1978.
[2] Not at issue here is the entitlement of Famuliner to benefits under the policies of his mother or father were the accident to have occurred while Famuliner was driving either of his parent's automobiles. Under the permissive use clause of the policy, coverage would have extended to Famuliner, or to any other driver or occupant of the parent's vehicle. Farmers conceded on oral argument that Famuliner would, under that state of facts, be entitled to "stack" three uninsured motorist coverages, two under his own policies and the one applicable to the policy on the car he was driving.
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878 A.2d 857 (2005)
379 N.J. Super. 378
STATE of New Jersey, Plaintiff-Respondent,
v.
Christopher PUZIO, Defendant-Appellant.
Superior Court of New Jersey, Appellate Division.
Submitted July 5, 2005.
Decided August 1, 2005.
Maynard & Truland, attorneys for appellant (Joe B. Truland, Jr. on the brief).
Paula T. Dow, Assistant Attorney General/Acting Prosecutor Essex County, attorney for respondent (Debra G. Simms, Special Deputy Attorney General, on the brief).
Before Judges STERN, WEISSBARD and LISA.
The opinion of the court was delivered by
WEISSBARD, J.A.D.
Defendant Christopher Puzio appeals from his conviction of driving while intoxicated (DWI), N.J.S.A. 39:4-50, after a trial de novo in the Law Division[1]. The sole *858 issue raised on appeal relates to the validity of the motor vehicle stop which led to defendant's arrest. We conclude that the stop was unwarranted because the officer, who misunderstood the meaning of a statute, did not have an objectively reasonable basis for believing that defendant had committed a motor vehicle offense. Accordingly, we reverse.
The facts are quite simple and essentially undisputed. On May 26, 2004, defendant was operating a passenger vehicle, an Acura sports coupe, westbound on Bloomfield Avenue in Caldwell. Officer Pelligrino was on routine patrol, also traveling westbound about twenty feet behind defendant's car. Pelligrino was in the right lane of travel, defendant was in the left. Pelligrino's attention was attracted by the fact that defendant's car had commercial license plates, with the word "commercial" directly on the rear plate. Pelligrino's experience taught him that the "x" in defendant's license plate number XC559H also signified a commercial plate. Pelligrino called in the license plate to his headquarters and was informed that the car was registered to a business. Pelligrino noticed that there was no placard on the right side of the vehicle displaying the name and address of the business. As a result, Pelligrino moved to the left lane and was able to observe that there was no placard or identifying information on the left side either.
Based on his observations, Pelligrino believed that the vehicle was being operated in violation of N.J.S.A. 39:4-46a, which requires display of the business name and address on a commercial vehicle. Based on that belief, Pelligrino stopped the vehicle and made the observations that led to defendant's arrest. Defendant was issued summonses for DWI, failure to exhibit an insurance card, N.J.S.A. 39:3-29, and violation of N.J.S.A. 39:4-46a.
Defendant moved to suppress, arguing that the stop was unlawful. At the suppression hearing, Pelligrino conceded that he had no basis on which to stop defendant's car other than the apparent violation of N.J.S.A. 39:4-46a. The municipal court judge denied the motion, reasoning that the stop was made "in good faith and based on articulable suspicion." The judge found that the correct interpretation of the statute was not at issue, merely whether the officer "had a basis to make the stop, based on his belief. I find that it was a good faith belief." As a result, the officer had a right to stop the vehicle "to make further inquiry."
After denial of his motion, defendant entered a guilty plea to DWI and, pursuant to a plea agreement, the State agreed to dismissal of the other two charges. Defendant was sentenced to a seven-month suspension of driving privileges, twelve to forty-eight hours in an Intoxicated Driver Resource Center, as well as appropriate fines, penalties, costs, and surcharges. The penalties were stayed pending appeal.
On de novo review, the Law Division judge was also of the view that the proper interpretation of the statute was not an issue the court needed to resolve. Rather, "[t]he issue is whether or not the police officer had a reasonable and articulable suspicion to pull the driver over based on his interpretation of that statute." The judge concluded that the officer did have a reasonable articulable suspicion to stop the *859 car and therefore denied defendant's suppression motion. The judge also stayed the penalties imposed pending this appeal.
As both judges correctly observed, in order to justify a motor vehicle stop, the officer need only have "an articulable and reasonable suspicion that the driver has committed a motor vehicle violation." State v. Locurto, 157 N.J. 463, 470-71, 724 A.2d 234 (1999) (quoting State v. Smith, 306 N.J.Super. 370, 380, 703 A.2d 954 (App.Div.1997)). In this case, if N.J.S.A. 39:4-46a means what Pelligrino believed it meant, he clearly had an articulable and reasonable basis for the stop. The vehicle had commercial plates and was registered to a business, but had no business-identifying information visible on either side. The statute reads in pertinent part as follows:
Every vehicle used for commercial purposes on a street or highway, except for passenger automobiles and vehicles owned or leased by a pharmacy and utilized for the transportation or delivery of drugs, shall have conspicuously displayed thereon, or on a name plate affixed thereto, the name of the owner, lessee or lessor of the vehicle and the name of the municipality in which the owner, lessee or lessor has his principal place of business.... The sign or name plate shall be in plain view and not less than three inches high. Where available space for lettering is limited, either by the design of the vehicle or by the presence of other legally specified identification markings, making a strict compliance herewith impractical, the size of the lettering required by this section shall be as close to three inches high as is possible, within the limited space area, provided the name is clearly visible and readily identifiable.... No person shall operate or drive or cause or permit to be operated or driven on a road or highway a commercial vehicle, except for passenger automobiles and vehicles owned or leased by a pharmacy and utilized for the transportation or delivery of drugs, which does not conform hereto.
[N.J.S.A. 39:4-46a.]
Contrary to Pelligrino, we read the statute to clearly exclude defendant's car. By its plain and unambiguous terms the statute does not apply to "passenger vehicles." Defendant was indisputably driving a passenger automobile. The fact that the vehicle was registered to a business and had commercial license plates may well give rise to an inference that the vehicle was "used for commercial purposes," but those facts cannot convert a passenger vehicle into a non-passenger vehicle. We do not subscribe to the officer's reading of the statute, echoed by the State in its brief, that because defendant's car bore commercial license plates, it required business-identifying information. As we have stated, the statute already presumes that a vehicle is used for commercial purposes, a fact that would be confirmed by commercial plates, but nevertheless exempts passenger automobiles. Accordingly, we conclude that defendant's car was stopped based on an entirely erroneous reading of the statute.
There is a clear distinction between the present situation and those presented in cases where the officer correctly understands the statute but arguably misinterprets the facts concerning whether a vehicle, or operator, has violated the statute. In those cases, the courts have approved the motor vehicle stop because it is only necessary that the officer have a reasonable and articulable suspicion of a violation. In such circumstances, it is not necessary or relevant that the facts testified to by the officer actually support a finding of guilt beyond a reasonable doubt of the *860 statutory violation. See State v. Williamson, 138 N.J. 302, 650 A.2d 348 (1994) (changing lanes without signaling); State ex rel D.K., 360 N.J.Super. 49, 52-55, 821 A.2d 515 (App.Div.2003) (obscured license plate); State v. Cohen, 347 N.J.Super. 375, 790 A.2d 202 (App.Div.2002) (tinted windows significantly obstructing vision); State v. Murphy, 238 N.J.Super. 546, 554, 570 A.2d 451 (App.Div.1990) (failure of license plate to be conspicuously displayed); State v. Nugent, 125 N.J.Super. 528, 534, 312 A.2d 158 (App.Div.1973) (hanging license plate and broken light lens). In each of those cases, the officer entertained a reasonable belief that a traffic law had been violated. In each, the only dispute was whether the officer's factual observations established guilt beyond a reasonable doubt of the traffic offense, not whether the officer correctly interpreted the statute.
Although we review the decision of the Law Division judge, we note that the municipal court judge expressly referred to the officer's "good faith belief." Implicitly, the Law Division judge did the same by concluding that he need not resolve whether the officer's interpretation of the statute was correct. However, our courts have rejected a good faith exception to the Fourth Amendment exclusionary rule. State v. Novembrino, 105 N.J. 95, 157-58, 519 A.2d 820 (1987). Thus, despite the fact that the officer had an objectively reasonable belief in the validity of a search warrant, id. at 131-32, 519 A.2d 820, the officer's good faith belief could not save a warrant that was lacking in probable cause. The officer's belief must be objectively reasonable. Williamson, supra, 138 N.J. at 305-06, 650 A.2d 348; Murphy, supra, 238 N.J.Super. at 554-55, 570 A.2d 451. In this case, for reasons we have already discussed, the officer's belief was not objectively reasonable.
Although our courts have never addressed this precise issue, other jurisdictions have concluded that where an officer mistakenly believes that driving conduct constitutes a violation of the law, but in actuality it does not, no objectively reasonable basis exists upon which to justify a vehicle stop. United States v. Mariscal, 285 F.3d 1127, 1130-33 (9th Cir.2002); United States v. Twilley, 222 F.3d 1092, 1096 (9th Cir.2000); United States v. Lopez-Soto, 205 F.3d 1101, 1105-06 (9th Cir.2000); United States v. Lopez-Valdez, 178 F.3d 282, 288-89 (5th Cir.1999); United States v. Miller, 146 F.3d 274, 279 (5th Cir.1998); In re Joseph F., 85 Cal.App.4th 975, 102 Cal.Rptr.2d 641, 654-55 (2000) (Jones, P.J., dissenting), review denied (2001). "[T]he legal justification [for the vehicle stop] must be objectively grounded." Miller, supra, 146 F.3d at 279. Even under the good faith exception rejected in Novembrino, objective reasonableness is judged through the eyes of a reasonable officer acting "in accordance with governing law. To create an exception here would defeat the purpose of the exclusionary rule, for it would remove the incentive for police to make certain that they properly understand the law that they are entrusted to enforce and obey." Lopez-Soto, supra, 205 F.3d at 1106. If officers were permitted to stop vehicles where it is objectively determined that there is no legal basis for their action, "the potential for abuse of traffic infractions as pretext for effecting stops seems boundless and the costs to privacy rights excessive." Lopez-Valdez, supra, 178 F.3d at 289. We cannot countenance an officer's interference with personal liberty based upon an entirely erroneous understanding of the law.
*861 Officer Pelligrino had no objectively reasonable basis to support his conclusion that defendant's car was being operated in violation of N.J.S.A. 39:4-46a. As a result, his stop of the vehicle was unlawful and defendant's motion to suppress should have been granted.
Reversed.
NOTES
[1] We do not address whether the decision was appealable, notwithstanding the guilty plea, under Rule 7:5-2(c)(2), the municipal counterpart to Rule 3:5-7(d). Here, the transcript of defendant's guilty plea reflects that the prosecutor did not disagree with defendant's response to the court that "the defendant has a right to to appeal the denial . . . of the suppression motion," to which the judge responded "okay." See e.g., State v. Greeley, 178 N.J. 38, 50-51, 834 A.2d 1016 (2003); State v. Diloreto, 362 N.J.Super. 600, 613, 829 A.2d 1123 (App.Div.2003), aff'd 180 N.J. 264, 850 A.2d 1226 (2004). See also R. 7:6-2(c).
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619 S.W.2d 723 (1981)
SOUTH CENTRAL BELL TELEPHONE COMPANY, Appellant,
v.
Malcolm D. GEORGE; James R. Yocom, Commissioner of Labor and Custodian of the Special Fund; and Workers' Compensation Board of Kentucky, Appellees.
Court of Appeals of Kentucky.
June 12, 1981.
Withdrawn and Reissued July 24, 1981.
Discretionary Review Denied September 15, 1981.
*724 John M. Stephens, Stephens, Combs & Page, Pikeville, for appellant.
Woodrow W. Burchett, Prestonsburg, Dennis S. Kline, Dept. of Labor, Louisville, for appellees.
Before LESTER, McDONALD and REYNOLDS, JJ.
McDONALD, Judge:
The sole issue in this appeal concerns the calculation of credit against a Workers' Compensation award for payments made by an employer under a pension plan.
In September of 1978, the Workers' Compensation Board determined that Malcolm D. George was totally and permanently disabled from injuries precipitated by a slip and fall at work on July 29, 1976. Because the disability was due in part to a pre-existing condition, the award was apportioned 50-50 between the employer and the Special Fund. The employer appealed the apportionment but both the Pike Circuit Court and this court affirmed the Board's decision. Subsequently, the employee George sought enforcement of the award. South Central Bell moved for entry of an order of satisfaction of judgment, tendering checks for the amount it believed was owed. The parties differed, however, on how much South Central Bell actually did owe. The controversy arose because South Central Bell had paid George $289 per week for a period of 52 weeks as sickness disability benefits under its "Plan for Employees' Pensions, Disability Benefits and Death Benefits" (the Plan). The Plan provided that should the employee be entitled under the law to comparable benefits, then the employer would only have to pay the difference between the Plan benefits and those prescribed by law. In essence, the Plan supplemented Workers' Compensation.
Under the terms of the Board's order, George was to recover $96 per week from South Central Bell, subject to reimbursement of half that amount by the Special Fund to be paid quarterly. The order states, ". . . and the defendant (South Central Bell) is to take credit for any compensation heretofore paid." In the action for enforcement of the award, the circuit court made findings of fact and concluded that the employer was obligated under the Plan to pay $193 per week, the difference between the Plan benefits ($289) and the award ($96), and that the employer was entitled to credit for the 52 payments of $96 per week paid over and above the amount owed under the Plan.
It is South Central Bell's contention here as below that benefits paid to an employee under a sickness and accident plan funded entirely by the employer should be credited dollar for dollar against the Workers' Compensation award because otherwise the employee would recover twice from the employer for the same injury. The appellee George maintains that any offset should be computed in terms of time, not dollars and that the trial court was correct in crediting the employer with a year's worth of payments made. George also initiated a cross appeal arguing that no offset against the award should be allowed at all; the cross-appeal, however, was never perfected and was ultimately dismissed by order dated March 17, 1981.
There are cases construing the same provision as was present in the employer's disability plan providing for integration of plan benefits with Workers' Compensation. In the case of Strohmeyer v. Southwest Bell Telephone Company, 396 S.W.2d 1 (Mo.App. 1965), the court allowed a credit for payments under the plan but limited that credit to the temporary total disability payments that were due. In a subsequent case relying on Strohmeyer, credits were not limited to the amount due under the compensation *725 act and the employer recovered the full extent of the payments made pursuant to the plan. Cowan v. Southwest Bell Telephone Company, 529 S.W.2d 485 (Mo. App.1975).
In this case the trial court gave the employer credit for one year of Workers' Compensation payments. The employer had actually paid $15,028 in sickness disability benefits. The employer now wants dollar for dollar credit against the Workers' Compensation award for the amount actually paid. For the reasons set out below we cannot agree and therefore we affirm the judgment of the trial court which granted credit for that portion of the payments under the Plan which represented the employer's liability under the Workers' Compensation schedule.
According to the Board's order, credit was to be allowed for any "compensation" heretofore paid. Construing this language together with the provision of the Plan which provided for integration of benefits with Workers' Compensation, we conclude that of the $289 per week paid to the employee only $96 per week could be considered "compensation" and the balance must be considered as sickness disability benefits pursuant to the Plan.
Professor Larson has discussed the legal status of contractual supplements to compensation and states:
It is possible to imagine a number of troublesome legal questions that might emerge from the type of contract in which the employer agrees to pay, say, $90 a week benefits instead of the $70 specified by statute. One cardinal principle, however, should ordinarily settle most such questions. That principle is the simple proposition that the contractual excess is not workmen's compensation. It performs the same functions, and is payable under the same general conditions, but legally it is nothing more than the fruit of a private agreement to pay a sum of money on specified conditions. 4 A. Larson, Workmen's Compensation Law § 97.53 (1981).
The appellant has not cited any Kentucky cases as authority for his proposition that the credit should be dollar for dollar. It is our opinion that any credit should be limited to the compensation due, as the trial court ruled. We affirm that judgment.
All concur.
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619 S.W.2d 249 (1981)
Mary Elizabeth BRIGHTWELL, Independent Executrix of the Estate of William Nathan Brightwell, Deceased, Appellant,
v.
BARLOW, GARDNER, TUCKER & GARSEK, a Professional Corporation, et al., Appellees.
No. 18424.
Court of Civil Appeals of Texas, Fort Worth.
June 18, 1981.
*250 Holmes & Gamble Law Office, and Clifton L. Holmes, Kilgore, for appellant.
Michael T. Watson, Simon, Peebles, Haskell, Gardner & Betty, and Anne Gardner, Fort Worth, for appellees.
OPINION
SPURLOCK, Justice.
This is a suit on a sworn account for professional legal services rendered to William Nathan Brightwell prior to his death. Summary judgment was granted for the plaintiff/appellee law firms. Defendant/appellant appeals.
We affirm.
Suit was brought against Brightwell's widow as Independent Executrix of his Estate in the form of a sworn account alleging personal services rendered on which a systematic record had been kept. The appellees also alleged an oral contract for services. Pursuant to Tex.R.Civ.P. 185 the original *251 petition and account statements attached thereto were duly verified with supporting affidavits of Anne Gardner and Richard Tucker members of the appellee law firms, based upon their personal knowledge that the claims were just and true.
Appellant Mary Elizabeth Brightwell, Independent Executrix of the Estate of the Deceased, answered by filing an unsworn general denial. Thereafter, Plaintiffs filed their motion for summary judgment based on the pleadings and affidavits attached to the motion. Appellant then filed a "Defendant's Response to Plaintiff's Motion for Summary Judgment" in which no objections or exceptions were made to the motion for summary judgment. Appellant only requested leave to file her opposing affidavit and that of her son, Dr. Nathan L. Brightwell.
In their original petition, appellee law firms alleged that William Nathan Brightwell, through members of his family, had retained them to perform professional legal services on May 5 and 6 of 1979; that they met with Mr. Brightwell and the members of his family, including Mary Elizabeth Brightwell, on May 6, 1979; and that plaintiffs did in fact perform professional services and incur expenses as set out in the account statements attached to the petition.
The account statements indicate that Anne Gardner was initially contacted on May 5th on behalf of the deceased, by Mr. and Mrs. Hutto, daughter and son-in-law of the deceased, that she reviewed the will of Mr. Brightwell on that date, talked with Richard Tucker and requested his assistance regarding tax provisions in the Will. Thereafter, she and Richard Tucker traveled to Dallas on May 6, 1979, and conferred at Baylor Hospital with Mr. Brightwell and other members of his family for seven hours.
The account statements further reflect that Richard Tucker prepared a codicil to the Will which he gave to Mrs. Hutto with instructions for its execution and that he on that date had further conversations with Dr. Brightwell, son of the Testator, and Clifton Holmes, the attorney who had prepared the original Will and who now represents the Estate.
In her affidavit attached to the response to appellees' motion for summary judgment, Mrs. Brightwell stated that she did not agree to pay any attorney's fees to plaintiffs. She denied any oral agreement and further denied that any services performed directly or indirectly by the appellees benefitted her or the deceased. The son of William Nathan Brightwell stated in his affidavit that the claims of plaintiff were "misdirected" against the Estate as sworn to him by his father on his deathbed and that, in effect, the services of Plaintiffs were not sought by him but solely by Mr. and Mrs. John Hutto.
On June 6, 1980, after a hearing on the motion for summary judgment and a trial at which the Court heard evidence limited to the issue of reasonable attorney's fees under Tex.Rev.Civ.Stat.Ann. art. 2226 (Supp.1980-81), judgment was rendered for appellees awarding the sum of $936.63 to Barlow, Gardner, Tucker & Garsek with interest of $24.33 and reasonable attorney's fees in the amount of $400.00. To Simon, Peebles, Haskell, Gardner & Betty, the judgment awarded the sum of $500.00, with interest of $12.99 and attorney's fees of $200.00.
Appellant first contends that there is a genuine issue of material fact created by her counter-affidavits denying the oral contract, the authority of Mrs. Hutto to retain Appellees on behalf of Mr. Brightwell, the reasonableness of the charges, and the existence of the client-attorney relationship.
We disagree and find that the counter affidavits filed by the appellant to be formally insufficient to raise the points asserted in them.
Tex.R.Civ.P. 185 provides, in part, that when any action is "for personal service rendered, or labor done or labor or materials furnished, on which a systematic record has been kept," and is supported by the affidavit of the party as required by the rule, then the same "shall be taken as prima facie evidence thereof," unless the defendant *252 files a written denial, under oath, stating that "each and every item is not just or true, or that some specified item or items are not just and true; .... When the opposite party fails to file such affidavit, he shall not be permitted to deny the claim, or any item therein, as the case may be." (Emphasis added.)
In addition, Tex.R.Civ.P. 93(k), requires that the following matters shall be verified by affidavit in the answer of the Defendant:
"(k) That an account which is the foundation of the plaintiff's action, and supported by the affidavit, is not just; and, in such case, the answer shall state that each and every item is not just or true, or that some specified item or items are not just and true."
Strict adherence to the requirements of these rules is uniformly required by our courts. See, Crystal Investments v. Manges, 596 S.W.2d 853 (Tex.1980); Edinburg Meat Products Co. v. Vernon Co., 535 S.W.2d 432 (Tex.Civ.App. Corpus Christi 1976, no writ); Carter v. Hegar, 595 S.W.2d 612 (Tex.Civ.App. Austin 1980, no writ); Brown v. Clark, 557 S.W.2d 558 (Tex.Civ. App. Texarkana 1977, no writ); Youngblood v. Central Soya Company, Inc., 522 S.W.2d 277 (Tex.Civ.App. Fort Worth 1975, writ ref'd. n. r. e.).
The effect of the failure to follow rule 185 is that the defendant is precluded from raising a fact issue. She is not permitted to dispute the receipt of the items or services rendered or the correctness of the stated items. Airborne Freight Corp. v. CRB Marketing, Inc., 566 S.W.2d 573 (Tex. 1978). Nor is she permitted to deny the claim, Wilson v. Browning Arms Company, 501 S.W.2d 705 (Tex.Civ.App. Houston [14th Dist.] 1973, writ ref'd) or to raise an issue that she did not owe the account or that it was wrongfully charged to her. First National Bank of San Angelo v. Sheffield, 475 S.W.2d 820 (Tex.Civ.App. Austin 1972, no writ). Nor will she be permitted to deny that the deceased received the benefit of the plaintiff's services. Wauson & Williams, Etc. v. Reeder Dev. Corp., 572 S.W.2d 24 (Tex.Civ.App. Houston [1st Dist.] 1978, no writ). Her failure to plead correctly constitutes an admission that the account is correct and no fact issue as to its validity is presented. Brown v. Clark, supra.
It is well settled that the denial of a verified account must be in the exact language of the rules. The courts have been extremely exacting in the nature of the language used in denying the account. Sigler v. Frost Bros. Inc., 555 S.W.2d 813, 816 (Tex.Civ.App. El Paso 1977, no writ); Jeffrey v. Larry Plotnick Co., Inc., 532 S.W.2d 99, 101 (Tex.Civ.App. Dallas 1975, no writ).
The strict adherence to the rules required by the courts is illustrated in Crystal Investments v. Manges, supra at 854. In that case, the Supreme Court of Texas held that a supplemental answer raised only a general denial and did not meet the requirements of rule 185 where it stated the following:
"Your Defendant denies that he owed the plaintiff the sums sued upon in his petition, or any part thereof, and that the said amount is not just and true in whole or in part, ...."
The trial court had struck this supplemental answer and had rendered judgment for the plaintiffs after refusing to allow the defendant to put on any evidence. The Supreme Court affirmed the judgment for the plaintiff, holding that the trial court's action was proper.
Zemaco, Inc. v. Navarro, 580 S.W.2d 616 (Tex.Civ.AppTyler 1979, writ dism'd), was a case similar to the one before this court. The defendant's answer failed to comply with rule 185, and the plaintiff filed a motion for summary judgment. The defendant then filed an instrument entitled "Affidavit in Opposition to Plaintiff's Motion for Summary Judgment." In that instrument, he averred that he never had an account with the plaintiff, that the goods were not sold or delivered to him, and that he did not promise to pay for them. He further stated: "[E]ach and every item is not just and true."
*253 The trial court denied the plaintiff's motion for summary judgment and rendered judgment for the defendant after a trial. Zemaco, Inc. v. Navarro, supra at 620, however, reversed and rendered judgment for the plaintiff as a matter of law. In so acting, the court held that rules 185 and 93(k), when applied together, "require that the language necessary to effectively deny the justness and/or truth of the plaintiff's sworn account must appear in a pleading of equal dignity with the plaintiff's petition, and therefore must appear in the defendant's answer." Even assuming that the language used in the affidavit was technically sufficient, the court stated at 620:
"An affidavit filed in opposition to a motion for summary judgment does not comprise a part of the defendant's answer to the plaintiff's petition. The fact that such an affidavit in the instant case contained the language referred by Rule 185, does not render it an effective denial of plaintiff's account. Appellant's account and verified affidavit, not being effectively denied, constituted prima facie evidence which entitles it to recover...."
Summary judgment is proper in a rule 185 suit on a sworn account solely upon the plaintiff's verified petition where the defendant, as here, has failed to file a sworn denial. In such a case, there is no issue of fact as to whether the defendant owes all or a part of the account. See, Youngblood v. Central Soya Company, Inc., supra; Wilson v. Browning Arms Company, supra; Brown v. Clark, supra. The procedure is discussed by Judge David Hillner in his article entitled Summary Judgment in Texas, 43 Tex.B.J. 11, 18 (1980).
"When the party opposing the claim fails to file a sworn denial in correct form, there is no issue of fact raised as to whether all or part of the account is owed. Therefore, summary judgment is properly rendered. In a case on a sworn account you can secure what is essentially a summary judgment on the pleadings, as non-compliance with Rule 185 basically concludes that there is no defense and you are `not in court.' See Hidalgo v. Surety Savings & Loan Association."[1]
In this case, Appellant filed only a general denial and made no effort whatsoever to comply with the rules. Her affidavits, filed later in opposition to the motion for summary judgment, may have attempted to deny the claim but the language of the affidavits in no way tracked the language of the rules. Her pleadings and affidavits are thus totally insufficient to constitute an effective denial of the sworn account of the appellees. The net result is that the appellant, under established law, was not permitted to raise fact issues on the grounds stated in her affidavits and the plaintiffs were entitled to judgment as a matter of law. We overrule the appellant's first point of error.
Appellant next contends that the trial court erred in considering the affidavit of Richard Tucker which she describes as being the only proof offered to support the basis for recovery by Appellees. We find that this complaint is waived because it was not raised in the trial court.
Tex.R.Civ.P. 166-A, as amended in 1978, states in part as follows: "Issues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal ...." Section (e) of that rule further provides: "Defects in the form of affidavits or attachments will not be grounds for reversal unless specifically pointed out by objection by an opposing party with opportunity, but refusal, to amend...."
In the recent case of City of Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 677 (Tex.1979), the Supreme Court of Texas set out the history and the effect of the recent amendments to the summary judgment rules, the purpose of which was to require the non-movant to define specifically in writing the controverted issues as *254 well as defects in the movant's proof that would defeat the motion. The Court stated: "Thus, both the reasons for the summary judgment and the objections to it must be in writing and before the trial judge at the hearing." Having failed to object to any inadmissibility of the affidavit of Richard Tucker on the ground that its consideration was precluded by the Dead Man's Statute, Tex.Rev.Civ.Stat.Ann. art. 3716 (1926), appellant cannot now complain on this ground for the first time on appeal.
Even prior to the 1978 amendment to rule 166-A, this court held that an objection to an affidavit in support of a motion for summary judgment on the grounds that the witness was disqualified under art. 3716 was waived by failure to object at the proper time. McNeil v. Lovelace, 529 S.W.2d 633 (Tex.Civ.App. Fort Worth 1975, no writ). In that opinion this Court quoted from Collins v. Smith, 142 Tex. 36, 175 S.W.2d 407, 409 (1943), as follows:
"Petitioner insists that this testimony had no probative force even if admitted without objection. The disqualification of witnesses under Art. 3716, supra, can be waived by failure to object at the proper time and for the proper reason, and when the disqualification is so waived the testimony has probative force. Besteiro v. Besteiro, 65 S.W.2d 759 (Tex.Com.App.); Adam v. Adam et al., 127 S.W.2d 1001 (Tex.Civ.App.); 14 Tex. Jur., p. 329, sec. 544."
In McNeil, supra, this Court held that it was the duty of the defendants who were present through their attorneys at the hearing on the motion to have objected to the affidavit on the basis of the disqualification contained in the Dead Man's Statute and to cause the record to reflect that fact. Having failed to do so, they waived that objection on appeal.
We overrule appellant's second point of error.
Appellant's final contention is that the trial court had no jurisdiction and that the County Court or District Court of Rusk County, Texas, where the estate was pending, was the Court of proper jurisdiction. The case cited by appellant, Podgoursky v. Frost, 394 S.W.2d 185 (Tex.Civ.App. San Antonio 1965, writ ref'd n. r. e.), concerns the procedure where an administrator ceases to act in such capacity and whether failure to follow the proper procedure would render a judgment void for lack of jurisdiction over the estate. We find that Podgoursky does not apply here as this suit was properly filed against the independent executrix of the estate of the decedent pursuant to Tex.Prob.Code Ann. §§ 145, 146 and 147 (1980).
The Court in which this estate was pending in Rusk County had no jurisdiction whatsoever of this suit. See Wood V. Paulus, 524 S.W.2d 749, 759 (Tex.Civ.App. Corpus Christi 1975, writ ref'd n. r. e.); State v. Traylor, 374 S.W.2d 203 (Tex.1963). The purpose of the Tex.Prob.Code Ann. § 145 (1980) is to free the independent executor from the control of the Probate Court. Those statutes pertaining to independent executors give the district court or county court, but not the probate court, jurisdiction of all claims against an estate administered by an independent executor as in any other cause of action not regulated by special statute. Rowland v. Moore, 141 Tex. 469, 174 S.W.2d 248 (1943). The District Court in Tarrant County clearly had jurisdiction to entertain the cause of action of the appellees.
"Jurisdiction" actually deals with the power of a court to determine an action involving a particular subject matter as between the parties and to render a certain judgment. "Venue" deals with the propriety of prosecuting a suit in a particular county. 1 McDonald, Texas Civil Practice, § 4.02, (1965). It is our opinion that appellant is questioning venue and not jurisdiction.
Appellant's real complaint is that venue of this case was properly in Rusk County were the deceased resided and where the probate of his estate was filed. However, this complaint, even if viewed in that manner, is without merit. Under Tex. Rev.Civ.Stat.Ann. Art. 1995 (1964), Mary Elizabeth Brightwell had the privilege to be *255 sued in the county of her residence. Under subdivision 6 of Art. 1995, where suit is against an executor to establish a money demand against an estate, suit may also be brought in the county in which such estate is administered. This exception is for the benefit of a plaintiff and does not benefit a defendant. Furthermore, a defendant must take advantage of his right to be sued in the county of his residence by filing a plea of privilege under the provision of Tex.R. Civ.P. 86. Appellant did not file a plea of privilege in this case and any right to be sued in Rusk County was thereby waived. We overrule appellant's third and final point of error.
Judgment affirmed.
NOTES
[1] 462 S.W.2d 540 (Tex. 1971, in which the Supreme Court stated at page 543, footnote: "In such cases summary judgment does not rest on proof supplied by pleadings, sworn or unsworn, but on deficiencies in the opposing pleadings...."
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431 B.R. 612 (2009)
In re DAUFUSKIE ISLAND PROPERTIES, LLC, Debtor.
The Melrose Club, Inc., Plaintiff,
v.
Robert C. Onorato, in his capacity as Chapter 11 Trustee for the Estate of Daufuskie Island Properties, LLC; Stewart Kittredge Collins and/or Susan Charles Collins, Trustees of the Collins Family Trust Dated May 26, 1989; William R. Dixon, Jr. and Gayle Bulls Dixon; AFG, LLC; Carolina Shores, LLC; Beach First National Bancshares, Inc. d/b/a Beach First National Bank; Beach Cottages II, LLC; Pensco Trust Company, Inc.; The Beach Cottages, LLC; The Greenery, Inc.; Coastal Connections, Inc.; Beach Cottages III, LLC; Easter Beach Villas, LLC; and Ocean Front Villas, LLC, Defendants.
The Melrose Club, Inc., Plaintiff,
v.
Daufuskie Island Properties, LLC; William R. Dixon, Jr.; Gayle Bulls Dixon; Stewart Kittredge Collins and/or Susan Charles Collins, Trustees of the Collins Family Trust Dated May 26, 1989, Defendants,
of whom Stewart Kittredge Collins and/or Susan Charles Collins, Trustees of the Collins Family Trust Dated May 26, 1989, is Third Party Plaintiff,
v.
William R. Dixon, Jr., Third Party Defendant.
Bankruptcy No. 09-00389-JW. Adversary No. 09-80094-JW.
United States Bankruptcy Court, D. South Carolina.
December 21, 2009.
*615 Ivan N. Nossokoff, Ivan N. Nossokoff, LLC, Charleston, SC, for Debtor.
Bernadette S. Gillians, Charles Pelot Summerall, IV, Buist Moore Smythe McGee PA, Charleston, SC, for Plaintiff.
Ellis R. Lesemann, John S. Wilkerson, III, Parker Poe Adams & Bernstein, LLP, Lindsey W. Cooper, Jr., The Law Offices of L.W. Cooper, Jr., John E. Robinson, McDowell Law Offices, Charleston, SC, Julio E. Mendoza, Jr., Nexsen Pruet, LLC, Michelle P. Clayton, Turner Padget Graham & Laney PA, Barbara George Barton, George Barry Cauthen, Columbia, SC, Robert A. Kerr, Jr., Hagood & Kerr, PA, Mount Pleasant, SC, Michael S. Church, Lexington, SC, for Defendants.
The Greenery, Inc., Hilton Head Island, SC, pro se.
Coastal Connections, Inc., Hardeeville, SC, pro se.
JUDGMENT
JOHN E. WAITES, Chief Bankruptcy Judge.
Based upon the Findings of Fact and the Conclusions of Law recited in the attached Order of the Court, the Court grants partial summary judgment to Carolina Shores, LLC ("Carolina Shores"), partial summary judgment to The Melrose Club, Inc. ("MCI"), and denies the motions for summary judgment as to the remaining claims of MCI, Carolina Shores, AFG, LLC, and Beach First National Bancshares, Inc.
ORDER
This matter comes before the Court on the motions for summary judgment ("Motions") filed by Carolina Shores, LLC; The Melrose Club, Inc.; AFG, LLC and Beach First National Bancshares, Inc.; and the responses and objections filed thereto. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334 and 157. All parties who contend that this matter is not a core proceeding have consented, pursuant to 28 U.S.C. § 157(c)(2), to the Court's issuance of a final order pertaining to the Motions. Pursuant to Fed.R.Civ.P. 52, made applicable to this proceeding by Fed. R. Bankr.P. 7052, the Court makes the following Findings of Fact and Conclusions of Law.[1]
FINDINGS OF FACT
A. The Parties
1. The Melrose Club, Inc., a South Carolina nonprofit mutual benefit corporation ("MCI"), previously owned approximately 300 acres on Daufuskie Island, which is located in Beaufort County, South Carolina (the "Property"). Improvements on the Property included, inter alia, the 52-room Melrose Inn, 37 Beach Cottages, Beach Club, golf and tennis club house, health and fitness center, equestrian center, Sportsman's Lodge, administration and maintenance facility, together with interests in the embarkation center at Salty Fare on Hilton Head Island with docks and parking, and debarkation center at Melrose Landing on Daufuskie Island.
*616 2. Debtor, the current owner of the Property except as indicated below, is a limited liability company with two members: William R. Dixon, Jr. and his wife, Gayle Bulls Dixon (collectively the "Dixons"). On January 20, 2009, Debtor filed a petition seeking relief under Chapter 11 of the Bankruptcy Code. On March 17, 2009, the Court ordered the appointment of a Trustee in Debtor's bankruptcy case.
3. Beach First National Bancshares, Inc. d/b/a Beach First National Bank ("Beach First") holds a first priority lien on the assets of the bankruptcy estate to secure post-petition loans made to the Trustee in April, May, and July 2009. The principal amount of the loan, which is a participation loan with Tidelands Bank, is $1.5 million. Beach First has also filed a proof of claim in the amount of $6,417,614.42 based on a third mortgage and security interest on portions of the Property owned by Debtor.
4. AFG, LLC ("AFG") has filed a proof of claim in the amount of $4 million based on a third mortgage and security interest on portions of the Property owned by Debtor.
5. Carolina Shores, LLC ("Carolina Shores") has filed a proof of claim in the amount of $27,750,128.51 based on a junior mortgage and security interest, as assigned by the Club Financial Corp., on portions of the Property owned by Debtor.
6. William Dixon, Jr. ("Bill Dixon") has also filed a proof of claim in the amount of $34,692,660.58 based on a mortgage and lien on portions of the Property owned by Debtor. The Trustee and Carolina Shores both dispute this claim in separate adversary proceedings, Adversary Proceeding No. 09-80120-jw and 09-80134-jw, respectively.
7. Stewart Kittredge Collins and/or Susan Charles Collins, Trustees of the Collins Family Trust Dated May 26, 1989 ("CFT") is the record owner of the embarkation center Salty Fare on Hilton Head Island with docks and parking ("Salty Fare"), which was transferred to it by Debtor in April 2007. At the time of the transfer, CFT and Debtor entered into a commercial lease agreement providing for Debtor's continued use and maintenance of Salty Fare. On June 2, 2009, this Court entered an order authorizing the Trustee's rejection of the commercial lease agreement. The Dixons hold an option to purchase Salty Fare.
8. Beach Cottages II, LLC ("Beach Cottages II") is the record owner of a portion of the Property. Beach Cottages II has filed a claim for $43,067.51 based on rental management revenue and an unauthorized loan made to Debtor in June 2008.
9. Beach Cottages III, LLC ("Beach Cottages III") is the record owner of a portion of the Property. Beach Cottages III has filed a claim for $781,935.31 based on rental management revenue and a series of promissory notes secured by the portion of Property owned by Beach Cottages II.
10. The Beach Cottages, LLC ("Beach Cottages I") is the record owner of a portion of the Property.
11. Pensco Trust Company, Inc. ("Pensco") was joined in this adversary as the holder of mortgages on the portion of Property owned by Beach Cottages III. Pensco characterizes itself as a passive custodian on behalf of third-party individuals who hold the promissory notes.
12. Easter Beach Villas, LLC ("Easter Beach") holds a mortgage on the portion of Property owned by Beach Cottages II.
13. Ocean Front Villas, LLC ("Ocean Front") holds a mortgage on the portion of Property owned by Beach Cottages III.
*617 14. The Court entered orders of default as to The Greenery, Inc. ("The Greenery") and Coastal Connections, Inc. ("Coastal Connections") on August 6, 2009, and August 7, 2009, respectively. The Greenery and Coastal Connections each filed a prepetition mechanics lien action on certain parcels of property.
B. The Property
15. MCI conveyed the Property to Melrose Club Management, Inc. n/k/a Daufuskie Club, Inc. ("DCI") on or about December 30, 1996, by special warranty deed.
16. The details of the conveyance of the Property from MCI to DCI were set forth in an unrecorded Transfer Agreement between the parties ("1996 Transfer Agreement" or the "Transfer Agreement").
17. The purchase price for the Property was DCI's payoff of a $1,200,000.00 promissory note payable to Club Financial Corp.; assumption of MCI's liabilities, as defined in the Transfer Agreement; assumption of certain Additional Obligations, as defined in the Transfer Agreement; and the issuance of Club Memberships pursuant to the terms in the Transfer Agreement.
18. Article 5 of the Transfer Agreement, entitled "Additional Obligations," provides as follows:
5.1 Purchaser's Additional Obligations. As additional consideration for the transfer and sale of the Assets, Purchaser agrees to execute, on the Closing Date, the Assignment and Assumption Agreement whereby Purchaser agrees to assume and fund the costs of the Additional Obligations pursuant to the terms and conditions recited therein. In the event Purchaser, at any time from the Closing Date to the expiration of twenty (20) years from the Closing Date, elects to not perform the Additional Obligations, or any material part thereof, then Purchaser shall provide written notice to Seller of its election (the "Written Notice"). Purchaser agrees to reconvey the Assets to Seller within thirty (30) days after the Written Notice has been received by Seller, if Seller, at its option in its sole discretion, notifies Purchaser, in writing within thirty (30) days after receipt of the Written Notice, that Seller agrees to accept such reconveyance. The closing of the reconveyance shall be in the same manner and the substantially same form of documentation as utilized for the Closing, and Seller shall assume all of the existing liabilities of Purchaser arising from its ownership and operation of the Assets, which liabilities shall not be greater than the Liabilities assumed by Purchaser at the Closing. Purchaser agrees, for a period of seven (7) years from the Closing Date, that any mortgage or security agreement against the Assets shall only secure funding for capital improvements, replacements, renovations, repairs, or the operation of the Club. The parties agree that a memorandum setting forth the reconveyance and debt restrictions set forth in this Section shall be recorded against the Real Property and shall be a covenant running with the land and be binding on any successor or assign of Purchaser who acquires the Real Property.
("Article 5" or "Section 5.1").
19. Exhibit A to the Second Amendment of the Transfer Agreement ("Exhibit A") defines "Additional Obligations" as including the following: (i) participation in and funding of a percentage of a beach renourishment project; (ii) funding of all operational deficits, as defined in Exhibit A, in connection with the operation of the Melrose Club facilities with no assessments *618 to the Melrose Club members; (iii) renovation of the Beach Cottages; (iv) repairing and replacement of the golf course irrigation system, golf cart paths and sand traps; and (v) preparation of a business plan evaluation concerning the construction of a potential conference facility.
20. Exhibit A defines "Operational Deficits" as "gross receipts, minus ... operational expenses as set forth on Purchaser's financial statements prepared in accordance with generally accepted accounting principles."
21. DCI thus granted MCI the right until 2016 to have the Property returned to MCI if DCI elected not to perform the Additional Obligations or any material part thereof. Article 5 states that the right is a covenant running with the land, binding on successors and assigns of DCI. DCI and MCI memorialized this right by executing a Memorandum of Agreement ("Memorandum"), which was recorded in the Beaufort County RMC Office on December 31, 1996, in Deed Book 911, at Page 1859.
22. Paragraph 1 of the recorded Memorandum provides:
This Memorandum is executed and filed of record to evidence the terms of Article 5 of that certain Transfer Agreement (the "Agreement") executed on September 27, 1996, as amended, between Seller and Purchaser. The specific terms and conditions in Section 5 of the Agreement (the "Restrictions") are covenants running with the land described on Schedule A hereto (the "Property"). After the date hereof, the Property shall be held, sold, and conveyed subject to the terms of the Restrictions, which shall run with the title to the Property and shall bind all parties having any right, title, or interest in the Property or any part thereof, their heirs, successors, successors-in-title, and assigns and shall inure to the benefit of Seller, unless released or terminated as provided.
Paragraph 2 of the recorded Memorandum sets forth the terms of the reconveyance right as laid out in Article 5.
23. The Transfer Agreement further provides:
14.1.6. Subsequent Assignments of the Assets. Notwithstanding anything in this Agreement to the contrary, Purchaser shall not, without Seller's express prior written consent, which consent will not unreasonably be withheld, transfer, or agree to transfer, in any manner, all or substantially all of the Assets, except to (i) any person whose net worth (determined in accordance with generally accepted accounting principles) is not at least as great as that of Purchaser immediately after the transfer of the Assets to Purchaser pursuant to this Agreement, and (ii) a person who has experience and a quality reputation in the club and resort industries. For all purposes of this Agreement, the term "person" shall be construed as broadly as possible and shall include, without limitation, any natural person, corporation, company, limited liability company, general partnership, limited partnership, limited liability partnership, unincorporated association, joint venture, sole proprietorship, business trust, or other entity, in each case whether or not for profit. Notwithstanding the above, Purchaser may sell portions of the Assets in the ordinary course of business, provided that the sale of said Assets do not materially impact the facilities provided to the Members or the operation of the Club.
25. Section 14.1.4 of the Transfer Agreement also outlines the purchaser's obligations:
Purchaser Operations. Purchaser covenants to (i) operate the New Club from *619 the Real Property in a manner materially consistent with the operation of the Club as it is currently operated, as modified by the New Club Bylaws and including resort guests' play and usage of the facilities, or pursuant to the operational standards of comparable golf and resort facilities operated by affiliates of Purchaser, (ii) maintain in good condition the Assets, (iii) fund and pay all operational deficits generated by Purchaser, (iv) not assess any Member any amount for operational or capital expenditures, and (v) honor the Club Memberships granted to the Members, which Club Memberships shall be binding on any subsequent owner of the Real Property.
26. With respect to a default by either party, the Transfer Agreement provides:
16.1. Event of Default. Except as otherwise expressly provided herein, either party hereto shall be deemed to be in default of this Agreement if such party fails or refuses to comply with the terms and conditions set forth herein for any reason other than the prior termination of this Agreement pursuant to a right to so terminate expressly set forth in this Agreement and said default continues for a period of thirty (30) days after written notice from the nondefaulting party to the defaulting party specifying the default....
....
17.2. Seller's Remedies After Closing. Except as otherwise provided in this Agreement, upon the occurrence of an Event of Default by Purchaser after Closing which is not cured within the time permitted, Seller shall be entitled to any remedy available at law or in equity, including specific performance, as determined by the arbitration proceedings in Article 18.
Section 18.1 provides that "[a]ny controversy arising out of, or relating to, this Agreement, or the breach thereof, shall be settled by binding arbitration" and outlines the terms for any arbitration proceeding between the parties.
27. In 2002, DCI and Debtor entered into an agreement for the transfer of assets previously transferred by MCI to DCI pursuant to the Transfer Agreement. On May 31, 2002, at the request of DCI, MCI executed an Estoppel Certificate, which provided that MCI consented to the transfer to Debtor and that Debtor assumed the obligations under the Transfer Agreement. The Estoppel Certificate provides in part:
General Narrative. [MCI] has been advised of the pending transaction involving DCI and other related entities conveying certain assets to Purchaser. [MCI] is a party to an agreement entitled "Transfer Agreement" originally dated September 17, 1996, as amended by the First Amendment and Second Amendment, (collectively the "Transfer Agreement") which was entered into by and between [MCI] and [DCI].... Included in the Transfer Agreement was specific obligations on the part of DCI which were defined as "Additional Obligations" in Section 5.1. Since the consummation of the Transfer Agreement, DCI has expended in excess of $45,000,000 for capital improvements, replacements, renovations, repairs and operation of the Club, a portion of which expenditures has been borrowed and is evidenced by a promissory note and secured by a mortgage against certain real property, including the Real Property as defined in the Transfer Agreement.
Purchaser, an independent, arms-length buyer for value of certain assets of DCI, will be taking these assets subject to the Transfer Agreement....
*620 Except for Paragraph 2 entitled Operational Deficits on Exhibit A to the Transfer Agreement, all other Additional Obligations, as defined in Section 5.1 and on Exhibit A to the Transfer Agreement, have been fully satisfied.
....
[MCI] acknowledges that (i) certain of the assets being transferred by DCI to Purchaser as referenced hereinabove include the Assets as defined in the original Transfer Agreement, and (ii) the rights and corresponding obligations of DCI will be assigned to Purchaser by DCI as a part of this overall acquisition of assets and that effective with the closing, Purchaser will step into the shoes of DCI and assume the obligations under the Transfer Agreement. Based upon the information provided by DCI and Purchaser, [MCI] consents to the transfer of the assets and to the assignment.
... Reference is made to the Memorandum of Agreement which relates to the Transfer Agreement.... [MCI] acknowledges that as part of the acquisition of assets by Purchaser from DCI, Purchaser will be assuming a portion of the indebtedness referenced hereinabove in the General Narrative, which indebtedness exists and secures funding for capital improvements, replacements, renovations, repairs and operations of The Club....
28. By order entered October 30, 2009, this Court denied the motions to dismiss and joinders therein, filed by AFG, Beach First, Carolina Shores, CFT, the Dixons, Beach Cottages II, Beach Cottages III, and the Trustee.
CONCLUSIONS OF LAW
A. Standard of Review
Pursuant to Fed.R.Civ.P. 56(c), made applicable to this adversary proceeding by Fed. R. Bankr.P. 7056, summary judgment is appropriate "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." When a motion for summary judgment is filed, the Court does not weigh the evidence, but determines if there is a genuine issue for trial. Listak v. Centennial Life Ins. Co., 977 F. Supp. 739, 743 (D.S.C.1997) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986)).
The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir.2003). Upon making this showing, the burden shifts to the nonmoving party to go beyond the pleadings and set forth specific facts demonstrating that a genuine issue exists for trial. Fed.R.Civ.P. 56(e); Campbell v. Capital One Bank (In re Broughton), C/A No. 99-06953-W, Adv. Pro. No. 00-80143-W, 2001 WL 1806983, at *2, (Bankr.D.S.C. Mar. 20, 2001). "If no material factual disputes remain, then summary judgment should be granted against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which the party bears the burden of proof at trial." Listak, 977 F.Supp. at 743 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986)).
B. Motions for Summary Judgment
Carolina Shores' motion seeks summary judgment on the following grounds:
1. The rights, title and interests of Carolina Shores are not subject to *621 nor subordinate to MCI's rights as a matter of law; and
2. The Debtor's alleged failure to perform does not constitute an "election" not to perform as a matter of law.
The Trustee filed a response in support of Carolina Shores' motion, and MCI filed an objection.
AFG and Beach First filed a cross-motion for partial summary judgment on the following grounds:
1. Any interest of MCI in the Property is subject to AFG and Beach First's mortgage interests in the Property; and
2. Any reconveyance to MCI would be subject to MCI's assumption and payment of all liabilities, debts and accounts payable set forth on Debtor's financial statements as of the date the right to reconveyance accrued together with all debts, obligations, and accounts payable incurred by Debtor in the ordinary course of business of operating the assets through the date of closing and all contingent liabilities.
MCI filed an objection to AFG and Beach First's motion.
MCI seeks partial summary judgment on the following grounds:
1. The right to reconveyance in Article 5 is a valid restrictive covenant running with title to the Property; and
2. The asserted interests of the Defendants in the Property are subject and subordinate to the prior recorded reconveyance right; and
3. The right to reconveyance has been triggered.
The Dixons, Beach Cottages II, Beach Cottages III, Ocean Front, and Easter Beach filed a joint objection, in which Pensco joined. Additionally, Carolina Shores, CFT, AFG and Beach First, and the Trustee filed objections.
For the reasons described below, the Court grants partial summary judgment to Carolina Shores as to its second ground that Debtor's alleged failure to perform does not constitute an election not to perform as a matter of law. The Court grants partial summary judgment to MCI as to its first ground that the reconveyance right described in Section 5.1 is a covenant running with the title to the property. With respect to the parties' remaining claims, the Court denies the motions for summary judgment.
C. The Reconveyance Right Has Not Been Triggered.
The Court grants partial summary judgment to Carolina Shores on the issue that Debtor's alleged failure to fund all operational deficits does not constitute an election not to perform under Section 5.1 of the Transfer Agreement. Accordingly, the Court denies summary judgment to MCI as to its related assertion that the reconveyance covenant has been triggered.
Initially, MCI challenges the Defendants' standing to interpret the terms of the Transfer Agreement because they are not signatories to the contract. To demonstrate standing, a party must show an "injury-in-fact, causation, and redressability." In re Mut. Funds Inv. Litig., 529 F.3d 207, 216 (4th Cir.2008). MCI commenced this adversary case against the Defendants, claiming that their rights and interests in the Property are subject to and subordinate to MCI's rights under Article 5 and the Transfer Agreement. The Court agrees with the Defendants' argument that any subordination of their interests through a construction of the Transfer Agreement would cause injury to them, which would be relieved by a favorable *622 decision by this Court. Thus, the Court rejects MCI's contention and finds the Defendants have standing in this matter.
Under South Carolina law, "[w]hen a contract is unambiguous, clear and explicit, it must be construed according to the terms the parties have used, to be taken and understood in their plain, ordinary and popular sense." C.A.N. Enters., Inc. v. S.C. Health & Human Servs., 296 S.C. 373, 377, 373 S.E.2d 584, 586 (1988). "Common sense and good faith are the leading touchstones of construction of the provisions of a contract" and a construction that is "reasonable, fair and just... must prevail." Id. Furthermore, where "the language of a contract is plain and capable of legal construction, that language alone determines the instrument's force and effect." Ellis v. Taylor, 316 S.C. 245, 248, 449 S.E.2d 487, 488 (1994).
While the parties agree that Section 5.1 contains no ambiguity, they dispute what acts constitute a trigger of MCI's right to reconveyance. No evidence of a formal election by Debtor has been presented. However, in its motion, MCI asserts that the failure of Debtor and the Trustee to fund the operational deficits acts as a trigger of the reconveyance covenant. Further, MCI argues that the proposed sale in the bankruptcy case triggers its right to reconveyance. The Court disagrees with MCI's position and finds the language of Section 5.1 plainly sets forth the conditions necessary to trigger the reconveyance right.
The operative part of Section 5.1 provides:
In the event Purchaser, at any time from the Closing Date to the expiration of twenty (20) years from the Closing Date, elects to not perform the Additional Obligations, or any material part thereof, then Purchaser shall provide written notice to Seller of its election (the "Written Notice"). Purchaser agrees to reconvey the Assets to Seller within thirty (30) days after the Written Notice has been received by Seller, if Seller, at its option in its sole discretion, notifies Purchaser, in writing within thirty (30) days after receipt of the Written Notice, that Seller agrees to accept such reconveyance.
(emphasis added). Because the terms are unambiguous, the Court will not look beyond this document, which clearly requires that two affirmative acts occur before MCI's reconveyance right is triggered. First, Debtor must elect not to perform the Additional Obligations, or any material part thereof. Secondly, Debtor must provide written notice to MCI of that election. Neither of those conditions has occurred.
The parties focus their dispute on the condition of election. The Court agrees with the parties opposing MCI's motion that the term "elect" is capable of being understood according to its plain and ordinary meaning, which requires a voluntary choice and a willing act on the part of Debtor. See William W. Bierce, Ltd. v. Hutchins, 205 U.S. 340, 346, 27 S. Ct. 524, 525, 51 L. Ed. 828 (1907) ("Election is simply what its name imports; a choice, shown by an overt act, between two inconsistent rights, either of which may be asserted at the will of the chooser alone."). Section 5.1 does not provide for a party's insolvency or failure to perform, and the Court cannot rewrite the contract between the parties. See C.A.N. Enters., Inc., 296 S.C. at 378, 373 S.E.2d at 587 (stating that courts are "without authority to alter a contract by construction or to make new contracts for the parties" but are "limited to the interpretation of the contract made by the parties themselves").
*623 Furthermore, the use of such specific language appears reasonable. As outlined by Exhibit A, the Additional Obligations, being assumed by the purchaser, included expensive beach renourishment, renovation of cottages, repairs and replacements to the golf course, and potential construction of a conference facility. In the Estoppel Certificate, MCI acknowledged that DCI spent $45 million performing these parts of the obligations. Since the Additional Obligations were extensive and the costs uncertain at the time the parties entered into the Transfer Agreement, it is logical that the purchaser may want an escape clause; that is, should the purchaser determine that it could not meet such significant expenses, it may wish to withdraw from its obligations by electing to not act further and return the assets to their original status rather than merely default and expose itself to a potentially more significant damage claim.
In addition, the Transfer Agreement provides MCI an alternative remedy for any failure of Debtor to fund operational deficits. Section 14.1.4 also imposes a duty on Debtor to fund operational deficits, and Section 16.1 identifies a party as being in default if the party "fails or refuses to comply with the terms and conditions set forth herein ... and said default continues for a period of thirty (30) days after written notice from the nondefaulting party." (Emphasis added). Sections 17.4 and 18.1 provide MCI with the right to "any remedy available at law or in equity, including specific performance" in an arbitration proceeding. Thus, MCI has a remedy to pursue outside of Section 5.1 for Debtor's alleged failure.[2]
Accordingly, finding that a voluntary, affirmative act is required, any failure of Debtor to perform does not and has not constituted an election so as to trigger MCI's right to reconveyance under Section 5.1.
Similarly, the proposed sale of Debtor's assets does not act as a trigger of MCI's reconveyance right. Section 5.1 is separate and distinct from Section 14.1.6, which specifically considers a sale of substantially all of the assets and sets out detailed requirements for a transfer. If the requirements are met, a transfer may occur without default or breach. Section 5.1 plainly does not address the sale of the property, but rather, is limited to an election not to perform the Additional Obligations.
Based on the foregoing analysis, the Court concludes that no election has been made under Section 5.1 and MCI's reconveyance right has not been triggered.
D. The Reconveyance Right is a Covenant Running with the Land.
The Court grants partial summary judgment to MCI as to MCI's first claim that the reconveyance right, as set forth in Section 5.1 of the Transfer Agreement and the recorded Memorandum, is a covenant running with the land.
Pursuant to South Carolina law, a covenant is a real covenant that runs with the land and binds successors to the original covenantor if three elements are found: (i) an indication the covenanting parties intended the covenant to run with the land; (ii) the covenant touches and concerns the real property; and (iii) the party required to observe the covenant has actual or constructive *624 notice of the covenant. In re T 2 Green, LLC, 363 B.R. 753, 766 (Bankr. D.S.C.2006); Harbison Cmty. Ass'n v. Mueller, 319 S.C. 99, 102-03, 459 S.E.2d 860, 862-63 (Ct.App.1995).
In considering the first element, the Court must construe the covenant "so as to carry into effect the intention of the parties, which is to be collected from the whole instrument and from the circumstances surrounding its execution." Cheves v. City Council of Charleston, 140 S.C. 423, 138 S.E. 867, 869 (1927); see also Midway Props., Inc. v. Pfister, 292 S.C. 104, 106, 354 S.E.2d 926, 927 (Ct.App.1987) (reviewing the instrument as a whole to discern the parties' intent, and finding the general rule of strict construction of restrictions is "not applicable if it will defeat the plain and obvious purpose of the restrictions"). The Court may look to the language of the covenant to determine whether the language used evidences an intention to attach the attribute of assignability. Cheves, 140 S.C. 423, 138 S.E. at 869; see also Gressette v. S.C. Elec. & Gas Co., 370 S.C. 377, 382-83, 635 S.E.2d 538, 541 (2006) (construing the language of an easement). The use of language indicating a covenant shall bind the "heirs and assigns" of a property owner is evidence of such intent. Id.
The Court finds the plain language of the Memorandum and Section 5.1 evidences a clear intention that the reconveyance right would run with the land. The final sentence of Section 5.1 states that the Memorandum setting forth the reconveyance shall be binding on any successor or assign of the purchaser who acquires the Property. The Memorandum, which was recorded to memorialize the agreement contained in Section 5.1, provides that "the Property shall be held, sold, and conveyed subject to the terms of the Restrictions, which shall run with the title to the Property and shall bind all parties having any right, title, or interest in the Property or any part thereof, their heirs, successors, successors-in-title, and assigns."
Additionally, the Estoppel Certificate provided that Debtor acquired the Property subject to the Transfer Agreement, and that upon the transfer, Debtor would "step into the shoes of DCI and assume the obligations under the Transfer Agreement." The Estoppel Certificate also made reference to the Memorandum. Thus, the Court concludes the contracting parties to the Transfer Agreement intended for the reconveyance covenant to run with the title to the land.
In determining whether the second element is satisfied, Epting v. Lexington Water Power Co., 177 S.C. 308, 181 S.E. 66 (1935), is instructive. The Epting Court distinguished personal covenants and covenants running with the land, stating "a covenant is personal when it has no relation to the land conveyed ... or is not connected with the title." 177 S.C. 308, 181 S.E. at 71. In contrast, to run with the land, a covenant "must relate to the realty demised, having for its object something annexed to, or inherent in, or connected with the land; that its performance or nonperformance must affect the nature, quality, value, or mode of enjoyment of the demised premises." Id. The South Carolina Court of Appeals has held that "covenants that require grantees to pay assessments for the upkeep of a particular parcel of property are ... real covenants which `touch and concern' land, and therefore, run with the land." Queen's Grant II Horizontal Prop. Regime v. Greenwood Dev. Corp., 368 S.C. 342, 361, 628 S.E.2d 902, 913 (Ct.App.2006).
The Defendants contest this element, arguing that the performance or *625 nonperformance of the covenant would not affect the nature, quality or value of the Property, but would rather just result in a change of ownership. However, under Section 5.1, Debtor has an obligation to assume and fund the costs of the Additional Obligations, which includes funding of Operational Deficits. Pursuant to the Transfer Agreement, Operational Deficits are defined as gross receipts minus operational expenses, which include, under generally accepted accounting principles, such things as taxes, insurance, repairs and maintenance. Here, the reconveyance covenant touches and concerns the Property by requiring the covenantor to perform obligations which involve the maintenance and repair of the Property that relate to the "nature, quality, value, or mode of enjoyment of the demised premises." Furthermore, Section 5.1 provides MCI with a right to regain title or ownership of the Property under certain circumstances at a structured price.
The third element, notice, is not disputed. Debtor had constructive notice of the reconveyance covenant by way of the Memorandum, which was recorded in the chain of title. Furthermore, the Estoppel Certificate establishes that Debtor had actual notice of the Transfer Agreement and Memorandum and of its assumption of the obligations under the Transfer Agreement.
Thus, the Court concludes the reconveyance right is a covenant that runs with the title to the Property, and grants partial summary judgment to MCI as to this issue.
E. Priority of Interests
In its motion, MCI seeks summary judgment as to its claim that the Defendants' interests in the Property are subject and subordinate to its reconveyance right.[3] Carolina Shores seeks summary judgment with respect to its claim that its interest is not subject to MCI's rights. AFG and Beach First moved for summary judgment on their claims that MCI's interest is subject to AFG and Beach First's interests, and that upon a reconveyance, MCI would take the property subject to all liabilities set forth on Debtor's financial statements and all obligations incurred by Debtor in the ordinary course of business of operating the assets. In support of their motions, Carolina Shores, AFG, and Beach First assert their debts are existing liabilities of Debtor which are not greater than the liabilities assumed by DCI, and therefore, under the terms of the Transfer Agreement, MCI would assume these debts upon a reconveyance.
In the motions presently before the Court, MCI's rights depend upon the triggering of the reconveyance right, and the arguments of Carolina Shores, and AFG and Beach First primarily depend upon a hypothetical reconveyance of the Property to MCI. However, for the reasons stated above, the Court has found that MCI's right of reconveyance under Section 5.1 has not been triggered by any alleged failure of Debtor to fund the Additional Obligations, nor is it triggered by the pending sale of the assets of the bankruptcy estate. Therefore, with respect to the priority of interests between MCI and the Defendants, the Court finds that summary judgment should be denied at this time on MCI's second claim, Carolina Shores' first claim, and AFG and Beach First's first and second claims.
As an additional ground, CFT objected to MCI's motion, claiming that a genuine issue of fact exists as to whether the sale of Salty Fare materially impacted the facilities or operation of the Club. The *626 Court agrees and finds a brief analysis of that issue would be helpful to these and similarly situated parties.[4]
In April 2007, Debtor transferred the portion of property known as Salty Fare, consisting of the embarkation center with docks and parking, to CFT. As set forth above, Section 14.1.6 of the Transfer Agreement provides terms and conditions for assignments of the assets and allows for transfers of portions of the assets in the ordinary course of business, absent MCI's consent, provided that the sale of the assets does not materially impact the facilities or the operation of the Club.
CFT contends the sale of Salty Fare did not materially impact the facilities or operation of the Club, or at least, there exists a genuine issue of fact in this regard. CFT asserts that MCI failed to object to the Trustee's motion to reject the commercial lease agreement, which the Court authorized. The Court agrees that the Trustee's decision to surrender the asset offers some evidence in favor of CFT's position that the sale of Salty Fare was not of material impact and that the property was validly transferred in the ordinary course of business under Section 14.1.6. However, MCI points to conflicting evidence presented by Bill Dixon's deposition, in which he stated that Salty Fare was a "crucial" piece of property. When considering a motion for summary judgment, the Court does not weigh the evidence, but determines if a genuine issue of fact remains. Because the conflicting evidence indicates that there is a genuine issue of fact for this claim, MCI's motion for summary judgment as to its asserted superiority over CFT's interest must be denied for this additional reason.
Conclusion
Based on the foregoing reasons, the Court grants partial summary judgment to Carolina Shores and finds that Debtor's alleged failure to perform by funding operational deficits does not constitute an election so as to trigger MCI's right to reconveyance under Section 5.1 of the Transfer Agreement. The Court grants partial summary judgment to MCI and concludes that the reconveyance right of Section 5.1 is a covenant running with the title to the Property. The Court denies the motions for summary judgment as to the parties' remaining claims at this time.
AND IT IS SO ORDERED.
NOTES
[1] To the extent that any of the following Findings of Fact constitute Conclusions of Law, they are adopted as such, and to the extent that any Conclusions of Law constitute Findings of Fact, they are so adopted.
[2] The Court notes the Trustee's argument that even if MCI's right to reconveyance has been triggered, MCI is neither willing nor able to purchase Debtor's primary assets. In light of the Court's finding that no right has been triggered, it is not necessary to address this issue.
[3] The reconveyance right is only operative if triggered.
[4] These same issues may also apply to Beach Cottages, Beach Cottages II, and Beach Cottages III, and to the mortgages given on the portions of property owned by these parties.
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704 A.2d 375 (1997)
1997 ME 232
Daniel GUIGGEY
v.
GREAT NORTHERN PAPER, INC.
Supreme Judicial Court of Maine.
Argued November 12, 1997.
Decided December 17, 1997.
*376 Wayne W. Whitney (orally), McTeague, Higbee, MacAdam, Case, Watson & Cohen, Topsham, for employee.
John A. Woodcock, Jr. (orally), Weatherbee, Woodcock, Burlock & Woodcock, Bangor, for employer.
Before WATHEN, C.J., and CLIFFORD, RUDMAN, DANA, LIPEZ, and SAUFLEY, JJ.
RUDMAN, Justice.
[¶ 1] Daniel Guiggey appeals from a decision of the Workers' Compensation Board concluding that his employer is not required to pay him pre-decree interest pursuant to 39-A M.R.S.A. § 205(6) (Supp.1997). Because we agree with Guiggey that, pursuant to the plain language of subsection 205(6), employees are entitled to pre-decree interest accruing from the date that each payment would have been due if voluntarily and timely paid, we vacate the decision of the Board.
[¶ 2] Guiggey suffered a work-related injury on March 12, 1994, while employed by Great Northern. Great Northern contested liability, and Guiggey petitioned for an award of benefits. The Board granted Guiggey's petition and awarded him continuing total incapacity benefits retroactive to the date of injury. Great Northern promptly paid Guiggey his past due benefits in a lump sum without interest. Guiggey then filed a second petition seeking interest at the rate of 10% per annum from the date that each payment would have been due if timely paid, totalling approximately $900. 39-A M.R.S.A. § 205(6). The Board denied Guiggey's petition for interest, and we granted his petition for appellate review pursuant to 39-A M.R.S.A. § 322 (Supp.1997).
[¶ 3] Two provisions of the Act require an employer to pay interest to an employee on an award of benefits: 39-A M.R.S.A. §§ 205(6) & (9)(F). Subsection 205(6), at issue in this appeal, provides:
When weekly compensation is paid pursuant to an award, interest on the compensation must be paid at the rate of 10% per annum from the date each payment was due, until paid.
39-A M.R.S.A. § 205(6) (emphasis added). Subsection 205(9)(F), relating to an employer's right to terminate unilaterally or to discontinue benefits, provides:
If benefits have been discontinued or reduced pursuant to paragraph A or B and the board, after hearing, determines that benefits have been wrongfully withheld, the board shall order payment of all benefits withheld together with interest at the rate of 6% a year. The employer shall pay this amount within 10 days of the order.
39-A M.R.S.A. § 205(9)(F) (Supp.1997).
[¶ 4] The parties agree that, because Great Northern contested its initial liability for the injury and did not terminate benefits pursuant to subsection (9)(A) or (9)(B), the applicable provision is subsection 205(6), not 205(9)(F). The Board concluded, however, that because an employer is liable for 6% interest pursuant to subsection (9)(F) for withholding benefits after liability is established, interpreting subsection 205(6) as providing a higher interest rate (10%) on predecree interest when an employer disputes its initial liability in good faith would be incongruous. Accordingly, the Board concluded that the phrase "the date each payment was due" in 39-A M.R.S.A. § 205(6) (emphasis added), is not triggered until there is a Board decree ordering payment of benefits.
[¶ 5] We do not agree with the Board's interpretation of the plain language of the statute. Pursuant to subsection 205(2), payment of workers' compensation benefits may be "due" without a Board decree. See 39-A M.R.S.A. § 205(2) (Supp. 1997) ("The first payment of compensation *377 for incapacity under section 212 or 213 is due and payable within 14 days after the employer has notice or knowledge of the injury or death, on which date all compensation then accrued must be paid") (emphasis added). Our interpretation of the plain language is also supported by use of the past-tense "was" to modify the word "due." Interest is required from the date that each payment was due, i.e., prior to the decree awarding benefits.
[¶ 6] As we have stated, our interpretation of a statute is controlled by the statute's plain meaning, unless that plain meaning leads to "absurd results." See Folsom v. New England Tel. & Tel. Co., 606 A.2d 1035, 1042 (Me.1992). Although the existence of different interest rates in subsection 205(6) and in subsection 205(9)(F) might appear illogical, we do not agree that the result is incongruous or absurd. Moreover, it does not necessarily follow, as Great Northern contends, that employers who, in good faith, fail to accept initial liability for an injury will pay more than employers who willfully violate the Act. Employers who willfully withhold benefits pursuant to either subsection 205(1) or 205(9) are subject to a penalty pursuant to 39-A M.R.S.A. § 324 (Supp.1997).
[¶ 7] Our reading of the plain language is entirely consistent with the legislative history of section 205(6) and with long established policy regarding prejudgment interest. Subsection 205(6) replaces former 39 M.R.S.A. § 72, which provided:
Upon each award of the Workers' Compensation Commission, interest must be assessed from the date on which the petition is filed at a rate of 8% per year, except that if the prevailing party at any time requests and obtains a continuance for a period in excess of 30 days interest will be suspended for the duration of the continuance. From and after the date of the decree, interest is allowed at the rate of 15% per year. Payment of any interest allowed after the 10th day following the date of the decree is not an element of loss for the purpose of establishing rates for worker's compensation insurance. This section must be enforced by the Workers' Compensation Commission.
39 M.R.S.A. § 72 (Supp.1992), repealed and replaced by Maine Workers' Compensation Act of 1992, P.L.1991, ch. 885, §§ A-7, A-8. We have stated that the assessment of pre-judgment interest serves two purposes in the ordinary civil context: first, it "compensate[s] an injured party for the inability to use money rightfully belonging to that party between the date suit is filed and the date judgment is entered," Osgood v. Osgood, 1997 ME 192, ¶ 10, 698 A.2d 1071, 1073-74; and second, it "`encourages the defendant to conclude a pretrial settlement of clearly meritorious suits,'" Pierce v. Central Maine Power Co., 622 A.2d 80, 85 (Me.1993) (quoting Simpson v. Hanover Ins. Co., 588 A.2d 1183, 1185 (Me.1991)). Similarly, the assessment of pre-decree interest serves two purposes in the workers' compensation context: (1) to compensate the employee for delay in the receipt of benefits; and (2) to discourage employers from contesting valid workers' compensation claims.
[¶ 8] By virtue of the Board's interpretation, the employee, who is often already financially strapped as a result of the injury, must not only wait months, or potentially years, for the litigation of a claim, but also will receive no recompense for the delay in payment. Moreover, aside from the legal expense, it would cost nothing for an employer, pursuant to the Board's interpretation, to contest a claim for compensation. Therefore, there would be little disincentive for the employer to contest valid claims. Although we have recognized that a purpose for the enactment of title 39-A was to reduce costs in the workers' compensation system, Ray v. Carland Constr., Inc., 1997 ME 206, ¶ 6, 703 A.2d 648, we have also recognized a legislative purpose to encourage informal acceptance of claims in order to reduce litigation, Mathieu v. Bath Iron Works, 667 A.2d 862, 865 (Me.1995). The Board's interpretation of subsection 205(6) runs directly counter to this latter legislative policy and represents a significant departure from pre-1993 law. We do not interpret the Workers' Compensation Act of 1992, P.L.1991, ch. 885, as repealing or modifying the law prior to 1993 absent express statutory language evincing that intent. *378 Ray, 1997 ME 206, at ¶ 6, 703 A.2d 648; Bureau v. Staffing Network, Inc., 678 A.2d 583, 588 (Me.1996).
[¶ 9] Moreover, as we have stated, the 1992 workers' compensation reforms were based in large part on the Michigan model. Bureau, 678 A.2d at 589-90; Bowie v. Delta Airlines, Inc., 661 A.2d 1128, 1130-31 (Me. 1995); Report of Blue Ribbon Commission to Examine Alternatives to the Workers' Compensation System and to Make Recommendations Concerning Replacement of the Present System, Findings of the Majority of the Blue Ribbon Commission 2 (August 31, 1992) ("The [Blue Ribbon] Commission has developed a bill that adopts many of the key features of the Michigan Workers Compensation system. A number of the Michigan provisions were revised in order to reflect considerations particular to the state of Maine"). As Guiggey contends, section 205(6) is virtually identical to the correlative statute in the Michigan Act:
When weekly compensation is paid pursuant to an award of a worker's compensation magistrate, an arbitrator, the board, the appellate commission, or a court, interest on the compensation shall be paid at the rate of 10% per annum from the date each payment was due, until paid.
Mich. Stat. Ann. § 418.801(6) (1997). As early as 1984, the Michigan Supreme Court interpreted the Michigan statute to require the assessment of pre-decree interest for each payment from the date that each payment was due. Selk v. Detroit Plastic Prods., 419 Mich. 32, 348 N.W.2d 652, 653 (1984).
[¶ 10] Although we accord deference to Board interpretations of the Act, we are compelled to overturn Board decisions when the plain language of the statute and its legislative history support a contrary result. Kinney v. Great No. Paper, Inc., 679 A.2d 517, 518 (Me.1996). Accordingly, we conclude that, pursuant to subsection 205(6), employees are entitled to interest in the rate of 10% per annum computed from the date that each payment would have been due had the employer accepted liability and voluntarily paid timely benefits.
The entry is:
Decision of the Workers' Compensation Board vacated and remanded for further proceedings consistent with the opinion herein.
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878 A.2d 1247 (2005)
In Re Estate of Anne T. SATO;
William E. Smith, Appellant,
v.
Tanja H. Castro, Successor Personal Representative of the Estate of Anne T. Sato, & Robert J. Pleshaw, Special Master, Appellees.
No. 04-PR-267.
District of Columbia Court of Appeals.
Argued May 17, 2005.
Decided July 21, 2005.
*1248 Roger C. Ohlrich, Washington, DC, for appellant.
Tanja H. Castro, Successor Personal Representative, on behalf of the Estate, with whom Robert J. Pleshaw, Special Master, was on the brief, on behalf of appellee.
Before RUIZ and GLICKMAN, Associate Judges, and KING, Senior Judge.
RUIZ, Associate Judge.
The appellant, former personal representative of his wife's estate, appeals from an order of the trial court requiring him to repay to the estate funds he paid to himself as a creditor without having filed a formal notice of his claim with the Register of Wills. We agree with the trial court's interpretation that the probate statute's notice requirement applies to claims of the personal representative. We remand the case, however, for the trial court's exercise of discretion in determining whether appellant's claim in this case should be disallowed due to the appellant's noncompliance with the formal filing requirements.
*1249 I.
The appellant and the decedent lived together as common law husband and wife for approximately ten years prior to her death. Appellant claims that during their marriage he paid off some of his wife's personal debt in order to secure refinancing on their home, presumably to improve their joint credit rating.[1] The appellant's wife died on October 15, 1997, leaving a properly executed Last Will and Testament that appointed her husband, the appellant, as personal representative.
After the appellant filed a petition in the probate division of the Superior Court, the will was admitted to probate and the appellant was appointed personal representative on March 25, 1998. The appellant hired an attorney to assist him in probating the will. The appellant filed an inventory of the estate, but, either through his own neglect or that of his attorney, he never filed with the probate court any of the required accounts. Various third-party creditors made claims against the estate, which appellant settled by paying a prorated amount because the estate funds were insufficient to pay all the debts in full. These payments included a payment to himself of $34,588, a similarly prorated amount of the debt he claimed against the estate. According to appellant, he provided his attorney with information about all of his wife's outstanding debts, including the debt he claimed. The fact central to this appeal is that appellant did not file with the Register of Wills a formal claim against the estate for the debt he claims is owed to him. While it is unclear whether, without the payment to appellant, the estate funds would have been sufficient to satisfy the third-party claims in full, it is indisputable that the third-party creditors received a lesser payment because of the appellant's payment of his own claim. It is also not clear from the record or from the briefs who the beneficiaries of the will were, but it appears that the decedent's son, at least, was a beneficiary.
Because he failed to file the proper accountings, the probate court issued an order on January 2, 2002 removing the appellant as personal representative and appointing appellee Tanja H. Castro, Esquire as successor representative. On October 16, 2002, upon motion from the successor representative, the trial court appointed appellee Robert J. Pleshaw as special master to supervise the case. After investigation, the successor representative discovered the appellant's payment to himself from the estate funds. The successor representative and the special master both requested the appellant to return those funds to the estate. The appellant did not do so. The special master then filed a report and recommendation with the court on April 18, 2003, recommending that the appellant be required to return the funds in question.
After holding an evidentiary hearing, the trial court issued a written order in which it held that, even though appellant was the personal representative, he was required to file with the Register of Wills a *1250 formal notice of his own claim before he could pay himself from the estate. The court found that because the appellant's failure to do so was not inadvertent, appellant's claim was barred. As a result, the trial court entered judgment against appellant, requiring that he repay the funds he had paid to himself, plus various fees resulting from the appointment of the special master.[2] The appellant filed a timely notice of appeal.[3]
II.
The issue before the court is whether the trial court erred in disallowing appellant's claim against the estate because it was not filed with the Register of Wills. In considering an order or judgment from the probate division where the case was tried to the bench, this court "may review both as to the facts and the law, but the judgment may not be set aside except for errors of law unless it appears that the judgment is plainly wrong or without evidence to support it." D.C.Code § 17-305(a) (2001); see also Drevenak v. Abendschein, 773 A.2d 396, 415 (D.C.2001). This court reviews the trial court's interpretation of a statute de novo. See Cass v. District of Columbia, 829 A.2d 480, 482 (D.C.2003).
The probate statute provides that "all claims against a decedent's estate, whether . . . founded on contract or other legal basis, shall be barred against the estate . . . unless presented within 6 months after the date of the first publication of notice of the appointment of a personal representative. . . ." D.C.Code § 20-903(a)(1). Further, "[a] claimant shall present a claim against a decedent's estate by delivering or mailing, return receipt requested, a written statement of the claim. . .: (1) to the personal representative with a copy to the Register [of Wills]; or (2) to the Register [of Wills] with a copy to the personal representative." D.C.Code § 20-905(a). However, if notice is given to either the personal representative or the Register of Wills, a claim nonetheless "shall be deemed presented" if the failure to notify both was "inadvertent." D.C.Code § 20-905(a)(2). The trial court has discretion to disallow a claim that does not meet the statutory requirements. See D.C.Code § 20-905(c).
Appellant acknowledges that he never filed a formal notice with the Register of Wills of the debt he claims the estate owed him.[4] Nor does he dispute that he paid himself $34,588 from estate funds. Thus, there is no question that appellant did not satisfy the express terms of the probate statute requiring timely notice of the claim to the Register of Wills.
The trial court found no evidence that this failure should be excused as "inadvertent" with the meaning of the statute, see D.C.Code § 20-905(a)(2), which the trial court interpreted as meaning "careless" or resulting from "lack of attention." Specifically, the trial court found that the appellant was familiar with the claim notice process from responding to notices of claims filed by other creditors. The appellant also had a probate attorney *1251 assisting him. Based on these facts, the trial court determined appellant's "failure to file his claim with the Register of Wills to be more akin to a willful or intentional decision than one resulting from a carelessness or lack of attention to the statutory requirement." Appellant does not seriously challenge this finding on appeal, and the record supports that it is not clearly erroneous.
"The primary and general rule of statutory construction is that the intent of the lawmaker is to be found in the language that he [or she] has used." Varela v. Hi-Lo Powered Stirrups, Inc., 424 A.2d 61, 64-65 (D.C.1980) (quoting United States v. Goldenberg, 168 U.S. 95, 102-03, 18 S. Ct. 3, 42 L. Ed. 394 (1897)). The language of the probate statute "plainly indicate[s]," Peoples Drug Stores, Inc. v. District of Columbia, 470 A.2d 751, 753 (D.C.1983) (citing Davis v. United States, 397 A.2d 951, 956 (D.C.1979)), that a creditor must give notice of a claim both to the Register of Wills and to the personal representative within six months of the public notice of the appointment of the personal representative. As the statute requires that all creditors, without exception, provide notice of claims in a timely manner to the Register of Wills, and the appellant's failure to do so was not inadvertent, the trial court did not err in concluding that the appellant did not comply with the statutory notice requirement.
Appellant contends, however, that because he, as the personal representative, knew of his own claim, formal notice to the Register of Wills was not required. The appellant's argument relies on twin premises: (1) the claims of a personal representative should be treated the same as claims by third-party creditors, and (2) the exception to the statutory notice requirement carved out in our case law that lack of formal notice does not necessarily bar claims where the personal representative had actual and timely notice applies equally where the claimant is the personal representative. Applying these principles, he contends, the law permitted him to pay his own claim despite lack of formal notice to the Register of Wills. The cases appellant cites to support his argument all deal with personal representatives who, despite having timely, actual notice of claims by third parties, nevertheless refused to pay those claims because of failure to file the claim or some defect in the formal notice. See In re Estate of Monge, 841 A.2d 769, 770 (D.C.2004); In re Estate of Barnes, 754 A.2d 284, 288 (D.C.2000); District of Columbia v. Gantt, 558 A.2d 1120, 1122 (D.C.1989); In re Estate of Phillips, 532 A.2d 654, 654-55 (D.C.1987). Those cases hold that "in administering an estate a personal representative is obliged to consider all valid claims about which he has actual knowledge, even if creditors fail to comply with the statute's enumerated filing formalities." In re Estate of Monge, 841 A.2d at 774. In other words, a personal representative cannot hide behind a procedural defect in the notice in order to avoid paying a legitimate debt of which the personal representative had actual, timely notice, and the trial court abuses its discretion under D.C.Code § 20-905(c) if it disallows such a claim purely for defect of formal notice to the personal representative. See Gantt, 558 A.2d at 1125; In re Estate of Phillips, 532 A.2d at 656. According to appellant, there is therefore no purpose to requiring that the personal representative file with the Register of Wills a claim of which he has actual notice his own and which he considers to be payable.
The cases cited by appellant all involved third-party claimants, and did not address the situation in this case, where a personal representative has not filed formal *1252 notice with the Register of Wills of his own claim. The appellant's argument assumes that the only purpose of the notice requirement is to give the personal representative notice of the claim. But notice to the Register of Wills does not simply serve the needs of the personal representative but "has another purpose, one that goes hand in hand with the protection of the executor, and that is the protection of creditors of the estate as well. The docketing of the claim with the Register of Wills . . . provides this protection both for the executor and the claimants." American Sec. & Trust Co. v. Bindeman, 303 A.2d 188, 192 (D.C.1973). The situation presented here, as the trial judge recognized, poses a conflict of interest not present in the case of third-party claims. For this reason, the trial court would "not sanction a statutory reading that would allow a personal representative to deplete the resources of an estate with personal claims without notifying the Court of his dealings." The need to maintain court supervision over claims of the personal representative is evident, and the ability of interested third parties, via notice to the Register of Wills, to contest such claims is an effective way to ensure that there is no unjustified self-dealing. As the trial court observed, allowing the court and third-party creditors to pass on the validity of a personal representative's claims prevents an unscrupulous representative from simply raiding the estate without fear of oversight.[5] Third-party claims are routinely subject to such scrutiny by the personal representative, as well as by other claimants. Thus, we consider that requiring that the personal representative's claims be filed with the Register of Wills accomplishes the equality of treatment appellant contends is a principle of estate administration. We, therefore, agree with the trial court's interpretation that the statutory notice filing requirement applies, with special force, to the claims of personal representatives.
Having so determined, we turn to the trial court's order requiring that appellant return the funds to the estate because his claim was barred. The trial court has discretion to "disallow a claim, in whole or in part, if the claimant fail[ed] to comply" with the formal notice requirements, "or with the personal representative's reasonable requests for additional information." D.C.Code § 20-905(c). The record in this case could support the trial court's exercise of discretion in disallowing the appellant's claim, particularly in light of the appellant's failure to file proper accountings and the additional effort required to correct this failure. But there could be countervailing reasons for not doing so. If the trial court were to find that appellant dealt fairly with the third-party claimants and that his own claim was valid issues not decided by the trial court denial of his claim might be purely punitive, as it came at a point in the proceeding when the conflict of interest had been cured by the appointment of a successor personal representative and special master. Based on our reading of the trial court's order, however, we cannot conclude that it disallowed the appellant's claim in an exercise of discretion, rather than as a perceived legal mandate.[6]See Johnson v. United States, *1253 398 A.2d 354, 363 (D.C.1979) ("Failure to exercise choice in a situation calling for choice is an abuse of discretion whether the cause is ignorance of the right to exercise choice or mere intransigence because it assumes the existence of a rule that admits of but one answer to the question presented.")
We, therefore, remand the case to the trial court for further proceedings to consider whether the appellant's claim should be disallowed because of non-compliance with the statutory filing requirement. If the trial court determines not to disallow the claim on this basis, it should proceed to decide whether the claim is valid and, if so, the amount that should be paid thereon.
Remanded.
NOTES
[1] There is some discrepancy regarding the amount the appellant claims he was owed. The special master found the amount to be $61,887. In his brief, the appellant claims the amount was $51,887, a difference of $10,000. The trial court had only the appellant's oral representations that this debt existed, as the appellant has no documentation showing that he and his wife agreed that she would repay him these funds. Appellant did submit, however, certain bank statements and cancelled checks that, he claims, evidence the debt. Because the trial court ruled that the claim was barred as against the estate for failure to file timely notice, it did not determine whether there was such a debt, and if so, in what amount.
[2] The trial court ordered appellant to pay $5,580.65 for fees and costs associated with the special master. Appellant does not challenge this aspect of the trial court's order, and we do not address it.
[3] The appellant's insurer, St. Paul Surety Co., filed a statement saying that, while neither an appellant nor an appellee in this case, it is "an interested party in this Appeal who supports the position of the Appellant. . . ."
[4] Appellant testified at the hearing that "he did not file [a formal claim] with the Register of Wills . . . . But he did file one with his attorney, not the formal claim for, but a statement of what was owed."
[5] We do not mean to imply that the personal representative in this case did not have a valid claim, or that he did not act in good faith. That issue is not before us. See supra note 1.
[6] In its order, the court stated that "[b]ased on [its] reading of the statute, the only potential exemption from the requirement to notify the Register of Wills is when the claimant's failure to do so is the result of inadvertence." (Emphasis added.) While we take no issue with the trial court's interpretation that the personal representative's claim must be filed with the Register of Wills as required by the statute, as discussed in the text, the ultimate sanction of disallowance of a claim does not follow automatically from noncompliance, but is entrusted to the discretion of the trial judge.
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619 S.W.2d 293 (1981)
Charles Davis BEAGO, Sr., et al., Appellants,
v.
Patricia M. CERES, et al., Appellees.
No. 17871.
Court of Civil Appeals of Texas, Houston (1st Dist.).
July 2, 1981.
*294 Lawrence C. Hoff, Jr., Houston, for appellants.
Groom, Miglicco, Gibson, Bussell & Stewart, Thea M. Fabio, Houston, for appellees.
DOYLE, Justice.
This appeal results from a judgment granting the appellee the right to partition certain real property, a right arising from a property settlement in a divorce action.
These are the undisputed facts as stated in appellees' brief concerning the subject property:
Appellees, Plaintiffs below, are PATRICIA M. CERES (formerly Mrs. Charles Davis Beago, Sr.), her daughters, HELEN CHRISTINE (formerly Helen Christine Beago) and CYNTHIA DEAN SIMPSON (formerly Cynthia Dean Beago). Appellants, Defendants below, are CHARLES DAVIS BEAGO, SR. and CHARLES DAVIS BEAGO, JR. CHARLES DAVIS BEAGO, SR. answered and defended the lawsuit. CHARLES DAVIS BEAGO, JR. defaulted at trial.
The subject property was acquired during the marriage of Patricia M. Ceres and Charles Beago, Sr., the principal parties, and was held jointly by them.
On October 14, 1957, the principal parties were divorced. The decree of divorce incorporated into it a separation agreement which provided, in pertinent part:
"PATRICIA BEAGO and CHARLES DAVIS BEAGO are to have title to their home at 1534 Wakefield St., Houston, Harris County, Texas, of the fair and reasonable value of $9,500.00. Mr. Beago to assume the outstanding balance and make payments of $70.00 a month. Mr. Beago is to maintain said premises and it will be rented with the proceeds to go to Mr. Beago. In the event of sale, the proceeds are to be split one third to Mr. Beago, one third to Mrs. Beago and one third to the children of said marriage."
Since the divorce, the house has been managed and rented by Mr. Beago, Sr. The monetary benefits derived from the rental were retained by Mr. Beago, Sr. alone. The mortgage was paid off in the late 1960's or early 1970's and the children have long passed the age of majority. Mr. Beago alone has claimed the depreciation on the house on his tax return.
Appellee testified that the parties intended to sell the house when the children reached majority age, but, when requested by Appellees, Appellant refused to sell the property. Consequently, this suit for partition by sale was filed.
Trial was before a jury. The sole issue presented to the jury for determination was the reasonableness of the time span of Charles Beago's possession of the property following the divorce. The jury's answer to the one special issue submitted was that a reasonable time had passed for appellant to possess and arrange for a sale of the subject property. Appellants filed a motion for new trial which was overruled. On appeal appellants present two points of error and appellee brings one counterpoint.
Appellants' two points of error, which we shall discuss jointly, complain of the insufficiency of the evidence to support the submission by the court and the finding by the jury "that a reasonable time for the defendant to possess and arrange for a sale of the subject property has passed."
It is uncontroverted that appellant and appellee were joint owners of the subject property. It is the statutory law of Texas that the right of a joint owner to partition property is absolute. Tex.Rev.Civ. Stat.Ann. art. 6082; Spires v. Hoover, 466 S.W.2d 344 (Tex.Civ.App. El Paso 1971, writ ref'd n.r.e.). This proposition of law is not disputed by either party.
Appellant argues that although the right of a joint owner to partition is absolute, this right can be waived or contracted away. He contends that appellee contracted away her right to partition by that portion of the separation agreement quoted in *295 the facts set out above. We have reviewed the record and find no evidence that appellee contracted away her right to partition. On the contrary there is evidence that appellee and appellant discussed delaying the sale of the home because "it would be of more value when the kids went to college, to sell it then." The record shows that no partition suit was filed until two of the children were in college.
It is a well established legal principle that after a determination that property is not susceptible to partition in kind, there must be a partition by sale. Tex.R.Civ.P. 770. The house involved in the case before us is not susceptible.
Although the absolute right to partition by the joint owners is statutory, the courts will not interfere with contracts between the joint owners not to partition. Here we have no written agreement by appellee to waive partition, nor can such agreement be implied since there is no evidence that a partition of the property would destroy the estate as appellant contends. Warner v. Winn, 191 S.W.2d 747 (Tex.Civ. App. San Antonio 1946, writ ref'd n.r.e.).
Appellant also contends that the duration of the separation agreement is perpetual. He states that the date when the jointly held property would be sold was not specifically expressed. Appellant points out that since the length of time was not specified, this contract was permanent and cites Foster v. Wright, 217 S.W. 1090 (Tex. Civ.App. Fort Worth 1919, no writ) as supporting this contention. The Foster case can be distinguished from the case at bar. It held that a contract which is not limited in duration by its express terms or its intrinsic nature will be permanent. The separation agreement in this case contemplates a sale of property and provides for distribution of proceeds in such event. The subject contract by its intrinsic nature clearly shows that it was of limited duration. Where the duration of a contract is not expressly prescribed, a reasonable time will be inferred. Dauray v. Gaylord, 402 S.W.2d 948 (Tex.Civ.App. Dallas 1966, writ ref'd n.r.e.); Houston County v. Landauer & Associates, 424 S.W.2d 458 (Tex.Civ.App. Tyler 1968, writ ref'd n.r.e.). Where a contract does not fix a time for performance, what constitutes a reasonable time will depend on the circumstances of each case. In the case before us appellee attempted to partition the property after all the children were grown and 23 years after the separation agreement was incorporated into the divorce decree. The evidence adduced was sufficient to sustain the jury's findings that a reasonable time had passed. Appellant's points of error are overruled.
Appellee, in her counterpoint, argues that appellant has taken this appeal for reasons of delay and urges this court to assess a penalty pursuant to Tex.R.Civ.P. 435 and 438. Rule 438 gives the this court the authority to make such an assessment based on a finding that the appeal is groundless, frivolous and for delay, only, and results in injury to appellee. Blume v. Saucier, 507 S.W.2d 827 (Tex.Civ.App. Houston [14th Dist.] 1974, writ ref'd n.r.e.). Before the imposition of a penalty, the record must clearly show that at the time the appeal was filed, the appellant had no reasonable ground to believe the judgment would be reversed. Select Insurance Co. v. Patton, 506 S.W.2d 677 (Tex.Civ.App. Amarillo 1974, writ ref'd n.r.e.).
Appellee testified without contradiction that she and appellant orally agreed to later sell the house to help the children with their education. Although the mortgage balance and community judgments had long been paid, appellant continued to collect the rentals on the house and enjoy a tax savings through depreciation. Except for maintenance, taxes and insurance, all the income was clear and used exclusively by appellant. Appellant stands to gain financially by delaying a final court determination on his appeal.
From the entire record before us and based upon the evidence, applicable law and points raised in appellant's brief, we find that appellant had no reasonable expectation that the trial court judgment would be reversed at the time he perfected his appeal *296 and that such appeal was groundless, frivolous and brought only for delay and caused injury to appellee. Appellee's counterpoint is sustained.
This court is authorized to require the appellant to pay 10% on the amount in dispute as damages, plus interest and costs of suit, when there has been a finding that an appeal or writ of error has been taken for delay and there was no sufficient cause for taking such appeal. Rule 438, T.R.C.P. There is testimony in the record that the value of the house at the time of trial was at least $40,000. Under the property settlement agreement, appellee would be entitled to one third of the net proceeds from the sale ordered by the partition judgment.
The judgment of the trial court is affirmed with penalty assessed against appellant in the sum of $1,000. All costs herein incurred are assessed against appellant.
EVANS and WARREN, JJ., also sitting.
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901 F. Supp. 1139 (1995)
Christina M. GOUDEAU
v.
DENTAL HEALTH SERVICES, INC., et al.
Civ. A. No. 93-449-B-1.
United States District Court, M.D. Louisiana.
October 10, 1995.
*1140 *1141 Durward D. Casteel, Baton Rouge, LA, for Plaintiff Christina M. Goudeau.
Tony G. Sanders, Covington, LA, for Defendants Dental Health Services, Inc. d/b/a Landmark Dental Care, James L. Jeansonne, Barry D. Gathright and Cleveland C. Carpenter, III.
RULING
POLOZOLA, District Judge.
After independently reviewing the Special Master's Report to which an objection was filed, the Court hereby adopts the Special Master's Report as the Court's opinion in this case.
Therefore,
IT IS ORDERED that plaintiff's case be dismissed for lack of subject matter jurisdiction. Judgment shall be entered accordingly.
SPECIAL MASTER'S REPORT
RIEDLINGER, United States Magistrate Judge.
This matter is before the court following an evidentiary hearing limited to the issue of whether the court has subject matter jurisdiction over this case under 42 U.S.C. § 2000e. Defendants asserted lack of subject matter jurisdiction as a defense in their answer,[1] contending that they do not meet the definition of "employer" as that term is defined in section 2000e(b). Defendants[2] admitted that they were engaged in an industry affecting commerce, but denied that they had the requisite 15 employees for 20 or more calendar weeks in either the year of the alleged discrimination or the year preceding it.[3]
*1142 Defendant Dental Health Services, Inc. d/b/a Landmark Dental Care contends that it is not an employer as defined under Title VII. This argument raises three related legal issues. Two questions involve the definition of "employee" under section 2000e(f). The third issue requires the court to examine the meaning of Title VII's definition of employer. In order to decide which employees can be counted to determine whether the employer meets the requisite number of 15, the court must interpret what is meant by Title VII's requirement that an employer "has fifteen or more employees for each working day in each of twenty or more calendar weeks in the current or preceding calendar year." An analysis of the law applicable to all three issues will help to determine what evidence is relevant to each issue.
Employee or Independent Contractor
Title VII defines an employee as "an individual employed by an employer." 42 U.S.C. § 2000e(f). In order to determine whether a person is an employee or independent contractor the court must apply the test used by the Fifth Circuit for determining the existence of an employment relationship. In Mares v. Marsh[4] the court adopted the hybrid economic realities/common law control test. This test utilizes a list of factors for the court to consider and emphasizes that consideration of all the circumstances of the work relationship is essential, and that no one factor is determinative. Nowlin v. Resolution Trust Corp., 33 F.3d 498, 505 (5th Cir. 1994). However, the right to control an employee's work is the most important factor.[5] In addition to the right to control, the other factors considered when assessing the economic reality of the alleged employment relationship are: (1) the kind of occupation, with reference to whether the work is usually done under the direction of a supervisor or is done by a specialist without supervision; (2) the skill required in the particular occupation; (3) whether the employer or the individual in question furnishes the equipment used and the place of work; (4) the length of time during which the individual has worked; (5) the method of payment, whether by time or by the job; (6) the manner in which the work relationship is terminated, i.e., by one or both parties, with or without notice and explanation; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the employer; (9) whether the worker accumulates retirement benefits; (10) whether the employer pays social security taxes; and (11) the intention of the parties.
Classification of the Dentists as Employees
Defendant contended that the dentists stockholders of corporation should not be counted as employees. Defendant argued that the four dentists, who were shareholders in the professional corporation engaged in the practice of dentistry and incorporated under Louisiana law,[6] were in reality more like partners in a partnership, i.e., that the management, control and ownership of the corporation was much like the management, control and ownership of a partnership. Defendant relied upon several decisions which specifically address the employment relationship issue in the context of professional corporations and partnerships. EEOC v. Dowd & Dowd, Ltd., 736 F.2d 1177 (7th Cir.1984); Wheeler v. Hurdman, 825 F.2d 257 (10th Cir.1987), cert. denied, 484 U.S. 986, 108 S. Ct. 503, 98 L. Ed. 2d 501 (1987); Fountain v. Metcalf, Zima & Company, 925 F.2d 1398 (11th Cir.1991). Plaintiff relied upon other decisions which addressed the same issue and reached the opposite conclusion. Hyland v. New Haven Radiology Assoc., 794 F.2d 793 (2d Cir.1986);[7]Gorman v. North *1143 Pittsburgh Oral Surgery Assoc., 664 F. Supp. 212 (W.D.Pa.1987); Jones v. Baskin, Flaherty, Elliot & Mannino, P.C., 670 F. Supp. 597 (W.D.Pa.1987), aff'd without op., 897 F.2d 522 (3d Cir.1990), cert. denied, 498 U.S. 811, 111 S. Ct. 47, 112 L. Ed. 2d 23 (1990).[8]
No Fifth Circuit decision was cited or found which specifically addresses the issue of the Title VII employment status of stockholders in a professional corporation. The Fifth Circuit applies the hybrid economic realities/common law control test to determine whether an individual is an employee or independent contractor. A review of decisions applying this test, as well as the cases which address the issue when a professional corporation or partnership is involved, shows that the court cannot look merely at the label placed on an individual's status but must look to the particular facts of each case and determine the economic realities of the relationship. See, Fountain, 925 F.2d at 1400-01. On this point EEOC v. Dowd & Dowd, Ltd. and the cases following it are more persuasive. Therefore, it is appropriate to utilize the factors of the hybrid economic realities/common law control test that are relevant here, and look for guidance to the cases in other circuits that have specifically addressed this issue in the context of professional corporations and partnerships, to determine whether the dentists themselves are employees.
Counting of Employees for Title VII Jurisdiction
Whether the defendant has enough employees to satisfy the definition of employer turns on the interpretation of the phrase "who has fifteen or more employees for each working day."
Title VII does not specify the method of counting employees under section 2000e(b). There are two recognized methods. One method, adopted by some courts and endorsed in the EEOC's Statement of Policy Guidance, is the payroll method.[9] The payroll method looks to the working days in each calendar week to see whether there were 15 or more employees maintained on an employer's payroll, regardless of whether they were actually working full time or on any particular day. The result of this method is that hourly or part time employees count toward the minimum if they are on the payroll of a particular calendar week, even though they are not present at work on each day of the work week.
The Fifth Circuit, in a footnote in Dumas, referred to the payroll method of counting in discussing whether CETA workers and other part time employees should be counted to determine whether the town employed 15 or more people in at least 20 weeks. However, in Dumas the court acknowledged that it did not have to decide the correct method of counting because even including the CETA and part time employees the number of weeks in which the town employed at least 15 people did not reach the minimum requirement of 20 weeks. Dumas, 612 F.2d at 980. Thus, the language in Dumas seemingly approving the payroll method is dicta.
The method adopted by the Seventh and Eighth Circuits interprets the phrase to mean that all salaried employees count, but takes a different approach with hourly or *1144 part time workers. These workers are counted toward the jurisdictional number only on days when they are physically present at work or are on paid leave. EEOC v. Metropolitan Educ. Enterprises, 60 F.3d 1225 (7th Cir.1995) (reaffirming Zimmerman) petition for certiorari filed (Aug. 14, 1995); EEOC v. Garden & Associates, Ltd., 956 F.2d 842 (8th Cir.1992); Zimmerman v. North American Signal Co., 704 F.2d 347, 353-54 (7th Cir.1983); Richardson v. Bedford Place Hous., 855 F. Supp. 366 (N.D.Ga. 1994).[10] The central rationale of these decisions is that this method of counting is most consistent with a plain reading of the language of the statute. In Zimmerman the court stated that the most natural interpretation of the phrase "for each working day" looks to the number of employees physically at work on each day of the work week. Richardson, 855 F.Supp. at 370.[11] To adopt the payroll method and count hourly or part time workers if they are on the weekly payroll, even if they were not at work each work day, would render this phrase meaningless or superfluous. Zimmerman, 704 F.2d at 353.
Plaintiff's argument in favor of applying the payroll method, and its reliance on policy considerations, is unpersuasive. To begin with, Congress clearly did not intend that Title VII cover all employers. No matter what method of counting the number of employees is used, some threshold determination will still have to be made. In the vast majority of cases this will be an extremely simple task, as evidenced by the dearth of cases in which this issue is dispositive.[12] Only in the rare marginal case will the task become more burdensome, and even then it is unlikely that it will be difficult. Plaintiff's argument that it would be a tedious task to determine the number of employees who reported to work each day during the two year period provided for by the statute[13] is an overstatement. It is more likely that since only small employers will contend that they are not covered by Title VII, the amount of documents which would reflect the employees at work on any given day such as time cards and work schedules is unlikely to be substantial.[14]
The second policy consideration argued by the plaintiff is the concern that counting only employees physically present each work day would allow an employer to manipulate work schedules to avoid Title VII coverage. Again, as noted previously, the statute does not apply to all employers. There is no persuasive evidence in any of the cases upon which the plaintiff relied, or generally, that employers are manipulating their work schedules to avoid Title VII coverage. Absent some persuasive evidence that corrective action needs to be taken to counteract demonstrated manipulation of work schedules to avoid Title VII coverage, use of the payroll method is not warranted. Additionally, because the payroll method is inconsistent with the statutory requirement that there be 15 or more employees for each working day, its use should be directed by Congress rather than the courts.
The holding and reasoning of Zimmerman and the cases adopting its analysis are persuasive. Following the method set forth in Zimmerman for counting hourly or part-time employees in the case, these types *1145 of workers will only be counted on the days they actually worked.[15]
Review and Analysis of the Evidence
As the party invoking the court's jurisdiction, plaintiff bears the burden of proving jurisdiction once it is challenged by the defendant. Plaintiff offered the testimony of two witnesses and documents to establish that the defendant is an employer under Title VII. Both witnesses were credible; virtually none of the evidence is seriously disputed.
Plaintiff claimed that one individual who performed services for the defendant satisfied Title VII's definition of employee and so should be counted. Lyna Buckley is a Certified Public Accountant who performs computer payroll accounting services for the defendant and began performing these services in February of 1990. She has specialized training and experience in computer accounting systems. In 1990 Buckley had five or six ongoing clients, other than the defendants, and several occasional customers. Buckley testified that there is no written contract between her and the defendant and that she never considered herself an employee of the defendant. She worked with the defendant's computer equipment at its place of business and also provided services over the phone. Her main contact was with the defendant's office manager or receptionist to arrange convenient times to go the office to start up new programs, solve problems or assist the employees in using the computer programs.
Defendant did not set her hours. Buckley's hours depended upon whether she was initiating some new program or solving problems as they arose with an established program. Buckley testified that she was paid on an hourly basis, based on invoices she submitted. Exhibit P-2. Either she or the defendant could have ended the work relationship at any time. Defendant provided her no annual leave or retirement benefits and did not pay her social security taxes. Buckley performed all the services and had no other employee she could send to do the work.
Application of the hybrid economic realities/common law control test results in the conclusion that Buckley is an independent contractor. She performed specialized computer accounting services not only for the defendant but other clients as well. After an initial start up period her services were called upon as needed. Importantly, neither Buckley nor the defendant considered her to be an employee. Consequently, Buckley cannot be counted as an employee for the purpose of determining whether the defendant is an employer under Title VII.
Dr. Cleveland Carpenter testified that he and the other three dentists were the only shareholders of the corporation during 1989 and 1990. At that time two of the dentists each owned one-third of the outstanding shares. He and the fourth dentist each owned one-half of the remaining shares. Dr. Carpenter worked as a dentist for the corporation before he became a shareholder on January 5, 1989. His pay was based on a percentage of the fees collected from his patients. After he became a shareholder he was still compensated based on a percentage of collections, but the percentage was larger. The other three dentists were also compensated based on a percentage of the fees collected from their respective patients. The balance of the patient fees collected was retained by the defendant corporation and used for payment of employee salaries, business overhead, supplies and other expenses.
Dr. Carpenter testified that in August of 1989 he formed his own corporation and contracted with the defendant to use its facilities in order to provide dental services to his own patients. This arrangement lasted until 1991. During this time, Dr. Carpenter explained, he was not on the defendant's payroll. Exhibit P-3. His corporation was an independent contractor which kept separate *1146 accounts and paid its own taxes.[16] When Dr. Carpenter returned to work directly for the defendant in late 1991 he returned also to being compensated based on a percentage of collections from his patients.
During 1990, however, there were time cards which reflected hours that Dr. Carpenter worked for the defendant. He explained that these payments were not from a payroll account but were from the defendant's general account. During this time he was paid to prepare an office policy and procedures manual, at the rate of $10.00 per hour. This occurred during August and September of 1989. The manual was completed and published in November 1989. Dr. Carpenter testified that the other doctors felt he should be compensated for this project. Otherwise, they would have had to pay someone else to prepare these documents.
When questioned about the distribution of profits, Dr. Carpenter explained that the defendant sponsors a profit sharing plan to provide retirement benefits and which, ideally, should help the corporation minimize its income tax liability by reducing the amount of taxable profits. The amount of money contributed to the plan annually is determined with the help of an accounting firm.
As to hiring and firing employees, Dr. Carpenter testified that it was agreed among the four dentists that Dr. Jeansonne would be the personnel manager. Although Dr. Jeansonne makes the final decision, the other dentists all have an opportunity to give their input and make a recommendation.
As in EEOC v. Dowd & Dowd, Ltd., the economic reality of the professional dental corporation in Louisiana is that the management, control and ownership of the corporation is much like the management, control and ownership of a partnership. Only duly licensed dentists may form a professional dental corporation, and only for the purpose of practicing dentistry. LSA-R.S. 12:982. Shareholders must be persons licensed to practice dentistry in Louisiana, or another professional dental corporation; only they may participate in the corporation's earnings. Any other shareholder has no voting rights whatsoever and may not participate in the corporation's earnings. R.S. 12:985. Forming a professional dental corporation does not relieve the individual shareholder-dentist from liability on account of fraud or breach of professional duty or other negligent or wrongful act, but the shareholder is not personally liable for any debts or liabilities of the corporation. R.S. 12:990.
While it is undisputed that the defendant's dental hygienists none of whom were shareholders were compensated in part based on a percentage of the fees collected from their respective patients, this similarity in the basis of compensation is insufficient to support classifying the dentists as employees. According to Dr. Carpenter, there is such a strong demand for qualified dental hygienists, and so few of them available, that dental hygienists on the whole in the Baton Rouge area are more able to effectively negotiate the terms and conditions of their employment. For example, dental hygienists who worked for the defendant could essentially set their own hours during the work day. There was simply an understanding that there should be at least one dental hygienist available during business hours.
The testimony showed that the individual dentists and those employees who were qualified shared in the defendant's profits through its profit sharing plan. A percentage of the dentists' fees collected was retained by the defendant to pay employee salaries, expenses and overhead.[17] Only the dentists had authority to hire and fire employees, and among themselves they agreed that Dr. Jeansonne would have the final authority in personnel matters.
Although it would be a simple matter to classify all persons who work for a corporation as its employees, see Hyland, supra, this simplistic approach ignores modern *1147 day economic reality. There is no evidence in this case or in the cases cited by the parties and in this report that the decision to form a professional corporation rather than a partnership is made based on some desire to avoid Title VII liability. Rather, it seems apparent that the purpose of forming a professional corporation is simply to take advantage of favorable tax treatment and to avoid certain financial liability. Simply declaring that all persons who worked for a professional corporation are its employees exalts form over substance and ignores all characteristics of the business entity except the form chosen by its owners. It seems particularly inappropriate in Title VII litigation to focus only on the label rather than the reality.[18]
Consideration of all the circumstances surrounding the organization and ownership of the defendant corporation, its relationship with the dentists shareholders, and their relationship to the defendant's employees supports the finding that the dentists are not employees for the purposes of Title VII.
The parties also presented statistical evidence regarding the number of full and part time employees on the defendant's payroll for the years 1989 and 1990. Exhibits D 1-4.[19] It is unnecessary to review in detail the evidence presented regarding the number of employees who worked for the defendant during 1989 and 1990. It is necessary, however, to note the evidence regarding the defendant's work week and typical staffing pattern.
Dr. Carpenter testified that the defendant's work week was 7:30 a.m. to 8:00 p.m. Monday through Friday and 9:00 a.m. to 5:00 p.m. on Saturday.[20] On Thursday a staff meeting was held from 1:30 to 3:00 p.m., during which time no patients were seen. The office was staffed with dentists, front desk secretaries, dental assistants and dental hygienists. There were four dentists, two of whom worked full time and two part time. The secretaries and dental assistants were organized into teams, labeled the Blue Team and the Gold Team. One team was scheduled from 7:30 a.m. until 2:00 p.m.; the other from 1:30 p.m. to 8:00 p.m., Monday through Friday.[21] The dental hygienists were not team members. They were organized in two shifts and the shift times did not necessarily *1148 coincide with the team hours.[22] The dental hygienists were expected to work eight hours a day but they could decide when during the day those eight hours would be worked.
The teams were set up to work schedules which, over the course of the two week payroll period, would result in approximately 80 hours. For example, during week one the Blue Team would work Monday through Friday but not Saturday; the Gold Team would work Monday through Thursday and Saturday but would be off on Friday. Saturday was a single shift day.
Dr. Carpenter testified that the defendant used part time employees for a variety of reasons. Part time workers were used primarily to fill in for full time or regular employees who were off work for some reason. When there was insufficient work to justify hiring an additional full time employee, a part time employee was hired.[23] Part time employees were also used as demand for particular services fluctuated from time to time.[24] On the typical Saturday, neither of the two full time dental hygienists would work. Throughout 1989 and 1990 there were several different part time dental hygienists who worked on Saturday.[25]
Typically, employees on the payroll during the work week consisted of four full time secretaries, Sylvia Jeansonne and/or Sharon Lowery, six full time dental assistants, Brian Kirkpatrick as a part time dental assistant, two full time dental hygienists, and one part time dental hygienist working on Saturday, for a total of 15-16 employees (not including the dentists). The total number of employees on the payroll would fluctuate, according to Dr. Carpenter, depending on the need to bring in substitute secretaries, dental assistants and dental hygienists.[26]
A review of the data in Exhibits D 1-4, with the help of the plaintiff's recompilation, confirms Dr. Carpenter's conclusions about the number of employees at work during each week of 1989 and 1990. If only the dentists are excluded, but all full time and part time employees are included, there were no weeks during 1989 or 1990 when 15 or more employees worked each day of the defendant's Monday through Saturday work week. If the dentists only two of whom worked full time are counted, along with all full time employees, but the part time employees are excluded, there were only 50 days during 1989 and 73 days during 1990 when 15 or more employees worked each day of the defendant's work week. Consequently, the defendant did not have 15 or more employees for each working day in each of 20 or more calendar weeks during either 1989 or 1990.[27] Under the applicable law, the *1149 defendant does not meet the section 2000e(b) definition of an employer.
Conclusions
For the purpose of determining whether Dental Health Services, Inc. is an employer as defined by section 2000e(b), none of the dentists shareholders of the corporation can be counted as an employee. Lyna K. Buckley is properly classified an independent contractor, so she cannot be counted as an employee either. Nor can the part time employees be counted as employees on those days when they did not actually work. Counting all full time employees for each day of the work week,[28] and all part time employees on the days they actually worked, leaves the defendant well short of the 15 or more employees for each working day during 20 or more calendar weeks in either 1989 or 1990. Therefore, the defendant is not a Title VII employer.
RECOMMENDATION
It is the recommendation of the magistrate judge that the plaintiff's action be dismissed.
NOTES
[1] Record document number 3, paragraphs 2, 4 and 6.
[2] In addition to Dental Health Services, Inc., d/b/a Landmark Dental Care, Inc., the defendants include the four dentists who owned the corporation. Plaintiff named them as defendants alleging that they are agents of the corporation. 42 U.S.C. § 2000e(b). The individual defendants' motion for summary judgment, based on the argument that they did not fall within the definition of an employer for Title VII purposes, was denied. Record document number 20. This report and recommendation applies to all of the defendants, but for convenience, the singular will be used.
[3] Plaintiff alleged that in September of 1990 she was fired from her position as a dental assistant with Dental Health Services, Inc. Plaintiff claimed that the termination was based on religious discrimination in violation of 42 U.S.C. § 2000e-2(a). Thus, 1989 and 1990 are the relevant years for counting numbers of employees.
[4] 777 F.2d 1066, 1067 (5th Cir.1985).
[5] The right to control an employee's work means the right to direct the work of the individual not only as to the result, but also as to the details by which that result is achieved. Fields v. Hallsville Indep. School Dist., 906 F.2d 1017, 1019 (5th Cir.1990), cert. denied, 498 U.S. 1026, 111 S. Ct. 676, 112 L. Ed. 2d 668 (1991).
[6] See, LSA-R.S. 12:981, et seq.
[7] Hyland and the cases following it focus more on the business form chosen by the professionals rather than the economic realities of the work relationship. Hyland, 794 F.2d at 796.
[8] A review of these six cases shows that some alleged this issue in order to determine whether an entity had the requisite number of employees to meet the statutory definition of employer. Other cases looked at the employment relationship in the professional corporation or partnership to determine whether a particular individual was an employee entitled to bring suit. The definitions of employee and employer under Title VII, the Age Discrimination in Employment Act (ADEA), and the Fair Labor Standards Act (FSLA) are substantially the same. Hyland, 794 F.2d at 796. Therefore, the cases cited and discussed in this report may involve one or more of these acts.
[9] Thurber v. Jack Reilly's, Inc., 717 F.2d 633, 634-35 (1st Cir.1983), cert. denied, 466 U.S. 904, 104 S. Ct. 1678, 80 L. Ed. 2d 153 (1984); Edwards v. Esau Invs., 66 FEP Cases 711, 1994 WL 606073 (D.Kan.1994); Cohen v. S.U.P.A., Inc., 814 F. Supp. 251, 256 (N.D.N.Y.1993); Gorman v. North Pittsburgh Oral Surgery Assoc., 664 F. Supp. 212, 214 (W.D.Pa.1987); Lynn v. JER Corp., 573 F. Supp. 17, 20 (M.D.Tenn.1983); see, Dumas v. Town of Mount Vernon, 612 F.2d 974, 979, n. 7 (5th Cir.1980).
[10] See also, Lord v. Casco Bay Weekly, Inc., 789 F. Supp. 32, 34-35 (D.Me.1992); Norman v. Levy, 756 F. Supp. 1060, 1063-64 (N.D.Ill.1990).
[11] The court in Richardson presents a good analysis of the two lines of cases and points out the weaknesses in the First Circuit's reasoning in Thurber. Also, if the language of footnote seven in Dumas had been a holding, it would be binding precedent in the Eleventh Circuit since Dumas was rendered prior to October 1, 1981 when the Fifth Circuit was split. Richardson, 855 F.Supp. at 368, n. 3.
[12] In the Fifth Circuit, for example, the only appellate case found is Dumas.
[13] Record document number 42, p. 6, Plaintiff's Memorandum Regarding the Counting of Employees for Jurisdictional Purposes, citing EEOC Policy Guidance, Chapter 405, § 6860, App. 103-A.
[14] In this case, it was necessary to call only one witness to testify about the number of employees for each working day of the defendant's work week.
[15] Just as in Richardson, this court need not address whether salaried employees should be counted for each day of the work week whether or not they actually are at work on a particular day. Richardson, 855 F.Supp. at 370, n. 8. Counting the part time workers only on the days they actually worked, if the dentists are excluded altogether the jurisdictional numbers will not be satisfied even if salaried employees are counted for each day of the work week.
[16] Dr. Carpenter's medical corporation was dissolved in 1992.
[17] As Dr. Carpenter testified, this was also true of the dental hygienists. Although it is not disputed that the dental hygienists were employees, several characteristics of their employment were similar to those of an independent contractor.
[18] Rejecting the Hyland approach and applying the economic realities/common law control test does not always result in the conclusion that the shareholder in a professional corporation is not a Title VII employee. For example, in Jones v. Baskin, Flaherty, Elliot & Mannino, P.C., supra, the court concluded that the plaintiff, although a shareholder in a law firm organized as a professional corporation, was nonetheless an employee under the ADEA. Jones received no profits or dividends from the firm, but only a salary and his expenses. Each shareholder of the corporation was paid as an employee. Taxes and FICA contributions were withheld even from the shareholders' pay. Each shareholder received a W-2 form. Importantly, Jones was never on the board of directors of the corporation nor was he a member of the executive or operating committees which managed the firm's day-to-day affairs. Nor was Jones an officer or department head. Considering all of these circumstances, the court concluded that Jones had little control over the management of the corporation, but it had considerable control over him and his work. The economic reality of his employment supported the conclusion that he was an employee under the ADEA.
[19] The data were presented on long charts referred to as scrolls during the evidentiary hearing. The data are complete and comprehensive, although the form is somewhat unwieldy. Each scroll covered approximately one-half of a calendar year. Exhibit D-1, also labeled 1989A, covers the first half of 1989; Exhibit D-2, also labeled 1989B, covers the second half of 1989; Exhibit D-3, also labeled 1990A, covers the first half of 1990; and Exhibit D-4, also labeled 1990B, covers the second half of 1990.
For the convenience of counsel for the plaintiff, Dr. Carpenter referred to the plaintiff's recompilation of the data rather than the scrolls introduced into evidence. The recompilation was not allowed into evidence, but has been provided to the court for its use in correlating Dr. Carpenter's testimony with the data in Exhibits D 1-4.
[20] Defendant leased space in Cortana Mall, a major shopping mall in Baton Rouge. Dr. Carpenter testified that the lease required that the office be open a certain number of hours per day and on Saturday. Defendant's work week was structured to comply with its lease.
[21] Dr. Carpenter testified that until late 1989 or early 1990 the hours worked by the teams did not overlap. This slight change of work hours has no effect on the outcome of this case.
[22] That the dental hygienists were not part of either team is indicative of the higher degree of independence they had as compared to other employees.
[23] For example, Brian Kirkpatrick worked for the defendant throughout 1989 and 1990 on a regular, part time basis. Dr. Carpenter testified that during those two years there were only three weeks when he did not work at least some hours. However, during none of the work weeks did Kirkpatrick work even as many as five days.
Sylvia Jeansonne is another example of a part time employee who worked regularly. During the first half of 1989 there were some weeks when she did not work at all, but then there were some periods of time where she worked consistently, from week to week, but only one or two days per week. Her work pattern was consistent throughout the second half of 1989 and until April of 1990. She did not work at all during the second half of 1990. Exhibits D 1-4.
Sharon Lowery was another part time secretary who Sylvia Jeansonne trained to do bookkeeping. Lowery started work in March of 1989. There were some weeks she skipped entirely, but in the others she worked mostly one or two days. Exhibits D 1-4.
[24] Dr. Carpenter referred to this last category as hiring part time employees "due to increased production."
[25] These included Kathy Campbell, Lisa Wells, Rene Higginbotham and Nancy Darden, who frequently worked on Saturday.
[26] For example, during the work week beginning June 25, 1990 one full time secretary resigned and another began work. That week there were five "full time" secretaries on the payroll but no more than four present on any work day.
For the work week beginning July 16, 1990 there were five dental hygienists on the payroll, but no more than two on Monday through Friday and only one on Saturday.
[27] However, if all employees on the payroll during the work week are counted, even excluding the dentists, then there were 15 or more employees in each of 20 or more calendar weeks during both 1989 and 1990.
[28] See, n. 15, supra.
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431 B.R. 394 (2010)
In re Betty Balles SALAS, Debtor.
No. 09-54716-C.
United States Bankruptcy Court, W.D. Texas, San Antonio Division.
July 14, 2010.
*395 Joris Robert Vanhemelrijck, Vanhemelrijck Law Offices, LP, San Antonio, TX, for Debtor.
MEMORANDUM DECISION AND ORDER DENYING MOTION TO VACATE DISCHARGE ORDER, DENYING MOTION NUNC PRO TUNC FOR ORDER ALLOWING DEBTOR TO ENTER INTO A REAFFIRMATION AGREEMENT WITH WELLS FARGO FINANCIAL, AND SETTING FOR HEARING DEEMED REQUEST FOR ENLARGEMENT OF TIME PURSUANT TO RULE 4008(A)
LEIF M. CLARK, Bankruptcy Judge.
CAME ON for consideration the foregoing matter. The debtor received her discharge *396 on March 15, 2010. The debtor failed to file a reaffirmation agreement with Wells Fargo Financial regarding her 2001 Jeep Wrangler. It is not clear whether such an agreement was in fact executed. The debtor sought to reopen the chapter 7 case in order to be able to file the reaffirmation agreement with the court.
If the reaffirmation agreement was not made prior to the date of the debtor's discharge, then it is too late to file the reaffirmation agreement. This is so because, under section 524(c)(1), such an agreement must be made prior to the entry of a debtor's discharge in order to be effective. "Made" means signed by the parties to the agreement. See In re Herrera, 380 B.R. 446, 450-51 (Bankr.W.D.Tex. 2007); see also Whitehouse v. LaRoche, 277 F.3d 568, 574 (1st Cir.2002); Lichtenstein v.Barbanel, 161 Fed.Appx. 461 (6th Cir.2005); In re Turner, 156 F.3d 713, 718 (7th Cir.1998); Lee v. Yeutter, 917 F.2d 1104, 1106 n. 3 (8th Cir.1990); Republic Bank of Ca. v. Getzoff (In re Getzoff), 180 B.R. 572, 574-75 (9th Cir. BAP 1995); Schott v. WyHy Fed. Credit Union (In re Schott), 282 B.R. 1, 7 (10th Cir. BAP 2002). As this court observed in Herrera,
Because reaffirmation agreements are effectively waivers of discharge with respect to a particular creditor, they are exceptions to the "fresh start" policy of the bankruptcy process. As such, the reaffirmation exception is strictly construed, and the requirements imposed for their enforceability are themselves enforced rigidly. See Matter of Duke, 79 F.3d at 44; In re Jamo, 283 F.3d 392, 398 (1st Cir.2002) (citations omitted); see also In re Bennett, 298 F.3d 1059, 1067 (9th Cir.2002) (citing Republic Bank of Cal. v. Getzoff (In re Getzoff), 180 B.R. 572, 574 (9th Cir. BAP 1995)).
Herrera, at 450-51. Without having seen the reaffirmation agreement sought to be filed here, the court cannot say whether the proposed reaffirmation is effective or not. What the court can say at this point is that, if it was not executed prior to March 15, 2010, it will not matter whether it is filed or not. It will not be a valid or effective reaffirmation agreement.[1]
If the agreement was executed prior to March 15, 2010, however, then it will be possible for the debtor to file the reaffirmation agreement at this late date, provided the court grants relief under Rule 4008(a). That rule states that "the court may, at any time and in its discretion, enlarge the time to file a reaffirmation agreement." FED.R.BANKR.P. 4008(a). It is a prerequisite for its enforceability that a reaffirmation agreement be filed with the clerk of court. See 11 U.S.C. § 524(c)(3); see also In re Mausolf, 403 B.R. 761, 765-66 (Bankr.S.D.Fla.2009). Whether the court should grant the relief requested turns of course on whether granting the relief would be futile (i.e., was the agreement made before or after the entry of discharge). It also turns, however, on whether the reaffirmation agreement would be an undue hardship on the debtor. This is so because, as a result of the discharge having already been entered, the court can no longer conduct a review of the agreement or have a hearing to determine undue hardship. The statute requires that any such hearing be conducted *397 prior to the entry of the debtor's discharge. See 11 U.S.C. § 524(m); see also In re Schmidt, 2009 WL 1587690 (Bankr. W.D.Ohio April 16, 2009). The court cannot conduct the section 524(m) hearing now. It is too late. By the same token however, the court should not permit the late filing of the reaffirmation agreement if it appears that the agreement would in fact impose just such a hardship.
For this reason, the court will set a hearing to determine whether relief should be granted under Rule 4008(a). At that hearing, the debtor can present a copy of the proposed agreement as an evidentiary exhibit. On review of the evidence, based on the standards set out here, the court will determine whether the requested extension should be granted. The date and time of the hearing will be furnished to the debtor and the creditor by separate notice.
For the reasons stated, the motion to vacate the discharge order is denied. The motion for order allowing the debtor to "enter into" a reaffirmation agreement post-discharge is also denied, for the reasons stated. However, the court construes the debtor's pleading to be sufficient as a request to enlarge the time for filing a reaffirmation agreement. The request is, by this order, to be set by the clerk of court for hearing. The clerk will send notice to the debtor and the creditor of the date and time of the hearing setting.
SO ORDERED.
NOTES
[1] It is for this reason as well that the motion to vacate the debtor's discharge is here denied. Vacation of the discharge will not cure a reaffirmation agreement that was not executed before the actual entry of the discharge. See In re Herrera, supra. Rule 4008(a) itself does not require vacation of the discharge as a prerequisite to the court's entering an order enlarging the time for the parties to file a reaffirmation agreement. Thus, vacation of the debtor's discharge is irrelevant to whether a reaffirmation agreement can be filed late.
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431 B.R. 549 (2010)
In re BAYOU GROUP, LLC, et al., Debtors.
No. 06-22306 (RDD).
United States Bankruptcy Court, S.D. New York.
April 5, 2010.
*552 MorrisonCohen LLP, by Joseph T. Moldovan, Esq., for the Unofficial Committee of Bayou OnShore Funds.
The United States Trustee for Region 2, by Andrew Velez-Rivera, Esq.
*553 Cahill Gordon & Reindell, LLP, by Kevin J. Burke, Esq., for DB Structured Products, Inc.
Sonnenschein Nath & Rosenthal LLP, by Carole Neville, Esq., for certain investor defendants/judgment debtors.
MEMORANDUM OF DECISION ON MOTION OF UNOFFICIAL COMMITTEE PURSUANT TO 11 U.S.C. §§ 503(b)(3)(D) and (b)(4)
ROBERT D. DRAIN, Bankruptcy Judge.
The members of the Unofficial Creditors Committee of the Bayou OnShore Funds (the "Unofficial Committee" or "Committee")[1] have requested the entry of an order under section 503(b)(4) of the Bankruptcy Code, 11 U.S.C. §§ 101 et seq., allowing, as administrative expenses, the fees and expenses of counsel to the Committee for pre-bankruptcy services (the "Motion"). The Motion seeks payment by the estate of $677,829.17. The United States Trustee objected to the Motion, as have certain judgment debtorsgenerally known as the "Sonnenschein Defendants"of the debtors herein (the "Debtors" or the "OnShore Entities"). A creditor, DB Structured Products, Inc., joined in the Sonnenschein Defendants' objection.[2]
The Court has reviewed the pleadings filed in connection with the Motion as well as the exhibits thereto, including the contemporaneous time and expense records of the Unofficial Committee's counsel, and considered the record of the March 5, 2010 hearing on the Motion. This Memorandum of Decision states the Court's basis for substantially granting the Motion and, except as noted, overruling the objections.
Background
Notwithstanding the rationale in Samuel Israel III's July 26, 2005 letter to investors that he was closing the Bayou family of funds to devote more time to his family and personal life, it became clear in the late summer of 2005 that the Bayou funds (including the OnShore Entities) were a Ponzi scheme, their earnings fraudulently reported and largely fictitious, and, therefore, that they were doomed to collapse. Soon thereafter, federal authorities raided the funds' Connecticut offices and seized their contents, and the funds' principals were placed in federal custody and their assets were subjected to seizure and forfeiture. (Eventually certain cash of the Debtors and/or their principals also was turned over by Arizona regulators to the Department of Justice.) Nevertheless, apparently because of disagreements among the SEC, the CFTC and the Department of Justice, the governmental authorities did not actively seek the appointment of an equity receiver for the OnShore Entities.[3]
*554 When it became clear that the appointment of an equity receiver might not be forthcoming, various investors in the On-Shore Entities who had been unable to redeem their investments before the funds' collapse and, therefore, were looking for ways to make good their losses, contacted each other. Although still operating largely in the dark, by January 2006, several of them determined, with the advice of counsel to individual investors, to form the Unofficial Committee to represent the interests of defrauded investors as a whole.
The largest investor, Silvercreek sent a notice of the proposed formation of the Unofficial Committee to all creditors with whom it or other investors were in contact, and the United States Attorney's office also agreed to include a notice of the Committee's proposed formation in a general notice to Bayou fraud victims, which apparently was mailed on February 2, 2006. Declaration of Jonathan J. Fisher in Support of the Unofficial On-Shore Creditors' Committee of the Bayou Family of Companies' Motion to Appoint a Receiver ¶¶ 4-5. Forty-two creditors with in excess of $109 million of unpaid investments responded. On February 7, 2006, six of the largest investors agreed to sit on the Unofficial Committee and to retain counsel for the Committee, the cost of which they agreed to share pro rata based on the amount of their unpaid investments. Id. ¶¶ 5-6.
Actually the Unofficial Committee retained two firms: Preston Gates Ellis & Rouvelas Meeds LLP (now K & L Gates LLP), on February 22, 2005, and Kasowitz, Benson, Torres & Friedman LLP ("KBLT & F"), on March 1, 2005.
With K & L Gates' assistance, the six investors further publicized and organized the Unofficial Committee's formation and held the Committee's first official meeting, which took place on February 28, 2005.
Based on the March 5, 2010 hearing record and on the Unofficial Committee's Bylaws, which were approved at a March 14, 2005 meeting, it appears that the Committee was indeed established to represent the collective interests of all unsecured creditors of the OnShore Entities, the vast majority of which were defrauded investors. The Unofficial Committee's overarching goal was "to represent the interests of creditors holding unsecured claims against one or more of the on-shore entities comprising the Bayou family of companies... by facilitating the marshalling of assets of Debtor and prompt distribution to creditors." By-laws of the Unofficial On-Shore Creditors' Committee of the Bayou Family of Companies ("Bylaws") Art. II. This goal was inconsistent with interests that the individual Committee members may have had to increase their own recovery at the expense of other similarly situated creditors. Given the Unofficial Committee members' cost sharing agreement, it also was in their interest to add to the voting membership of the Committee and thus reduce their pro rata share of the costs. The Unofficial Committee sought wide participation in its activities, not only encouraging investors to become voting members but also inviting investors to participate as non-voting ex officio members.
It was clear even before the Unofficial Committee's formation that a significant source of creditor recovery (and perhaps the primary source, given that the Bayou funds' hard assets and the assets of its principals had been seized and were subject to criminal forfeiture) was the Debtors' *555 potential claims against investors who had redeemed or partially redeemed their investments before the OnShore Entities' collapse. The Sonnenschein Defendants, so-called "full redeemers," turned out to be such a target; DB Structured Products, Inc., a so-called "partial redeemer" (that is, an investor who was repaid some but not all of its investment before the On-Shore Entities' collapse) was another.
DB Structured Products, Inc. has contended that the Unofficial Committee ignored its legitimate concerns as a creditor in respect of its claim for the portion of its investment that was not redeemed, and, in fact, after the commencement of the bankruptcy case the official committee of unsecured creditors, which substantially overlapped with the prepetition Unofficial Committee, may have favored strategies to exert litigation leverage on DB and other similarly situated partial redeemers that gave short shrift to those entities' rights as creditors. However, review of counsel to the Unofficial Committee's time records and the other pleadings filed in connection with the Motion establish that the Unofficial Committee did not engage in such conduct prepetition. Moreover, members of the Unofficial Committee included other partial redeemers, and the United States Trustee has not asserted any undue parochialism on the Unofficial Committee's part as a basis for objecting to the Motion (or as a basis, for that matter, for objecting to the fees of counsel to the official unsecured creditors committee). The Sonnenschein Defendants' contention that the Unofficial Committee was unduly hostile to them is not relevant, given that the Sonnenschein Defendants were solely litigation targets and not creditors at all.
In addition to its goal of representing all creditors, it also is clear that from its inception the Unofficial Committee expressly laid the groundwork for what became this chapter 11 case, including the means for administering the case. The Bylaws state that to achieve its purpose the Unofficial Committee may engage in the following:
(1) Evaluate the need to seek support for and implementation of a process for judicial appointment of a receiver/trustee to marshal assets and make distributions to creditors;
(2) Evaluate prospects and make recommendation for the selection of a receiver/trustee;
(3) Monitor and work with the receiver/trustee or other fiduciary acting on behalf of the creditors to facilitate an efficient and timely forensic investigation, pursuit of claims, and, if appropriate, the commencement of a bankruptcy proceeding;
(4) Negotiate and formulate a liquidation plan to facilitate prompt distribution of Debtor's assets with adequate reserve to finance the pursuit of additional assets, including claims of the Debtor or the Debtor's creditors; and
(5) Any other acts determined by the Committee to be reasonable or necessary to achieve the overall objective.
Bylaws Art. II (emphasis added). Moreover, the Bylaws recognized that
In its pursuit of the above described objectives, the Committee intends, to the extent practicable and except as otherwise determined, to constitute itself in conformity with Federal Rule of Bankruptcy Procedure 2007(b) so that the Committee is well situated to be appointed as the Official Unsecured Creditors' Committee, pursuant to 11 U.S.C. § 1102(b)(1)[4]in any case filed by or *556 with respect to the Debtor under Title 11 of the United States Code.
Id. (emphasis added).[5] As will be discussed in more detail below, when the Committee sought the appointment of a receiver, it also requested that the receiver's duties include, in the receiver's capacity as sole managing member of the On-Shore entities, (a) petitioning to commence a case under the Bankruptcy Code and (b) serving as the debtor in possession in a case under chapter 11 of the Bankruptcy Code. [Proposed] Order Granting the Unofficial On-Shore Creditors' Committee's Motion to Appoint a Receiver ¶ 7(e).
Having organized itself and retained counsel, the Unofficial Committee, in large measure through its counsel, performed the following tasks:
researched potential claims of the OnShore Entitles, or assertable on behalf of their creditors as a group, including against "redeemers" and "partial redeemers;"
searched for suitable candidates to serve as receiver/managing member of the OnShore Entities, identified the individual, Jeffrey Marwil, who eventually was appointed as receiver and sole managing member, and negotiated the terms of Mr. Marwil's compensation;
researched and prepared a complaint and motion for the appointment of a receiver and sole managing member for the OnShore Entities, and related injunction;
obtained the consent, or non-opposition, of important parties, including the Department of Justice, the Cayman Islands liquidator, and class counsel, to the motion for appointment of a receiver and sole managing member;
obtained the District Court's approval of the receiver/sole managing member motion substantially in its entirety, which, after wide notice, was unopposed;
shared its legal research of potential claims on behalf of the OnShore Entities and their creditors as a whole with Mr. Marwil and his counsel after Marwil's appointment, pursuant to a common interest agreement; and
on the borrower side, obtained and documented a preliminary financing commitment that served as the basis for debtor in possession financing once the OnShore Entities sought relief under chapter 11.
Based on the time records of the Unofficial Committee's two counsel, these are the only tasks for which the Committee seeks reimbursement. The time records begin only with the firms' retention after the formation of the Committee; they do not include time previously spent in the firms' capacity as counsel to individual Committee members.
Jurisdiction
This Court has jurisdiction over the Motion, which arises under section 503(b) of the Bankruptcy Code, under 28 U.S.C. *557 §§ 1334(b) and 157(a) and the provisions of the Debtors' confirmed chapter 11 plan and the confirmation order that reserved such jurisdiction. This is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (B).
Discussion
Bankruptcy Code section 503(b)(3)(D) provides for the allowance as an administrative expense of
the actual, necessary expenses, other than compensation and reimbursement specified in paragraph (4) of this subsection, incurred by a ... committee of creditors ... other than a committee appointed under section 1102 of this title, in making a substantial contribution in a case under chapter ... 11 of this title.
(Emphasis added.)
Section 503(b)(4) of the Bankruptcy Code provides for the allowance as an administrative expense of
reasonable compensation for professional services rendered by an attorney ... of an entity whose expense is allowable under subparagraph ... (D) of paragraph (3) of this subsection, based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title, and reimbursement for actual, necessary expenses incurred by such attorney....
(Emphasis added.)
Before turning to whether the requested fees and expenses of the Unofficial Committee's counsel were reasonable based on the time, the nature, the extent, and the value of such services and the cost of comparable services in contexts other than cases under the Bankruptcy Code, and to whether counsel's expenses were necessary, a threshold issue raised by the United States Trustee must be addressed. Do Bankruptcy Code sections 503(b)(3)(D) and (b)(4) apply to the Committee's and its counsel's pre-bankruptcy work, and, if so, what kind of work falls within the coverage of those sections?
One starts with the statute's text and ends there if the meaning is plain and the disposition required by the plain meaning is not absurd. Lamie v. United States Trustee, 540 U.S. 526, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004). Here, the key phrase is Bankruptcy Code section 503(b)(3)(D)'s requirement, as incorporated in section 503(b)(4), that the Unofficial Committee be eligible to be reimbursed for expenses "in making a substantial contribution in a case under chapter 11." Does this mean that the Committee's substantial contribution had to be made during the chapter 11 case for it to be eligible under section 503(b)(3)(D)? It would, of course, if the statute actually said "during" instead of "in."
One might argue, however, that the statute could have used the preposition "to" instead of "in" if Congress really meant it to apply to a contribution made before, but with respect to, a subsequent chapter 11 case, or if the statute said "in furtherance of" or, even better, "in or in contemplation of" a chapter 11 case.[6]
In support of the United States Trustee's interpretation that section 503(b)(3)(D) applies only to postpetition activity, it is also worth noting that for an expense to be accorded administrative priority under Bankruptcy Code section 503(b)(1)(A), which covers "the actual, necessary costs and expenses of preserving the estate"[7] (a concept that conceivably *558 could include pre-bankruptcy costs and expenses as long as they could be said to have preserved the subsequently created, postpetition estate), the case law is clear that the expense must, among other things, derive from a post petition transaction with the debtor in possession or trustee or a post petition tort by the debtor in possession or trustee. Supplee v. Bethlehem Steel Corp. (In re Bethlehem Steel Corp.), 479 F.3d 167, 172 (2007); Trustees of the Amalgamated Ins. Fund v. McFarlin's, Inc., 789 F.2d 98, 101 (2d Cir.1986); see also In re Refco, Inc., 2008 U.S. Dist. LEXIS 2484, *16-17, 2008 WL 140956, *4-5 (S.D.N.Y. Jan. 14, 2008), aff'd Palley v. Refco Inc. (In re Refco Inc.), 331 Fed. Appx. 12 (2d Cir.2009); In re Norwalk Furniture Corp., 418 B.R. 631 (Bankr. N.D.Ohio 2009). For example, in the latter case, the court stated that it did not question that the claimant's prepetition services conferred a substantial economic benefit on the entity that became the chapter 11 debtor in possession; more was needed for administrative expense treatment under section 503(b)(1), however, because "the bankruptcy estate only comes into existence when a case is commenced.... Consequently, [the claimant's] services, having been performed prior to the filing of a petition in bankruptcy, could not have accorded a direct benefit upon the Debtor's estate as, by definition, no bankruptcy estate existed." In re Norwalk Furniture, 418 B.R. at 633-34. See also In re Lockwood Enterprises, Inc., 54 B.R. 829, 831-32 (Bankr.S.D.N.Y.1985).
Similarly, one can argue that the OnShore Entities' chapter 11 case did not exist when the Committee was operating and, therefore, that the Committee could not have made a substantial contribution in such case for purposes of section 503(b)(3)(D). This interpretation would also be in keeping with the general rule that priorities must be narrowly construed in light of the presumption in bankruptcy cases that the debtor's limited resources will be equally distributed among all unsecured creditors. Howard Delivery Serv. v. Zurich Am. Ins. Co., 547 U.S. 651, 667, 126 S. Ct. 2105, 165 L. Ed. 2d 110 (2006); In re Bethlehem Steel, 479 F.3d at 172.
On the other hand, it can be argued that because Congress chose to put the "substantial contribution" test in a different subsection of section 503(b) than subsection (b)(1)(A), the foregoing interpretations of section 503(b)(1)(A) should not apply to it.[8]
More significantly, it has been held that the language of section 503(b)(3)(D) is, by its plain terms, applicable not only to postpetition activity but also to prepetition activity. Thus, as stated by the Third Circuit, *559 "It is the `substantial contribution,' not the activity, that must occur `in a case' under chapter 11, and the [contrary] argument assumes that activities conducted and expenses incurred before the filing of a chapter 11 petition cannot substantially contribute to the reorganization efforts during the pendency of a chapter 11 case" when, in fact, they can. Lebron v, Mechem Fin., Inc., 27 F.3d 937, 944 (3d Cir. 1994).
The Lebron court found further support for its construction of section 503(b)(3)(D) in extensive pre-Bankruptcy Code precedent: "Under section 77(B)(c) of the Bankruptcy Act, reimbursement of fees was authorized for pre-petition services of informal committees of creditors and stockholders where those services directly benefitted the reorganization." Id. at 945 (citations omitted). See also Randolph & Randolph v. Scruggs, 190 U.S. 533, 538-39, 23 S. Ct. 710, 47 L. Ed. 1165 (1903) (allowing administrative claim under the Bankruptcy Act for prepetition services by assignee for creditors). Further, the legislative history of section 503(b)(3)(D) indicates that Congress "intended to alter preexisting law in only one respect: `It does not require a contribution that leads to confirmation of a plan [because Congress believed that in] many cases it will be a substantial contribution if the person involved uncovers facts that would lead to a denial of confirmation, such as fraud in connection with the case.'" Lebron, 27 F.3d at 945, citing 1978 U.S.C.C.A.N. at 5852-53.
At a minimum, the Third Circuit's reading of section 503(b)(3)(D) suggests that the provision does not "plainly" draw a line between pre- and postpetition conduct, which ambiguity renders both pre-Bankruptcy Code practice and the legislative history relevant. Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A., 530 U.S. 1, 10, 120 S. Ct. 1942, 147 L. Ed. 2d 1 (2000); Dewsnup v. Timm, 502 U.S. 410, 418, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992) ("Congress must have enacted the Code with a full understanding of this [clearly established] practice.").
Several other courts have also recognized (although most only in dicta, because they ultimately determined that the movant had not established that it made a substantial contribution) that section 503(b)(3)(D) should not be confined to postpetition activity. See Haskins v. United States (In re Lister), 846 F.2d 55, 57 (10th Cir.1988) (dictum); In re Trans World Airlines, Inc., 1993 U.S. Dist. LEXIS 16810, at *22-28, 1993 WL 559245, at *7-9 (D. Del. June 22, 1993); In re Alert Hldgs., Inc., 157 B.R. 753, 758 (Bankr. S.D.N.Y.1993) ("I am not prepared to hold... that as a bright line rule, services performed during prepetition negotiations and attempted workouts are not compensable under section 503(b) of the Bankruptcy Code.") (dictum); In re Texaco, Inc., 90 B.R. 622, 630 (Bankr.S.D.N.Y. 1988) (dictum); In re Russell Transfer, Inc., 59 B.R. 871, 872-73 (Bankr.W.D.Va. 1986); In re Valley Isle Broadcasting, Ltd., 56 B.R. 505, 506 (Bankr.D.Haw.1985) (dictum); In re Med General, Inc., 17 B.R. 13, 14 (Bankr.D.Minn.1981).
At least two courts have skirted the issue, either determining that it was premature to take a position in the context of the particular chapter 11 case on whether section 503(b)(3)(D) applies to prepetition work, In re Financial News Network, Inc., 134 B.R. 732, 736-37 (Bankr.S.D.N.Y. 1991), or that the movant had not made a substantial contribution in any event. In re Yellowstone Mountain Club, LLC, 2009 Bankr.LEXIS 3654, at *13-14, 2009 WL 3790207, at *5-6 (Bankr.D.Mont. Nov. 12, 2009).
*560 Two courts in this district, however, have held that Bankruptcy Code section 503(b)(3)(D) does not apply to a creditor's prepetition activity, in each case where it appeared that the creditor was attempting to use section 503(b)(3)(D) to circumvent Bankruptcy Code section 503(b)(1)(A)'s clear, bright line test between preand postpetition transactions. Short Pump Entm't, L.L.C. v. Randall's Island Family Golf Ctrs, Inc. (In re Randall's Island Family Golf Ctrs., Inc.), 300 B.R. 590, 598 (Bankr.S.D.N.Y.2003); In re Balport Constr. Co., 123 B.R. 174, 180-81 (Bankr. S.D.N.Y.1991). See also In re T & B Mortg. Corp., 2008 Bankr.LEXIS 1674, at *6-9, 2008 WL 2224822, at *2-4 (Bankr. E.D.Va. May 27, 2008) (noting that section 503(b)(3)(D) does not apply in chapter 7 cases but also disagreeing with the TWA and Russell Transfer courts' application of it to prepetition activity in the chapter 11 context).
What stands out in all of the foregoing cases is the difficulty highlighted by Randall's Island Family Golf Centers and Balport: when, if ever, may prepetition expenses properly be viewed as "expenses... incurred ... in making a substantial contribution in a case under ... chapter 11" under section 503(b)(3)(D) even though they would not qualify, simply because they were incurred prepetition, under section 503(b)(1)(A) as "expenses of preserving the estate"? This, in turn, highlights the difficulty of determining what qualifies as a "substantial contribution," a term that the Bankruptcy Code does not define. The answer to those two problems should resolve the underlying issue of whether Congress intended section 503(b)(3)(D), whose text the Court concludes is not entirely plain on this point, to apply to prepetition work. Ensuring that section 503(b)(3)(D) is not applied to circumvent section 503(b)(1)(A) in this context also may confer some added clarity to the "substantial contribution" standard generally.
Certain aspects of the term "substantial contribution" are well recognized. The substantial contribution inquiry is factual, with the movant bearing the burden by a preponderance of the evidence. In re United States Lines, Inc., 103 B.R. 427, 429 (Bankr.S.D.N.Y.1989). Also, the section's policy of promoting meaningful creditor participation in the reorganization process is in tension with the contrasting policy, noted above, that provisions establishing administrative expenses should be construed narrowly and administrative expenses kept to a minimum. Id. See also In re Dana Corp., 390 B.R. 100, 108 (Bankr.S.D.N.Y.2008); In re Granite Partners, L.P., 213 B.R. 440, 445 (Bankr. S.D.N.Y.1997) ("substantial contribution provisions must be narrowly construed" including to "discourage mushrooming expenses" and "do not change the basic rule that the attorney must look to his own client for payment").
Accordingly, "The integrity of section 503(b) can only be maintained by strictly limiting compensation to extraordinary creditor actions which lead directly to tangible benefits to the creditors, debtor or estate." In re Best Prods. Co., Inc., 173 B.R. 862, 866 (Bankr.S.D.N.Y. 1994). See also In re Granite Partners, 213 B.R. at 445 (movant must show "actual and demonstrable benefit to the debtor's estate, the creditors, and to the extent relevant, the stockholders"); In re Alert Hldgs., 157 B.R. at 757. See also In re Am. Plumbing & Mech., Inc., 327 B.R. 273, 280 (Bankr. W.D.Tex.2005) (citing cases requiring a "significant and tangible benefit," a "concrete benefit," a "direct, significant and demonstrably positive benefit," and a contribution that is "considerable in amount, value or worth").
*561 The Am. Plumbing court rightly observed, though, that "The problem with all these synonyms and definitions is that they do little to shed any real light on how to apply the direct benefit rule in practice." Id. at 280-81. Case law has, however, narrowed the imprecision arising from the statute's language. Id. at 281. To qualify, the direct benefit must be a substantial net benefit. In re Granite Partners, 213 B.R. at 446. A direct benefit also cannot be established merely by the movant's extensive participation in the case or be based on services that duplicated those of professionals already compensated by the estate, such as counsel for the debtor or an official committee. Id.; In re Dana Corp., 390 B.R. at 108; see also Hall Fin. Group v. DP Partners Ltd. Pshp. (In re DP Partners Ltd. Pshp.), 106 F.3d 667, 673 (5th Cir.1997), cert. denied, 522 U.S. 815, 118 S. Ct. 63, 139 L. Ed. 2d 26 (1997).
Relatedly, "Creditors face an especially difficult burden in passing the `substantial contribution' test since they are presumed to act primarily for their own interests" and "[e]fforts undertaken by creditors solely to further their own self interest are not compensable under section 503(b)" and "services calculated primarily to benefit the client do no justify an award even if they also confer an indirect benefit on the estate." In re Dana Corp., 390 B.R. at 108 (internal citations omitted); In re Granite Partners, 213 B.R. at 446; In re Am. Plumbing & Mech., 327 B.R. at 284-85.
Importantly, this last consideration is relevant not because the creditor's mere motive should determine the outcome (see In re DP Partners Ltd. Pshp, 106 F.3d at 673; In re Pow Wow River Campground, Inc. 296 B.R. 81, 86 (Bankr. D.N.H.2003)); rather, it recognizes that section 503(b)(3)(D) focuses on process as much as on contribution, on the movant's substantial contribution in the casethat is, the entire chapter 11 caseand, generally speaking, the proper administration of the case as a whole rarely contemplates individual creditors or even unofficial committees contributing to the case.[9] Normally, it is the job of professionals retained under sections 327 and 328 of the Bankruptcy Code, and ultimately of the Court, to ensure that chapter 11 cases proceed properly and efficiently. Third parties, who generally represent only their clients' interests and only indirectly contribute to the case's administration, therefore normally would not be compensated by the estate on an administrative priority basis. Instead, "compensation under section 503 is reserved for those rare and extraordinary circumstances when the creditor's involvement truly enhances the administration of the estate." In re Dana Corp., 390 B.R. at 108 (emphasis added); see also In re Texaco, Inc., 90 B.R. at 630 ("in addition to showing an actual and demonstrable benefit to the estate, compensation for fees incurred prepetition must substantially contribute to the administration of the debtors' estates post-petition") (emphasis added); In re Richton Int'l. Corp., 15 B.R. 854, 856 (Bankr.S.D.N.Y.1981).
Thus, section 503(b)(3)(D) and (b)(4) may not be used to buy off a pest, who did little if anything to advance, and in fact may have impeded, the proper administration of the case. In re Dana Corp., 390 B.R. at 110-11; In re Granite *562 Partners, 213 B.R. at 448-49. Nor may section 503(b)(3)(D) and (b)(4) be relied on to reward creditors and unofficial committees who merely furthered their own or their constituents' interests, the Code having established other claims and priorities for such expenses. See 11 U.S.C. § 506(b) (allowing oversecured creditors' claim for fees and expenses, to be paid from collateral); Travelers Cas. & Sur. Co. of Am. v. PG & E, 549 U.S. 443, 453, 127 S. Ct. 1199, 167 L. Ed. 2d 178 (2007) (recognizing potential allowance of general unsecured claim for postpetition attorneys fees under 11 U.S.C. § 502(b)); Ogle v. Fid. & Deposit Co., 586 F.3d 143, 149 (2d Cir.2009) (allowing general unsecured claim for postpetition attorneys fees provided for in prepetition contract). See generally In re Buttes Gas & Oil Co., 112 B.R. 191, 195 (Bankr. S.D.Tex.1989) ("[Movant] claims that its most significant contribution related to the development of a confirmed Plan. However, there is no dispute that the Plan was consensual and as such was the goal for which all parties were striving. There was no evidence that [Movant] functioned as more of a peacemaker than did any other creditor. Further, the Plan and the disclosure statement were submitted and presented by the Debtor, which is represented by its own counsel."); In re Valley Isle Broadcasting, 56 B.R. at 507 ("Applicant in reality did what any other attorney would do under the circumstances: that is, defend against actions brought against the debtor [by secured creditors], and to attempt to effectuate a settlement.").
The majority of cases allowing creditors' substantial contribution claims under sections 503(b)(3)(D) and (b)(4) have, therefore, found that the creditor played a leadership role that normally would be expected of an estate-compensated professional but was not so performed; most have, consistent with pre-Bankruptcy Code practice, involved a creditor who actively facilitated the negotiation and successful confirmation of the chapter 11 plan or, in opposing a plan, brought about the confirmation of a more favorable plan. See generally In re Granite Partners, 213 B.R. at 446-47. Even in the cases, noted by Judge Bernstein in Granite Partners, where courts have granted substantial contribution awards in other contexts because the creditor's efforts led to a concrete, measurable monetary benefit for the estate, id. at 447, the movants performed functions that normally would have been undertaken by estate-compensated professionals, or that had to be performed because estate compensated professionals were not doing their job. See In re McLean Indus., Inc., 88 B.R. 36, 39 (Bankr.S.D.N.Y.1988); and In re Baldwin-United Corp., 79 B.R. 321, 344 (Bankr.S.D.Ohio 1987), where the movants' actions directly led to materially enhanced bids for estate assets. See also 4 Collier on Bankruptcy ¶ 503.10[5] (15th ed.2009) at 503-65 (listing instances of "substantial contribution" awards earned other than in the plan context).[10]
Particularly when the services at issue were performed pre-bankruptcy, the foregoing emphasis on the movant's contribution in place or instead of professionals who normally would be compensated out of the debtor's assets is important. The cost of such services will much more likely merit allowance under section 503(b)(3)(D) if the services led directly to the efficient and proper administration of the case *563 when other parties, who normally would be expected to do the work at the debtor's expense, were not doing it. Compare In re Med General, Inc., 17 B.R. at 14 ("[T]he informal creditors' committee was engaged in the beginning of a continuous process which eventuated in the acceptance of a plan of reorganization beneficial to the general creditors. I see no reason to distinguish on the facts known to the Court between the beneficial results of the pre-petition activity as opposed to the post-petition activity of the committee which is admittedly compensable") and In re Alert Hldgs., 157 B.R. at 758; In re Jensen-Farley Pictures, Inc., 47 B.R. 557, 569 (Bankr.D.Utah 1985), in which the creditors' prepetition workout efforts were in keeping with normal prepetition creditor conduct and therefore did not contribute to the subsequent bankruptcy case. See also Lebron, 27 F.3d at 945 n. 3 (noting, as a basis not precluding prepetition services from the reach of section 503(b)(3)(D), that Congress recognized in Bankruptcy Code section 1102(b) a possible continuum of creditor committee representation pre and postpetition).[11]
On the other hand, if the movant argues merely that, but for some action that it took prepetition, the chapter 11 case would not have been filed or steps would not ultimately have been taken to recover and marshal the debtor's assets for creditors, the creditor would have a heavy burden to show that it made a "substantial contribution in the case" as opposed to having merely pursued its rights as a creditor. See Lebron, 27 F.3d at 946 (noting that movant's prepetition efforts in uncovering the debtor's fraud may not meet section 503(b)(3)(D)'s test because they were incurred "in litigation over control of [the debtor] many months before a reorganization was anticipated by anyone"); Lister, 846 F.2d at 55, in which the Tenth Circuit held that a creditor was not entitled to a section 503(b)(3)(D) expense for gathering information on, and preventing the transfer of, the debtors' assets prepetition, which eventually forced the debtors into bankruptcy:
Mr. Haskins undertook these pre-petition efforts solely for the purpose of collecting his judgment. His actions could not have been undertaken in anticipation of the reorganization of the debtors, as he was unaware of the pendency of bankruptcy proceedings until after the petition had been filed. Any benefit accruing to the bankruptcy estate as a result of these efforts was only incidental.
Id. at 57. Finally, if the movant's argument is only that it provided some good or service that enhanced the estate, instead of contributing directly to the administration of the case, its request would more properly be viewed as one under section 503(b)(1)(A) and, therefore, be barred because of the prepetition nature of the transaction.
In light of the foregoing, it is clear that the Unofficial Committee would qualify under Bankruptcy Code section 503(b)(3)(D) as having made a substantial contribution in the case that a debtor-compensated professional should have made but did not, and that its counsel, therefore, are entitled to reasonable compensation and reimbursement of their necessary expenses relating to such contribution *564 under Bankruptcy Code section 504(b)(4).[12]
Several points about the Unofficial Committee's activities in this regard are worth noting. First, the Committee clearly worked with an eye to the prompt commencement of an organized chapter 11 case. This was no small aim, given this particular Debtor and the absence of any fiduciary for the OnShore Entities who could protect the Debtor's and creditors' interests generally until Mr. Marwil's appointment. Second, the Committee took upon itself the task (and perhaps some inherent related risk) of representing the interests of the OnShore Entities' creditors as a whole. Indeed, the Unofficial Committee specifically contemplated and prepared for the members of the Committee being appointed as members of an official creditors committee under Bankruptcy Code section 1102(b)(1) after the start of the contemplated chapter 11 case.
Having retained K & L Gates on February 22, 2006, the Unofficial Committee filed the receiver motion on March 28, 2006, it obtained the order appointing Mr. Marwil on April 28, 2006, and Mr. Marwil filed the chapter 11 case on May 30, 2006 and the complaints to avoid redemptions and other potential recoverable transfers shortly thereafter, all in about the minimum time permitted considering notice requirements and proper planning. There was at least one good reason for such speed separate and apart from wanting to move on to the last stage of the process, the filing of a chapter 11 case and the invocation of the automatic stay under Bankruptcy Code section 362(a): to reduce the risk that potential assets subject to recovery would dissipate and that evidence would become stale. However, it is clear from counsel's time entries that this goal was consistent with the Committee's representation of the interests of creditors generally and its desire to organize the prompt filing of a reasonably orderly chapter 11 case.
That desire is also reflected in the Committee's efforts during the same prepetition period to line up debtor in possession financing, which was approved in the early days of the chapter 11 case, and, therefore clearly benefitted the Debtors' estates and creditors and substantially contributed to the chapter 11 cases.[13]
One element of the Unofficial Committee's activities, which gave rise to the largest amount of counsel fees and expenses, is, nevertheless, the second basis for the United States Trustee's objection. The Committee members did not file an involuntary case under section 303 of the Bankruptcy Code (for which their fees and expenses would have been subject to allowance as an administrative expense under Bankruptcy Code section 503(b)(3)(A)).[14] Instead, the Committee sought the prepetition appointment of a receiver with operating powers, as the *565 Debtors' sole managing member, including the power to commence a voluntary chapter 11 case for the OnShore Entities and to serve as the OnShore Entities' managing member in such a case. The Committee obtained this relief when the District Court entered the order granting the unopposed receiver/managing member motion. Then, in the chapter 11 case, Mr. Marwil and the official unsecured creditors' committee successfully defeated the United States Trustee's motion for the appointment of a chapter 11 trustee on the basis that Mr. Marwil was, in addition to being a prepetition receiver, the Debtors' validly appointed management. See Adams v. Marwil (In re Bayou Group, LLC), 564 F.3d 541, 547-48 (2d Cir. 2009).[15]
The foregoing decision validates the Unofficial Committee's strategy; and perhaps that is enough to defeat the United States Trustee's objection to its fees and expenses related to obtaining the prepetition receiver/managing member order. It should also be noted, however, that, while the Committee's strategy was creative and its novelty gave rise to material litigation costs in the chapter 11 case as a result of the United States Trustee's reasonably anticipatable response, it also appears in practice to have substantially benefitted the estate and the case. The courts who denied the United States Trustee's motion for the appointment of a trustee found Mr. Marwil to be diligently exercising his fiduciary duties. Id. at 547. At least as relevant is the fact that, by obtaining the appointment of a known quantity in Mr. Marwil (whom the Unofficial Committee put forward only after conducting a thorough search process) and by formulating the requested relief in the receiver/managing member motion so as to prevent his replacement in the crucial early stages of the anticipated chapter 11 case, the Committee ensured that a case that needed a strong central fiduciary "during a corporation's most troubled hour," Adams v. Marwil (In re Bayou Group, L.L.C.), 363 B.R. 674, 688 (S.D.N.Y.2007), aff'd 564 F.3d 541 (2d Cir.2009), would have such a person from start to finish, uninterrupted, having become better informed about the On-Shore Entities than any other non-insider. That benefit significantly exceeded the cost of litigation over the strategy's implementation, including the litigation with the United States Trustee.
Finally, the Unofficial Committee's legal research on potential claims clearly was conducted with an eye to the commencement of the bankruptcy case and its implementation by an estate fiduciary. The Committee promptly shared its research with Mr. Marwil and his counsel under a joint privilege agreement, and it was rapidly put to use in the chapter 11 case; indeed, the OnShore Entities filed complaints to avoid redemptions almost simultaneously with the filing of the chapter 11 petitions. Moreover, these claims ultimately resulted in most of the assets comprising the estate and funding the Debtors' confirmed chapter 11 plan: approximately $81.2 million of settlements and judgments, on which the Debtors have received approximately $ 56.5 million, another approximately $24.7 million being subject to bonded appeals by "redeemers." Under the circumstances, the Committee's expenses were in contemplation of, and a substantial contribution in, the case and of direct benefit to the estate, without duplication *566 of costs separately incurred by estate compensated professionals.[16]
In respect of all of the foregoing services, therefore, the Unofficial Committee's prepetition activities made a substantial contribution for purposes of Bankruptcy Code section 503(b)(3)(D).
Having established a substantial contribution, the Unofficial Committee's Motion raises one last issue, which is whether the fees of the Committee's counsel meet the remaining criteria of section 503(b)(4): that they are "reasonable ... based on the time, the nature, the extent, and the value of such services, and the cost of comparable services other than in a case under this title," and that counsel's expenses be "actual and necessary." 11 U.S.C. § 503(b)(4). These terms are similar to the terms used in Bankruptcy Code section 330 for evaluating estate-compensated professionals' fee requests, including the reference to comparable fees in non-bankruptcy matters.[17] Accordingly, with one exception, the Court's evaluation of the reasonableness of counsel fees and expenses under section 503(b)(4) should generally follow the approach used under section 330. 4 Collier on Bankruptcy ¶ 503.11[5] at 503-71.[18] The exception is that, because the professional may not know that he or she will be submitting a fee and expense request, the Court need not necessarily enforce time record requirements as strictly as with requests under section 330, id.; on the other hand, one cannot rely on a lodestar approach premised on the market-based propriety of a professional's hourly rate in relation to the hours expended if the professional does not keep meaningful time records. In any event, the exception does not apply here, because the two firms' time and expense records are consistent with such records of counsel retained under Bankruptcy Code section 327 and compensated and reimbursed under section 330.
Here, the Committee's two law firms' time and staffing (and related billing rates) generally are reasonable in light of the work counsel was asked to do, especially when one keeps in mind the relatively novel position in which the Committee found itselfacting on behalf of the investors in a Ponzi scheme to supplement the efforts of prosecutorsand the urgency of the situation, which called for a high level *567 of legal attention. The need for speed may also have kept counsel from going off on tangents.[19]
The one exception is some unnecessary duplication of effort between the two firms. Apparently KBLT & K was originally retained as local counsel, but it was soon performing a more substantive role than local counsel usually performs, without a corresponding decrease in K & L Gates' role. It is impossible to determine which firm was responsible for this; most likely, both firms were equally responsible. Therefore, each firm should have its share of the requested fees reduced by $25,000 ($50,000 being the amount that a reasonable client of the two firms in this situation would obtain as a reduction in the overall bill.) With this exception, the Motion should be granted.
Conclusion
For the foregoing reasons,[20] the Unofficial Committee's Motion is granted to the extent set forth herein, and the Committee and its counsel, in the aggregate, are allowed an administrative expense under Bankruptcy Code section 503(b)(4) of $627,829.17. Counsel for the Unofficial Committee should submit a proposed order consistent with this Memorandum of Decision.
NOTES
[1] The movants, who at one time or another were members of the Unofficial Committee, are Silvercreek Long/Short Holdings LLC ("Silvercreek"), DePauw University, 6800 Capital L.L.C./Bermuda Fund, L.P., Rembrandt & Partners/Southwind Partners, Regent University, John H. Williams, LIBOR Partners/305 Partners, and Phoenician Trading Partners.
[2] The Sonnenschein Defendants have been adjudicated to be liable for the receipt of substantial avoidable transfers from the Debtors. They have not paid or turned over those transfers to the estate and, therefore, under 11 U.S.C. § 502(d), any claim that they may have in these cases is disallowed. Consequently, the Court separately determined that they do not have party-in-interest standing. The Court also denied their motion for permissive intervention in respect of the Motion under Bankruptcy Rule 2018(a), on the basis that their interests were adequately represented by the United States Trustee and DB Structured Products, Inc.
[3] Liquidation proceedings were commenced in the Cayman Islands against Bayou off-shore entities, and the court-appointed liquidator for those entities obtained ancillary relief in the United States Bankruptcy Court for the District of Connecticut in furtherance of the Cayman Islands liquidation proceedings.
[4] Bankruptcy Code section 1102(b)(1) provides for the possibility of the appointment of the members of a prepetition committee to the official committee of unsecured creditors. Bankruptcy Rule 2007(b) provides that the bankruptcy court may find that a committee organized by unsecured creditors before the commencement of a chapter 11 case was fairly chosen for purposes of its members serving as the official committee of unsecured creditors under Bankruptcy Code section 1102 if certain criteria ensuring adequate notice and a proper record of the committee's formation meeting were met and "the organization of the committee was in all other respects fair and proper." Fed. R. Bankr.P. 2007(b).
[5] The Unofficial Committee also required that its professionals meet the "no adverse interest" and "disinterested" requirements of Bankruptcy Code sections 328(c) and 1103(b). Id. Art. VIII(1).
[6] Even the use of the word "to" instead of "in" could be read as making the movant's contribution dependent on a pre-existing case.
[7] 11 U.S.C. § 503(b)(1)(A).
[8] Two subsections of Bankruptcy Code section 503(b)(3) more clearly contemplate administrative priority status for prepetition expenses: subsection 503(b)(3)(A), pertaining to the expenses of creditors who file an involuntary case under Bankruptcy Code section 303, and subsection 503(b)(3)(E), pertaining to the expenses of a prepetition custodian superseded under Bankruptcy Code section 543. Neither of these sections, however, uses language that assists in the interpretation of subsection 503(b)(3)(D)'s use of the phrase "substantial contribution in a case under ... chapter 11." Nor does subsection 503(b)(3)(B), which clearly covers only post-petition activity, because it requires prior bankruptcy court approval, or subsection 503(b)(3)(F), which covers expenses of a member of an official committee appointed under section 1102 of the Bankruptcy Code incurred in the performance of such committee's dutiessuch a committee by its nature being a postpetition creation (although, as noted above, under Bankruptcy Code section 1102(b)(1) and Bankruptcy Rue 2007 the members of a prepetition committee may be appointed to an official committee "if such [prepetition] committee was fairly chosen and is representative of the different kinds of claims to be represented").
[9] There is no excuse, over thirty years after the enactment of the Bankruptcy Code, for lawyers practicing in bankruptcy court to continue to refer to bankruptcy cases as "proceedings." "Proceedings" are discrete types of litigated matters within the larger bankruptcy case, and the correct terminology, including section 503(b)(3)(D)'s use of the word "case," has a practical meaning.
[10] As noted above, it is clear from section 503(b)(3)(D)'s legislative history that Congress did not intend the section to be limited to pre-Bankruptcy Code practice limited to plan-related activity. S.Rep. No. 95-989, 95th Cong., 2d Sess. 67 (1978), U.S.C.C.A.N. 1978, pp. 5787, 5852-53.
[11] The issue of the applicability of sections 503(b)(3)(D) and (b)(4) to prepetition activity may arise as rarely as it does because in practice it is commonplace during pre-bankruptcy negotiations for corporate debtors to pay the reasonable fees and expenses of the professionals working for the key creditor groups with whom they are negotiating.
[12] "While the language of section 503(b)(4) does not specifically limit the professional services to those incurred in the activity for which the entity qualified for treatment under section 503(b)(3), courts have had no trouble implying such a requirement." 4 Collier on Bankruptcy ¶ 503.11[3] at XXX-XX-XX.
[13] There was no assurance that the Unofficial Committee's members would be reimbursed for their agreement to pay counsel in what was essentially a contingency case. The same lack of funds could also have hampered the conduct of the anticipated chapter 11 case; the DIP financing ameliorated that risk and increased the likelihood that Mr. Marwil's efforts in pursuing estate claims would be credible.
[14] It is unlikely that such an involuntary petition would have been denied or even opposed, given that the OnShore Entities' principals were in jail.
[15] The United States Trustee sought Mr. Marwil's replacement by a chapter 11 trustee not because of the way Mr. Marwil was performing his duties but in the belief that, as a prepetition receiver, he was not authorized under the Bankruptcy Code to continue to serve postpetition. Id.
[16] Mr. Marwil's prepetition counsel, which subsequently became the Debtor's counsel under section 327(a) of the Bankruptcy Code, has not sought payment for unpaid prepetition fees, including fees related to Committee counsel's research on avoidable transfers, perhaps because it believed it was precluded from doing so by Bankruptcy Code section 330. See Lamie v. United States Trustee, 540 U.S. at 526, 124 S. Ct. 1023.
[17] See In re Cenargo Int'l., PLC, 294 B.R. 571, 595-96 (Bankr.S.D.N.Y.2003) for a discussion of the factors to be considered under section 330 and the considerable extent of the court's discretion in determining the reasonableness of fee applications in the light of its experience with such applications and judgment pertaining to applicable billing practices. (Indeed, bankruptcy fee applications are one of the more reliable ways for law firms to discern their competitors' billing rates.)
[18] It has been noted that section 503(b)(4) also differs from section 330 in that the inquiry under section 503(b)(4) is applied in hindsight, whereas the section 330 test considers the services a reasonable lawyer would have performed knowing what he or she knew at the time. In re Granite Partners, 213 B.R. at 447. However this distinction really applies to whether there has been a substantial contribution. Id.; see also In re Financial News Network, 134 B.R. at 736-37. Once the movant has established a substantial contribution, the reasonableness of the professional's services in making that contribution should be measured by looking at what a reasonable professional would have done to achieve such a goal under the circumstances.
[19] The two firms' requested expenses were reasonable and necessary.
[20] The Unofficial Committee also sought approval of the reimbursement of its counsel's fees and expenses on the alternative basis of "common fund" doctrine. Given the Bankruptcy Code's treatment of the right to administrative expenses, including fees and costs, under section 503(b), it seems unlikely that this doctrine would apply; in any event, the Committee's alternative theory is unnecessary given the Court's ruling.
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901 F. Supp. 252 (1995)
Dorothy L. WILLIAMS, Francine G. Thomas, Carrolle E. Henley, Oddie Hazen, Amy Pickett, Lillian Garner, Leona Palmer, Donald Mimmings, Mary Pogue, George Iskerko, Helen Hall, Fatry Allen, Shirley C. Thompson, Terrice Smith, Lorene Hill, Phyllis Watkins, Mary R. Phillips, Louise Johnson, Ira M. Ervin, Leontine Ferson, Gloria L. Alexander, Gracie J. Jackson, Jack Joiner, James Snow, Corine Rozier, Lucille Jenkins, Odessa Smith, Lorene Walker, Curtis L. Bailey, and Rosa L. Numm, Plaintiffs,
v.
GENERAL MOTORS CORPORATION, Defendant.
No. 94-73609.
United States District Court, E.D. Michigan, Southern Division.
October 25, 1995.
Gary A. Benjamin, Detroit, MI, for plaintiffs.
Terence V. Page, Timothy K. McConaghy, Birmingham, MI, for defendant.
OPINION AND ORDER
FEIKENS, District Judge.
I. BACKGROUND
Plaintiffs are former hourly employees of General Motors ("GM" or "the company") who had been working at the company plant on Fort Street in Detroit until it closed in 1988. At that time, they were placed in what is known as the Job Opportunity Bank Security Program ("JOBS Program") and not laid off. The JOBS Program was negotiated between GM and the United Auto Workers ("UAW" or "the union"), which represented the plaintiffs. Plaintiffs were required to report to a "JOBS bank" located at the Fort Street Plant. The JOBS bank employee group received full pay but were not required to do productive work; they watched television, read books, worked on crafts, took classes, and participated in volunteer projects.
*253 As jobs at GM became available, employees in the JOBS bank would be called back to work; those with highest seniority would be called back first. An employee offered a fulltime position within GM could either accept it or risk termination of employment[1]. Plaintiffs had to make such a choice after the JOBS bank moved from Fort Street to the Livonia Inland Fisher Guide Plant in April of 1992. Employees in the JOBS bank were to be transferred to the Saginaw Gear and Axle Plant in Detroit when jobs became available there. On November 16, 1992, the transfer became effective.
On November 12, 1992, all JOBS bank employees[2] were called to a meeting at which they were apprised of the transfer plan. UAW representatives were present at this meeting. GM representatives from the Saginaw Gear and Axle Plant were also present. The employees were informed that jobs were available for all of them. They were told that they could choose from among the following alternatives: acceptance of employment at the Saginaw Gear and Axle Plant[3]; normal retirement (available only to employees who were eligible); "document 117 retirement", which allowed employees to remain at home and collect 85 percent of normal wages until they were eligible for full retirement (available only to employees who were within two years of full retirement; plaintiffs who elected this option became eligible for full retirement in February of 1993); or placement on unpaid leave, without benefits, with the risk of job loss. Employees who opted for employment at the Saginaw Gear and Axle Plant were required to take physicals.
Plaintiffs' age and disability discrimination complaints under the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 621 et. seq., Michigan's Elliott-Larsen Civil Rights Act, MCL § 37.2101 et seq., and the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101 et. seq., are based on claims that GM played on the fears of plaintiffs by suggesting that the jobs which they were offered on a "take it or leave it or retire" basis would require heavy work that these employees, many of whom were over 55 and/or had medical restrictions, feared they could not perform. Claiming that they believed GM would fire them if they took the production jobs and proved unable to lift heavy items, causing them to lose both their jobs and retirement benefits, each plaintiff opted for the form of retirement for which he or she was eligible.
Plaintiffs support their claims that they were "coerced" into retirement through deposition testimony in which a company presentation they witnessed at the November 12 meeting is described. Betty Williams, Director of Hourly Employment at the Gear and Axle Plant at that time, conducted the presentation. In describing the type of work at the Saginaw facility, she projected pictures of heavy axles and parts. There is testimony that she told plaintiffs that they would be required to assemble a part that would weigh at least 200 pounds. Many plaintiffs were left with the impression that they would be required to do heavy lifting[4]. There is testimony that plaintiffs were told *254 that their existing medical restrictions would not be accepted, that they would have to "rock and roll" on the job, and that any employee who did not think he or she could do the job should not take it.
GM essentially argues that plaintiffs misinterpreted the information they received at the November 12 meeting, and that in any event, all Fort Street JOBS bank employees, young and old, were treated similarly. Betty Williams stated in her affidavit that new physicals were necessary because the company could not accept medical restrictions based on physicals taken years earlier, and that the company made efforts to accommodate medical restrictions which resulted from the new physicals. Defendant points out that plaintiffs did not attempt to take physicals, did not report to the plant, or make any effort to determine if there were jobs for them within their possible restrictions.
Added to the claims of unlawful employment discrimination, plaintiffs in Count II of their complaint allege that the defendant violated the Older Workers Benefit Protection Act ("OWBPA"), 29 U.S.C. § 621, by rushing them into signing retirement agreements without allowing them to consider their decisions during the statutorily mandated time period and by not advising them to consult attorneys. Plaintiffs were given at most a day or so to decide and to inform management of their decisions. Each plaintiff accepted retirement within one day of the November 12 meeting. Plaintiffs argue that if they had been given 21 days to consider their decisions and 7 days to reconsider them, in accordance with their reading of OWBPA, they would have discovered that jobs existed at the Saginaw Plant which do not require heavy lifting, and they would have accepted such jobs. They seek recovery for economic and non-economic losses.
Nine employees signed releases of claims in connection with their retirements, and received a $10,000 voucher toward the purchase of a GM vehicle and an entitlement to a $3,000 cash payment. Twenty-one did not sign any release of any claims. Fourteen of the thirty never filed a charge of age discrimination with the Equal Employment Opportunity Commission/Michigan Department of Civil Rights ("EEOC/MDCR"). Twenty-seven never filed a charge of handicap discrimination with the EEOC/MDCR (the remaining three released their claims). On September 9, 1994, plaintiffs initiated this lawsuit.
II. ANALYSIS
The parties argue over whether plaintiffs are procedurally barred from bringing these claims. I do not find it necessary to reach this issue since I am satisfied that plaintiffs have failed to establish a genuine issue of material fact under any of their claims. Pursuant to Fed.R.Civ.P. 56(c), summary judgment for the defendant on all counts must be granted.
Because a violation of OWBPA does not trigger a substantive cause of action under ADEA, summary judgment for defendant on Count II is warranted. The relevant portions of OWBPA provide:
(f) Waiver
(1) An individual may not waive any right or claim under this chapter unless the waiver is knowing and voluntary. Except as provided in paragraph (2), a waiver may not be considered knowing and voluntary unless at a minimum-
. . . . .
(E) the individual is advised in writing to consult with an attorney prior to executing the agreement;
(F)(i) the individual is given a period of at least 21 days within which to consider the agreement; or
(ii) if a waiver is requested in connection with an exit incentive or other employment termination program offered to a group or class of employees, the individual is given a period of at least 45 days within which to consider the agreement;
(G) the agreement provides that for a period of at least 7 days following the execution of such agreement, the individual may revoke the agreement, and the agreement shall not become effective or enforceable *255 until the revocation period has expired; ....
29 U.S.C. § 626.
Putting aside the question whether defendant complied with the above provision, I do not accept plaintiffs' contention that a violation of the procedural requirements above may be extrapolated into a holding that a substantive cause of action for age discrimination exists. The statute means what it says, and it says, quite simply, that an employer must take certain steps when executing an agreement with an employee in which that employee relinquishes his or her right to press an age discrimination suit against the employer under ADEA. Assuming arguendo that OWBPA has been violated, the only conclusion that necessarily follows is that an employee who has suffered such a violation has not lost the right to press claims of age discrimination under ADEA. For purposes of simplifying the analysis only, I assume here that none of the employees effectively waived their right to an ADEA suit. Plaintiffs still bear the burden of proving that they suffered unlawful discrimination on the basis of age at the hands of GM.
Plaintiffs have not submitted evidence to sustain either a cause of action for age or disability discrimination. There has been no showing of disparate treatment; all of the Fort Street JOBS bank employees were invited to attend the November 12 meeting to hear the presentation made by Ms. Williams. All were advised of their options as JOBS bank participants under the collective bargaining agreement negotiated on their behalf by the UAW and GM. All had enjoyed the benefit of full pay without performing productive work after the Fort Street Plant closed.
GM was not obliged to continue this arrangement forever; the JOBS Program, as described in the Memoranda of Understanding in the collective bargaining agreement (see defendant's Exhibit C), provides GM with the option of placing JOBS bank employees on hiring lists for locations other than Fort Street. The agreement did not give the JOBS bank employees the right to pick and choose among jobs at GM, falling back on full pay for no work while available, albeit unattractive, jobs were offered to them.
Plaintiffs do not appear to be arguing to the contrary, for in their brief supporting their motion for summary judgment, they admit that GM could legally take the actions relating to the retirement offer if it had complied with OWBPA. But as stated, showing a violation of OWBPA does not suffice; without further evidence tending to show that GM acted with an intent to discriminate based on age or disability, plaintiffs cannot meet their burden of proof. Thus, summary judgment for defendants is appropriate on all counts.
For the above reasons, plaintiffs' motion for summary judgment is DENIED and defendant's motion for summary judgment is GRANTED.
IT IS SO ORDERED.
NOTES
[1] This program was part of collective bargaining agreements between the union and General Motors in 1984, 1987 and 1990. Defendant has provided relevant excerpts at Exhibit D to its motion for summary judgment.
[2] The term "JOBS bank employees" is used throughout this opinion to refer to the employees who reported to the Fort Street location when it was operative.
[3] There is some evidence (affidavit of Dorothy Williams, Exhibit D to plaintiffs' response to defendant's motion for summary judgment) that one "younger" employee was allowed to work for General Motors as a financial secretary at a local union. However, by itself, this fact is not significant. There is no indication that any of the "older" employees were qualified for the position of financial secretary and that they should have been considered for that position.
[4] Most of the testimony in this regard indicates that the plaintiffs believed they would have to do heavy lifting, but it is not clear what specifically they were told. Francine Thomas' deposition indicates that Williams said that an employee could expect to have to lift 30 pounds unassisted. What exactly was said with regard to how many people would be required to lift the fully assembled part is unclear; Thomas testified it was indicated that an employee might have to pick up the part, weighing over 200 pounds, with "someone else."
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619 S.W.2d 23 (1981)
Robert M. HELTON, Individually, and Helton Oil Company, a Partnership, Appellant,
v.
CITY OF BURKBURNETT, Appellee.
No. 18433.
Court of Civil Appeals of Texas, Fort Worth.
June 25, 1981.
Rehearing Denied July 23, 1981.
R. M. Helton, Wichita Falls, for appellant.
Walter Nelson, Burkburnett, Clyde Fillmore, Wichita Falls, for appellee.
OPINION
SPURLOCK, Justice.
Robert M. Helton challenges the constitutionality of Ordinance No. 375 of the City of Burkburnett. This case stems from his refusal to comply with that Ordinance. Ordinance No. 375 regulates the drilling and operation of oil wells within the city limits.
Helton refused to obtain a permit to drill an oil well prior to the commencement of drilling operations at a location designated as the "Beach Lease". The Beach Lease is located within the city limits in the southern, relatively undeveloped, section of the City of Burkburnett. The city responded to this refusal by obtaining a permanent injunction enjoining Helton from further drilling until he obtained a permit from the city as required by Ordinance No. 375.
Helton seeks to reverse this holding, asserting that Ordinance No. 375 violates the 14th Amendment of the U. S. Constitution on its face and as applied to the Beach Lease.
Helton raises two points of error, arguing that Ordinance No. 375 violates the 14th Amendment of the U. S. Constitution in that it denies him due process of law and equal protection of the law.
*24 We overrule each point of error and affirm the judgment.
Helton's primary complaint is that Ordinance No. 375 purports to provide the power to totally prohibit drilling and as such goes beyond the legitimate use of the city's police power, that it does more than merely regulate when it purports to possess the power to totally prohibit the use of the land and the underlying minerals.
The city argues that Ordinance No. 375 exists as a valid exercise of its police power. We agree.
The Ordinance regulates in the following ways: It requires a permit to drill within the city limits. It charges a permit fee of $250.00. It requires a surety bond to be filed with the city. It requires the lessee to carry a minimum amount of insurance, covering personal injury and property damage. It prohibits wells from being drilled within fifty feet and tank batteries from being located within one hundred feet of a residence, or a commercial or public structure unless a signed, notarized release is obtained in advance from the such owners. It authorizes the City Commissioners to refuse any permit to drill a well "where by reason of such particular location and the character and value of the permanent improvements already erected on or adjacent to the particular location in question, for school, hospital park civic purposes, health reasons, safety reasons, or any of them where the drilling of such wells on such particular location might be injurious or be a disadvantage to the city or it's inhabitants as a whole or to a substantial number of it's inhabitants or would not promote orderly growth and development to the city."
Comprehensive zoning has long been established as a legitimate exercise of a city's police power. Euclid v. Ambler Co., 272 U.S. 365, 47 S. Ct. 114, 71 L. Ed. 303 (1926).
In determining the constitutionality of an ordinance passed pursuant to the police power of the city it must be borne in mind that the presumptions favor the ordinance. For a challenge to be successful the ordinance must clearly appear to be unreasonable and arbitrary. Zahn v. Bd. of Public Works, 274 U.S. 325, 47 S. Ct. 594, 71 L. Ed. 1074 (1927). In making this determination this court is not entitled to substitute its judgment for that of the city and its officers. Zahn v. Bd. of Public Works, supra.
Helton argues that Ordinance No. 375 is invalid in that it presumes to grant the city the authority to take away or impair his vested right to reach the oil underlying his property. However, the deprivation of individual rights cannot prevent the operation of the police power, once it is shown that its exercise is within the meaning of due process of law. Hadacheck v. Los Angeles, 239 U.S. 394, 36 S. Ct. 143, 60 L. Ed. 348 (1915). Nor do we conclude that Ordinance No. 375 works a deprivation of vested property rights. It neither prohibits the drilling of oil and gas wells nor their maintenance and operation. The Ordinance merely provides rules facilitating the orderly and harmonious development of both oil exploration and city growth.
We find that Ordinance No. 375 is neither unreasonable, arbitrary, nor discriminatory upon its face or as applied. Its enforcement does not deprive Helton of his property rights without due process of law.
Nor does the challenged Ordinance deny Helton equal protection of the law by creating a class of land owners oil lease owners regulated apart from other land owners. This Ordinance applies to all persons similarly situated within the city limits. As stated in 56 Am.Jur.2d, Classification § 365 (1971):
"The equal protection clause of the Fourteenth Amendment does not prohibit a municipality with properly delegated powers from enacting ordinances based on reasonable classification of the objects of the legislation or of the persons whom it affects. Ordinances will not be regarded as special and class legislative merely because they affect one class and not another, provided they affect all members of the same class alike; if a classification in municipal ordinances is reasonable, including all that may fairly be said to be similarly situated and affecting *25 alike all of those, there is no forbidden discrimination. Thus, specific municipal regulations for one kind of business, which may be necessary for the protection of the public, can never be the just ground of complaint because like restrictions are not imposed upon other businesses of a different kind...."
We overrule each of Helton's points of error and affirm the judgment of the trial court.
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619 S.W.2d 584 (1981)
In re I. B.
No. 9291.
Court of Civil Appeals of Texas, Amarillo.
June 24, 1981.
Rehearing Denied July 22, 1981.
*585 West Texas Legal Services, K. A., Tony Wright, Lubbock, for appellant.
John T. Montford, Criminal Dist. Atty., Lubbock, for appellee.
DODSON, Justice.
I.B., a juvenile, appeals from an order of the juvenile court waiving its jurisdiction and transferring him to the district court for criminal proceedings. Finding that I.B. does not present cause for disturbing the order, we affirm.
The criminal district attorney of Lubbock County filed a petition in the district court, sitting as a juvenile court, requesting that the juvenile court waive its jurisdiction over I.B. and that I.B. be transferred to a district court of Lubbock County, Texas, for criminal proceedings pursuant to Tex.Fam. Code Ann. § 54.02 (Vernon 1975). In its petition, the State alleged, among other things, that on or about 29 July 1980, in Lubbock County, Texas, I.B. violated Texas Penal Code Ann. § 19.02 (Vernon 1974), a penal law of the grade of felony, in that I.B. intentionally and knowingly caused the death of an individual, E.G., by shooting him with a gun.
The juvenile court ordered the Lubbock County Chief Juvenile Probation Officer to obtain and prepare a complete diagnostic study, social evaluation, and full investigation of I.B., his circumstances, and the circumstances of the offense. After a hearing on the petition, the juvenile court entered its order waiving jurisdiction over I.B. and transferring him to the district court for criminal proceedings.
I.B. brings six points of error. By his first and second points, he maintains that the order should be reversed because the court did not obtain a full investigation into the circumstances of the alleged offense. We disagree.
In pertinent part, section 54.02 of the Texas Family Code Annotated (Vernon 1975) states:
(a) The juvenile court may waive its exclusive original jurisdiction and transfer a child to the appropriate district court or criminal district court for criminal proceedings if:
* * * * * *
(3) after full investigation and hearing the juvenile court determines that *586 because of the seriousness of the offense or the background of the child the welfare of the community requires criminal proceedings.
* * * * * *
(d) Prior to the hearing, the juvenile court shall order and obtain a complete diagnostic study, social evaluation, and full investigation of the child, his circumstances, and the circumstances of the alleged offense (emphasis added).
* * * * * *
I.B. judicially admits that the juvenile court ordered a full investigation of the circumstances of the alleged offense and that an investigation was conducted. However, he contends that the court did not obtain a full investigation of the circumstances of the alleged offense because, at the transfer hearing, "only very small parts and only those parts of it [the investigation] prejudicial to the child were presented to the court."
In support of his position, I.B. maintains that the court did not obtain a "full" investigation of circumstances of the alleged offense because the person who prepared and presented the report for the Lubbock County Juvenile Probation office admitted that neither she nor anyone in the Juvenile Probation office made such an investigation, and that she relied on the investigations of the Lubbock City Police and Criminal District Attorney's office. He further argues that the investigation was incomplete because it failed to resolve alleged conflicts in the statements of two witnesses, showed that several persons other than I.B. had motives to kill the deceased, and, in general, failed to eliminate all of the alleged "possible suspects" in the case.
To accede to I.B.'s argument would sanction an adjudicatory hearing to determine the juvenile's guilt or innocence. That is not the purpose of the proceeding. The purpose of the waiver and transfer proceeding authorized in section 54.02 is to establish whether the juvenile's and society's best interests would be served by maintaining juvenile custody of the child or by transferring him to a criminal district court for adult proceedings. In re Honsaker, 539 S.W.2d 198, 201 (Tex.Civ.App. Dallas 1976, writ ref'd n. r. e.). In this proceeding, it is not the function of the juvenile court to determine the guilt or innocence of the juvenile on the offense alleged against him. As stated in Honsaker:
The burden is not upon the district attorney in such a case to establish the guilt of a child but only to present evidence which will allow the juvenile court to exercise its discretion in making the transfer. Obviously, there must not be a full trial on the merits during these proceedings because double jeopardy will attach. (Emphasis added). Id.
The phrase "full investigation of the circumstances of the offense" is not defined in section 54.02. We believe that for good reasons the legislature did not attempt to define the phrase. Of necessity, any inquiry into the circumstances of an offense must be one of degree. It is a matter of common knowledge that the course and scope of an investigation will vary according to the circumstances surrounding the event.
The primary function of the investigation is to discover evidence of probative force, whether for or against the juvenile, for presentation at the hearing. The juvenile can, of course, test the fullness of the investigation made. If tested, the matter of the completeness of the investigation is one for initial determination by the trial court which ordered it.
Here, I.B. tested the fullness of the investigation made, touching upon all of the matters he claimed were omitted from the investigation. The court found that it had obtained a full investigation. Thus, under the record before us, we cannot say as a matter of law that the court erred in overruling I.B.'s objections to the investigation made and finding that a full investigation was obtained. Accordingly, we overrule I.B.'s first and second points.
By his third, fourth and fifth points of error, I.B. challenges the legal and *587 factual sufficiency of the evidence to support the juvenile court's finding that the offense was committed in a premeditated manner. In determining whether the evidence is legally sufficient to support the court's finding of premeditation, we must review the record for any probative evidence to support the finding and ignore all contrary evidence. Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965). The evidence is factually sufficient to support the finding if, from an examination of the entire record, there is some probative evidence to support the finding and if, in light of all the evidence, the finding is not manifestly wrong or unjust. Id.
In this instance, the evidence and reasonable inferences therefrom show that, at the time of the occurrence, the victim was seated on his motorcycle. The assailant approached him and shot him four times with apparent accuracy in the right side of the face. The victim fell off the left side of his motorcycle to the pavement. His body was discovered on the pavement, next to his motorcycle, with both feet on the motorcycle. There is no evidence of any weapon on the victim's body or in the nearby vicinity. Because a premeditated design can legally be formulated in an instant, see Ohrlich v. Texas, 162 Tex. Crim. 502, 287 S.W.2d 478, 479-80 (1956); Stanley v. Texas, 150 Tex. Crim. 173, 199 S.W.2d 518 (1947), we conclude that the evidence and reasonable inferences set forth above are legally sufficient to permit the inference that the alleged offense was committed in an "aggressive and premeditated manner," as that term is used in section 54.02(f)(2). Furthermore, we have reviewed the evidence under the appropriate legal standard set forth above and conclude that the evidence is factually sufficient to support the challenged finding. Accordingly, we overrule the third, fourth and fifth points of error.
By his sixth point of error, I.B. maintains that the transfer order should be reversed because the juvenile court entered "a `form' order without any statement of the factual reasons for waiver, as required by Family Code § 54.02(h)." Section 54.02(h) of the Texas Family Code provides, in part:
(h) If the juvenile court waives jurisdiction, it shall state specifically in the order its reasons for waiver and certify its action, including the written order and findings of the court, and transfer the child to the appropriate court for criminal proceedings. (Emphasis added).
* * * * * *
This provision does not preclude "form" orders and does not require a statement of the factual reasons for waiver. The order in this case lists the six "considerations" of section 54.02(f) as findings of the court. In addition to findings as to I.B.'s age and address and the nature of the alleged offense, the court order states:
[A]fter considering all of the matters set out in Section 54.02(f) of the Texas Family Code and after making the specific findings set out herein, for the reasons set out in this Order, this Court should waive its exclusive original jurisdiction and transfer the child to the appropriate district court for criminal proceedings.
In support of his position, I.B. contends that the six findings of the court are not sufficient to comply with section 54.02(h) and maintains that the court is required to make other, specific evidentiary findings in support of its order. We disagree. It is not reversible error for the court to "parrot" the considerations set forth in section 54.02(f) as the "reasons" for the transfer, so long as those reasons have evidentiary support. In re B. Y., 585 S.W.2d 349, 351 (Tex.Civ.App. El Paso 1979, no writ); see, e. g., Q____ V____ v. Texas, 564 S.W.2d 781, 784 (Tex.Civ.App. San Antonio 1978, writ ref'd n. r. e.); In re Honsaker, 539 S.W.2d at 200; In re W. R. M., 534 S.W.2d 178, 181-82 (Tex.Civ.App. Eastland 1976, no writ); D. L. C. v. Texas, 533 S.W.2d 157, 159 (Tex.Civ.App. Austin 1976, no writ).
In support of his contention that these findings are insufficient, I.B. refers us to the Texarkana Court's holding in In re J. R. C., 522 S.W.2d 579 (Tex.Civ.App. Texarkana 1975, writ ref'd n. r. e.). In that *588 case, the court reviewed an order for transfer which utterly failed to show that the juvenile court considered any of the matters enumerated in section 54.02(f). Id. at 582. At most, the court only considered the sophistication and maturity of the child. Id. We agree with the Austin Court's observation that the order in J. R. C. was "patently inadequate." D. L. C. v. Texas, 533 S.W.2d at 159. However, such is not the case here and we conclude that the court adequately specified its reasons for ordering the transfer in accordance with section 54.02(h).
Under the sixth point, I.B. further maintains that the court committed reversible error by entering a "form" order. By this contention, he says, in essence, that the court rendered its order pro forma without carefully considering the evidence in the record. We disagree. The substantive content of the order controls over its form. Furthermore, from our review of the record, we are convinced that the judge made a carefully considered determination and did not sign and render the order pro forma.
In summary, we overrule I.B.'s six points of error and affirm the juvenile court's order.
ON MOTION FOR REHEARING
In his motion for rehearing, I.B. requests us to make the immaterial and evidentiary finding that one of the witnesses to the incident in question was lying. We are not required to make either immaterial or evidentiary findings of fact. See Construction and Gen'l Labor Union v. Stephenson, 148 Tex. 434, 225 S.W.2d 958, 963 (1950); Dahse v. National City Bank of Waco, 234 S.W.2d 102, 104 (Tex.Civ.App. Waco 1950, writ ref'd n. r. e.). Furthermore, we have considered all of the matters raised in I.B.'s Motion for Rehearing and conclude that it should be overruled.
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431 B.R. 649 (2010)
In re DAUFUSKIE ISLAND PROPERTIES, LLC, Debtor.
Carolina Shores, LLC, Plaintiff,
v.
William R. Dixon, Jr.; and Robert C. Onorato, in his capacity as Chapter 11 Trustee for the Estate of Daufuskie Island Properties, LLC, Defendant.
Bankruptcy No. 09-00389-JW. Adversary No. 09-80134-JW.
United States Bankruptcy Court, D. South Carolina.
February 25, 2010.
*650 Daufuskie Island Properties, LLC, Hilton Head Isla, SC, pro se.
Barbara George Barton, Columbia, SC, for Plaintiff.
Frederick M. Adler, Adler Law Firm, LLC, Pawleys Island, SC, Lindsey W. Cooper, Jr., The Law Offices of L.W. Cooper Jr., Charleston, SC, for Defendants/Cross Defendant/Cross-Claimant.
T. Eugene Allen, III, Nexsen Pruet, LLC, Columbia, SC, for Defendants/Trustee.
Julio E. Mendoza, Jr., Nexsen Pruet, LLC, Columbia, SC, for Trustee.
Robert C. Onorato, Columbia, SC, pro se.
ORDER GRANTING CAROLINA SHORES' MOTION FOR PARTIAL SUMMARY JUDGMENT
JOHN E. WAITES, Bankruptcy Judge.
This matter comes before the Court on a Motion for Partial Summary Judgment ("Motion") filed by Carolina Shores, LLC ("Carolina Shores"). Robert C. Onorato, as Trustee for Daufuskie Island Properties, LLC ("Trustee"), filed a response supporting the Motion, and William R. Dixon, Jr. ("Dixon") filed a response in opposition. This Court has jurisdiction over this proceeding pursuant to 28 U.S.C. §§ 1334 and 157. Based on the parties' pleadings and presentations to the Court, it appears that the following facts are undisputed.
UNDISPUTED FACTS
1. In 2002, Daufuskie Island Properties, LLC ("Debtor") was created for the purpose of purchasing, owning, and operating certain property located on Daufuskie Island, South Carolina. Dixon and his wife are the two sole members of Debtor.
2. At or around the same time, Carolina Shores was created as an investment vehicle in order to raise capital to be lent *651 to Debtor for the purchase of the property on Daufuskie Island.[1]
3. On or about May or June of 2002, and as evidenced by deeds recorded in June 4, 2002, in Beaufort County, Debtor purchased certain property on Daufuskie Island (the "Property").
4. At the time Debtor purchased the Property, it assumed obligations under two mortgages, both in favor of Club Financial Corp ("CFC"). The first mortgage, securing a note in the principal amount of $18,000,000, was originally recorded on May 28, 2002, and subsequently amended and restated and recorded on June 4, 2002, in Beaufort County (the "CFC First Mortgage").
5. The second mortgage (the "CFC Second Mortgage") secured a note in the principal amount of $20,000,000 and was expressly subordinate to the CFC First Mortgage by its terms. The CFC Second Mortgage was recorded on May 29, 2002, in Beaufort County.
6. On May 14, 2002, Debtor executed a note in favor of Carolina Shores (the "CS Note") in the principal amount of $12,700,000, plus interest and a participation interest as specified by its terms, with a maturity date of December 31, 2032. The CS Note provides that it "is secured by a second mortgage on the Property."
7. In order to secure the CS Note, the CFC Second Mortgage was assigned to Carolina Shores ("CS Assignment"). The CS Assignment and Debtor's assumption of the CFC Second Mortgage ("Debtor Assumption") were recorded in Beaufort County on June 4, 2002.
8. On the same day as the CS Assignment, Carolina Shores entered into a subordination agreement with Debtor and CFC ("CFC Subordination Agreement"), whereby Carolina Shores expressly agreed to subordinate the CFC Second Mortgage to the CFC First Mortgage "in consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged by all parties." Carolina Shores does not dispute the validity of the CFC Subordination Agreement, which was duly recorded and executed with exchange of recited consideration.
9. The CFC Second Mortgage, CS Assignment, and Debtor Assumption (collectively referred to as the "CS Mortgage") serve as security for the CS Note and grant Carolina Shores a security interest in a portion of the Property.
10. The CS Note provides:
Source of Interest and Principal Payments. Payment of Stated Interest, Participation Interest and Principal Amount shall be required to be paid only from Cash Available From Operations and Cash Available From Refinance or Sale. In the event that there is insufficient Cash Available From Operations or Cash Available From Refinance or Sale to make the payments of Stated Interest, the shortfall shall accrue and shall be added monthly to the Principal Amount.
*652 11. The terms of the CS Note provide for a 12% Stated Interest rate and a 30% Participation Interest. Under the CS Note, Carolina Shores is entitled to Participation Interest to the extent Cash Available from Operations or Cash Available from Refinance or Sale exceeds payments of the principal amount and stated interest.
12. "Cash Available From Operations" is defined as:
Gross cash receipts from operations of the [Debtor], less all operating expenses of the [Debtor], including, but not limited to, property management fees, operating costs of [Carolina Shores], the Asset Management Allowance, capital expenditures, reasonable reserves, and payments required on the Seller's Note or on any other loans which the [Debtor] may enter into in connection with the operation, development or refinance of the Property, but excluding Debt Service paid to [Carolina Shores]. The calculation of Cash Available From Operations shall include any net proceeds the [Debtor] receives from the sale of club memberships and the receipt of dues from club members.
13. "Cash Available From Refinance or Sale" is defined as:
Funds received by the [Debtor] from a refinance or sale of any or all of the Property, less any principal or interest payments or expenses the [Debtor] is then required to pay including real estate commissions or fees, but excluding Debt Service to [Carolina Shores], and less reasonable reserves.
14. The CS Note further provides: "[Debtor] shall not distribute any Cash Available from Operations or Cash Available From Refinance or Sale to any manager or member of the [Debtor] unless and until all required payments of Principal Amount and Stated Interest under this Note, which are then due and payable, have been paid."
15. Pursuant to the CS Note, upon default or upon bankruptcy filing by Debtor, Carolina Shores may "declare the entire Note immediately due and payable."
16. The CFC First Mortgage was satisfied on June 12, 2007, the satisfaction of which was recorded in Beaufort County on June 13, 2007.
17. Some time after the execution of the CS Note and CS Mortgage, Dixon executed a promissory note in his favor to evidence a loan from Dixon to Debtor in the principal amount of $30,000,000.00 ("Dixon Note"). The Dixon Note is dated June 1, 2002.
18. In April 2008, Debtor (through Dixon as a Member of Debtor) executed a Mortgage and Security Agreement in favor of Dixon,[2] recorded on April 23, 2008, in Beaufort County ("Dixon Mortgage"). The Dixon Mortgage indicates that it secures a $28,000,000 loan evidenced by "promissory notes delivered to [Dixon] from [Debtor]," and it encumbers all of the property that the CS Mortgage encumbers, as well as several parcels that the CS Mortgage does not encumber.
19. On January 20, 2009, Debtor filed a petition under Chapter 11 of the Bankruptcy Code.
20. On March 30, 2009, Carolina Shores filed a secured proof of claim in the amount of $27,750,128.51.
21. On March 30, 2009, Dixon filed a proof of claim in the amount of $34,692,660.58, subsequently amended on January 6, 2010 to claim the amount of *653 $92,698,033.58. Of the amended amount, Dixon claims that $33,709,887.24 is secured, with the remaining amount being an unsecured claim.
22. On August 21, 2009, Carolina Shores filed this adversary proceeding against Dixon and the Trustee seeking, among other relief, a declaratory judgment from this Court that the CS Mortgage has priority over the Dixon Mortgage.
23. On September 8, 2008, Debtor borrowed $4,000,000.00 from AFG, LLC ("AFG"), secured by a mortgage encumbering the same property as the CS Mortgage. Carolina Shores entered into a subordination agreement with AFG (the "AFG Subordination Agreement"). The AFG Subordination Agreement subordinates the CS Mortgage to that of AFG and states that it is "for good and valuable consideration, the receipt, adequacy and sufficiency of which is hereby acknowledged." There is no mention in the AFG Subordination Agreement of the Dixon Mortgage or any priority of mortgage as between the Dixon Mortgage and the CS Mortgage.
24. There is no recorded subordination agreement between Dixon and Carolina Shores.
CONCLUSIONS OF LAW
I. Standard of Review
Federal Rule of Civil Procedure 56(c), made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, provides that summary judgment shall be granted "if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Summary judgment is a favored mechanism "to secure the `just, speedy and inexpensive determination' of a case." In re Hovis, 325 B.R. 158, 163 (Bankr.D.S.C. 2005) (quoting Thompson Everett, Inc. v. Nat'l Cable Adver., L.P., 57 F.3d 1317, 1322-23 (4th Cir.1995)).
When a motion for summary judgment is filed, the Court does not weigh the evidence but determines if there is a genuine issue for trial. Listak v. Centennial Life Ins. Co., 977 F. Supp. 739, 743 (D.S.C. 1997) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 2511, 91 L. Ed. 2d 202 (1986)). Regardless of whether a movant "may ultimately be responsible for proof and persuasion, the party seeking summary judgment bears an initial burden of demonstrating the absence of a genuine issue of material fact." Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 522 (4th Cir. 2003).
Once a moving party has made an initial showing that there is no genuine issue of material fact, the burden then shifts to the non-moving party to go beyond the pleadings and set forth affidavits, depositions, answers to interrogatories or admissions to show specific facts indicating a genuine issue for trial. Campbell v. Capital One Bank (In re Broughton), C/A No. 99-06953-W, Adv. Pro. No. 00-80143-W, 2001 WL 1806983 at *2 (Bankr.D.S.C. Mar. 21, 2001).
II. Arguments of the Parties
Carolina Shores moves for summary judgment with respect to its first cause of action, which seeks a declaratory judgment as to the priority of secured claims of Dixon and Carolina Shores. Carolina Shores first asserts the CS Mortgage was recorded prior to the Dixon Mortgage, and pursuant to S.C.Code Ann. § 30-7-10 which determines priority according to the time of filing for record, the CS Mortgage has priority over the Dixon Mortgage. Secondly, Carolina Shores argues there is no valid subordination agreement which *654 subordinates the CS Mortgage to the Dixon Mortgage.
Dixon does not contest either point made by Carolina Shores; instead, Dixon argues that the CS Note does not evidence a bona fide debt but an equity investment, and consequently, the CS Mortgage is a nullity and cannot have priority over Dixon's mortgage.
In its reply, Carolina Shores initially argues that Dixon should not be able to raise the new issue of reclassifying the CS Note as an equity investment in his response to Carolina Shores' motion. Furthermore, Carolina Shores asserts that Dixon is estopped from raising this argument because he signed the proof of claim submitted by Carolina Shores in the underlying bankruptcy case, which identified the basis of the claim as "money loaned plus interest," which is "secured by a lien on the property;" because Dixon failed to deny the validity of the CS Mortgage in his Amended Answer; and because the Dixon Mortgage acknowledges the CS Mortgage as an existing lien on the Property. Carolina Shores also argues that the CS Note evidences a bona fide debt, and that there is no legal support for Dixon's conclusion that a reclassification would nullify the CS Mortgage.
III. Legal Analysis
Dixon does not contest Carolina Shores' assertion that there is no valid subordination agreement that subordinates the CS Mortgage to the Dixon Mortgage. Dixon also acknowledges that South Carolina is a "race notice" jurisdiction and under the priority rule of S.C.Code Ann. § 30-7-10, the CS Mortgage would take priority over the Dixon Mortgage because it was filed first. Therefore, the issue before the Court is whether the Dixon Mortgage, regardless of the order of the filing, has priority because the CS Mortgage secures an equity investment rather than a bona fide debt.[3]
A. Recharacterization of Claim
The Fourth Circuit has recognized that a bankruptcy court's power to recharacterize a claim as an equity contribution is "essential to the implementation of the Code's mandate that creditors have a higher priority in bankruptcy than those with an equity interest." Fairchild Dormer GmbH v. Official Comm. of Unsecured (In re Dornier Aviation (N. Am.), Inc.), 453 F.3d 225, 233 (4th Cir.2006). The factors a court should consider in determining whether to recharacterize a claim include:
(1) the names given to the instruments, if any, evidencing the indebtedness; (2) the presence or absence of a fixed maturity date and schedule of payments; (3) the presence or absence of a fixed rate of interest and interest payments; (4) the source of repayments; (5) the adequacy or inadequacy of capitalization; (6) the identity of interest between the creditor and the stockholder; (7) the security, if any, for the advances; (8) the corporation's ability to obtain financing from outside lending institutions; (9) the extent to which the advances were subordinated to the claims of outside creditors; (10) the extent to which the advances were used to acquire capital assets; and (11) the presence or absence of a sinking fund to provide repayments.
Id. at 233-34 (citing Bayer Corp. v. Masco-Tech, Inc. (In re AutoStyle Plastics, Inc.), *655 269 F.3d 726, 749-50 (6th Cir.2001)). The eleven-factor inquiry "var[ies] in application from case to case" and "[n]one of these factors is dispositive;" rather, the significance of each factor depends upon the circumstances. Dornier, 453 F.3d at 234 (internal citations omitted). Furthermore, the factors "are aimed at determining the intent of the parties at the time they entered into the loan transaction, which is the overarching inquiry in determining whether the true character of an investment is either a loan or an equity contribution." Vieira v. AGM II, LLC (In re Worldwide Wholesale Lumber, Inc.), 372 B.R. 796, 811 (Bankr.D.S.C.2007).
B. Application of the Factors
Carolina Shores argues that a consideration of the factors weighs in its favor. The Court agrees. First, the CS Note was executed to evidence the indebtedness to Carolina Shores. As this Court has previously found, "[t]he issuance of a... note is indicative of a bona fide indebtedness." In re Ail. Littleneck Clamfarms, Inc., 211 B.R. 827, 834 (Bankr.D.S.C.1997). Additionally, although the CS Note does not provide for a schedule for payments, it does fix a maturity date of December 31, 2032, at a fixed rate of interest of 12%.
With respect to the source of repayments, the CS Note provides that payment is to be paid from Cash Available From Operations and Cash Available From Refinance or Sale. While the Court has noted that "[i]f repayment is possible only out of corporate earnings, the transaction has the appearance of a contribution of equity capital," Carolina Shores' expectation of repayment under the CS Note did not depend "solely on the success of the borrower's business." Id. at 835; Drake v. Frankling Equip. Co. (In re Franklin Equip. Co.), 418 B.R. 176, 196 (E.D.Va.2009). Repayment to Carolina Shores was not purely speculative as Dixon asserts; rather, the CS Note provides for payment upon the maturity date or upon default or liquidation from the sale of the property. The fact that repayment was effectively and contemporaneously secured by a lien on the Property weighs in favor of the CS Note constituting debt. Drake, 418 B.R. at 196 ("All loans to a commercial borrower are initiated with the expectation they will be repaid from the earnings of the borrower, with the collateral securing the loan serving as a secondary source of repayment should earnings be insufficient to regularly pay the indebtedness. Even if the Debtor could only repay the ... Note by surrendering the collateral does not mean the... Note was not a loan."). In this case, the CS Note clearly provides that the Property would serve as collateral securing Carolina Shores' right to repayment, and that repayment would be made upon the refinance or sale of the Property.
Additionally, despite any argument by Dixon that the Debtor was inadequately capitalized, Carolina Shores' transaction with the Debtor consisted of a one-time, sum-certain loan as evidenced by the CS Note. Carolina Shores did not provide continued capitalization to keep Debtor's business afloat.[4] The transaction also appears to be more consistent with a loan because Carolina Shores does not have any formal ownership interest in the Debtor, and therefore, there is no connection between *656 any ownership interest and the amount of the loan. See Atl. Littleneck Clamfarms, 211 B.R. at 836 ("If advances are made by stockholders in proportion to their respective stock ownership, an equity capital contribution is indicated.").
The CS Note also clearly provides that it is secured by a second mortgage on the Property; thus, the presence of security for repayment indicates that the CS Note evidenced a debt and not equity. The Court further agrees with Carolina Shores that it appears that financing was available from other entities since Debtor obtained financing from CFC in its initial acquisition of the Property. See id. at 837 ("If a corporation is able to borrow funds from outside sources at the time the transaction is made, the transaction has the appearance of bona fide indebtedness."). The extent to which the CS Note was subordinated to outside creditors' claims similarly does not weigh in Dixon's favor. While the CS Mortgage was an assignment of an existing second mortgage on the Property, subordinate to the CFC First Mortgage, the CS Mortgage moved into first lien position once the CFC First Mortgage was satisfied. Thereafter, the CS Mortgage was subordinated only to the mortgage of AFG by a subordination agreement in exchange for consideration. Although the CS Note provides for payment out of cash flow, it also provides for payment upon refinance or sale of the Property, which does not require payment to other creditors before payment to Carolina Shores.
The final two factors do not appear to weigh heavily in either direction. Pursuant to the PPM and Carolina Shores Memo, the money loaned from Carolina Shores was intended to provide partial funding for the purchase of the Property, for which Carolina Shores was granted a security interest, and to provide for operating expenditures and operational contingencies. Therefore, while the loan was used in part to acquire capital assets, it was also used to meet the daily operating needs of the Debtor. See Drake, 418 B.R. at 200 (quoting AutoStyle Plastics, 269 F.3d at 752) ("Use of advances to meet the daily operating needs of the corporation, rather than to purchase capital assets, is indicative of a bona fide indebtedness."). Finally, there is no dispute that Debtor did not have a sinking fund for repayment of the CS Note. Nevertheless, it has been found to be unusual "where the borrower is a smaller, non-publicly traded entity" for a lender to require the establishment of a sinking fund. Drake, 418 B.R. at 200. The "pledging of collateral for repayment of the [CS Note] by the Debtor also mitigates the absence of a sinking fund." Id. at 200-01.
The Court acknowledges that a few aspects of the CS Note might suggest a capital contribution was made, such as the participation interest after the debt was paid; however, after fully considering the Dornier factors and the circumstances of the transaction, the Court concludes that the CS Note is more consistent with a loan.
Aside from an application of the eleven factors, the Court cannot agree with Dixon's conclusion that even if a reclassification of the CS Note as equity was warranted, it would nullify the CS Mortgage. In his response to Carolina Shores' Motion, Dixon cites McCaughrin & Co. v. Williams, 15 S.C. 505 (1881) for the premise that such a reclassification would render the CS Mortgage a nullity. The McCaughrin court found that "where the mortgage does not undertake within itself to specify and reasonably ascertain the *657 debt, that debt must be fixed elsewhere, because the mortgage is executed for the sole purpose of securing the debt, and, therefore, when there is nothing fixing the debt, the mortgage is a nullity." Id. However, the Court finds the McCaughrin case is distinguishable because it involved a mortgage that was executed without consideration as there was no evidence of any indebtedness prior to the execution of the mortgage, and the mortgage itself did not specify any debt. In the present case, the CS Mortgage secures the debt fixed by the CS Note. Accordingly, the Court is not persuaded that even if a consideration of the Dornier factors merited a reclassification of the CS Note that the CS Mortgage would be rendered void.
IV. Conclusion
Based on the foregoing, the Court finds that reclassification of the CS Note is not warranted, and since there is no dispute regarding the law regarding priority of mortgages or the order of the recording of the mortgages, the CS Mortgage has priority over the Dixon Mortgage. Because the Court finds that no genuine issue of material fact has been presented, summary judgment is appropriate, and the Motion is granted.
AND IT IS SO ORDERED.
JUDGMENT
Based upon the undisputed facts and conclusions of law recited in the attached Order of the Court, the Court grants the Motion for Partial Summary Judgment filed by Carolina Shores, LLC ("Carolina Shores"), and finds that the mortgage of Carolina Shores has priority over the mortgage of Defendant William R. Dixon, Jr.
NOTES
[1] An August 2, 2002 memorandum authored by Dixon ("Carolina Shores Memo") describes the creation of Carolina Shores with the purpose of "[f]inancing for the purchase and ongoing operation and development of the property." In a Private Placement Memorandum dated July 22, 2002 ("PPM"), Carolina Shores is described as having the purpose of "pay[ing] a portion of the $22,000,000 effective purchase price of the Property, to provide reserves for certain projected operating and capital expenditures, to provide a substantial additional reserve for operational contingencies and capital opportunities and to pay the costs of this offering."
[2] The Trustee filed Adversary Proceeding No. 09-80120 against Dixon on August 5, 2009, to avoid the Dixon Mortgage as a preferential transfer. That action is currently pending.
[3] The Court rejects Carolina Shores' estoppel arguments on the basis that Dixon filed Carolina Shores' proof of claim in his capacity as manager, rather than personally, and on the basis that Dixon's present arguments do not dispute the existence of the previously recorded CS Mortgage, but instead, the priority of Carolina Shores' claim.
[4] The Court notes that other lenders, such as AFG, did provide ongoing capital to the Debtor during this time.
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704 A.2d 785 (1997)
LAKE MOREY INN GOLF RESORT, Limited Partnership,
v.
TOWN OF FAIRLEE.
No. 96-435.
Supreme Court of Vermont.
November 7, 1997.
*786 Elizabeth A. Glynn of Ryan Smith & Carbine, Ltd., Rutland, for plaintiff-appellee.
David A. Otterman of Otterman and Allen, P.C., Barre, for defendant-appellant.
Before AMESTOY, C.J., and GIBSON, DOOLEY, MORSE and JOHNSON, JJ.
GIBSON, Justice.
The Town of Fairlee appeals a State Board of Appraisers decision that valued a 164-room resort and conference center, owned by the Lake Morey Inn Golf Resort, at $3,275,000. The Town contends that (1) the market data approach is the best method to determine the value of the property, and the Board erred in rejecting the Town's comparables; (2) the Board improperly relied on the cost approach as the sole method to value the property; and (3) the Board's decision was not supported by adequate findings of fact. We hold that the method used by the Board to value the property was proper and supported by adequate findings of fact; we therefore affirm.
On December 28, 1992, the taxpayer purchased the subject property for $5,454,500 from Avery Inns of Vermont, Inc. The property is located on a 6.8-acre parcel of land on Lake Morey in the Town of Fairlee. On April 1, 1994, the Town assessed the property at a value of $5,525,100, and the taxpayer appealed the assessment to the Board of Civil Authority (BCA). When the BCA upheld the assessment, the taxpayer appealed to the Board of Appraisers.[*]
At the Board hearing, both the taxpayer's and the Town's appraisers presented evidence regarding the fair market value (FMV) of the property. The taxpayer's appraiser used three different valuation methods to arrive at his final figure: the market data, the income, and the cost approach. The three methods yielded the following values, respectively: $2,706,000, $2,932,000, and $2,798,400. The appraiser then reconciled the three and arrived at a final figure of $2,835,000 for the property, or approximately $17,000 per room.
The Town's appraiser used two methods to value the subject property: the market data and the income approach. The market data approach produced a value of $5,100,000, while the income approach generated a value of $4,400,000. Reconciling these two figures, the Town's appraiser arrived at a FMV of $5,000,000, or approximately $30,000 per room.
The Board, however, found numerous problems with both the Town's and the taxpayer's analyses. The Board determined that the market data evidence of both parties was weak and that the Town's analysis had a "significant error in reasoning." In addition, the Board found the income approaches of both parties to be weak and flawed. The *787 Board noted that the taxpayer's analysis lacked probative value and that the Town's original analysis and its amended discounted-cash-flow analysis, which had been submitted prior to the hearing, contained numerous mathematical errors, omissions, and flawed assumptions. Finally, the Board found the taxpayer's cost approach to be mathematically flawed. While the Board noted that the original cost value of the property, as calculated by the taxpayer's appraiser, was sound, the Board found the appropriate physical-and-functional-depreciation factor to be 45%, rather than the 49.4% used by the taxpayer.
Because of the errors in both the taxpayer's and Town's methodologies, the Board discounted the parties' analyses. Instead, the Board conducted its own cost-approach analysis and arrived at a value of $3,282,100 for the property. In addition, the Board performed a market data analysis using data provided by both the taxpayer and the Town, arriving at a value of about $20,000 per room, or a total FMV of $3,280,000. Based on its review of the evidence, the Board determined that the property's value fell within a range of $3,250,000 to $3,300,000, and concluded that the FMV of the property was $3,275,000. The Town appealed.
The Board's decision will be deemed presumptively correct and its findings will be conclusive if they are supported by the evidence. See Woolen Mill Assocs. v. City of Winooski, 162 Vt. 461, 464, 648 A.2d 860, 863 (1994); see also In re Southview Assocs., 153 Vt. 171, 178, 569 A.2d 501, 504 (1989) ("[W]e must defer to the Board when its findings are supported even if the record contains contradictory evidence and when its conclusions are rationally derived from its findings and based on a correct interpretation of the law."). Thus, if the record contains "some basis in evidence for [the Board's] valuation, the appellant bears the burden of demonstrating that the exercise of discretion was clearly erroneous." Breault v. Town of Jericho, 155 Vt. 565, 569, 586 A.2d 1153, 1156 (1991). With the standard of review in mind, we turn to the Town's appeal.
I.
First, the Town contends that the market data approach is the best method to value the property, and the Board's failure to give adequate consideration to the Town's market data evidence was clearly erroneous. Our statutes do not prescribe how the Board should determine the fair market value of a property. See Sondergeld v. Town of Hubbardton, 150 Vt. 565, 567, 556 A.2d 64, 66 (1988); see also Gionet v. Town of Goshen, 152 Vt. 451, 453, 566 A.2d 1349, 1350 (1989) ("The unswerving goal of the statute is fair market valuation, but there is no single pathway to that goal."). In the past, "[t]he court has noted that the cost approach, the income approach, and the market data approach offer the parties means of determining fair market value." New England Power Co. v. Town of Barnet, 134 Vt. 498, 505, 367 A.2d 1363, 1368 (1976). This list, however, is not exhaustive, and other methods may be used. The use of any or all methods is an "appropriate subject[ ] for expert testimony to be properly evaluated by the [Board]," id., and unless the use of a single method or combination of methods leads the Board astray, this Court will not second-guess its judgment. See Town of Barnet v. Central Vt. Pub. Serv. Corp., 131 Vt. 578, 580-81, 313 A.2d 392, 393-94 (1973).
It is the duty of the Board "to explore all methods that help in determining fair market value" and to reject those "that do not lead toward fair market value." Re Montpelier & Barre R.R., 135 Vt. 102, 105, 369 A.2d 1379, 1381-82 (1977). In some cases, the Board may be required to use one approach exclusively in order to determine the FMV; in other cases, the Board may have to use a different method or a combination of methods. Thus, the Town's unqualified contention that the market data approach is the "best" method is not invariably correct. The "best" method is decided by the Board, on a case-by-case basis, and as long as the method is supported by the findings, we will not disturb the Board's decision.
The Town contends that the Board erred by rejecting the market data approach without making findings concerning the comparable properties put forth by the Town's *788 appraiser. We have consistently held that the Board's decision to use or reject comparable properties "`is not a question of law'" but instead "`is an evidentiary question.'" Connors v. Town of Dorset, 134 Vt. 233, 236, 356 A.2d 536, 538 (1976) (quoting In re Town of Essex, 125 Vt. 170, 172, 212 A.2d 623, 627 (1965)). From the Board's findings, it is evident that the Board found problems in using any or all of the taxpayer's and the Town's comparables. It is the Board's prerogative to judge the credibility and probative value of the evidence that is presented. See id. at 235, 356 A.2d at 537; see also Sondergeld, 150 Vt. at 571, 556 A.2d at 68 (noting that Board decision to weigh one party's evidence more heavily than other party's is not abuse of discretion). Admittedly, the Board provided a detailed rationale for rejecting or discounting each of the taxpayer's comparable properties while only briefly noting that "[the Town's comparables] differ from the subject property." This one-sentence rejection or discounting of the Town's comparable properties, however, is not error because the Board's subsequent analysis explains how and why the Board's conclusions were reached. We conclude that the Board's decision was supported by the evidence and adequate findings of fact, and was not clearly erroneous.
II.
Secondly, the Town contends that the Board erroneously used only the cost approach to value the property. The Board's findings, however, clearly indicate that a combination of methods was used. The Board explicitly noted that it recomputed the value of the subject property using its own cost-approach analysis because the taxpayer's appraiser had used too high a physical-and-functional-depreciation factor and had committed a computational error. The Board arrived at a value of $3,282,100. In addition, the Board used a market data approach and noted that the comparable properties used by both appraisers, adjusted for size, location and other amenities, would produce a value of about $20,000 per room a value in between the $17,000 per room value calculated by the taxpayer and the $30,000 per room value calculated by the Town for total value of $3,280,000. Reconciling the computations, the Board arrived at a FMV of $3,275,000.
Under these facts, the Board's valuation would have been questionable if it had used the cost approach exclusively because, as the Board acknowledged, the "cost-computed analysis of value is not always the best method of determining value, especially for older, vintage properties." See The Appraisal Institute, The Appraisal of Real Estate 322 (10th ed. 1992) ("The difficulty of estimating the accrued depreciation in older improvements diminishes the reliability of the cost approach, unless adequate data are available."). The Board, however, also used the market data approach in combination with the cost approach. Because we find the Board's valuation of the property to be in accordance with the evidence and the statutory requirements for determining FMV, the Board's methodology was not clearly erroneous. See Kruse v. Town of Westford, 145 Vt. 368, 374, 488 A.2d 770, 774 (1985) (noting that Board, as trier of fact, is under no obligation to accept, interpret, or apply evidence in accordance with views of either party; it is within Board's discretion to determine weight, credibility and persuasive effect of evidence).
III.
The Town's final contention that the Board's decisions regarding the market data approach and the cost approach were not supported by adequate findings of fact is also without merit. More specifically, the Town, contends that: (1) the Board failed to make specific and detailed findings concerning what comparable properties were rejected and which were used in the market data approach, (2) the Board's decision regarding the cost approach was not supported by adequate findings of fact, and (3) the Board's decision not to use the market data approach was not supported by its findings of fact. The Board is required to make its findings and determinations in writing and ensure that they are available to the parties. See 32 V.S.A. § 4467. We have consistently held that the principal inquiry in all of these cases *789 is whether the Board's decision reveals to the parties and this Court how the decision was reached. See Weyerhaeuser Co. v. Town of Hancock, 151 Vt. 279, 287, 559 A.2d 158, 163 (1989). The rationale underlying these requirements is to assure this Court and the parties that the Board's determination of FMV was not a guess. See New England Power Co., 134 Vt. at 503, 367 A.2d at 1367.
A careful review of the Board's findings establishes that it did not guess at the value of the subject property when it used the market data approach to value the property. The Board's market data valuation of $20,000 falls squarely between the Town's valuation of $30,000 and the taxpayer's valuation of $17,000. Because the Board's value is within the evidence and, more importantly, "within the range of rationality," Woolen Mill Assocs., 162 Vt. at 464, 648 A.2d at 863, we find the Board's conclusion regarding the market data approach supported by the findings of fact, and we will not disturb the Board's decision. See id.
Secondly, we disagree that the Board's conclusions in regard to the use of the cost approach were not supported by adequate findings of fact. We have held previously that "[i]t is not necessary for [the Board] exercising discretion to explain the precise mathematics that led to a particular decision involving a sum of money." Breault, 155 Vt. at 568, 586 A.2d at 1155. But see Sondergeld, 150 Vt. at 570, 556 A.2d at 67 (surveying cases where Board's decision was not supported by adequate findings.). Here, the Board explained its rationale in some detail. For example, while the Board accepted the taxpayer's determination of the original cost value because it was "based upon the highly recognized Marshall and Swift formula for determining replacement cost," the Board explicitly noted that the taxpayer's cost approach was computationally flawed. Further, the Board, after a site visit to the subject property, determined the physical-and-functional-depreciation factor to be 45% close to the uncontested factor of 49.4% that was presented by the taxpayer. Finally, the Board, in detail, described the formula and data it used to recompute the value of the resort. The Board's determinations regarding the cost approach were clear and concise, and its conclusion was supported by adequate findings of fact.
The Town's last contention that the Board's decision not to use the market data approach was not supported by adequate findings of fact is without merit because, as we noted previously, the Board did use the market data approach in combination with the cost approach to determine the FMV of the property. In short, we find that the Board did a thorough job, the Board's decision was fully explained and supported by adequate findings, and the Board's conclusion that the value of the property was $3,275,000 was within the evidence presented by both the Town and the taxpayer.
Affirmed.
NOTES
[*] On July 28, 1994, while the taxpayer was appealing the 1994 assessment, the taxpayer and Avery Inns of Vermont, Inc. entered into an agreement that reduced the property's sale price to $4,454,500. On April 1, 1995, the Town reassessed the property and reduced the assessment to $5,262,000. The taxpayer appealed to the BCA, which upheld the reassessment.
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431 B.R. 216 (2010)
In re Damian Gerald CHAPMAN and Melissa Ann Chapman, Debtors.
No. BKY 0835303.
United States Bankruptcy Court, D. Minnesota.
June 10, 2010.
*217 Craig W. Andersen, Craig W. Andersen Law Office, Bloomington, MN, for Debtors.
Jasmine Z. Keller, Minneapolis, MN, Michael J. Iannacone, Lake Elmo, MN, Trustees.
ORDER DENYING MOTION OF UNITED STATES TRUSTEE FOR DISMISSAL UNDER 11 U.S.C. § 707(b)(1)
GREGORY F. KISHEL, Bankruptcy Judge.
This case came on before the Court for hearing on the motion of the United States Trustee for dismissal pursuant to 11 U.S.C. §§ 707(b)(1)-(3). The United States Trustee appeared by his attorney, Sarah J. Wencil. The Debtors appeared by their attorney, Craig W. Andresen. The Debtors' response raised an issue that appeared to go to the fundamental availability of relief under § 707(b) in this case, as it was then postured. Further proceedings on the motion were held in abeyance, to determine how best to address this issue. Analysis of the relevant statutory text revealed that the issue was dispositive. This order sets forth the disposition and its supporting rationale.
The Debtors in this joint case are husband and wife. They started this case by filing a voluntary petition under Chapter 13 on October 10, 2008. After one pre-confirmation modification, their plan was confirmed on January 29, 2009. In the early fall of 2009, relief from stay was granted to two secured parties, the holder of a mortgage against the Debtor's homestead and the creditor on the one auto loan that was treated under their plan. The Debtors had not contested either motion. On October 16, 2009, the Debtors converted this case to one under Chapter 7.
On December 28, 2009, the U.S. Trustee filed a motion for dismissal under 11 U.S.C. § 707(b)(1). He cited grounds under 11 U.S.C. § 707(b)(2) (invoking the presumption of abuse that arises from that statute's so-called "means test" for relief under Chapter 7) and 11 U.S.C. § 707(b)(3) (maintaining that the "totality of circumstances" of the Debtors' income, expenses, debt structure, and history in bankruptcy evidenced an abuse of Chapter 7 remedies).
Both of the U.S. Trustee's theories implicated substantial issues of fact. However, in their response the Debtors raised an issue purely of law: whether § 707(b)(1) even applies in a case that had been commenced via a petition under Chapter 13, and was converted to one under Chapter 7 post-petition. As it turns out, the issue is one of simple statutory construction, resolved by reference to the face of the governing statutes. And, it has been explored by other courts in an appreciable number of published decisions that are readily-accessible and reasonably clear in their logic. Thus, further briefing or argument from the parties is not warranted; *218 the record at bar is an adequate platform for a decision now.
The relevant statutory text that creates the remedy now invoked is:
After notice and a hearing, the court,... on a motion by the United States trustee, ... may dismiss a case filed by an individual debtor under this chapter whose debts are primarily consumer debts, ... if it finds that the granting of relief would be an abuse of the provisions of [Chapter 7].
11 U.S.C. § 707(b)(1) (emphasis added). The italicized language creates the dispute at bar; the question is the meaning of the phrase "filed ... under this chapter," i.e., Chapter 7, the chapter of the Bankruptcy Code in which the governing section, § 707(b), is located.
The issue is created by a potential inconsistency in statutory language, specifically in the verbs that are used in participle form to identify signal events for the application of the Code's substantive provisions.[1] The inconsistency is that, in the direct sense of the nouns and verbs in the Code's general structural provisions, a bankruptcy "case" is not "filed," in and of itself.[2] Rather, a bankruptcy case is "commenced," via the filing of a specific document, a discrete statement of an intention to invoke bankruptcy remedies that is called a "petition." 11 U.S.C. § 301(a).[3] Then, via something like the tertiary part of a syllogism, "[t]he commencement of a voluntary case under a chapter of [the Bankruptcy Code] constitutes an order for relief under such chapter." 11 U.S.C. § 301(b) (emphasis added).[4]
A consistent vocabulary, with precise linkages and meaning, is the basis of these provisionsspringing as they did from the carefully-balanced craftsmanship that produced the Bankruptcy Code's original, 1978 enactment. That consistency is underlined by the text of 11 U.S.C. § 348(a), which is the same today as when enacted *219 in 1978. This paragraph opens a section that governs the effect of the conversion of a case between the governance of different chapters of the Code; and it provides as follows:
Conversion of a case from a case under one chapter of [the Bankruptcy Code] to a case under another chapter of [the Bankruptcy Code] constitutes an order for relief under the chapter to which the case is converted, but ... does not effect a change in the date of the filing of the petition, the commencement of the case, or the order for relief.
11 U.S.C. § 348(a) (emphasis added).[5]
So, on the sense of the basic, structural provisions of the Bankruptcy Code alone, the participle-modifier "filed" in the prefatory text of § 707(b) unequivocally signifies the act of initiating the bankruptcy process, "under" a particular chapter of the Code as requested in the petition. The case then is propelled forward under that chapter via a figurative "order" for such relief that is deemed to have been issued at the instant of commencement. The case remains pending under that chapter, i.e., substantively governed by the specific provisions of the chapter and funneled through the chapter's own complex of remedies, until its administration is completed or until it is converted to a case under another chapter. If it is converted to a case under another chapter, the new figurative order directing that new track of remedies, deemed to have been issued coincident with the event of conversion, "does not effect a change in the filing of the petition, the commencement of the case, or the order for relief," per § 348(a). And, the reference just quoted to the unchanged order for relief must be read as the case's original order for relief, or the language makes no sense in context.
This textual backdrop from the Code's general governance is so clear that it arguably obviates any inquiry into the sense of the specific provision, § 707(b)(1), or its implications in light of the policy underlying § 707(b). The language in question is from a specific provision, § 707(b), in a comprehensive enactment, the Bankruptcy Code; but it has its reference points in general provisions of the same enactment, and the consistency of the general provisions makes the meaning of the specific provision unambiguous in context. All of these parts of the Code are appropriate sources from which to identify "the plain meaning" of a statute, and specific language "must always be read in its proper context." McCarthy v. Bronson, 500 U.S. 136, 139, 111 S. Ct. 1737, 114 L. Ed. 2d 194 (1991). See also Crandon v. United States, 494 U.S. 152, 158, 110 S. Ct. 997, 108 L. Ed. 2d 132 (1990) ("In determining the meaning of the statute, we look not only to the particular statutory language, but to the design of the statute as a whole...") When that exercise is complete, the courts' inquiry is finished and the language is to be enforced according to its plain meaning. K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291, 108 S. Ct. 1811, 100 L. Ed. 2d 313 (1988).
This is the case with the language at bar, under the analysis above. The only exception is "the `rare case' ... that [would] produce[] an `absurd result'" from the application of the text's plain meaning. Owner-Operator Indep. Drivers Ass'n v. United Van Lines, LLC, 556 F.3d 690, 694 (8th Cir.2009). But if one goes through that further exercise, one cannot identify an "absurd result" so out of kilter with the *220 purpose of § 707(b), even post-BAPCPA; so, the above construction of the word "filed," in the fixed, narrow context of § 707(b) alone, is still fully sustainable.
The reason is as follows. In this district, at least, the U.S. Trustee premises almost all motions under § 707(b) on a general fact-based proposition: where a debtor has the ability to pay something of substance to unsecured creditors over a span of future time, allowing that debtor to proceed to an unqualified, general discharge of unsecured debt would be "an abuse of the provisions of" Chapter 7. This proposition is used under either substantive prong of the statute. When the U.S. Trustee invokes § 707(b)(2), the U.S. Trustee relies entirely on the "deeming" effect of that statute's means test and presumption, triggered with little reference to the debtor's actual financial circumstances, current and future.[6] The other prong, § 707(b)(3), is phrased broadly enough to prompt its invocation on a comparable showing, though on case-specific facts rather than by attributing uniform financial characteristics to the debtor. The U.S. Trustee does not hesitate to do that.[7]
Where a debtor is "coming in fresh" into bankruptcy (i.e., he is seeking Chapter 7 relief in the first instance, based solely on his and his counsel's anticipatory analysis under the means test and the "totality" approach), the field should be relatively open for a properly-founded challenge to that analysis via a motion under § 707(b)(1). After all, there would be nothing in the debtor's actual past experience to corroborate his assertion, that he simply could not perform under the post-BAPCPA regime of Chapter 13 and should be allowed the full benefit of Chapter 7; and, the clear tenor of BAPCPA's amendments to § 707(b) is that the debtor's initial conclusion on this point is not entitled to any initial deference. Performed by a detached party like the U.S. Trustee, analysis between the bounding-points of the means test and 11 U.S.C. § 1325(b) may reveal something entirely different. Without actual experience in a repayment regimen under the bankruptcy process to rebut the thrust and conclusion of such analysis, the issues are to be aired in court as Congress intended.
*221 But where (as here) a debtor initially sought relief under Chapter 13, it is proper to assume that he did so after recognizing that the means test would deem the availability of surplus income for debt service under a plan, and that a petition under Chapter 7 would be subject to dismissal.[8] In that event, the ostensible goal of both prongs of § 707(b) would have been met in the inception: the debtor shunted his initial resort to bankruptcy remedies over to the repayment mode, toward discharge of debt at the cost of long-term constraints and a commitment of monies. When that effort fails (again, as here), what is the sense of dredging up the convoluted, blunt-instrument assumptions of the means test, and plowing through its considerations on a financial experience and history that is now more deeply in the past?[9] In such a case, the debtor already deferred to the sensibility of that statutory regime but the effort just did not work.
In a case of this posture, the absurd result would be to resubject such a debtor to the grinding test of §§ 707(b)(2)(3). Neither prong of the provision makes sense now. Imposing the straitjacket of the means test after the debtor had already deferred in good faith to its governance and essayed an attempt at compliance via structured debt repayment would be cumulative to the point of punitive, and without a reason.[10] Even more pointedly, running the debtor through the analysis of a hypothetical Chapter 13 case would be pointless. The very expedient was applied already, via a feasibility analysis for the confirmation process, and then it was tested de facto by performance post-confirmation. If the conversion of the case was prompted by a failure of that effort, and if the outcome was not cynically manipulated in advance, it would be ludicrous to eject such a debtor from Chapter 7 on the argument that they could now go forward under Chapter 13.
It is not inconsistent with the spirit of § 707(b) to free such a debtor from the prospect of dismissal. The statutory policy would have been honored already, and its goal of repayment reached to the extent that was possible under the indeterminacy and unpredictability of individual life-experience.[11] Under the facial language of § 707(b), the remedy of dismissal for an abuse of Chapter 7 is not available in a case that was originally "filed under" *222 Chapter 13, and then converted to one under Chapter 7.
A handful of courts have reached the opposite conclusion, via rationales that go to varying lengths of complexity and entanglement to rationalize in a post-BAPCPA world, statutory language from prior law that was not changed though Congress had every opportunity to harmonize it toward the U.S. Trustee's argument. In re Willis, 408 B.R. 803 (Bankr.W.D.Mo.2009); In re Perfetto, 361 B.R. 27 (Bankr.D.R.I. 2007); In re Kellett, 379 B.R. 332 (Bankr. D.Or.2007); In re Kerr, 2007 WL 2119291 (Bankr.W.D.Wash.2007). Those courts are, simply, wrong.[12] Other courts, in comparably-small aggregate, have gotten to the outcome reached here. In re Dudley, 405 B.R. 790 (Bankr.W.D.Va.2009); In re Guarin, 2009 WL 4500476 (Bankr. D.Mass.2009); In re Miller, 381 B.R. 736 (Bankr.W.D.Ark.2008); In re Ryder, 2008 WL 3845246 (Bankr.N.D.Cal.2008); In re Fox, 370 B.R. 639 (Bankr.D.N.J.2007). Their analyses vary in their complexity, as well; but the most cogent is In re Dudley. The Dudley court went through an extended analysis starting with the "plain [i.e., facial] meaning" of the relevant language from § 707(b)(1), 405 B.R. at 793-795; then holding that "literal application" of the participle-modifier "filed under" did not lead to an absurd result, 405 B.R. at 795-798; and concluding that the same "literal application" was not at odds with Congressional intent or BAPCPA's purpose, 405 B.R. at 798-801. Its analysis of the extant, published decisions, the text of the statute, and the sparse indications of legislative purpose is intense and cogent enough that it need not be reprised here.
Thus, the United States Trustee's motion must be terminated now, for want of a statutory basis to go forward under the current posture of this case.
IT IS THEREFORE ORDERED that the motion of the United States Trustee for dismissal of this case pursuant to 11 U.S.C. § 707(b)(1) is denied.
NOTES
[1] This inconsistency predates the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub.L. No. 109-8 ("BAPCPA"). The language in question, "a case filed by an individual debtor under this chapter," was a part of the original text of § 707(b), enacted by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. No. 98-353, 98 Stat. 355, 381. The preexisting inconsistency of the text has gained a new prominence and momentum with the advent through BAPCPA of the so-called "means test" of § 707(b)(2), and its a strong presumption of abuse upon an abstracted, numerically-driven calculation of surplus income.
[2] As a concept, the bankruptcy "case" is best understood as an ongoing, intangible procedural framework for the invocation of federal jurisdiction over the basic functions of the bankruptcy process. In re Marine Iron & Shipbuilding Co., 104 B.R. 976, 980 (D.Minn. 1989); In re Arctic Enters., Inc., 68 B.R. 71, 76 n. 4 (D.Minn. 1986); In re Northwest Cinema Corp., 49 B.R. 479, 480 n. 4 (Bankr. D.Minn. 1985). Under the Bankruptcy Code's structure, the "case" is not itself a "proceeding"; but it furnishes a platform with the potential of jurisdiction for the commencement of many sorts of proceedings, administrative and judicial. In re Northwest Cinema Corp., 49 B.R. at 480 n. 4.
[3] This citation is to the statute that governs the commencement of a voluntary bankruptcy case for an individual debtor. Two other classes of cases are also "commenced" by the filing of a petition: a voluntary case by joint (husband and wife) individual debtors, 11 U.S.C. § 302(a), and an involuntary bankruptcy case, 11 U.S.C. § 303(b).
[4] In an involuntary case, the order for relief is not entered until after the debtor has had an opportunity to controvert the petition, i.e., to challenge the request of the petitioning creditor(s) to put the debtor into bankruptcy other than by the debtor's volition. If the debtor answers and resists the petition, the court must hold a trial and then must make certain findings before it can issue an order for relief. 11 U.S.C. § 303(h).
[5] The text references certain exceptions to its governance, as set forth in §§ 348(b)-(c), but the reference is deleted from this quotation. A motion under § 707(b) is not among the enumerated exceptions.
[6] See In re Ellringer, 370 B.R. 905, 909-910 (Bankr.D.Minn.2007) (noting that means test "will nearly always calculate a different disposable income than the debtor's actual income because it uses predetermined expenses based on the debtor's income and household size and not the debtor's actual expenses," and "also uses historical income rather than current income."). In its opinion of earlier this week, Hamilton v. Lanning, the Supreme Court recognized the near-complete difference between the retrospective, "mechanical" calculus of the means test and its result, and any determination of a debtor's surplus income that is based on real-life experience. 560 U.S. ___, ___ _ ___ n. 2, ___ _ ___, 130 S. Ct. 2464, 2469-70 n. 2, 2474-76, ___ L.Ed.2d ___ (2010).
[7] By its structure, criteria, and impersonal mechanistic approach, the presumption of § 707(b)(2) focuses exclusively on a notion of surplus income. The "totality of the circumstances" option under § 707(b)(3) is focused on "the debtor's financial situation," in a more general sense; and though that language does not denote the concept of surplus income per se, it is usually advanced by an analysis centered on ability to fund a hypothetical Chapter 13 plan, á la the prevailing construction of the "substantial abuse" provisions of pre-BAPCPA § 707(b). In re Taylor, 212 F.3d 395 (8th Cir.2000); In re Koch, 109 F.3d 1285 (8th Cir.1997); In re Huckfeldt, 39 F.3d 829 (8th Cir.1994); U.S. Trustee v. Harris, 960 F.2d 74 (8th Cir.1992); Fonder v. United States, 974 F.2d 996 (8th Cir.1992); In re Walton, 866 F.2d 981 (8th Cir.1989); In re Cox, 315 B.R. 850 (8th Cir. BAP 2004); In re Nelson, 223 B.R. 349 (8th Cir. BAP 1998). It is not yet settled in this circuit that post-BAPCPA § 707(b)(3) even allows for this sort of inquiry; the present discussion assumes that it does, for the sake of analysis.
[8] The simple performance of the means test's calculus "concentrates his mind wonderfully" toward that possible end ... to use the phrasing of Dr. Samuel Johnson.
[9] The means test of § 707(b)(2) uses the debtor's "current monthly income" as the beginning point of its calculation for a deemed ability to pay. 11 U.S.C. § 707(b)(2)(A)(i). A creation of BAPCPA, CMI is a retrospective measure, using the date of the bankruptcy filing as the point of beginning and going back from there, over a "6-month look-back period, which generally consists of the six full months preceding the filing of the bankruptcy petition." Hamilton v. Lanning, 560 U.S. at ___ _ ___, 130 S.Ct. at 2469-70. See also In re Ellringer, 370 B.R. at 910. It is calculated as "the average monthly income . . . that the debtor receives . . . derived during the six-month period ending on . . . the last day of the calendar month immediately preceding the date of the commencement of the case...." 11 U.S.C. § 101(10A) (emphasis added). The emphasized words are noteworthy in their use of the 1978-vintage terminology.
[10] An exception might be recognized, where there was convincing proof that the debtor had harbored a strategic goal of evading scrutiny under § 707(b), from the inception of the casei.e., had self-injected into Chapter 13 with the express intent to fail, though success was possible. There is no such proof here.
[11] From a different direction, the majority opinion in Hamilton v. Lanning strongly counsels us that debtors' real lives and actual experiences are the key consideration when exacting payment of them in Chapter 13.
[12] To deal with the conundrum of subjecting a debtor to a post-conversion motion under § 707(b), "many months (or years) after the petition date" but with the means test driven by old and older experience, the Perfetto court elected to "consider the treatment of those cases on an ad hoc basis." 361 B.R. at 31. That would lead straight away from the standardized sort of outcome, with severely reduced latitude in judicial discretion, that the means test in specific compels, and BAPCPA more generally contemplated. See In re Frederickson, 545 F.3d 652, 658 (8th Cir.2008).
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491 S.W.2d 757 (1973)
W. H. STARK, Appellant,
v.
Charlie STEFKA, Appellee.
No. 11963.
Court of Civil Appeals of Texas, Austin.
February 28, 1973.
*758 Cicily Simms, Travis County, Legal Aid & Defender Society, Austin, for appellant.
Mary Wilkov, Brooks Holman, Austin, for appellee.
O'QUINN, Justice.
Charlie Stefka, appellee, brought this suit in trespass to try title to recover a small rural tract of land in Travis County from W. H. Stark, who lived on the land. The case was tried before the court without intervention of a jury in January of 1972, and on February 16 the court entered judgment for Stefka, plaintiff.
At the trial plaintiff introduced a sheriff's deed to plaintiff, an order of execution, and proof of advertisement of the sale, but did not introduce the judgment, upon which the order issued, in proof of the sheriff's power to sell.
Stark filed a motion for new trial setting up his claim of homestead in the property existing at the time of execution, sale, and making of the deed, and taking the position that the judgment in favor of Stefka was not supported by sufficient evidence justifying execution and levy on the homestead.
The trial court overruled the motion for new trial March 30, 1972, noting in the order Stark's notice of appeal. After Stark had perfected his appeal and the cause had been set for submission and oral argument in this Court, Stefka filed a motion in the trial court to reopen evidence pursuant to Rule 270, Texas Rules of Civil Procedure, seeking to introduce the judgment under which the sheriff's sale and deed were made. Stark also filed a motion offering to prove his claim of homestead. The trial court overruled both motions, and supplemental transcript of these proceedings has been filed in this Court.
Stark was represented by counsel at the trial which resulted in judgment awarding the land to Stefka. Stark was not present, and upon learning that judgment had been entered against him, Stark sought the aid of attorneys in the Travis County Legal Aid and Defender Society, who timely filed a motion for new trial and have represented Stark since that time in this case.
The record shows that Stark's counsel at the trial of his cause made a brief statement to the court in which he asserted that he had notified Stark of the hearing but had not heard from him and could not account for Stark's absence. Counsel offered no evidence in behalf of Stark, did not object to the introduction of any evidence by Stefka, and asked only one question of a witness for Stefka. Counsel on Voir dire asked the deputy sheriff who supervised the sheriff's sale "... whether you [the witness] or anyone else from your office made any determination as to whether or not this property you were selling was exempt property or not?" The witness replied, "Our department did not."
*759 On appeal Stark seeks reversal of the trial court's judgment and remand of the cause on two grounds. Appellant contends that the judgment is void because the sheriff's deed, in the absence of proof of the judgment and writ issued thereon by which the sheriff made the sale, is insufficient to show title in Stefka. Appellant also contends that the trial court abused its discretion in not granting a new trial upon the ground that the court could not properly determine validity of the forced sale of the homestead because there was insufficient evidence to justify the execution and levy.
In bringing suit in trespass to try title, Stefka assumed the burden of offering proof upon which he might recover on the strength of his own title. Hejl v. Wirth, 161 Tex. 609, 343 S.W.2d 226 (1961). Stark answered by general denial only, but the general denial put Stefka upon proof of his right to recover the land. Harlan's Heirs v. Haynie, 9 Tex. 459, 462 (1853). It is basic and well established that the execution of a deed by an agent, such as the sheriff in this case, must be upon authority, and the deed is inoperative without proof of power to sell. The judgment and the execution must be proved to show such power in the sheriff. Wofford et al. v. McKinna, 23 Tex. 36, 43 (1859). Recitals in the deed of such power do not have the effect of proving the power to sell. Richards v. Rule, 207 S.W. 912, 914, Tex.Comm.App., jmt. adptd. (1919); Atkinson v. Citizens' State Bank of Giddings, 221 S.W. 998 (Tex.Civ.App. Austin 1920, no writ).
Stefka offered no proof of a judgment to show the sheriff's power to sell the land and to make the deed under which Stefka claimed title. In his motion for new trial Stark did not assign the lack of such proof as error, and the issue was raised for the first time in his brief on appeal. Stark was entitled to appeal without filing a motion for new trial, and having filed a motion Stark is not limited on appeal to the assignments set out in the motion for new trial. Glasgow v. Hurley, 333 S.W.2d 658, 663 (Tex.Civ.App. Dallas 1960, no writ); Hoge v. Lopez, 394 S.W.2d 816, 817 (Tex.Civ.App. San Antonio, 1965, no writ).
We sustain Stark's assignment that Stefka failed to make such proof of his title as will support the judgment, and upon reversing the judgment will remand the cause for new trial. In view of our disposition of this point we do not reach the contention that the trial court abused its discretion in overruling Stark's motion for new trial.
Nor do we consider for any purpose the proceedings contained in the supplemental transcript with respect to motions filed under Rule 270. The trial court correctly overruled the motions seeking to offer additional evidence. The trial court's jurisdiction had ended, and the cause was pending in this Court at the time the motions were filed. Texas Employers' Insurance Association v. Elder, 155 Tex. 27, 282 S.W.2d 371, 375 (1955); Republic National Bank v. Fredericks, 155 Tex. 79, 283 S.W.2d 39, 48 (1955); Carroll v. Lee, 451 S.W.2d 766, 768 (Tex.Civ.App. Texarkana 1970, writ ref. n.r.e.).
We conclude that appellee failed to prove record title in himself; therefore, the judgment must be reversed. We are of the opinion that the evidence was not fully developed in behalf of either party, and that the ends of justice require that the judgment be reversed and the cause be remanded for further proceedings.
The judgment of the trial court is reversed and the cause remanded.
Reversed and remanded.
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901 F. Supp. 1211 (1995)
UNITED STATES of America
v.
M.H., a Juvenile.
Crim. No. 1:95-CR-82.
United States District Court, E.D. Texas, Beaumont Division.
September 5, 1995.
*1212 ORDER
HEARTFIELD, District Judge.
On this day the court considered the defendant's objections to the United States Magistrate Judge's Report and Recommendation and the Government's response thereto. After conducting a de novo review of the record, the court hereby overrules defendant's objections, and follows the United States Magistrate Judge's Report and Recommendation, thus granting the government's motion to transfer the proceedings against this juvenile to an adult prosecution.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
HINES, United States Magistrate Judge.
I. PROCEDURAL BACKGROUND
M.H., a juvenile, is charged by information with seven counts of knowingly obstructing, delaying, and affecting commerce and the movement of articles in commerce by robbery (18 U.S.C. § 1951 (1994)) and with seven counts of knowingly using and carrying a firearm during and in relation to crimes of violence (18 U.S.C. § 924(c)(1) (1994)).
The United States District Court obtained jurisdiction to proceed against the juvenile defendant upon certification by the U.S. attorney (1) that the State of Texas does not have an adequate variety of programs available to meet the rehabilitative requirements of its juveniles and (2) that there is a significant federal interest in the case by virtue of the fact that defendant is charged with numerous violent crimes involving restaurants involved in interstate commerce. 18 U.S.C. § 5032 (1994).
*1213 On July 19, 1995, the United States moved to transfer proceedings against M.H. to adult criminal status. The motion was referred to the undersigned United States Magistrate Judge.
A federal public defender was assigned to represent M.H., and an initial appearance was conducted on July 25, 1995 at which the juvenile was informed of the charges and advised of his rights.
On August 4, 1995, the transfer hearing that is the subject of this report was held on the government's motion to proceed against M.H. as an adult.
II. LEGAL FRAMEWORK
The main thrust of a juvenile proceeding is rehabilitation and not retribution. Thus, juvenile proceedings in U.S. district courts must normally conform to the procedures dictated by the Juvenile Justice and Delinquency Prevention Act, 18 U.S.C. § 5031 et seq. Yet there are two exceptions that authorize the government to proceed against a juvenile as an adult. The first occurs when the juvenile elects to be proceeded against as an adult. M.H., after consultation with his appointed counsel, has not so elected. The second method occurs when the government, as here, moves to have the juvenile transferred to adult status and can prove that rehabilitation is not likely and that a transfer would be in the interests of justice.
The ultimate aim of the Act is to rehabilitate juveniles, not to punish them. S.Rep. No. 1011, 93d Cong., 2d Sess. 22 (1974), reprinted in 1974 U.S.C.C.A.N. 5283, 5286. Congress accordingly circumscribed narrowly the circumstances under which a transfer is permissible over objection. A transfer to adult status may only be directed by the Court over the objection of the juvenile if the juvenile is fifteen years of age or older, if the offense alleged would constitute a violent felony had it been committed by an adult, and if the transfer is in the interests of justice. 18 U.S.C. § 5032 (1994).
The first two elements of this test are satisfied. Further, the statute provides explicit guidance on how to proceed in determining whether a transfer would be in the interests of justice. A hearing must be held, and the district court must take evidence on the following six factors: (1) the age and social background of the juvenile; (2) the nature of the alleged offense; (3) the extent and nature of the juvenile's prior delinquency record; (4) the juvenile's present intellectual development and psychological maturity; (5) the nature of past treatment efforts and the juvenile's response to such efforts; and (6) the availability of programs designed to treat the juvenile's behavior problems. Id.
At the hearing, evidence must be presented on all six factors. Failure of the government to address any factor leads to a denial of the transfer request. See United States v. A.J.M., 685 F. Supp. 1192 (D.N.M.1988); United States v. C.B., No. 93-CR-81-1 (E.D.Tex. June 1, 1993). If evidence is presented on all six factors, then disposition is to be in the sound discretion of the district court. United States v. Doe, 871 F.2d 1248 (5th Cir.1989); United States v. Hemmer, 729 F.2d 10, 18 (1st Cir.), cert. denied sub nom. Randazza v. United States, 467 U.S. 1218, 104 S. Ct. 2666, 81 L. Ed. 2d 371 (1984).
The factors need not be given equal weight. Doe, 871 F.2d at 1254-55; cf. United States v. A.W.J., 804 F.2d 492, 493 (8th Cir.1986). For example, the district court may determine that one factor, such as seriousness of the crime, outweighs the other five factors. See e.g., Hemmer, 729 F.2d at 18.
Finally, although Congress intended for rehabilitation to be the primary focus, the district court considering the motion to transfer is not required to subscribe to what amounts to no more than a futile hope that rehabilitation is possible. See Doe, 871 F.2d at 1253; United States v. E.K., 471 F. Supp. 924, 932 (D.Or.1979).
[T]he balance must be struck somewhere and somehow between providing a rehabilitative environment for young offenders as well as protecting society from violent and dangerous individuals and providing sanctions for anti-social acts.... It is incumbent upon the court to deny the motion to transfer where, all things considered, the juvenile has a realistic chance of rehabilitative potential in available treatment facilities *1214 in the period of his minority.... However, where no realistic chance for rehabilitation exists, we have the clearest case where the balance does indeed tip in favor of bringing the philosophy of the criminal justice system into play.
E.K., 471 F.Supp. at 932, quoted in Doe, 871 F.2d at 1253. In re T.W., 652 F. Supp. 1440, 1445 (E.D.Wis.1987).
III. THE "INTERESTS OF JUSTICE" FACTORS
A. Age and Social Background
The juvenile in this case is eighteen years old. He has lived his entire life with his mother, a substitute teacher in the Beaumont Independent School District. His mother appears to be the only potentially stabilizing figure in his life, and even her influences clearly have not held sway. M.H. lost his father several years ago as a result of a shooting.
The juvenile's educational background is not good. According to the testimony of various witnesses, M.H. has never been a distinguished student. By the time he reached eighth grade, he was referred to alternative school, an educational institution designed for students at risk, teen parents, students academically behind and students in trouble.
He dropped out of an alternative school during ninth grade after an extended string of absences. While at the alternative school, his performance ranged from adequate to less than exemplary. His behavior and performance became increasingly poor while at the school. A formerly polite, soft-spoken, well-behaved child, he turned into an unkempt, inattentive, and withdrawn student. M.H. admits he began using drugs regularly during this period of time. He never reenrolled after dropping out.
M.H.'s brief work history is reflected in the record and in the testimony of Ruth Hall, Jefferson County Juvenile Probation Officer. M.H. worked on and off after school and on weekends during 1991-1992 at a family-owned recreational room in Newton. There-after, M.H. voluntarily entered the Job Corps in late 1993. He participated for three months before being discharged from the program due to poor behavior.
M.H. informed Dr. Edward B. Gripon, M.D. P.A., during an examination on July 27, 1994 that he believed he was the father of a baby his girlfriend had recently had (he was unsure of the exact date of birth). M.H. was not sure whether he was the father, yet made no efforts to determine paternity. He was not even certain of the date of birth, and he had made no arrangements whatsoever to provide financial or emotional support to the child.
One year later he told Pretrial Services that he was not the father of any children. His failure to seem particularly concerned at the time of either interview with whether he is a father is indicative of unwillingness to take responsibility for his actions.
Shirley Broussard, a family friend familiar with M.H.'s social background, testified that it was her opinion that M.H. could be rehabilitated. She stated that she never felt threatened by M.H. in social situations, and further testified that she would be comfortable leaving her five-year-old child with him.
Because it appears that there is no additional guiding influence in M.H.'s home or among his peers to aid him in his rehabilitation, because there are indications that he has difficulty accepting responsibility for his actions, because he has not obtained a satisfactory level of education, because he labors under a disability of a drug habit, and because he expresses no desire to change, the social background factor cannot be considered to weigh in favor of rehabilitation or other treatment as a juvenile delinquent.
B. The Nature of the Alleged Offense[1]
M.H. is charged with participating in seven armed robberies, most of them of fast food restaurants. In at least three of the robberies, guns were discharged. In one, a person was held against her will. In at least one other, a gun was placed against a victim's head. And most seriously, during the Peking *1215 restaurant robbery, one person was killed and another seriously wounded.
As to this incident, state felony charges are pending. M.H. has been certified to stand trial as an adult in state court on charges of attempted murder, attempted capital murder, and aggravated assault in connection with this robbery.
All appear to be well-timed, well-plotted affairs. The juveniles involved always made a point of covering their faces. They always struck at the same time around closing time.
There appear to be no mitigating factors associated with these robberies. For example, the juvenile did not claim to have committed the offenses out of destitute poverty or under duress. Rather, they appear motivated out of mere maliciousness, selfish desire for monetary gain, or perhaps for recreation. Finally, the defendant has exhibited no remorse for his involvement in these incidents.
This factor does not reflect a realistic potential for rehabilitation and therefore weighs in favor of adult criminal punishment and protection of society.
C. The Extent and Nature of the Juvenile's Prior Record
The court has reviewed records of Jefferson County and the First Judicial District (Jasper and Newton Counties). In addition, the court heard testimony from Lance Caraway, former Jasper County Juvenile Probation Officer, and Ruth Hall, Jefferson County Juvenile Probation Officer. Altogether, the evidence shows only one prior occasion for formal supervision. Nevertheless, the juvenile has a long record dating back to a time when he was just twelve years old. The record shows criminal episodes became more serious and more frequent with time, ultimately culminating in the string of seven armed robberies that are the subject of the present information. A quick synopsis of the juvenile's prior record illustrates his progression from a mere troublemaker to a career delinquent:
1. March 17, 1990 Arrested for shoplifting from a Target store. Charged with stealing three videogames and spray paint.
2. April 4, 1990 Assaulted a Beaumont schoolteacher who was trying to break up a fight. Hit her over the head with an unknown object and knocked her to the ground, where she was repeatedly kicked and her glasses were broken.
3. May 5, 1990 Stole M & M candies and Dorito chips from a student shop at Lamar University. After this incident, ordered to pay restitution for the March 17, 1990 and May 5, 1990 thefts. Placed under voluntary supervision for six months, which is a type of probation that is often recommended for juveniles in lieu of proceeding in court.
4. March 28, 1991 Picked up for burglarizing a residence and for unauthorized use of a vehicle.
5. August 9, 1993 Picked up for spray painting gang-related graffiti on several public housing projects.
6. October 4, 1993 Picked up for a disorderly conduct incident in which he harassed a police officer by shouting obscenities at him.
7. February 6, 1994 Picked up for a similar incident.
8. March 27, 1994 Arrested for unlawfully carrying a weapon and evading detention. Brandished a loaded gun in front of a police officer during this incident.
9. Finally, in addition to the seven charged armed robberies, one of which led to one person's death, there is evidence that this juvenile participated in two other uncharged armed robberies, one of a Church's Chicken in Beaumont and the other of a Church's Chicken in Port Arthur.
This obviously is not the record of an otherwise exemplary youth who commits an anomalistic digression. The extent and seriousness of this record render it highly doubtful that this juvenile could be successfully rehabilitated. Again, this factor weighs in favor of adult criminal prosecution and protection of society.
*1216 D. Present Intellectual Development and Psychological Maturity
The court has reviewed records of examinations by Ray Coxe, Phd., a psychologist who conducted examinations on July 28, 1994 and February 8, 1995. The court also has reviewed reports of examinations by Dr. Edward B. Gripon, M.D. P.A., who conducted examinations on July 28, 1994, January 29, 1995, and August 1, 1995. The latter examination was pursuant to order of this court issued on August 2, 1995.
Dr. Gripon's examinations on January 29, 1995 and August 1, 1995 were abortive due to lack of cooperation from the juvenile. Based on his other examination, however, Dr. Gripon testified that the juvenile's intelligence level is within the dull to borderline range. These developmental limitations, absence of remorse, and fewer than three to five years remaining for M.H. to be detained in a federal juvenile rehabilitation program, render the prospects of his becoming fully rehabilitated very remote, in Dr. Gripon's opinion.
Nevertheless, M.H. is independent-minded and can take care of all of his nonfinancial needs on his own. He is quite "street smart." Dr. Gripon testified that M.H.'s IQ does fall within a range typically seen among adults involved with the criminal justice system. Finally, there is no evidence that M.H. has sought or received any mental health counseling or that he is suffering from any mental disorder.
The clinical findings of Dr. Coxe, clinical psychologist, are consistent with Dr. Gripon's evaluation. It may be significant that the juvenile's performance deteriorated after five months detention. That might indicate tactical gamesmanship or actual deterioration. In either instance, it does not bode well for rehabilitation.
As M.H. is capable of functioning intellectually and emotionally as an adult in some ways, but has limited intellectual and psychological potential for rehabilitation, this factor, too, points against proceeding as a juvenile.
E. Nature of and Response to Past Treatment Efforts
The voluntary six months supervision program undertaken in 1990 was the only formal treatment program attempted with this juvenile. This program was not completed because M.H. moved to another county. In any event, M.H. was apparently not well suited for this program, and his infractions quickly became more serious.
One informal treatment that was attempted was a transfer in the eighth grade to an alternative school within the Beaumont school district. Elizabeth Richard, a guidance counselor at that school, testified that the school specializes in nurturing at risk children: those who have drug problems, those who are teen parents, those who have disciplinary problems, those who have persistent academic troubles, etc. When M.H. first came to this school, Ms. Richard was under the impression that he was making progress. However, as time passed, and particularly in the ninth grade, changes in his disposition began to manifest themselves. He became moody and withdrawn. He started to fall behind in his work, and his grades dropped sharply. He had several periods of extended absence. He would sleep through classes and often appeared unkempt. Finally, M.H. simply dropped out.
At present, he is too old to qualify for any alternative programs offered by the Beaumont school district. The Court takes note of Ms. Richard's earnest testimony that, in her opinion, M.H. could be rehabilitated. It should be noted, however, that Ms. Richard had not seen M.H. (other than for her court appearance) since early 1993, well before the charged offenses were committed.[2]
Analysis of this factor reflects no realistic potential for rehabilitation. Therefore, this factor points against proceeding as a juvenile.
F. Availability of Treatment Programs to Treat Behavioral Problems
The government presented the testimony of Ken Laborde, a probation officer in the Eastern District of Texas. He testified that *1217 due to the relatively low number of juveniles in the federal criminal justice system, the federal government does not itself run any treatment programs for juveniles, but rather contracts with outside agencies to provide treatment services. He estimated that there are probably only between 100 and 125 juvenile treatment programs under contract with the federal government in the entire country. He further testified that, for a number of reasons, M.H.'s chance of gaining admittance to such a program is very slight. Most programs have age limits, and the juvenile is already 18. Many refuse to accept juveniles with violent backgrounds. Most have waiting lists. Finally, many of these programs define their mission very narrowly and accept only a very specific type of applicant.
Further, there is little chance that the juvenile will be able to obtain treatment services through the state. He is currently being prosecuted for murder. Because he is being tried as an adult and because of his age, he no longer qualifies for state programs.
This factor should not weigh against the juvenile solely because the government fails to offer a treatment program. Conversely, the government's default in making available a wide range of programs is insufficient reason to conclude this factor in the juvenile's favor. Under this circumstance, the court appropriately may consider the likely success of such a rehabilitative program were one available.
There are numerous indications in the record that this juvenile has a problem with authority figures, such as the assault on the schoolteacher in 1990 and the 1993 and 1994 harassment incidents with police officers. Additionally, the juvenile has a history of not following through at school or in the Job Corps. Finally, the court finds the one reported rehabilitative effort the alternative school to be instructive. Be it a want of motivation or some other reason, M.H. failed to make the most of the alternatives this program offered him. There is no indication that M.H. would approach any other program differently.
IV. CONCLUSION
As stated at the outset, it is incumbent on the court to deny the motion to transfer when, all things considered, the juvenile has a realistic chance of rehabilitative potential in available treatment facilities in the period of his minority. Here, however, there is at best only a glimmer of hope that rehabilitation is possible. The court should have more than a mere glimmer of hope before determining that interests of justice favor non-criminal treatment as a juvenile delinquent. Doe, 871 F.2d at 1253; United States v. Alexander, 695 F.2d 398, 401 (9th Cir.1982). Here, all six interest-of-justice factors weigh in favor of granting the government's motion to transfer to adult status.
V. RECOMMENDATION
Evidence has been received and findings have been made on all six factors and a recommendation can now be made on the motion. Cf. United States v. C.G., 736 F.2d 1474 (11th Cir.1984) (failure of district court to make findings with respect to two prongs justified remand for further findings). Because the factors on balance compel the conclusion that a transfer to adult status would be in the interests of justice, it is hereby recommended that the government's motion to transfer proceedings against this juvenile to an adult prosecution be granted.
VI. OBJECTIONS
Within ten (10) days after receipt of the magistrate judge's report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C. § 636(b)(1)(C).
Failure to file written objections to the proposed findings and recommendations contained in this report within ten days after service shall bar an aggrieved party from de novo review by the district court of the proposed findings and recommendations and from appellate review of factual findings accepted or adopted by the district court except on grounds of plain error or manifest injustice. Thomas v. Arn, 474 U.S. 140, 148, 106 S. Ct. 466, 471, 88 L. Ed. 2d 435 (1985); *1218 Rodriguez v. Bowen, 857 F.2d 275, 276-277 (5th Cir.1988).
Signed this 15 day of August, 1995.
NOTES
[1] For purposes of a transfer hearing, the court may assume the truth of the alleged offenses. Doe, 871 F.2d at 1250 n. 1; In re Sealed Case, 893 F.2d 363, 369 (D.C.Cir.1990).
[2] The first of the seven charged robberies occurred on April 1, 1994.
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491 S.W.2d 700 (1973)
ANGELO STATE UNIVERSITY, Appellant,
v.
INTERNATIONAL INSURANCE COMPANY OF NEW YORK, Appellee.
No. 11992.
Court of Civil Appeals of Texas, Austin.
February 28, 1973.
Don W. Griffis, Griffis & Griffis, San Angelo, for appellant.
John H. Hofmann, Smith, Davis, Rose, Finley & Hofmann, San Angelo, for appellee.
PHILLIPS, Chief Justice.
This is a suit on a fire insurance policy which, under the facts and the record on appeal, presents the question whether the failure of appellant, Angelo State University to furnish proof of loss precludes its recovery under the terms of the policy. Since, in our opinion, the failure to furnish the proof of loss does present a bar to the action before us, and since the trial court rendered judgment for the appellee, we will affirm this judgment.
The pertinent facts are these: In November of 1970 there was in full force and *701 effect an insurance contract between appellant and appellee under the terms of which appellee was to compensate appellant for fire and smoke damage to specified buildings located on the campus of appellant University. Among the buildings thus insured was Concho Hall, a building in the basement of which was housed a steam boiler and hot water generator. In November, 1970, apparently due to the malfunction of a safety device on this boiler, there was a fire in and around the boiler. There was evidence of some minor damage to the room in which the boiler was housed but the boiler itself bore the brunt of the loss. There was also in effect at the time of the fire a second fire insurance policy which covered the boiler only. This policy, herein called the boiler policy, was not carried by appellee insurer but was with the American Motorist Insurance Co. whose local agent was one Henry Batjer.
The court, at the close of evidence, granted appellee's motion for instructed verdict.
Although appellant is before us on three points of error, our disposition of its first point makes it unnecessary for us to reach the remaining two.
Appellant's first point presents the question (which appellant asserts must be answered in the affirmative) whether appellee denied liability on the policy within 91 days allowed under the policy for filing claims and thereby waived the contractual requirement that the insured furnish proof of loss to insurer as a condition precedent to recovery on the policy.
In reviewing an instructed verdict on appeal our sole task is to determine whether there was sufficient evidence of probative force to raise a fact issue on a material question presented. Air Conditioning, Inc. v. Harrison-Wilson-Pearson, 151 Tex. 635, 253 S.W.2d 422 (1952). In determining whether there was sufficient evidence to raise a fact issue, the evidence must be considered most favorably in behalf of the party against whom the verdict is instructed. This Court is obliged to consider only the evidence favorable to the party against whom the verdict was instructed and may consider none of the evidence adverse to the party against whom the verdict is instructed. Air Conditioning, Inc., supra; Anderson v. Moore, 448 S.W.2d 105 (Tex.Sup.1969). Finally, a necessary corollary to the last-stated rule is the rule which requires this Court to remand the case if the evidence, when viewed as indicated above, raises any fact issue for the jury, even if a verdict based upon such evidence would have to be set aside as not supported by sufficient evidence. Maryland Casualty Co. v. Morua, 180 S.W.2d 194 (Tex.Civ.App.1944, writ ref.); Great Atlantic and Pacific Tea Company v. Giles, 354 S.W.2d 410 (Tex. Civ.App.1962, writ ref. n. r. e.); Alaniz v. Haegelin, 384 S.W.2d 431 (Tex.Civ.App. 1964, no writ).
It is undisputed that appellant never furnished appellee with any proof of loss required by the policy. Consequently, unless appellee denied liability under the policy, appellant is foreclosed. Whitehead v. National Casualty Co., 273 S.W.2d 678 (Tex.Civ.App.1954, writ ref.); Williams v. Bankers Fire and Marine Insurance Co., 277 S.W.2d 742 (Tex.Civ.App.1955, writ dism.); Farmers Mutual Protective Association of Texas v. Thompson, 365 S.W.2d 226 (Tex.Civ.App.1963, writ ref. n. r. e.). Thus, the dispute before us presents a question of evidence. Appellant does not deny its contractual obligation to furnish appellee with a sworn statement of loss within ninety-one days after the fire. Neither does appellee deny the well-established rule of law that insurer will be deemed to have waived this requirement where insurer denies liability within the time allotted by the terms of the policy for proof of loss to be furnished. Federal Surety Co. v. Smith, 41 S.W.2d 210 (Tex.Com.App.1931, adopted); United States Fidelity and Casualty Co. v. Bimco Iron and Metal Corporation, 464 S.W.2d 353 (Tex.1971). Our *702 question then is whether the evidence adduced at the trial was sufficient to raise a fact issue on the question whether appellee denied liability on the policy.
A careful review of the evidence before this Court indicates that the only evidence of a denial of liability by appellee is found in the testimony of two witnesses, Batjer, an agent of the insurance company which carried the boiler policy, and Bill Hale, appellant's business manager. The relevant testimony of each of these witnesses concerned conversations each had held with Lauren Caulkin, who was investigating the fire in question on behalf of appellee. Batjer testified that in his conversation with Caulkin, the latter told him that "at that time ... they [meaning appellee] did not think that it [the damage to the boiler itself] was covered under the fire policy and was probably under the boiler policy." Batjer further testified that he conveyed this information to Hale, business manager of Angelo State, in a conversation in which Batjer described the position of Caulkin to be "that the boiler itself was, in their opinion not covered under the fire policy but that the damage outside the boiler in the room ... would be covered under their policy."
Assuming for purpose of argument that Batjer was appellant's agent (which appellant asserts) when Caulkin told him of his tentative opinion, this conversation amounted to no more than an exchange of opinion, and did not contain enough direct, unequivocal statements to raise a fact issue whether such statements amounted to a denial of liability. Central Federal Fire Insurance Co. v. Lewis, 26 S.W.2d 474 (Tex.Civ.App.1930, modified on other grounds 44 S.W.2d 936); Millers Mutual Fire Insurance Co. of Texas v. Mitchell, 392 S.W.2d 703 (Tex.Civ.App.1965, no writ).
With respect to Hale's conversation with Caulkin, Hale was asked if Caulkin told him he thought the boiler policy owed for the damage to the boiler. Hale replied "No, I don't believe he indicated." He was then asked "He [Caulkin] never did tell you directly to your face: `"We are denying coverage'?" To this Hale answered "no".
The judgment of the trial court is affirmed.
Affirmed.
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704 A.2d 1225 (1998)
348 Md. 486
ATTORNEY GRIEVANCE COMMISSION OF MARYLAND
v.
Herschel D. MILLIKEN.
Misc. Docket (Subtitle BV) Nos. 46, 49, Sept. Term, 1995.
Court of Appeals of Maryland.
January 22, 1998.
Melvin Hirshman, Bar Counsel, and Raymond A. Hein, Asst. Bar Counsel, for Attorney Grievance Commission of Maryland, petitioner.
Herschel D. Milliken, Baltimore, for respondent.
Argued before BELL, C.J., ELDRIDGE, RODOWSKY, CHASANOW, RAKER and WILNER, JJ., and KARWACKI, J. (retired, Specially Assigned).
RAKER, Judge.
Acting through Bar Counsel, the Attorney Grievance Commission filed two petitions for disciplinary action against Herschel D. Milliken for violations of the Rules of Professional Conduct. On February 14, 1996, this Court consolidated the two petitions. We referred the matter, pursuant to Maryland Rule BV9 (b)[1] to Judge Carol E. Smith of *1226 the Circuit Court for Baltimore City to make findings of fact and conclusions of law. Following an evidentiary hearing and oral argument involving ten separate complaints, Judge Smith found evidence sufficient to sustain nine of the ten complaints. Judge Smith found that Milliken had repeatedly violated Rules 1.1,[2] 1.3,[3] 1.4,[4] 1.15(a), (b),[5] 1.16(d),[6] 3.2,[7] 5.3(b),[8] 5.4(a),[9] 8.1,[10] 8.4,[11] of the Maryland Rules of Professional Conduct, and Maryland Rules BU7(a)[12] and BU9.[13] We set *1227 forth those findings and conclusions as follows:
FINDINGS OF FACTS AND CONCLUSIONS OF LAW
Introduction
"Herschel D. Milliken, Esquire is the subject of two Petitions for Disciplinary Action filed by the Attorney Grievance Commission ("AGC") of Maryland pursuant to Maryland Rule BV9. Bar Counsel, acting on the direction of the Review Board and pursuant to Maryland Rule BV7, filed charges against the Respondent pertaining to eight separate Complaints received by the Review Board. The charges related to each Complaint were set forth in the Petition for Disciplinary Action, case number 96022071. On January 18, 1996, the Court of Appeals ordered that the charges be transmitted to the Circuit Court for Baltimore City for service and hearing in accordance with Maryland Rule BV9. On February 13, 1996, Bar Counsel, again acting on the direction of the Review Board, filed a second set of charges against Respondent Milliken pertaining to two Complaints by former clients. The charges related to these two Complaints were set out in the second Petition for Disciplinary Action, Case number 96053040. On February 14, 1996, the Court of Appeals ordered that these new charges be transmitted to the Circuit Court for Baltimore City, and further ordered that the Petitioner's Motion for Consolidation of these two matters for a hearing of charges be granted.
"The charges in both Petitions allege that the Respondent engaged in misconduct, defined by Maryland Rule BVl(k) as "an act or omission by an attorney, individually or in concert with any other person or persons which violates the Maryland Rules of Professional Conduct, as adopted by Rule 1230, whether or not the act or omission occurred in the course of an attorney-client relationship." The hearings on both Petitions for Disciplinary Action were held before the undersigned judge, and took place over the course of several days in April and May, 1996. Raymond Hein, Assistant Bar Counsel, represented the Petitioner, Attorney Grievance Commission of Maryland. Herschel D. Milliken, the Respondent, proceeded pro se. In support of its allegations, Petitioner's counsel entered nineteen exhibits into evidence.
Standard of Proof
"Maryland Rule BVlO(d) provides that the hearing of charges is governed by the same rules of law, evidence, and procedure as in civil proceedings in equity. Consequently, factual findings shall be supported by clear and convincing evidence. In contrast, an attorney establishing a defense, including mitigating circumstances, need only prove factual matters by a preponderance of the evidence. Attorney Grievance Commission v. Bakas, 322 Md. 603, 589 A.2d 52, modified, 323 Md. 395, 593 A.2d 1087 (1991).
Background
"At the hearings before this Court in April and May, 1996, the following facts were established by clear and convincing evidence.
"The Respondent attended the University of Baltimore School of Law, and obtained his Juris Doctor degree in 1979. Mr. Milliken was admitted to practice in Maryland in September 1981. Except for one year when he worked for the firm of Singleton, DeShiell & Robinson, Milliken has historically engaged in the general practice of law as a sole practitioner. The Respondent has always practiced law in Baltimore City, and currently maintains a *1228 law office in his home at 1509 East 36th Street, Baltimore, Maryland.
I. Complaint of Tonya L. Steward (Dorsey)
"As a preliminary matter before this Court, Petitioner requested that Mr. Milliken stipulate to the submission of the IPT of Ms. Dorsey because she had moved from her last known address, and the Petitioner was unable to locate her. The Respondent refused to stipulate to this witness' testimony and stated that he was interested in conducting a cross-examination of Ms. Dorsey on certain matters. The Respondent had an opportunity to cross-examine Ms. Dorsey at the IPH on March 21,1994. The Respondent also stated that he wished to see if the witness would recant her testimony. The Respondent further suggested that Petitioner's Counsel had not satisfactorily proven Ms. Dorsey's unavailability as defined by Maryland Rule 5-804(a).
"Finding that Ms. Dorsey was absent from the hearing and that Bar Counsel had made reasonable, albeit unsuccessful, attempts to procure her attendance through the issuance of subpoenas at her last known address, this Court declared Ms. Dorsey to be "unavailable" in accordance with Maryland Rule 5-804. Due to Mr. Milliken's prior opportunity to cross-examine Ms. Dorsey, this Court held that Ms. Dorsey's former testimony at the IPH was admissible under the standards set forth in Maryland Rule 5-804.
"At the April 16, 1996 hearing before this Court, the Petitioner introduced evidence and testimony obtained through its investigation of this Complaint and established the following facts. Tonya Dorsey met Respondent in May, 1993, and hired him to represent her in a divorce case. A fee was agreed upon at that time. Although there was a discrepancy between Ms. Dorsey's testimony that the Respondent wanted $700.00 and Respondent's testimony at the Circuit Court hearing that his standard fee in such a matter was $350.00, it is clear from the evidence that Ms. Dorsey wrote a check on May 5, 1993, to Herschel D. Milliken payable in the amount of $200.00 as partial payment of his fee for representation. There was no written retainer agreement and she did not receive any correspondence either during, or after the period in which the Respondent was supposed to be representing her.
"Ms. Dorsey's case had already been filed and a hearing was scheduled for June 4, 1993.
"The Respondent accepted and kept the $200.00 paid to him by Ms. Dorsey despite the fact that he never performed any work beyond conducting the initial interview. He never reviewed the court file to check the status of Ms. Dorsey's case. He conceded that he had no justification for keeping Ms. Dorsey's $200.00 payment and he did not deposit her check in a trust account. Instead, he cashed it immediately. Curiously, Respondent noted his trust account number on the back of the check. However, this was done to identify him as a person who maintained an account with the bank in order that the bank would cash the check, and not for the purpose of placing it in the trust account.
"In fact, Mr. Milliken admitted that he tried to liquidate checks as soon as possible. It appears from his testimony that generally checks were either cashed immediately or placed directly in his operating account.
"Mr. Milliken testified several times over the course of the hearing that it was his policy to be paid in full before appearing in court or performing any work. Indeed, he suggested in this particular instance that he did not show up because he had not been paid the balance. Both the Respondent and Ms. Dorsey agreed that her case already had been filed and a trial was scheduled for June 4, 1993. Although she left several messages on the Respondent's answering machine, Ms. Dorsey was unable to reach him to discuss her divorce and the balance of the fee. After paying Mr. Milliken the $200.00 retainer, she was not contacted by him until June 3, 1993, the day before her hearing. During this phone conversation, the Respondent instructed Ms. Dorsey to meet him in court the next day with the balance of his fee. However, the Respondent failed to appear *1229 the next day for Ms. Dorsey's hearing. Ms. Dorsey was forced to proceed without an attorney. The Respondent telephoned Ms. Dorsey on June 5, 1993 to apologize for his behavior and promised to refund the money she had paid. However, no refund was ever made.
"In light of the clear and convincing evidence as set forth above, this Court finds that the Respondent violated Maryland Rule 1.1 of the Rules of Professional Conduct which provides that "a lawyer shall provide competent representation to a client" and Maryland Rule 1.3 which requires that an attorney act "with reasonable diligence and promptness in representing a client." Mr. Milliken's failure to contact his client, to review her file and prepare her case, and to appear in court are clear violations of these rules. Further, the Respondent's lack of communication with Ms. Dorsey, which was evidenced by his neglecting to send her correspondence, failing to respond to her phone messages and/or failing to contact her by telephonic or other means of communication to inform and prepare her for trial violates Maryland Rule 1.4(a) which obligates a lawyer to "keep a client reasonably informed about the status of the matter and promptly comply with reasonable requests for information." Finally, according to Maryland Rule 1.16(d), Mr. Milliken had a duty to "take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, ... surrendering papers and property to which the client is entitled and refunding any advance payment of the fee that has not been earned." In dereliction of this duty Milliken never formally terminated his representation, nor did he surrender all documents and property to this client or refund the $200 of Ms. Dorsey's money that he admitted he did not earn.
"Although the Respondent stated, presumably by way of defense or mitigation, that this and other client files were destroyed in office fires, he failed to produce any evidence to show that such fires ever occurred. Throughout the proceedings before this Court, the Respondent referred to fires allegedly taking place at his offices at 2901 Druid Park Drive. In response to inquiries concerning his lack of documentation and inability to produce files, Mr. Milliken asserted that his paperwork and files were destroyed in these fires. However, Mr. Milliken was unable to produce even a scintilla of evidence that these fires actually occurred despite the fact that he had ample opportunity to do so for several years during the investigation process and again over the course of the hearings before this Court. In fact, the Respondent could not provide this Court with even dates certain as to when the fires took place. To the contrary, John Reburn an investigator for the AGC contacted Mr. Milliken at his home on October 10, 1993 and requested Ms. Dorsey's files and records. Mr. Milliken's law office had closed sometime in August or September, 1993. Originally, Mr. Milliken shared space in Suite 110A at 2901 Druid Park Drive with a cleaning service. He later moved to Suite 302 with George Davis and another attorney. Mr. Milliken told Reburn that his records and files were still at the Druid Park complex. Reburn advised him to retrieve them. Mr. Milliken never did so. Another AGC investigator wrote to Morris lies, the CEO for the Druid Park office complex regarding Mr. Milliken's files. Iles's written response of May 13, 1994 advised that Mr. Milliken left five (5) boxes of papers and two (2) to four (4) file cabinets when he defaulted on his lease and vacated Suite 302. An additional sixteen (16) boxes of papers were removed from the offices and stored by the landlord. Mr. Milliken's files and papers were among those stored by the landlord in its general purpose storage.
"If fires had occurred there surely would be verification available from the City police, and/or fire departments or the landlord. This Court gave Milliken the opportunity to obtain and provide verification. Whether he chose not to, or could not do so because there is no such verification, the result is the same. This Court finds his assertions utterly without support or credibility.
II. Complaint of Thelma Lambert
"As a result of the Complaint filed by Thelma Lambert, an AGC investigation *1230 was initiated. Although Ms. Lambert was not present at the hearing before this Court, the excerpt of her testimony from the IPH was introduced without objection. The facts revealed by the investigation follow.
"Ms. Lambert wanted a deed prepared for her home. After seeing an advertisement in the paper for Maryland Paralegal Associates, Inc. ("MPA"), Ms. Lambert contacted Robert Morgan. Mr. Morgan is not an attorney. Mr. Morgan agreed to perform the desired services for her upon receipt of her check for the fee. The check was sent in May, 1993. Ms. Lambert then made numerous attempts to reach Mr. Morgan. Eventually, she received a call from Mr. Morgan who told her that he would take care of the matter.
"In July, 1993, Mr. Morgan visited Ms. Lambert's house with Mr. Milliken. Mr. Morgan asked Ms. Lambert in the presence of Mr. Milliken if there was any other work for him to do. Both Mr. Morgan and the Respondent gave Ms. Lambert their business cards. After promising to take care of the paperwork that day, Mr. Morgan and Mr. Milliken left the house. Mr. Morgan never completed the work, contacted Ms. Lambert, or refunded her money.
"On cross-examination, Ms. Lambert admitted that she did not expect anything from Mr. Milliken nor did he promise to do anything for her. After this contact, Ms. Lambert was unable to reach Mr. Morgan again even though he had cashed a $200 check from her. Mr. Milliken maintained that he had nothing to do with Ms. Lambert. He did not recall handing her his business card and stated that he was only there because he was getting a ride from Mr. Morgan. The Respondent testified that he went outside with Ms. Lambert's son while Mr. Morgan discussed business.
"Bar Counsel urges this Court find that Mr. Milliken violated Maryland Rule of Professional Conduct 5.5 by assisting a person not a member of the Bar with the unauthorized practice of law. Bar Counsel was unable to establish by clear and convincing evidence a relationship of the nature that would violate this rule. Ms. Lambert was unclear whether Mr. Morgan and Mr. Milliken were working together and Mr. Milliken stated that he was not involved in the case. In fact, on May 2, 1996, Bar Counsel admitted in closing argument that this was the most tenuous of the complaints and asked this Court to find that evidence showing a close working relationship between both men, the carrying of each other's business card, and Mr. Milliken's presence at the meeting with Ms. Lambert were enough to demonstrate the alleged misconduct. This Court declines such an invitation as Bar Counsel was unable to meet its burden of proof of clear and convincing evidence with respect to this Complaint. Since the client herself acknowledged at the IPH that she did not expect anything from Milliken and that he did not promise to do anything for her, this Court finds the evidence utterly insufficient in this instance.
III. Complaint of Shannette Taylor-Hawkins
"Evidence was presented at the Circuit Court hearings on April 17 and 18, 1996 to establish the following facts regarding the above Complaint.
"On October 10, 1991, Ms. Taylor-Hawkins, the Complainant, and her daughter, Charise Nicole Colbert, were passengers in a taxicab that was involved in an accident. Initially, the Complainant hired attorney Nelson Kandel to represent her in a personal injury action. After fifteen months, Ms. Taylor-Hawkins discharged Kandel, and hired Mr. Milliken "to her knowledge."
"Ms. Taylor-Hawkins learned of Mr. Milliken from an acquaintance. During their initial telephone conversation, Mr. Milliken told Ms. Taylor-Hawkins to pick up the file from Nelson Kandel's office and drop it off at MPA with his paralegal, Robert Morgan. Ms. Taylor-Hawkins believed the Respondent also maintained one of his offices at MPA. When she arrived there, she gave the file to Mr. Morgan. Mr. Milliken was not present. Subsequently, Ms. Taylor-Hawkins called MPA's office at St. Paul Street several times and spoke to Robert Morgan or his wife. She also tried to contact the Respondent at his *1231 office but always spoke with an individual named Ina. She found that the "462" number (Druid Park, the location of Mr. Milliken's office), was eventually disconnected. The only contact she had regarding her case was with Mr. Morgan with whom she met one time. He told her "they" were working on the file.
"Mr. Milliken explained that Ms. Taylor-Hawkins knew she could reach him through a mutual friend named Margo. He testified that his role was to determine whether she had a case. He determined that she did not, and he informed her of his conclusion by phone. He believed that to be a sufficient communication and therefore did not send any written correspondence. When asked for verification of his actions, Mr. Milliken stated that he had no files or records because "he did not record incidents of that nature." He testified that he did not maintain records because he never accepted money from her, and therefore, did not view her as a client.
"Finally, although Mr. Milliken testified that he made his relationship with MPA clear to her, Ms. Taylor-Hawkins did not understand the distinction between a lawyer and a paralegal. In the Answers to Requests for Admissions, the Respondent addressed Mr. Morgan's involvement with Ms. Taylor-Hawkins' file. Mr. Milliken admitted that he asked Mr. Morgan to "take a look into the file and see just what was in it and what would I needwhat, if anything, I might need." Mr. Milliken stated that he took the file for his own review, but after deciding that he did not want the case, he returned it to Robert Morgan.
"Bar Counsel demonstrated through clear and convincing evidence that the Respondent violated several Maryland Rules of Professional Conduct in the course of his representation of Ms. Taylor-Hawkins. In this situation Mr. Milliken essentially left Ms. Taylor-Hawkins dangling. Though he did not understand that she was his client, from the moment that he agreed to review her case and directed her to deliver her file to his paralegal associate, Mr. Milliken was bound by the Maryland Rules of Professional Conduct in handling this matter. Although Mr. Milliken asserted that he did review the file and advised Ms. Taylor-Hawkins by phone that she had no case, he did not memorialize the conversation in any fashion. He did not notify her in writing. He did not make or keep a file of any kind. He did not even make any notes regarding his evaluation of the case or any conversation with her. Indeed, he attempted to justify the failure to make or maintain records on the rather astounding basis that because he never accepted money from her, he did not view her as a client. By contrast, Ms. Taylor-Hawkins was quite convincing in explaining that after their one (and only) telephone conversation, she never heard from Mr. Milliken again. He failed to return any of her numerous phone calls, and after his office phone was disconnected, he never provided her with information regarding how she could get in touch with him. Such inaction by Mr. Milliken clearly fails to comply with Rule 1.1 which requires a lawyer to provide competent representation and necessitates thoroughness and preparation reasonably necessary for the representation. Further, Mr. Milliken's inaction and inattentiveness, as noted above likewise fails to satisfy Rule 1.3 which obligates a lawyer to act with reasonable diligence and promptness in representing a client.
"By failing to contact, communicate with, or respond to his client's requests Mr. Milliken failed to comply with Rule 1.4(a). It obligated him to keep her reasonably informed about the status of the matter and promptly comply with reasonable requests for information. In startling contrast to this important duty, Mr. Milliken did nothing to respond to, or communicate with his client.
"Rule 1.16(d) obligates a lawyer to surrender papers and property to which the client is entitled. Since the file that was obtained from Nelson Kandel and turned over to Robert Morgan at Mr. Milliken's direction for delivery to, and review by Mr. Milliken was somehow lost and never returned to Ms. Taylor-Hawkins after review by Mr. Milliken, he has also violated Rule 1.16(d).
*1232 "Finally, in the context presented, having directed the client to deliver her file to Robert Morgan to do some type of work, and subsequently directing Mr. Morgan to return the file to the client, Mr. Milliken had supervisory responsibility under Rule 5.3(b) over Mr. Morgan and his possession and disposition of the file. Mr. Milliken's responsibility to supervise the activities of such non-lawyer assistants obligated him to make reasonable efforts to ensure that Mr. Morgan's conduct was compatible with the lawyer's professional obligations in this case, including the responsibility to return the file or take other reasonable steps to make certain that the client knew what happened to the file. Ms. Taylor-Hawkins' file was never returned to her. Neither Mr. Milliken nor Mr. Morgan had any explanation for what happened to the file. Such shoulder shrugging hardly suffices to satisfy the mandate of Rule 5.3(b).
IV. Complaint of Bar Counsel
"The Complaint filed by Bar Counsel in this matter concerns the Respondent's representation of Charles Clark in a Post Conviction proceeding before the Honorable Marvin Steinberg. The matter was first brought to the attention of Bar Counsel by Judge Steinberg after the Respondent missed two scheduled pre-hearing conferences.
"Mr. Milliken readily admitted that he misnoted the date of the original conference and failed to appear for a rescheduled conference because he had not checked his messages to learn of the new date. Mr. Milliken also admitted that he did not respond to two letters from Bar Counsel relating to these events.
"The asserted "misnoting" of the first scheduled conference might be credible and even excusable as inadvertent clerical error if Respondent had not also, in connection with this same client matter, failed to appear for a subsequently rescheduled conference about which ample notice was given, or if he had responded, as required, to Bar Counsel's two letters relating to these events. Failing to check messages in the context presented can in no way suffice to justify the second failure to appear for a scheduled court conference. At a minimum both Judge Steinberg and his client had the right to expect Mr. Milliken's attendance, or to receive the courtesy of some reasonable notice or explanation for non-appearance if not reasonably before, then surely promptly after the fact(s) of his non-appearance. Mr. Milliken appears simply to have ignored the matters in the hope they would, as often colloquially expressed, "go away." Based upon Respondent's own admissions, this Court finds by clear and convincing evidence, that the Respondent violated Maryland Rules 1.3, 3.2, and 8.4(d). By failing to attend the conferences, it is clear that the Respondent did not "act with reasonable diligence and promptness in representing a client." In addition, Maryland Rule 3.2 requires that an attorney "make reasonable efforts to expedite litigation." Respondent's repeated absence from the conferences made compliance with this Rule impossible. These absences also indicate that the Respondent "engage[d] in conduct that [was] prejudicial to the administration of justice," which is prohibited by Maryland Rule 8.4(d).
"Lastly, Respondent's failure to respond to Bar Counsel's letters was in dereliction of his duty under Maryland Rule 8.1(b) which requires that Respondent "shall not... knowingly fail to respond to a demand for information from an admissions or disciplinary authority. . . "
V. Complaint of Bar Counsel
"The second Complaint filed by Bar Counsel concerns Mr. Milliken's handling of his attorney trust account from 1992-1993. During the course of this investigation, several violations of the Maryland BU Rules, governing attorney trust accounts were discovered.
"The evidence introduced at the hearing consisted of Nations Bank statements (Exhibit 7), a summary "Review of Escrow Account Records" prepared by AGC Investigator John Reburn in April 1994 at the request of Assistant Bar Counsel Walter D. Murphy (Exhibit 8), a spreadsheet illustrating the monthly activity of the Respondent's attorney trust account for the period *1233 of January, 1987September, 1993 (Exhibit 9) and 1992 Nations Bank statements (Exhibit 10).
"The evidence indicated that from 1986-1991, the activity related to Mr. Milliken's attorney trust account was in the normal range; there was nothing unusual about his method of disbursements. There was consistently a running balance at the end of each month of approximately $20,000 or more. However, in 1992, there was a significant change in the way the Respondent disbursed funds from the attorney trust account. Interestingly, this change in attorney trust account activity coincided with the Bank's unsatisfactory closeout of Mr. Milliken's general account in June, 1992 after three months of overdrafts.
"After Mr. Milliken's general account was closed, he regularly deposited funds into his attorney trust account and immediately wrote counterchecks payable to cash. He also issued regular escrow checks payable to cash. As a result, the funds in the attorney trust account dwindled significantly. Mr. Milliken began drawing down on the accumulated funds in the attorney trust account. All these transactions and balances are reflected in the exhibits introduced at the hearing.
"In addition to writing checks payable to "cash," the Respondent made cash disbursements to some of his clients from the trust account. He also stated that he would cash checks for clients as an accommodation because some of his clients did not have bank accounts. On August 4, 1992 Respondent received a check for $3,000.00 from the MTA in settlement of a case he was handling for Theola Moore. He deposited the total amount into his escrow account, and then wrote and cashed a countercheck for $3,000.00 payable to cash. At the end of August Respondent received a check for $4,000.00 from Continental Loss Adjusting in settlement of a claim he was handling for Norma Williams. On September 15, 1992 he deposited the $4,000.00 check in his escrow account, and then wrote and cashed a countercheck for $4,000.00 payable to cash. On September 16, 1992, Respondent received a check for $2,250.00 from MAIF in settlement of a claim he was handling for Wylie Cator. On that same date he wrote and cashed a countercheck for the full amount payable to cash. An especially intriguing series of escrow account transactions by Mr. Milliken was evident in his handling of $6,000.00 in settlement funds which he received in connection with a case for his client, Sharon Stanley. On September 23, 1992 he deposited the $6,000.00 into his escrow account. On that same date he issued a check for two-thirds of that amount, i.e, $4.000.00 to his client. However, on September 24, 1992 he wrote a check from escrow for $1,500.00 to his wife, Ruth Milliken and a check for $500.00 payable to cash. Ruth Milliken was not Respondent's employee. Mr. Milliken explained that his wife handled the bills for their home and family and that in writing the $1,500.00 to her directly from escrow he was just taking "a short cut." He had no explanation as to what happened to or who received the $500.00 payable to cash.
"Mr. Milliken also accommodated corporate clients by keeping money in the trust account. He claimed that he was in-house counsel, although he was unable to provide any details as to what legal work he performed on behalf of the corporations.
"The Respondent testified that he neither put non-client funds into his escrow account, nor did he commingle his funds and other clients' funds. However, according to his testimony at the IPH, the Respondent acknowledged holding monies for people with whom he had a personal relationship rather than an attorney-client relationship. When asked at the Circuit Court hearing to verify his relationship with these entities and his business with them, Mr. Milliken merely responded that he did "whatever legal matters came up." He produced no records or files, nor any corporate clients or other witnesses to substantiate any such corporate client relationships.
"Furthermore, the Respondent allowed fees to accumulate in the attorney trust account, and then drew on those fees in 1992-1993.
"Despite all of the above-mentioned activity, the Respondent has no records of *1234 any of these transactions, payments, fees, etc. He testified that the only records he kept were on a "simple pad," which was not produced at the hearing.
"The documentary evidence and Respondent's own admissions discussed above lead to the obvious and inescapable conclusion that Mr. Milliken did violate Rule BU9 by drawing instruments payable to cash on his attorney trust account. Making cash disbursements or writing counterchecks from the trust account is clearly prohibited. AGC Investigator Reburn's testimony concerning his review and analysis of Mr. Milliken's bank records demonstrated that for several years prior to 1992 Mr. Milliken allowed fee income to accumulate in his trust account in violation of Rule BU7.
"Further, by his own admission at the IPH, Mr. Milliken deposited and held funds for non-clients. Although he testified before this Court that such individuals and entities were clients, he produced none of these "clients" or other witnesses nor records of any kind to substantiate client relationships as to those individuals and entities. By allowing his own fees to accumulate in escrow and by holding nonclients' funds in escrow for extended periods with the funds of clients, and by not keeping those funds separate from the property of clients and third persons, he violated Rule 1.15(a) and BU7(a) which prohibit commingling of funds in a trust account.
"Maryland Rule BU9 prohibits an attorney from "borrow[ing] or pledg[ing] any funds required by these rules to be deposited in an attorney trust account, ..., or us[ing] any funds for any unauthorized purpose." As previously discussed, Mr. Milliken wrote a check from the trust account directly to his wife for $1,500.00 for maintenance of their household, he wrote checks for cash, and cashed checks from his attorney trust account. The funds that he removed from the account or neglected to place in the account were appropriately attorney trust account funds and therefore, the Respondent was unauthorized to use the funds in the manner listed above.
"The Respondent also had a duty under Maryland Rule 1.15(a) to keep "complete records of such accounts ... [to be] preserved for a period of five years after termination of the representation." By Respondent's own admission, he kept no records. In light of his consistent and repeated use of counterchecks and instruments payable to cash, Mr. Milliken's failure to produce any records himself regarding the trust account is hardly surprising. Keeping track and accounting would be difficult, if not impossible, without some concomitant system of record-keeping correlating such instruments with particular clients, cases, or transactions.
VI. Complaint of Gorman Murphy
"Mr. Gorman Murphy was not present at the hearings before this Court. Neither were Ms. Rosaleen Brewer or Ms. Pauleen Williams. However, both women testified before the Inquiry Panel in April and May, 1995. Mr. Murphy never testified. The facts related to this Complaint were established as follows.
"Mr. Murphy and his two sisters, Ms. Brewer and Ms. Williams, went to Mr. Milliken's office for his assistance in preparing a deed that would convey Mr. Murphy's property to his grandsons. Although Mr. Murphy said very little during the meeting because of his ill health, it was agreed that the Respondent would prepare both a will and a deed. The will was to be sent to Mr. Murphy's house and the deed was to be delivered to the sisters' house. The Respondent testified that he fully explained to the sisters the necessary steps to execute the will and the deed properly, and how to take the deed to the land records office and have it recorded and pay the necessary property tax.
"Mr. Milliken stated that the sisters were unhappy with the completed deed because they wanted the house to be deeded to them and apparently decided that if the property was not deeded to them, they did not want the work done. Mr. Milliken testified that he told the sisters he could not do as they wished because it was contrary to the wishes of his client, Mr. Murphy, who was allegedly satisfied with the work.
*1235 "At the hearing, Bar Counsel introduced a copy of a letter to Mr. Milliken signed by Mr. Murphy, Ms. Brewer, and Ms. Williams. The letter, dated August 1, 1993, indicated that they expected Mr. Milliken to record the deed and send it back to them and, if this was not possible, they expected the return of their money. At that time, the Respondent had not contacted the Complainants for approximately one year since their first meeting. Ms. Brewer and Ms. Williams were unable to contact the Respondent. He never recorded the deed and they never received a refund.
"The Respondent maintained that he did everything they requested of him and more because he gave them a will in addition to the deed. Mr. Milliken was unable to support his contentions as he produced no documents to support his position. Instead, he claims that all relevant documents were destroyed in the alleged office fires.
"In light of the facts established by clear and convincing evidence at the hearing, this Court concludes that Mr. Milliken violated Maryland Rules 1.1, 1.3, 1.4(a), (b), and 8.1(b). His failure to record the deed or provide adequate instructions for the Complainants, his dereliction in failing to contact his clients either before or after they wrote him the letter, and his nonexistent documentation of work allegedly performed demonstrate that he acted incompetently and without diligence. Further, he did not keep his client "reasonably informed about the status of his legal matter and promptly comply with reasonable requests for information ... or explain [the] matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation."
"In addition, as admitted by the Respondent in Exhibit 2, it is clear that he violated Maryland Rule 8.1 by failing "to respond to a lawful demand for information," in that he refused to answer letters from Bar Counsel regarding the Complaint of Gorman Murphy.
VII. Complaint of Patricia Carmichael
"Based upon allegations set forth in this Complaint as well as testimony elicited from the Respondent at an IPH on May 3, 1994, an investigation into Mr. Milliken's representation of Patricia Carmichael took place. The following facts were established.
"Patricia Carmichael testified under oath before the IPH by telephone from a federal correctional facility in California on April 20, 1995 (Exhibit 13) and on May 23, 1995 (Exhibit 14). She was introduced to Mr. Milliken by Mr. Morgan. Mr. Milliken visited her with Morgan one time at the Montgomery County Detention Center. He agreed to represent her on her three (3) pending state matters for an agreed fee of $1,500.00. The three matters involved a Parole Violation, and two (2) state matters involving theft charges. Ms. Carmichael's mother, Iva Andrew, sent the $1,500.00 to Mr. Morgan. Mr. Morgan gave Mr. Milliken $1,500.00. Mr. Milliken in turn gave him back $500.00 for Morgan's services in working on Ms. Carmichael's legal problems. After the initial meeting at the Montgomery County Detention Center Ms. Carmichael never heard from Mr. Milliken again. He did not effect the desired nolle prosequi on the state charges, nor did he assist in bringing about the lifting of the Maryland detainers. The state matters were ultimately resolved with the assistance of Colleen Beach, a legal intern at Legal Aid at Lexington, Kentucky.
"Although the Respondent denied in testimony before this court that he ever represented Ms. Carmichael, his testimony before the Inquiry Panel on May 3, 1994 indicates otherwise. In fact, before the Inquiry Panel at a time before Ms. Carmichael had filed a Complaint with the AGC, the Respondent testified that he was hired to negotiate with a State's Attorney to nolle pros Ms. Carmichael's shoplifting charge in order for her to avoid serving substantial federal time. He specifically stated that, "that's what I was hired for and that's what I dealt with."
"Before this Court, Mr. Milliken testified that he spoke with Ms. Carmichael at the Baltimore City or Baltimore County Detention Center and told her that he would handle her State case for $1500.00. He testified that he made it clear that he *1236 would not do any work until he was paid in full and then he gave Ms. Carmichael his name, address, telephone number, paper and a pen, and told her to have a relative get in touch with him about the fee. Mr. Milliken stated that he never again heard from Ms. Carmichael.
"Two letters, allegedly signed by the Respondent, and on his office letterhead, were introduced into evidence before this Court. One letter was addressed to Ms. Carmichael and confirmed that Mr. Milliken had been retained, having received the necessary funds, and that he would visit her within a week. The second letter was addressed to the Warden of the Montgomery County Detention Center indicating that the Respondent was Ms. Carmichael's attorney and he intended to visit his client. The Respondent denied writing the letters, and suggested that Mr. Morgan may have used the Respondent's letterhead and forged the Respondent's signature.
"Mr. Morgan appeared before this Court on May 2, 1996, and confirmed that he arranged the meeting between Ms. Carmichael and Mr. Milliken and Mr. Milliken returned $500.00 to Mr. Morgan for services rendered.
"The testimony of Ms. Carmichael before the IPH, the testimony of Mr. Morgan before the IPH and before this Court, as well as that of Mr. Milliken before both the IPH and this Court are essentially consistent with respect to Mr. Morgan introducing Mr. Milliken to Ms. Carmichael, arranging their meeting, the nature of the work to be performed and the amount of the fee. At a time before Ms. Carmichael had actually filed a Complaint, Mr. Milliken readily, repeatedly and in great detail admitted that he was hired by Ms. Carmichael to deal with her state matters. His subsequent denial before this Court years after such admissions and at a time after Ms. Carmichael's complaint was filed and pursued by the AGC, renders Mr. Milliken's former rather than latter testimony credible. This Court further finds that Ms. Carmichael's testimony that Mr. Milliken never did any work in her cases was, however, in some sense at least corroborated by Mr. Milliken's later position in testimony before this Court in that he acknowledged that he never did any work. His justification, i.e., never having received any money from her, is what is not credible. This Court's conclusion is further bolstered by the fact that once again Mr. Milliken produced no record, files or documentation of any kind to support any of his testimony at any time.
"By failing to undertake any work in this case Mr. Milliken has violated his obligation under Rule 1.3 to act with diligence in representing this client. By not communicating with her, or responding to her or her family's messages and requests for contact he has violated Rule 1.4(a) which governs his obligation to communicate with his client and to comply with reasonable requests for information. Having failed to do any work whatsoever for Ms. Carmichael his fee of $1,500.00 can hardly be said to have been reasonable as required by Rule 1.5(a). Further under Rule 1.5(b) Mr. Milliken was obligated to communicate, preferably in writing, the basis or rate of his fee to Ms. Carmichael, who had not regularly been represented by Mr. Milliken. In this instance there was never any communication of any kind concerning the basis of his fee.
"The evidence in this matter further satisfies this Court that Mr. Milliken violated Rule 5.4 by sharing legal fees with a nonlawyer. Mr. Morgan got the $1,500.00 fee from Ms. Carmichael's family, gave it all to Mr. Milliken, who immediately gave $500.00 back to Mr. Morgan.
"By requesting a fee, receiving it in full, and then failing to do any work whatsoever Mr. Milliken's conduct and actions were dishonest, deceitful and fraudulent. They constitute not only misconduct, but indeed the very kind of misconduct which is also prejudicial to the administration of justice under Rule 8.4.
"Finally, in this as in several other instances, Mr. Milliken by his own admissions failed to respond to a lawful demand for information by Bar Counsel concerning this Complaint in violation of Rule 8.1(b).
*1237 VIII. Complaint of Carroll Middleton
"In connection with this Complaint, the following facts were established by clear and convincing evidence at the hearings before this Court in April and May, 1996.
"This Complainant was introduced to the Respondent in the spring or summer of 1994 by Marian Turner, a mutual acquaintance. The Respondent met with Mr. Middleton at Ms. Turner's house. The purpose of the meeting was to discuss whether Mr. Milliken would review and evaluate a prior lawsuit in which Mr. Middleton was a party. The Respondent suggested at their meeting that Mr. Middleton's prior lawyer had not pursued the case in Mr. Middleton's best interest, and that Mr. Middleton had a potential lawsuit against that lawyer. Mr. Milliken agreed to review the file and think about how to pursue the case.
"After conferring with Mr. Morgan, who was also present, Mr. Milliken said his fee was $350.00 and asked Mr. Middleton to make the check out to Mr. Morgan, who Mr. Middleton understood was not an attorney. Mr. Middleton stated that he was never really sure what basis there was for the fee. The fee was never placed in an attorney trust account.
"At the request of Mr. Milliken, Mr. Middleton produced all of his files and documents. However, when Mr. Middleton tried to contact Mr. Milliken, he was unsuccessful. Mr. Middleton left several messages, but it took more than six months for Mr. Milliken to respond. When Mr. Milliken did respond, he agreed to return $250.00 and the files. However, Mr. Middleton received nothing from the Respondent.
"Mr. Milliken stated that he reviewed the files and sent an opinion letter, which he was unable to produce at the hearing because it was destroyed in the alleged fire. The Respondent had no documents, files, correspondence, or retainer agreements to evidence any work.
"Bar Counsel has established by clear and convincing evidence that the Respondent met with Mr. Middleton, agreed to perform legal services for him, collected a fee, cashed the check prior to performing any services, and then made himself unavailable to Mr. Middleton. Mr. Milliken ultimately promised to refund money to this client, but never did.
"Based on the Respondent's failure to communicate with Mr. Middleton after receiving his file and his negligence in acting to apprise Mr. Middleton regarding his case, this Court concludes that Mr. Milliken violated Maryland Rules 1.3 and 1.4(a) requiring him to act with diligence and to keep his client reasonably informed.
"By failing to perform any work on Mr. Middleton's behalf and charging a fee, the basis of which was not explained to the client, the Respondent violated Maryland Rule 1.5(a), (b) which obligates a lawyer to charge reasonable fees consistent with the amount of effort made on a client's behalf and to communicate the basis of the fee to the client. Here, Mr. Milliken charged $350.00 and did nothing. In addition, Mr. Milliken neglected to return Mr. Middleton's files and the fee which he did not earn. These actions are violative of Maryland Rule 1.16 which requires an attorney to "surrender[] papers and property to which the client is entitled and refund[ ] any advance payment of fee that has not been earned."
"Finally, as admitted by the Respondent in Petitioner's Exhibit 2, it is clear that he violated Maryland Rule 8.1(b) by failing "to respond to a lawful demand for information," in that he refused to answer letters from Bar Counsel regarding the above Complaint.
IX. Complaint of Olivia Cornish
"Evidence and testimony were presented at trial to establish the following facts relating to this Complaint.
"This Complaint resulted from Mr. Milliken's representation of William Cornish, an individual who was a fugitive from the law at the time he sought legal assistance. Federal charges were pending against Mr. Cornish, his co-defendant had been apprehended, and was in the last phase of his trial. Mr. Cornish allegedly asked the Respondent to monitor the trial to find out the outcome and to determine whether there was evidence incriminating Mr. Cornish.
*1238 "Mr. Milliken approached Ms. Cornish several times for money and actually received seven cash payments totaling $5,000.00 from Ms. Cornish on behalf of her son. Mr. Milliken testified that he told Ms. Cornish exactly how much to pay him for each service. Randolph Cornish, the client's brother, testified that Mr. Milliken was told by Ms. Cornish to communicate through Randolph regarding the case and the fees, but that the Respondent continued to demand the money from Ms. Cornish and never contacted Randolph.
"Ms. Cornish stated that she was nervous about the lack of progress. She noticed that the Respondent never gave progress reports. Furthermore, although the Respondent testified that he met with detectives and the federal prosecutor, consulted with Mr. Cornish's girlfriend and did research, he produced no evidence of any kind at the hearing to substantiate such assertions. He had no accounting of time spent on the Cornish matters. He testified that he did take notes on research but did not keep them, nor did the Respondent keep notes regarding the alleged visits to the District Court to see if a warrant was outstanding for Mr. Cornish. Respondent explained that he did not feel the records were necessary.
"It is unclear from the evidence presented at the hearing precisely what Mr. Milliken's responsibilities entailed because it seems that Mr. Cornish was the only person who spoke to the Respondent about the scope of his representation. In fact, Ms. Cornish testified that she was called to the Grand Jury and expected to see Mr. Milliken there because she thought he was her lawyer. He did not appear. The Respondent indicated during his cross-examination of Ms. Cornish that the above responsibilities, i.e. meeting with the federal prosecutors and detectives, etc., were his function as Mr. Cornish's attorney. The Respondent also testified that he attempted to update Ms. Cornish but she admittedly did not want to hear the details.
"Mr. Milliken stated that he had several conversations with the federal prosecutor to see if he could get a deal for Mr. Cornish. Both Ms. Cornish and her son, Randolph, believed that Mr. Milliken was hired to work out a plea with the federal prosecutor. Testimony indicates that there was some understanding that Mr. Milliken was to monitor a federal trial and engage in plea negotiations with the federal prosecutor. However, Mr. Milliken is not a member of the Federal Bar. Mr. Milliken indicated that he knew he couldn't represent Mr. Cornish in federal court, but he thought he could do the work leading up to the court date and suggested that Mr. Cornish could represent himself.
"Ultimately when William was caught and put in prison, Mr. Milliken was nowhere to be found. Ms. Cornish was forced to hire another attorney to represent her son because she never heard from Mr. Milliken again, nor did she know how to contact him.
"Subsequently, Ms. Cornish filed a suit against the Respondent and was awarded a civil judgment for $5000.00 by default. Respondent stated that he did not contest the suit because "the time just got away from [him]." Mr. Milliken neither paid nor appealed the judgment. He testified that he did not pay it because he "didn't feel she [was] entitled to it."
"The facts established by clear and convincing evidence at the trial support a conclusion by this Court that Mr. Milliken violated Maryland Rule 1.16(d). There is absolutely no credible evidence to show that Mr. Milliken performed any work on behalf of Mr. Cornish and he never refunded the money Ms. Cornish was entitled to receive as a "fee that had not been earned." Having accepted fees to work out a plea agreement in a Court before which he was not admitted to practice, doing no work and failing to be present at any hearings directly involving his client, Mr. Milliken also violated Maryland Rule 8.4(d) which deems it to be professional misconduct when a lawyer "engage[s] in conduct that is prejudicial to the administration of justice." Similarly, as a lawyer who has failed to pay a judgment, which he neither contested nor appealed, because he doesn't feel that Ms. Cornish is entitled to the money, he has in this Court's view engaged in conduct prejudicial to the administration of justice.
*1239 "Finally, as admitted by the Respondent in Petitioner's Exhibit 4, it is clear that he violated Maryland Rule 8.1(b) by failing "to respond to a lawful demand for information," in that he refused to answer letters from Bar Counsel regarding the above Complaint.
X. Complaint of Tyrese Alexander
"The facts established before this Court demonstrated that the Respondent agreed to represent a Ms. Alexander, accepted payment for services to be performed, and never fulfilled his responsibilities.
"In this case, Ms. Alexander approached Mr. Milliken for assistance in an uncontested divorce and was quoted a fee of $350.00. Mr. Milliken did not explain the basis of the fee to Ms. Alexander. She paid a $200.00 retainer fee on the date of their initial meeting in March, 1991. She tried unsuccessfully to reach him by phone on numerous occasions, but got no response for months. Five months after reaching Mr. Milliken, Ms. Alexander recalled getting a two page Bill of Complaint for Absolute Divorce in August, 1991. There was no cover letter and no instructions as to how she should proceed. Mr. Milliken testified that he previously instructed her, but he cannot produce evidence of his work.
"Subsequently, Ms. Alexander attempted to call the Respondent several times without success. Finally, on December 24, 1993, Mr. Milliken contacted Ms. Alexander and requested that she give him until January 1, 1994 to refund her money. Ms. Alexander never heard from the Respondent again, nor did she receive a refund.
"Based upon the facts established by clear and convincing evidence, this Court concludes that the Respondent has violated Maryland Rules 1.3 and 1.4(a) by failing to act with diligence and to communicate with Ms. Alexander and keep her "reasonably informed." As noted above, Mr. Milliken provided no letter of explanation with the Complaint he sent, nor did he return her many phone calls. More than two (2) years passed without any further work by Mr. Milliken or communication with this client. By charging Ms. Alexander a fee, doing minimal work, and failing to explain the basis for the charge, Mr. Milliken violated Maryland Rule 1.5(b) which obligates a lawyer to charge reasonable fees consistent with the amount of effort made on a client's behalf and to communicate the basis of his fee to the client within a reasonable amount of time.
"Although Mr. Milliken told Ms. Alexander he would return her money, he did not do so and therefore he is in violation of Maryland Rule 1.16(d) which mandates that a lawyer "refund[] any advance payment of fee that he has not earned."
"Finally, as admitted by the Respondent in Petitioner's Exhibit 4, it is clear that he violated Maryland Rule 8.1(b) by failing "to respond to a lawful demand for information," in that he refused to answer letters from Bar Counsel regarding the above Complaint."
(Footnotes omitted).
The hearing judge found by clear and convincing evidence that Milliken violated the following Rules of Professional Conduct: 1.1 (Competence); 1.3 (Diligence); 1.4(a), (b) (Communication); 1.15(a), (b) (Safekeeping Property); 1.16(d) (Declining or Terminating Representation); 3.2 (Expediting Litigation); 5.3(b) (Responsibilities Regarding Nonlawyer Assistants); 5.4(a) (Professional Independence of a Lawyer); 8.1(b) (Bar Admission and Disciplinary Matters); 8.4 (Misconduct), and Maryland Rules BU7 (Commingling of Funds) and BU9 (Prohibited Transactions). Neither Bar Counsel nor Respondent has filed exceptions to these findings of fact and conclusions of law.
The sole issue before this Court is the extent of the discipline to be imposed upon Respondent. This Court is vested with the responsibility to supervise the conduct of lawyers in order to protect the public and to maintain public confidence in the judicial system and the bar as a whole. The purpose of sanctions is not to punish the errant lawyer, but rather to protect the public from further acts of misconduct, to protect the integrity of the legal profession and to deter other lawyers from engaging in violations of the Rules of Professional Conduct. Attorney Griev. Com'n v. Myers 333 Md. 440, 447, 635 A.2d 1315, 1318 (1994). Each case is to be judged *1240 based on the particular facts and circumstances. Attorney Griev. Comm'n v. Babbitt, 300 Md. 637, 642, 479 A.2d 1372, 1375 (1984). Bar Counsel recommends disbarment as the appropriate sanction in this case. Respondent urges this Court to consider some lesser sanction other than disbarment, such as suspension. For the following reasons, we conclude that the appropriate sanction is disbarment.
The hearing judge found that Respondent engaged in egregious misconduct that amounted to "fraud, deceit and misrepresentation." His clients suffered severe detriment. He repeatedly neglected client matters and failed to take steps to protect client interests. Respondent repeatedly failed to apprise clients honestly of the status of their cases, and in effect, repeatedly lied to his clients. In failing to provide proper representation, he misled his clients into believing that their matters were being appropriately handled. He did not refund advance payment of fees that had not been earned and, on more than one occasion, he shared fees with a non-lawyer. When sued by a client for the return of the unearned fee, he did not appear in court, and subsequently ignored the default judgment simply because he felt the judgment was unwarranted. Respondent violated Maryland Rules BU7 and BU9 by drawing instruments payable to cash on his attorney trust account, by making cash disbursements from his trust account, and by allowing fee income to accumulate in his attorney trust account. He deposited and held funds for non-clients in his trust account, thereby commingling client funds with personal and non-client funds. In writing checks from the trust account directly to his wife, he used trust funds for unauthorized purposes. He also failed to keep complete records of his trust account. In addition to his pattern of misconduct and neglect of client matters, Respondent failed to cooperate with Bar Counsel. He repeatedly refused to answer Bar Counsel's letters.
In each of the matters before the Court, Respondent received fees from the client for work to be performed in the future.[14] As an advance fee payment, he was obligated to return any unearned portion of the fee under Rule 1.16(d). See Attorney Griev. Com'n v. David, 331 Md. 317, 323, 628 A.2d 178, 181 (1993) (sanctioning attorney in part for his failure to return a fee which was unearned); Attorney Griev. Com'n v. Hill, 314 Md. 293, 294, 550 A.2d 707, 707 (1988) (ordering attorney to show cause why he should not be suspended for refusal to return the fees to two clients for whom he took no action); Attorney Griev. Com'n v. Bloom, 306 Md. 609, 610, 510 A.2d 589, 589 (1986) (disbarring attorney, in part, for conversion of client funds in failing to refund a retainer after attorney took no action on client's case); Attorney Griev. Com'n v. Harper, 300 Md. 193, 198, 477 A.2d 756, 758 (1984) (disbarring attorney, in part, for misappropriation of funds in failing to return monies client paid attorney); CHARLES W. WOLFRAM, MODERN LEGAL ETHICS § 9.2.2, at 506 (1986). Milliken has never returned the unearned portion of the fees to the clients. In Attorney Griev. *1241 Comm'n v. Manning, 318 Md. 697, 704-05, 569 A.2d 1250, 1254 (1990), we noted:
In recent years, however, we have noticed too many instances when lawyers have agreed to represent clients and accepted fees, in part or in whole, only to completely neglect these same legal problems, causing the same clients emotional distress, financial loss, or other varying kinds of inconvenience. More often than not, these situations have been exacerbated by the lack of respect and attention extended to the courts as evidenced by the failure to file timely pleadings or to make appearances as scheduled before the court to enable proceedings to be conducted. It seems to us that this kind of persistent conduct is evidence of a lawyer's disregard of his obligation.
As in Manning, the instant case is a clear example of such an attitude. The hearing judge found that "[b]y requesting a fee, receiving it in full, and then failing to do any work whatsoever Mr. Milliken's conduct and actions were dishonest, deceitful and fraudulent. They constitute not only misconduct, but indeed the very kind of misconduct which is also prejudicial to the administration of justice." The hearing judge found that Respondent told clients Steward (Dorsey), Middleton, and Alexander that he would refund the legal fee, but he failed to do so.
It is well settled that the extent of discipline to be applied is dependent upon the severity of the attorney's misconduct and the particular facts of the case. Attorney Griev. Comm'n v. Montgomery, 318 Md. 154, 165, 567 A.2d 112, 117 (1989). The gravity of misconduct is not measured solely by the number of rules broken but is determined largely by the lawyer's conduct. Flint's Case, 133 N.H. 685, 582 A.2d 291, 293 (1990). This case involves the most serious of professional and ethical duties arising from the attorney-client relationship. Respondent's treatment of his trust account in violation of Rules BU7 and BU9 alone warrants disbarment. As we have repeatedly said, commingling and conversion of client funds, in the absence of mitigating circumstances, ordinarily warrants disbarment. Myers, 333 Md. at 449, 635 A.2d at 1319; Attorney Griev. Comm'n v. White, 328 Md. 412, 417, 614 A.2d 955, 958 (1992); Attorney Griev. Comm'n v. Bakas, 323 Md. 395, 403, 593 A.2d 1087, 1091 (1991); Attorney Griev. Comm'n v. Lazerow, 320 Md. 507, 513, 578 A.2d 779, 782 (1990); Attorney Griev. Comm'n v. Ezrin, 312 Md. 603, 608-09, 541 A.2d 966, 968. (1988). Respondent has never returned the money he owes to his clients, even in the face of a judgment for the amount of the unearned fee. Respondent's pattern of neglect of client affairs, resulting in serious harm to his clients, and his failure to return unearned fees, undermine the "very underpinnings of the practice of law, which are honesty toward his clients and loyal advocacy on their behalf." Flint's Case, 582 A.2d at 293.
As an attorney licensed to practice law in the State of Maryland, Respondent has submitted to the exclusive disciplinary jurisdiction of this Court. The refusal of an attorney to respond to a demand by the disciplinary authority is sanctionable conduct under Rule 8.1(b). Attorney Griev. Comm. v. Hallmon, 343 Md. 390, 408, 681 A.2d 510, 519 (1996). Respondent's failure to respond to Bar Counsel's letters in any manner evidences his disrespect for the attorney disciplinary process in this State. His total disregard for the judgment entered against him on behalf of Ms. Cornish evidences his lack of concern for the administration of justice.
The violations in this case are serious and reveal in Respondent the absence of fundamental requirements of a lawyer: honesty, integrity, and respect for the legal system. Writing for the Court in Maryland St. Bar Ass'n. v. Phoebus, 276 Md. 353, 366, 347 A.2d 556, 563 (1975), Judge O'Donnell observed:
As we see it, the interests of the public mandate his disbarment; indeed, to order otherwise, would constitute an abnegation of our responsibilities, and would convey to the public, implicitly, a misrepresentation that the respondent continues to possess the basic attributes, required of all members of the bar, that they will act with proper care in representing their clients and will, with strictest fidelity, diligently attend their clients' interests. On the part of the respondent these attributes are convincingly found to be utterly wanting.
The record in the instant matter shows numerous trust account violations, a continuing pattern of neglect of client affairs, conversion *1242 of client monies in failing to return unearned fees, and contempt for the disciplinary process. The gravity of Respondent's conduct is further aggravated by the fact that the Court rejected as totally incredible Respondent's explanation that his failure to maintain records relating to his trust account as well as client matters was due to an office fire. See Bar Ass'n v. Marshall, 269 Md. 510, 520, 307 A.2d 677, 682 (1973). As in Phoebus, to protect the public, to instill confidence in the legal profession, and to deter similar behavior, disbarment is mandated. Myers, 333 Md. at 446-47, 635 A.2d at 1318. Accordingly, the name of Herschel D. Milliken will be stricken from the rolls of those authorized to practice law in this State.
IT IS SO ORDERED; RESPONDENT SHALL PAY ALL COSTS AS TAXED BY THE CLERK OF THIS COURT, INCLUDING COSTS OF ALL TRANSCRIPTS, PURSUANT TO MARYLAND RULE BV15(c), FOR WHICH SUM JUDGMENT IS ENTERED IN FAVOR OF THE ATTORNEY GRIEVANCE COMMISSION AGAINST HERSCHEL D. MILLIKEN. *1243 *1244
NOTES
[1] By order dated June 5, 1996, effective January 1, 1997, this Court renumbered Maryland Rules governing attorney discipline proceedings and attorney trust accounts. Formerly under subtitle BV, attorney disciplinary proceedings are now found in Chapter 700, Maryland Rules 16-701 through 16-718. Formerly under subtitle BU, the rules regarding attorney trust accounts are now found in Chapter 600, Maryland Rules 16-601 through 16-612. In this opinion, all reference to the Maryland Rules will be to the former Maryland Rules, BV1 through BV18 and BUI through BU18, which were in effect at the time these proceedings were commenced.
[2] RULE 1.1. COMPETENCE.
A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.
[3] RULE 1.3. DILIGENCE.
A lawyer shall act with reasonable diligence and promptness in representing a client.
[4] RULE 1.4. COMMUNICATION.
(a) A lawyer shall keep a client reasonably informed about the status of a matter and promptly comply with reasonable requests for information.
(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.
[5] RULE 1.15. SAFEKEEPING PROPERTY.
(a) A lawyer shall hold property of clients or third persons that is in a lawyer's possession in connection with a representation separate from the lawyer's own property. Funds shall be kept in a separate account maintained pursuant to Subtitle BU of the Maryland Rules. Other property shall be identified as such and appropriately safeguarded. Complete records of such account funds and of other property shall be kept by the lawyer and shall be preserved for a period of five years after termination of the representation.
(b) Upon receiving funds or other property in which a client or third person has an interest, a lawyer shall promptly notify the client or third person. Except as stated in the Rule or otherwise permitted by law or by agreement with the client, a lawyer shall promptly deliver to the client or third person any funds or other property that the client or third person is entitled to receive and, upon request by the client or third person, shall promptly render a full accounting regarding such property.
[6] RULE 1.16. DECLINING OR TERMINATING REPRESENTATION.
(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client's interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.
[7] RULE 3.2. EXPEDITING LITIGATION.
A lawyer shall make reasonable efforts to expedite litigation consistent with the interests of the client.
[8] RULE 5.3. RESPONSIBILITIES REGARDING NONLAWYER ASSISTANTS.
With respect to a nonlawyer employed or retained by or associated with a lawyer:
* * * * * *
(b) a lawyer having direct supervisory authority over the nonlawyer shall make reasonable efforts to ensure that the person's conduct is compatible with the professional obligations of the lawyer;
[9] RULE 5.4. PROFESSIONAL INDEPENDENCE OF A LAWYER.
(a) A lawyer or law firm shall not share legal fees with a nonlawyer ...
[10] RULE 8.1. BAR ADMISSION AND DISCIPLINARY MATTERS.
An applicant for admission or reinstatement to the bar, or a lawyer in connection with a bar admission application or in connection with a disciplinary matter, shall not:
* * * * * *
(b) fail to disclose a fact necessary to correct a misapprehension known by the person to have arisen in the matter, or knowingly fail to respond to a lawful demand for information from an admissions or disciplinary authority, except that this Rule does not require disclosure of information otherwise protected by Rule 1.6.
[11] RULE 8.4. MISCONDUCT.
It is professional misconduct for a lawyer to:
* * * * * *
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice;
[12] RULE BU7. Commingling of Funds.
a. General Prohibition.
An attorney or law firm may deposit in an attorney trust account only those funds required to be deposited in that account by BU4 or permitted to be so deposited by section b. of this Rule.
[13] RULE BU9. Prohibited Transactions.
An attorney or law firm may not borrow or pledge any funds required by these Rules to be deposited in an attorney trust account, obtain any remuneration from the financial institution for depositing any funds in the account, or use any funds for any unauthorized purpose. An instrument drawn on an attorney trust account may not be drawn payable to cash or the bearer.
[14] This Court has not previously addressed the question of whether advance payment fees must be placed in a trust account, or whether they are funds which may be placed in the operating account. But Cf. Attorney Griev. Comm. v. Hallmon, 343 Md. 390, 409, 681 A.2d 510, 519-20 (1996). Most courts that have considered the issue have determined that advance payment fees must be placed in the trust account. See Louisiana State Bar Ass'n v. Tucker, 560 So. 2d 435, 440 (La. 1989). For example, in Louisiana State Bar Ass'n v. Williams, 512 So. 2d 404, 409 (La.1987), the Supreme Court of Louisiana held that "an advanced fee for particular services not yet performed constitutes funds of the client which should be placed in a trust account and not withdrawn or withheld without the consent of the client." See also The Advance Fee Payment Dilemma, 10 CARDOZO L.REV. 647, 649, (1989); CHARLES W. WOLFRAM, MODERN LEGAL ETHICS § 9.2.2, at 506 (1986) (advance fee payment must be treated as client trust funds subject to the special rules for safeguarding them).
It is beyond question, however, that under Rule 1.16(d), any portion of an advance payment fee that is unearned must be returned to the client. In the case before us, there is no dispute as to whether the fees Milliken received were advance payment for work to be done in the future. The only issue before the hearing court was whether Milliken had earned the full fee. The hearing judge found that the fees were unearned and should have been returned to the clients. Moreover, the judgment in the Cornish case, which Milliken did not appeal, is further evidence that Milliken failed to return unearned fees.
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491 S.W.2d 216 (1973)
STATE of Texas, Appellant,
v.
Arthur H. HUFF, Appellee.
No. 8317.
Court of Civil Appeals of Texas, Amarillo.
February 5, 1973.
*218 Crawford C. Martin, Atty. Gen., and C. Bennett, Jr., Austin, for appellant.
Huffaker & Green, Calloway Huffaker, Tahoka, for appellee.
ELLIS, Chief Justice.
This is an appeal from an order sustaining the defendant's plea of privilege in an action brought by the State of Texas seeking statutory penalties and injunctive relief on the basis of defendant's alleged violations of the Texas Motor Carrier Act. Affirmed.
The State of Texas, plaintiff-appellant, by and through its Attorney General, instituted suit against Arthur H. Huff, defendant-appellee, in the 99th District Court of Lubbock County, Texas, alleging that on specified occasions the defendant had operated as a motor carrier for compensation without a proper certificate or permit from the Railroad Commission of Texas in violation of certain provisions of Article 911b, Vernon's Annotated Civil Statutes. The State seeks the enforcement of civil penalties and injunctive relief with respect to such violations as provided under Article 1690b, Vernon's Annotated Penal Code. The defendant filed his plea of privilege to be sued in Lynn County, Texas, the county of his residence. The State then filed its sworn controverting plea stating therein that the allegations of its sworn original petition, incorporated in its controverting plea by reference, "... show and aver, and it is a fact, that this Court has venue of this suit within the meaning of Exceptions 9 and 30 to Article 1995, V.A. C.S....."[1] Also, the controverting plea sets out "... that the Defendant committed within the meaning of Section 9 of Article 1995 numerous offenses in Lubbock, Lubbock County, Texas, more particularly 36 separate and individual offenses in violation of Article 911b, V.A.C.S." Such controverting plea further asserts that venue lies in Lubbock County on the grounds that Art. 1690b is a special venue statute under Exception 30 to Art. 1995, and provides specifically that suits for penalties and injunctions for violation of the Texas Motor Carrier Act (Art. 911b), "... shall beinstituted ... [in] the county in which the violation occurs...."
The venue question was heard before the court without a jury, and thereafter the trial court entered its order sustaining the defendant's plea of privilege. From such judgment the State has brought this appeal. The parties shall generally be designated as in the trial court, "plaintiff" and "defendant."
The pertinent provisions of the Texas Motor Carrier Act are: (1) Art. 911b, V. A.C.S., which sets out the prohibitions; and (2) Art. 1690b, V.A.P.C. (codified by the editors of Vernon's Texas Statutes as *219 a part of the penal code), encompassing both criminal and civil sanctions in connection with the enforcement of the Act. Article 911b prohibits any person from operating as a motor carrier in the transportation of property for compensation or hire over the public highways of the State of Texas between two or more incorporated cities without having first obtained from the Railroad Commission of Texas an appropriate motor carrier certificate or permit authorizing such operations. Subdivision (a) of Art. 1690b declares that violation of the Act is a misdemeanor and provides that upon conviction criminal punishment by way of a fine may be imposed for each and every day of violation. Sections (b) and (c) of Art. 1690b set out the civil sanctions. Section (b) provides that every person who violates any provision of the Act, shall "in addition" (to possible criminal liability) be subject to the payment of a penalty not exceeding $100 for each and every day of said violation, and that "Such penalty shall be recovered in any court of competent jurisdiction in [the county]... in which the violation occurs."; and Section (c) provides that "Upon the violation of any provision of this ... Act, ... any district court of [any county] ... where such violation occurs shall have the power to restrain and enjoin the person, ... so offending from further violating the provisions of this Act...." In this particular suit, the State is seeking the application of the "civil" sanctions.
In its first two points of error the plaintiff contends that the trial court erred in sustaining the plea of privilege because (1) venue in this case is controlled by Sections (b) and (c) of Art. 1690b, V.A.P.C., as provisions of law coming within Exception 30 to Art. 1995, thereby placing the venue for the suit within the county in which the violations occurred; and (2) under such provisions the defendant has proved facts sufficient to establish venue in Lubbock County.
The defendant has conceded that subsections (b) and (c) of Art. 1690b are special venue statutes within the meaning of Subdivision 30 of Art. 1995, V.A.C.S., and that the primary issue is whether the plaintiff has proved by sufficient evidence that a violation of Art. 911b occurred in Lubbock County, Texas. In discussing various situations coming within the purview of Subdivision 30 of Art. 1995, which prescribes that venue shall be governed by the law regulating the particular character of action involved in the suit, it is stated in 1 McDonald, Texas Civil Practice, § 4.37, at 557: "Given a venue exception, the burden rests upon the plaintiff to establish the determinative venue facts."
The plaintiff points out in its brief that there are no appellate cases setting out the venue facts necessary for proof under Art. 1690b. It is significant to note that in plaintiff's sworn controverting plea it relied upon the commission of offenses within the meaning of Sec. 9 of Art. 1995, along with Art. 911b and the respective sections of Art. 1690b as being a statutory directive within Exception 30 of Art. 1995, to establish venue in this case. However, we observe that plaintiff's allegation of Sec. 9 was not urged during the plea of privilege hearing or in its appellate brief.
In cases involving the imposition of civil penalties or sanctions it has been held that the plaintiff is required to show a meritorious cause of action. In the case of Taylor v. Whitehead, 88 S.W.2d 716 (Tex. Civ.App.Fort Worth 1935, no writ), involving a suit for the recovery of a statutory penalty for the charging of usurious interest under a particular statute dealing with such subject, it was held that a defendant cannot be required to answer a suit in a county other than that of his residence unless the plaintiff can introduce proof, prima facie, to show a right of recovery in the first instance. In the case of Flowers v. Dempsey-Tegeler & Co., 472 S.W.2d 112 (Tex.Sup.1971), a suit involving *220 the imposition of civil sanctions in connection with alleged violations of registration requirements of the Securities Act, it was pointed out that the plaintiff in contesting a plea of privilege is required to prove a cause of action.
With respect to issues involving the commission of a crime or offense, such as that within the purview of Exception 9 to Art. 1995, the proof of the fact of the commission of the offense is an essential part of the venue proof. Compton v. Elliott, 126 Tex. 232, 88 S.W.2d 91 (1935). Further, proof of the fact of the commission of the offense is as essential as proof of the place where it was committed. Gann v. Murray, 151 Tex. 130, 246 S.W.2d 616 (1952), and this proof must include evidence of each element of the offense. Wiederkehr v. Coker, 304 S.W.2d 185 (Tex.Civ.App.Eastland 1957, no writ); Downs v. McCampbell, 203 S.W.2d 302 (Tex.Civ.App.Austin 1947, no writ).
Under Art. 911b and Sections (b) and (c) of Art. 1690b, the special statute involved here, in order to constitute an offense or violation it must be shown by competent evidence that the defendant does not hold the required certificate or permit from the Railroad Commission of Texas; that such defendant actually transported property for compensation or hire over public highways between two or more incorporated cities, towns, or villages; and that such alleged violations occurred in Lubbock County. The State introduced certain exhibits and evidence indicating that New Lynn Gin Company, Wilson, Texas, had issued checks to "Herbert Huff," identified as the same person as "Arthur Herbert Huff," in payment for hauling cotton seed, and that Paymaster Gin Co., Lubbock, Texas, had issued receipts for certain loads of cotton seed indicating New Lynn Gin, Wilson, Texas, as a customer and "Huff" as a truck driver. It is clear, however, that there was no proof that the defendant did not have the required certificate or permit from the Railroad Commission, and it is our opinion that, in the instant case, the State as plaintiff, failed to prove its cause of action the various elements of the violationby sufficient evidence, or that the violations constituting its alleged cause of action occurred in Lubbock County, Texas.
The plaintiff relies upon the case of Cole v. Western Brick & Supply Co., 364 S.W.2d 761 (Tex.Civ.App.Amarillo 1963, writ dism'd), wherein the court held that the special venue statute pertaining to suits for collection for labor and materials furnished on projects contracted by the State or political subdivisions placed the venue in the county in which the project or work or any part of it was situated. In the Cole case, it was stipulated that the materials were delivered to the project. Also, it was undisputed that the project was constructed in the county in which the suit was instituted, and all facts or elements necessary to bring the case within the requirements of the special statute governing the venue were clearly established. We believe that this case is distinguishable in that all of the elements of the alleged violations necessary to establish a cause of action against the defendant were not proven by the evidence shown in the record. The plaintiff has also cited Flowers v. Dempsey-Tegeler & Co., supra, wherein the Securities Act there involved was a special statute directive of the venue. In that case the court held that had the venue hearing been a trial on the merits of the case the record would support a judgment for the plaintiffs. Thus, the plaintiffs had proved a cause of action; however, in our opinion this was not accomplished in the case at bar.
In plaintiff's fourth and fifth points of error, it contends that the court erred in allowing the defendant the right to refuse to testify against himself and that such privilege must be raised by the defendant *221 and not by his attorney. The plaintiff called the defendant as a witness, obviously for the purpose of seeking to prove by him certain of the required elements of the violations of Art. 911b which the State had alleged against him. After the defendant was sworn as a witness, but before he was asked any questions, his attorney requested that the court "... advise Mr. Huff fully as to his rights to refuse to answer questions which might or could incriminate him in any criminal matter."
Under this record, when the defendant was called by the plaintiff and sworn as a witness his attorney properly requested the court to instruct him concerning his privilege against self-incrimination. After considerable legal argument by counsel for plaintiff and defendant concerning the applicability of the privilege against self-incrimination in this case, the court made it known that the right of the defendant to refuse to testify to any matters that might incriminate him was recognized and that the hearing would proceed as if the privilege had been personally claimed by the defendant. No exception to such pronouncement or ruling was made by the plaintiff. The plaintiff's attorney asked the defendant no questions, nor made any request to question the witness as a predicate for a bill of exception to the court's ruling. See Rule 372, Texas Rules of Civil Procedure. The defendant did not personally assert his right to refuse to answer any question which he considered might tend to incriminate him, for he was asked no question, made no statement and gave no testimony whatsoever. The plaintiff's counsel then called as a witness a captain of the License and Weight Service of the Texas Department of Public Safety and sought to establish through his interrogation that the Department of Public Safety would not seek criminal prosecution against the defendant for violations relating to the period involved in this civil case. It is elementary that only the prosecuting attorney and the court can grant immunity from criminal prosecution. See Tischmacher v. State, 146 Tex. Crim. 464, 176 S.W.2d 188 (1943). No immunity was granted to the defendant in this case.
The appellant contends that the defendant's privilege to refuse to testify was not applicable because the State was seeking to impose only the civil sanctions under the Motor Carrier Act. In support of its position the State relies upon the holding in Helvering v. Mitchell, 303 U.S. 391, 58 S. Ct. 630, 82 L. Ed. 917 (1938), a case involving a penalty for violation of the income tax laws, wherein the court pointed out that the sanction imposed being civil in nature, the defendant had no right to refuse to testify. It should be noted, however, that in Helvering, under the facts as they existed, any answers given would expose the defendant only to civil liability. There was no possibility of criminal prosecution for the defendant had already been tried and acquitted of criminal charges arising out of the same circumstances for which the government was seeking to enforce civil liability. Further the rule is well established that a person cannot be compelled to incriminate himself in any kind of a case in which one is called as a witness, including civil as well as criminal cases. In re Gault, 387 U.S. 1, 87 S. Ct. 1428, 18 L. Ed. 2d 527 (1967); Fleishman v. State, 91 S.W.2d 493 (Tex.Civ.App.Texarkana 1936, no writ); Dendy v. Wilson, 142 Tex. 460, 179 S.W.2d 269 (1944). In the case of Meyer v. Tunks, 360 S.W.2d 518 (Tex.Sup.1962), a suit to remove a sheriff from office, the Texas Supreme Court held that the case was civil and that the defendant could be required to subject himself to oral deposition before trial, subject to the right to refuse to answer on the ground of self-incrimination. Also, where the defendant is on the stand as a witness, the usual rule is that his counsel may not make the claim for him. Fleishman v. State, supra. In order to invoke the privilege *222 against self-incrimination, a witness in a civil case cannot sit silently and refuse to answer a question, but he must swear that to give an answer would incriminate him in criminal prosecution. Sovereign Camp Woodmen of the World v. Bailey, 163 S.W. 683 (Tex.Civ.App.San Antonio 1914, no writ). The proper procedure is for counsel to raise the point and ask that the witness be apprised of his rights. 1 McCormick & Ray, Texas Evidence § 434 (2d ed. 1956), at 368. The witness, upon being questioned, if he so desires, may then invoke his privilege against self-incrimination.
Under this record, since the State made no interrogation of the witness, and in the absence of exception to the trial court's pronouncement, or without seeking to make a bill of exception concerning the court's ruling, the State cannot prevail in its contentions concerning the lack of testimony from the defendant under which it may have sought to establish certain essential elements of the violations forming the basis of its alleged cause of action against the defendant, and which were not otherwise proven at the time the plaintiff rested its case.
In view of the foregoing, it is our opinion that the State failed to meet its burden of proving the elements of the violations of the Texas Motor Carrier Act and therefore did not establish its alleged cause of action against the defendant in order that venue may be maintained in Lubbock County under the applicable statutes. Appellant's first and second points of error are overruled. This holding is dispositive of the venue question in this case and pretermits further consideration of the other specific points raised by the appellant.
Accordingly, the judgment of the trial court sustaining the defendant's plea of privilege is affirmed.
NOTES
[1] Exceptions Nos. 9 and 30 of Article 1995, V.A.C.S., above referred to contain the following provisions:
"9. Crime or trespass.A suit based upon a crime, offense, or trespass may be brought in the county where such crime, offense, or trespass was committed by the defendant, ... or in the county where the defendant has his domicile."
"30. Special venue.Whenever in any law authorizing or regulating any particular character of action, the venue is expressly prescribed, the suit shall be commenced in the county to which jurisdiction may be so expressly given."
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994 F. Supp. 603 (1998)
Gary C. TYLER,
v.
George M. O'NEILL, Michelenia O'Neill and Wm. M. Hendrickson, Inc.
Civil Action No. 97-3353.
United States District Court, E.D. Pennsylvania.
February 23, 1998.
*604 *605 *606 *607 Bruce S. Marks, Spector Gadon & Rosen, P.C., Philadelphia, PA, for Plaintiff.
Jeffrey B. McCarron, Christopher D. McDemus, Swartz, Campbell & Detweiler, Philadelphia, PA, for Defendants.
MEMORANDUM AND ORDER
JOYNER, District Judge.
This case has been brought before the Court upon motion of Defendants for dismissal of Plaintiff's second amended complaint. For the reasons which follow, the motion shall be granted in part and denied in part.
Factual Background
According to the allegations in plaintiff's complaint, defendant, Wm. M. Hendrickson, Inc. ("Hendrickson") is a Pennsylvania corporation engaged in the business of repairing railway cars with its principal place of business in Philadelphia. In 1981, Defendant George O'Neill purchased 90% of the stock of Hendrickson and left his employment with General Electric to take over the company. In reliance upon O'Neill's representation that he would make more money investing in Hendrickson than he would if he invested in GE, plaintiff purchased some 400 shares or 10% of Hendrickson for $20,000 at about the same time.
Hendrickson purportedly grew and by 1988, had shareholders' equity of $927,000. From time to time, Plaintiff received dividend payments from Hendrickson as a return on his investment and interest in the company. Beginning in the late 1980's or early 1990's, George O'Neill told plaintiff that the company would be relocating to a new facility which it was building on land which it was purchasing at 7700 Holstein Avenue in Philadelphia. Unbeknownst to plaintiff, however, it was George and Michelenia O'Neill who, backed by a guarantee from Hendrickson, Inc., financed the purchase of the land and the construction of the building and who took title to both the property and the facility. Thereafter, the O'Neills charged and received from Hendrickson nearly $1 million in rent from 1991 through June, 1997.
The complaint further alleges that in 1997, plaintiff learned for the first time that between 1988 and 1990, Hendrickson paid George O'Neill substantial bonuses and consulting fees in excess of $500,000 and that the O'Neills falsely represented Mr. O'Neill to be the company's sole owner in loan applications, income tax returns and in filings with the Bankruptcy Court pursuant to a corporate reorganization so as to conceal the company's true financial condition from him. Following Mr. Tyler's relocation to Wilmington, DE in 1996 to assume employment with Hendrickson, he received financial statements reflecting that the total shareholders' equity had dropped to $43,233. When plaintiff tried to learn about the company's finances and what caused the reduction in shareholders' equity, George O'Neill terminated him. Plaintiff contends that he believes George O'Neill has diverted other funds from the company to himself and that further demand on the company or O'Neill for an inspection of the company's books and records would be futile.
On the basis of these alleged facts, Mr. Tyler seeks relief against both George and *608 Michelenia O'Neill and Hendrickson, Inc. for violations of the Racketeer Influenced Corrupt Organizations Act, 18 U.S.C. § 1961, et. seq., the Pennsylvania Business Corporation Law, 15 Pa.C.S. § 1508, the Pennsylvania Unfair Trade Practices and Consumer Protection Statute and the Pennsylvania Wage Payment and Collection Law, breach of fiduciary duty, fraud and civil conspiracy. Defendants move to dismiss Count I in its entirety as moot and the remaining counts for failure to state a claim upon which relief can be granted.
Standards Applicable to 12(b)(6) Motions
The rules governing the pleading of cases in the district courts are clear. Under Fed. R.Civ.P.8(a),
"A pleading which sets forth a claim for relief, whether an original claim, counterclaim, cross-claim, or third-party claim, shall contain (1) a short and plain statement of the grounds upon which the court's jurisdiction depends, unless the court already has jurisdiction and the claim needs no new grounds of jurisdiction to support it, (2) a short and plain statement of the claim showing that the pleader is entitled to relief, and (3) a demand for judgment for the relief the pleader seeks. Relief in the alternative or of several different types may be demanded.
It is equally clear that the issue of the sufficiency of a pleading may be raised by the filing of a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6) or through a motion for a more definite statement under Rule 12(e). In resolving a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record, orders, items appearing in the record of the case and exhibits attached to the complaint may also be taken into account. Chester County Intermediate Unit v. Pennsylvania Blue Shield, 896 F.2d 808, 812 (3rd Cir.1990). In so doing, the court must accept as true the facts alleged in the complaint, together with all reasonable inferences that can be drawn therefrom and construe them in the light most favorable to the plaintiff. Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3rd Cir.1990); Hough/Loew Associates, Inc. v. CLX Realty Co., 760 F. Supp. 1141 (E.D.Pa.1991). The court's inquiry is directed to whether the allegations constitute a statement of a claim under Rule 8(a) and whether the plaintiff has a right to any relief based upon the facts pled. Dismissal under Rule 12(b)(6) for failure to state a claim is therefore limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved. Ransom v. Marrazzo, 848 F.2d 398, 401 (3rd Cir.1988); Angelastro v. Prudential-Bache Securities, Inc., 764 F.2d 939, 944 (3rd Cir.1985), cert. denied, 474 U.S. 935, 106 S. Ct. 267, 88 L. Ed. 2d 274 (1985).
Discussion
A. Motion to Dismiss Count I as Moot.
Defendants first assert that Plaintiff's claim for breach of the Pennsylvania Business Corporation Law, 15 Pa.C.S. § 1508 should be dismissed as moot. We cannot agree.
It is clear that under 15 Pa.C.S. § 1508(b), Every shareholder shall, upon written verified demand stating the purpose thereof, have a right to examine in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books and records of account, and records of the proceedings of the incorporators, shareholders and directors and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to the interest of the person as a shareholder. In every instance where an attorney or other agent is the person who seeks the right of inspection, the demand shall be accompanied by a verified power of attorney or other writing that authorizes the attorney or other agent to so act on behalf of the shareholder. The demand shall be directed to the corporation at its registered office in this Commonwealth or at its principal place of business wherever situated.
Authority to institute a legal proceeding to enforce this right of inspection is conferred upon a shareholder (or attorney or agent acting on behalf of a shareholder) in *609 § 1508(c). Prior to instituting such a proceeding, the shareholder first must establish that the purpose for which inspection is sought is proper and that he or she has complied with the requirements in § 1508(b) for making an inspection demand. Thereafter, the burden of proving that the inspection was for an improper purpose falls on the corporation. 15 Pa.C.S. § 1508(c); Goldman v. Trans-United Industries, Inc., 404 Pa. 288, 171 A.2d 788 (1961).
In this case, plaintiff alleges that by letter from his attorney to Defendant O'Neill in his capacity as President of Wm. M. Hendrickson, Inc. dated April 9, 1997, he made a demand to inspect and copy the company's books and records pursuant to 15 Pa.C.S. § 1508. (Second Amended Complaint, ¶ 79 and Exhibit "A" thereto). That letter recited the purpose for the inspection as being "... to determine the rights and liabilities of Mr. Tyler as a shareholder, including, but not limited to, a determination of the assets and liabilities and the income and expenses of the Corporation over the past 10 years ...," and was accompanied by a verified power of attorney executed by Mr. Tyler. (Second Amended Complaint, Exhibit "A"). The Complaint further avers that although Mr. O'Neill initially responded that the Company agreed to the inspection, when plaintiff's accountant and attorney appeared for the inspection on May 2, 1997, O'Neill refused to permit it. (Second Amended Complaint, ¶ s 80-81, 97). Although certain records were produced after the complaint in this matter was filed, numerous records have not been produced. (2d Am.Compl., ¶ 98).
We find these allegations, viewed in the light most favorable to the plaintiff as the non-movant, to be sufficient to state a claim for a violation of Section 1508 of the Business Corporations Law, notwithstanding the vagueness of plaintiff's averment that "certain records were produced subsequent to the filing of the complaint." As it remains unclear to this Court as to whether an inspection was permitted of all of those books and records of the Company which plaintiff requested, Count I of the second amended complaint cannot be dismissed as moot based on the existing record. Count I shall therefore be permitted to stand.
B. Dismissal of Derivative Claims
Defendants next move to dismiss Counts II through VII for the reason that claims which involve harm to the corporation must be maintained by the corporation not by a shareholder as an individual. While we would agree that at first blush plaintiff's complaint is confusing, it nevertheless appears after careful examination that only Counts II (Breach of Fiduciary Duty), III (Fraud) and VII (Civil Conspiracy) seek to recover damages on behalf of both the corporation and plaintiff individually, while the remaining claims (for violations of the RICO Act, the Pennsylvania Unfair Trade Practices and Consumer Protection Act and the Wage Payment and Collection Law) seem to be asserted by Mr. Tyler only in his own behalf.
As a general rule, an action for injury to a corporation must be pursued in the name of the corporation; that an individual shareholder or employee may sustain harm incidental to the injury to the corporation does not confer upon him standing to sue. Jordan v. Fox, Rothschild, O'Brien & Frankel, 787 F. Supp. 471, 474 (E.D.Pa.1992), aff'd in part, vacated in part on other grounds, 20 F.3d 1250 (3rd Cir.1994). Where, however, an individual stockholder or officer has pled an injury separate and distinct from that suffered by the corporation, such as where a corporation tortiously conspires with others to cause him harm, a cause of action arises which belongs to the individual. Moffatt Enterprises, Inc. v. Borden, Inc., 807 F.2d 1169, 1176 (3rd Cir.1986); eds Adjusters, Inc. v. Computer Sciences Corp., 818 F. Supp. 120, 121 (E.D.Pa.1993); Temp-Way Corp. v. Continental Bank, 139 B.R. 299, 316-317 (E.D.Pa.1992), aff'd, 981 F.2d 1248 (3rd Cir.1992). The general test for determining whether an action asserts a direct or derivative claim is:
If the injury is one to the plaintiff as a stockholder and to him individually, and not to the corporation, as where the action is based on a contract to which he is a party, or on a right belonging severally to him, or on a fraud affecting him directly, it *610 is an individual action. On the other hand, if the wrong is primarily against the corporation, the redress for it must be sought by the corporation, except where a derivative action by a stockholder is allowable, and a stockholder cannot sue as an individual. The action is derivative, i.e., in the corporate right, if the gravamen of the complaint is injury to the corporation, or to the whole body of its stock or property without any severance or distribution among individual holders, or if it seeks to recover assets for the corporation or to prevent the dissipation of its assets.
John L. Motley Associates, Inc. v. Rumbaugh, 104 B.R. 683, 686 (E.D.Pa.1989), citing In Re Penn Central Securities Litigation, 347 F. Supp. 1327 (E.D.Pa.1972), 13 W. Fletcher, Corporations, § 5911 (1970); J. Moore, Federal Practice, § 23.1.16[1] (2d ed. 1969).
Devised as a suit in equity, the purpose of the derivative action was to place in the hands of the individual shareholder a means to protect the interests of the corporation from the misfeasance and malfeasance of "faithless directors and managers." Kamen v. Kemper Financial Services, Inc., 500 U.S. 90, 95, 111 S. Ct. 1711, 1716, 114 L. Ed. 2d 152 (1991), quoting Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 548, 69 S. Ct. 1221, 1226, 93 L. Ed. 1528 (1949). Thus, the derivative form of action permits an individual shareholder to bring "suit to enforce a corporate cause of action against officers, directors, and third parties." To prevent abuse of this remedy, the courts established as a precondition to suit that the shareholder demonstrate that the corporation itself had refused to proceed after suitable demand, unless excused by extraordinary conditions. Id., quoting Ross v. Bernhard, 396 U.S. 531, 534, 90 S. Ct. 733, 736, 24 L. Ed. 2d 729 (1970).
The pleading of derivative actions by shareholders is governed by Fed.R.Civ.P. 23.1, which states, in relevant part:
In a derivative action brought by one or more shareholders or members to enforce a right of a corporation or unincorporated association, the corporation or association having failed to enforce a right which may properly be asserted by it, the complaint shall be verified and shall allege (1) that the plaintiff was a shareholder or member at the time of the transaction of which the plaintiff complains or that the plaintiff's share or membership thereafter devolved on the plaintiff by operation of law, and (2) that the action is not a collusive one to confer jurisdiction on a court of the United States which it would not otherwise have. The complaint shall also allege with particularity the efforts, if any, made by the plaintiff to obtain the action the plaintiff desires from the directors or comparable authority and, if necessary, from the shareholders or members, and the reasons for the plaintiff's failure to obtain the action or for not making the effort. The derivative action may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders or members similarly situated in enforcing the right of the corporation or association....
The rule therefore requires a shareholder derivative complaint to allege either that a demand was made or the reasons for failing to make the demand. Courts will excuse the derivative shareholder from the demand requirement when the allegations show that the directors upon whom demand would be made are too involved in the alleged wrongdoing to determine fairly whether the claim should be pursued by the corporation. In Re Sunrise Securities Litigation, 916 F.2d 874, 879, note 5 (3rd Cir.1990). Because Rule 23.1 gives little dimension to the requirements for demand, state law of the state of incorporation fills in the contours of the demand mandate. BTZ, Inc. v. Grove, 803 F. Supp. 1019, 1020 (M.D.Pa.1992). In accord, Kamen v. Kemper Financial Services, Inc., supra, 500 U.S. at 95-99, 111 S.Ct. at 1716-1717. In this case, Wm. M. Hendrickson, Inc. is a Pennsylvania corporation and we are therefore compelled to examine the demand futility exception as codified in the Pennsylvania statute and interpreted by the Pennsylvania courts. See, e.g.: Garber v. Lego, supra, at 1201.
In so doing, we find that Pennsylvania's demand requirement, codified at 42 Pa.C.S. § 1506(a)(2), Pa.R.C.P., is quite similar *611 to Fed.R.Civ.P. 23.1 and that it likewise directs that a derivative plaintiff must set forth the efforts made to secure enforcement by the corporation or similar entity or the reason for not making such efforts.[1] Traditionally, the Pennsylvania courts have been aggressive in enforcing the demand requirements. In Re Westinghouse Securities Litigation, 832 F. Supp. 989, 995 (W.D.Pa.1993). Thus under Pennsylvania law also, the failure to first demand the corporation to take action will only be excused where the plaintiff states with particularity averments of participation, self-dealing, bias, bad faith or corrupt motive such as alleging that a majority of the defendant directors are insiders who have depleted and misappropriated corporate assets for their own personal gain. Id., at 996, citing, inter alia, Lewis v. Curtis, 671 F.2d 779 (3rd Cir.), cert. denied, 459 U.S. 880, 103 S. Ct. 176, 74 L. Ed. 2d 144 (1982); Recchion on Behalf of Westinghouse Elec. Corp. v. Kirby, 637 F. Supp. 1309, 1320 (W.D.Pa.1986). Stated otherwise, "in order to excuse demand under Pennsylvania law, the plaintiff must allege that a majority of the board of directors engaged in acts that are fraudulent, not that they merely exercised erroneous business judgment." Garber, at 1203.
Applying the preceding principles to the case at hand, we first note that the Second Amended Complaint alleges the plaintiff has been a shareholder in Hendrickson since 1981 and that this action is not a collusive one to confer jurisdiction on a U.S. District Court where no such jurisdiction would otherwise exist. (2d Am. Compl., ¶ s9-10). Plaintiff further avers that given Mr. and Mrs. O'Neill's alleged past conduct of fraudulent bankruptcy and tax filings, concealment of company financial information and diversion of corporate assets and income to themselves, further demand that the corporation institute suit would be futile. (2d Am. Compl. ¶ s 85-95). We find that these averments, viewed in the context of the second amended complaint as a whole and accepting them and all reasonable inferences that can be drawn from them as true and in the light most favorable to plaintiff, are sufficient to satisfy the pleading requirements of Fed. R.Civ.P. 23.1 and Pa.R.C.P. 1506(a). These claims shall therefore be permitted to stand in their derivative capacity and defendants' motion to dismiss these claims is denied.
C. Request for Dismissal of Plaintiff's Claims for Breach of Fiduciary Duty, Fraud and Conspiracy.
Having found that the second amended complaint sufficiently pleads facts to excuse the demand requirements for derivative actions, we must next examine whether it adequately states causes of action under the theories of breach of fiduciary duty, fraud and conspiracy upon which relief may be granted against the defendants and in favor of Plaintiff Tyler in both his individual capacities and in his capacity as minority shareholder of Hendrickson.
A fiduciary duty arises when the relationship between the parties is one of trust and confidence such that the party in whom trust and confidence is reposed must act with scrupulous fairness and good faith in his dealing with the other and refrain from using his position to the other's detriment and his own advantage. Young v. Kaye, 443 Pa. 335, 279 A.2d 759, 763 (1971). Fiduciary duty demands undivided loyalty, prohibits conflicts of interest and its breach is actionable. See, e.g., Maritrans v. Pepper, Hamilton *612 & Scheetz, 529 Pa. 241, 602 A.2d 1277, 1283 (1992), citing, inter alia, Stockton v. Ford, 52 U.S. (11 How.) 232, 13 L. Ed. 676 (1850). A business relationship may be the basis of a confidential relationship if one party surrenders substantial control over some portion of his affairs to the other. Chrysler Credit Corp. v. B.J.M.,Jr., Inc., 834 F. Supp. 813, 842 (E.D.Pa.1993) citing Commonwealth, Dep't. of Transportation v. E-Z Parks, 153 Pa.Cmwlth. 258, 620 A.2d 712, 717 (1993).
It is axiomatic that in Pennsylvania, as in most jurisdictions, officers and directors of a corporation stand in a fiduciary relation to the corporation and must discharge the duties of their position in good faith and with the diligence, care, and skill which ordinarily prudent persons would exercise under similar circumstances. In re Allegheny International, Inc., 954 F.2d 167, 180 (3rd Cir.1992); Enterra Corp. v. SGS Associates, 600 F. Supp. 678, 684 (E.D.Pa.1985). The duty of loyalty requires that corporate officers devote themselves to the corporate affairs with a view to promote the common interests and not their own; they cannot directly or indirectly, utilize their position to obtain any personal profit or advantage other than that enjoyed also by their fellow shareholders. In re Athos Steel and Aluminum, Inc., 71 B.R. 525, 540 (Bkrtcy.E.D.Pa.1987). It is therefore the general rule that directors of a corporation may not seize for their own personal gain a business opportunity which lies within the scope of the corporation's activities unless the corporation itself is incapable of taking advantage of the opportunity. In re Insulfoams, Inc., 184 B.R. 694, 707 (Bkrtcy.W.D.Pa.1995), aff'd, 104 F.3d 547 (3rd Cir.1997). While whether something constitutes a business opportunity is a question of fact that is determined by reference to the circumstances surrounding it, a business opportunity generally is acknowledged as belonging to the corporation if the corporation is in the same or related business as is the subject matter of the opportunity. Id.
Similarly under Pennsylvania law, majority shareholders or group of shareholders who combine to form a majority, are fiduciaries, and they may not use their voting power to benefit themselves personally at the expense of the minority. Id; In the Matter of Reading Company, 2 B.R. 719, 724 (E.D.Pa.1980); Provident National Bank v. United States, 436 F. Supp. 587, 589 (E.D.Pa. 1977). The test of liability for breach of fiduciary duty is whether the officer, director, or shareholder was unjustly enriched by their actions. In re Insulfoams, supra, at 708, citing Bailey v. Jacobs, 325 Pa. 187, 189 A. 320, 324 (1937).
An employee, in turn, as an agent of his employer,is considered a fiduciary with respect to matters within the scope of his agency. See: SHV Coal, Inc. v. Continental Grain Co., 376 Pa.Super. 241, 545 A.2d 917, 920-921 (1988), rev'd on other grounds, 526 Pa. 489, 587 A.2d 702 (1991).
Fraud, in turn, arises under Pennsylvania law where the following elements coalesce: (1) a material misrepresentation of fact, (2) which is false, and (3) made with knowledge of its falsity, (4) which is intended to induce the receiver to act, and (5) upon which a party justifiably relies. Michael v. Shiley, Inc., 46 F.3d 1316, 1333 (3rd Cir.1995); Sowell v. Butcher & Singer, Inc., 926 F.2d 289 (3rd Cir.1991). Fraud consists of anything that is calculated to deceive, whether by single act or combination or by suppression of truth, or suggestion of what is false, whether it be by direct falsehood or by innuendo, by speech or silence, word of mouth, or look or gesture. Moser v. DeSetta, 527 Pa. 157, 589 A.2d 679, 682 (1991). See Also: Gibbs v. Ernst, 538 Pa. 193, 647 A.2d 882 (1994); Cottman Transmission Systems, Inc. v. Melody, 869 F. Supp. 1180, 1186 (E.D.Pa.1994).
Civil conspiracy occurs where two or more persons combine or agree with intent to do an unlawful act or to do an otherwise lawful act by unlawful means. Thompson Coal Co. v. Pike Coal Co., 488 Pa. 198, 412 A.2d 466 (1979); Doe v. Kohn, Nast & Graf, P.C., 862 F. Supp. 1310, 1328 (E.D.Pa.1994). Malice, i.e., intent to injure and a lack of justification, are essential parts of a civil conspiracy cause of action. Barmasters Bartending School v. Authentic Bartending School, 931 F. Supp. 377, 386 *613 (E.D.Pa.1996) citing Rutherfoord v. Presbyterian-University Hospital, 417 Pa.Super. 316, 333 612 A.2d 500, 508-509 (1992).
Generally under Pennsylvania law, a corporation cannot conspire with itself nor with its officers and agents when they act solely for the corporation and not on their own behalf. Doe v. Kohn, Nast & Graf, supra, at 1328. However, a corporation can conspire with its agents or employees if the agents or employees are acting not for the corporation, but for personal reasons and one of the parties to the conspiracy is not an agent or employee of the corporation. Id., citing Johnston v. Baker, 445 F.2d 424, 426-427 (3rd Cir.1971). This rule has been liberally construed, however, so as to allow a civil conspiracy claim to proceed where agents or employees act outside of their corporate roles even in the absence of a co-conspirator from outside the corporation. Id., citing, inter alia, Denenberg v. American Family Corp., 566 F. Supp. 1242, 1253 (E.D.Pa.1983) and O'Neill v. ARA Services, Inc., 457 F. Supp. 182, 188 (E.D.Pa.1978).
In applying the foregoing to the matter now before us, we note that the second amended complaint avers that since 1981 Defendant George O'Neill has been an officer, director and 90% share owner of Hendrickson, Inc., that Michelenia O'Neill is employed as Hendrickson's bookkeeper and manager and as such is authorized to sign checks on the company's behalf and that plaintiff, as minority shareholder trusted Mr. O'Neill to honestly and properly manage the company's affairs and to treat plaintiff fairly. (2d. Am. Compl. ¶ s2, 3, 20, 24). Plaintiff further avers that in violation of his trust and their respective fiduciary duties to Hendrickson, Inc., the O'Neills usurped the Company's opportunity to purchase the land and building out of which the company's operations are run with the result that they took money from the company to pay themselves nearly $1 million in rent since 1991 and that the O'Neills are diverting proceeds from the sale of scrap copper from the company to themselves. (2d. Am. Compl., ¶ s 40-41, 88-89). Defendants have further endeavored to keep these dealings from coming to plaintiff's attention by refusing to provide him with financial statements and other information and by concealing plaintiff's ownership interest in the company by failing to include his name in loan applications, financing documents and income tax and bankruptcy filings. (2d. Am. Compl., ¶ s 29-39, 42-60, 63-70, 74-81). These averments, we find, more than sufficiently allege a claim against defendants for breach of their fiduciary duties to both Mr. Tyler individually and as a minority shareholder and to the corporation itself. Consequently, Defendants' motion to dismiss plaintiff's claim for breach of fiduciary duty is denied.
In like fashion, we conclude that plaintiff has adequately pled claims upon which relief may be granted for civil conspiracy and fraud. Again, the second amended complaint alleges that the defendants conspired with one another and acted in concert in intentionally misrepresenting the company's financial condition and/or in failing to inform plaintiff of the reduction in shareholder's equity from $927,000 to $-43,233. Plaintiff further contends that defendants intentionally misrepresented George O'Neill as the sole owner and shareholder in Hendrickson in bankruptcy and tax filings and in financing applications so as to permit them to purchase the land and building in lieu of the company and thereafter charge the company rent. These actions had the effect of wasting the company's assets and depleting the equity in the company and the value of plaintiff's investment and defendants purportedly knew that plaintiff would rely on their conduct in concealing their actions in deciding not to undertake any efforts to reverse the fraud. (2d. Am. Compl. ¶ s21, 23, 25-70, 74, 109, 114). Thus, in application of the principles underlying Rule 12(b)(6), Defendants' motion to dismiss plaintiff's civil conspiracy and fraud claims under Pennsylvania state law must be denied.
D. Dismissal of Plaintiff's RICO Claims.
Defendants next move to dismiss Counts V *614 and VI[2] which endeavor to state claims under Sections 1962(c) and (d) of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961, et seq.
Under 18 U.S.C. § 1964(c), the right to commence a civil suit and recover treble damages is conferred upon "any person injured in his business or property by reason of a violation of section 1962." The options for proceeding under § 1962 are four-fold: § 1962(a) makes it unlawful for "any person who has received any income directly or indirectly from a pattern of racketeering activity[3] ... to use or invest that income" in the acquisition, establishment or operation of any enterprise affecting or engaged in interstate or foreign commerce. Section 1962(b) prohibits "any person through a pattern of racketeering activity or through collection of an unlawful debt" from acquiring or maintaining any interest in or control of any enterprise "engaged in or affecting interstate or foreign commerce." Under Section 1962(c), it is not permissible for "any person employed by or associated with any enterprise [affecting interstate or foreign commerce] to conduct or participate ... in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of an unlawful debt." Finally, Section 1962(d) provides that "it shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b) or (c) of this section." See: U.S. v. Console, 13 F.3d 641, 650 (3rd Cir.1993).
Naturally, the pleading requirements differ depending upon which subsection of § 1962 has been invoked to obtain relief. To state a cause of action under Section 1962(c), it is incumbent upon a plaintiff to allege: (1) the existence of an enterprise affecting interstate commerce; (2) that the defendant was employed by or associated with the enterprise; (3) that the defendant participated, either directly or indirectly, in the conduct of the affairs of the enterprise; and (4) that he or she participated through a pattern of racketeering activity that must include the allegation of at least two racketeering acts. Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S. Ct. 3275, 3285, 87 L. Ed. 2d 346 (1985); Shearin v. E.F. Hutton Group, Inc., 885 F.2d 1162, 1165 (3rd Cir.1989); Marrazzo v. Bucks County Bank and Trust Co., 814 F. Supp. 437, 441 (E.D.Pa.1993). However, since § 1962(c) requires a finding that the defendant "person" conducted or participated in the affairs of an "enterprise" through a pattern of racketeering activity, the "person" charged with a violation of § 1962(c) must be separate and distinct from the "enterprise." Marrazzo, at 441, citing Brittingham v. Mobil Corporation, 943 F.2d 297, 300 (3rd Cir. 1991). See Also: Kehr Packages, Inc. v. Fidelcor, Inc., 926 F.2d 1406, 1411 (3rd Cir. 1991).
Similarly, to plead a "pattern of racketeering activity," a plaintiff must aver not only that the defendant committed at *615 least two acts of prohibited racketeering activity but also that the predicate acts are related and that they amount to or pose a threat of continued criminal activity. H.J., Inc. v. Northwestern Bell Telephone Co., 492 U.S. 229, 240, 109 S. Ct. 2893, 2900, 106 L. Ed. 2d 195 (1989); Kehr Packages, supra, at 1412. Racketeering acts are said to be related if they have the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events. Schroeder v. Acceleration Life Insurance Co., 972 F.2d 41, 46 (3rd Cir.1992), citing H.J., Inc., 492 U.S. at 240, 109 S.Ct. at 2901.
Continuity, on the other hand, has been said to be both a closed and open-ended concept referring either to a closed period of repeated conduct or to past conduct that by its nature projects into the future with a threat of repetition. H.J., Inc., 492 U.S. at 241-242, 109 S.Ct. at 2902. Thus, a party alleging a RICO violation may demonstrate continuity over a closed period by proving a series of related predicates extending over a substantial period of time or by demonstrating that a threat of continuing criminal activity exists. Id.; Hindes v. Castle, 937 F.2d 868, 872 (3rd Cir.1991).
Whether the predicate acts constitute a threat of continued racketeering activity depends on the specific facts of each case. Tabas v. Tabas, 47 F.3d 1280, 1295 (3rd Cir.1995). While predicate acts extending over a few weeks or months and threatening no future criminal conduct do not satisfy this requirement, open-ended continuity may be satisfied where it is shown that the predicates are a regular way of conducting defendant's ongoing legitimate business or of conducting or participating in an ongoing and legitimate RICO enterprise. H.J., Inc., 492 U.S. at 243, 109 S.Ct. at 2902; Tabas, at 1295. In determining whether a pattern of racketeering activity has been established in a given case, it is appropriate to consider: (1) the number of unlawful acts; (2) the length of time over which the acts were committed; (3) the similarity of the acts; (4) the number of victims; (5) the number of perpetrators; and (6) the character of the unlawful activity. Tabas, at 1292; Barticheck v. Fidelity Union Bank/First National State, 832 F.2d 36, 39 (3rd Cir.1987).
To plead a claim under § 1962(d), a plaintiff must allege that: (1) there was an agreement to commit the predicate acts of fraud, and (2) defendants had knowledge that those acts were part of a pattern of racketeering activity conducted in such a way as to violate §§ 1962(a), (b) or (c). Martin v. Brown, 758 F. Supp. 313, 319 (W.D.Pa.1990). Any claim under § 1962(d) based on a conspiracy to violate the other subsections of Section 1962 necessarily must fail if the substantive claims are themselves deficient. Jiffy Lube International v. Jiffy Lube of Pennsylvania, 848 F. Supp. 569, 583 (E.D.Pa.1994), citing Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1191 (3rd Cir.1993).
In this case, we find that plaintiff has sufficiently pled the elements needed to state claims under Sections 1962(c) and (d) of RICO to withstand defendants' 12(b)(6) motion. Indeed, the second amended complaint avers that Hendrickson, Inc. is an enterprise affecting interstate commerce and that the O'Neills were associated with and participated in Hendrickson's affairs through a pattern of racketeering activity. (2d. Am. Compl. ¶ s121-122). Paragraphs 123-124 describe the pattern of racketeering activity as consisting of "... a scheme and artifice to defraud the Bank, the Bankruptcy Court and Plaintiff ..." by mailing tax returns and documents to the bank and bankruptcy court to obtain a construction loan, an equipment loan and a working capital loan, thereby committing mail and wire fraud. While these allegations are admittedly conclusory, when read in the context of the entire complaint, they are adequate to state a § 1962(c) claim given the averments in paragraphs 70, 74-76 and 83-89 that these actions were undertaken to conceal from plaintiff the company's true financial condition and the fact that the O'Neills had allegedly managed the company in such a way as to pay themselves more than $1,500,000 in rent, salaries, bonuses and other payments and to deplete the shareholder's equity from over $900,000 to $-43,000 in an eight-year period.
*616 Likewise, inasmuch as Count VI avers that the O'Neills acted in concert and conspired together to violate Section 1962(c), we conclude that this Count, too, has pled sufficient facts to state a claim upon which relief may be granted under Section 1962(d). Accordingly, defendants' motion to dismiss Counts V and VI shall be denied.
E. Defendants' Request to Dismiss Plaintiff's Claims under the Pennsylvania Unfair Trade Practices and Consumer Protection Act.
Defendants have also moved for the dismissal of Count IV which endeavors to state a claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law, 73 P.S. § 201-1, et. seq.
The Pennsylvania Unfair Trade Practices and Consumer Protection Law (CPL) declares that "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce as defined by subclauses (i) through (xxi) of clause 2 of this act .... are ... unlawful ..." 73 P.S. § 201-3; Denison v. Kelly, 759 F. Supp. 199, 202 (M.D.Pa.1991). The CPL contemplates as the protected class only those who purchase goods or services, not those who may receive a benefit from the purchase. Gemini Physical Therapy v. State Farm Mutual Automobile Insurance Co., 40 F.3d 63, 65 (3rd Cir.1994). Under § 201-2(4)(xxi), a seller of goods and services is prohibited from engaging in any "fraudulent conduct which creates the likelihood of confusion or misunderstanding." Schroeder v. Acceleration Life Ins. Co., supra, at 46; 73 P.S. §§ 201-2(4)(xxi), 201-3.
Although never specifically addressed by the Pennsylvania courts, as the holdings of the Middle and Eastern Districts evince, the CPL may apply to the providing of brokerage services, but is not applicable to sales of securities themselves. Klein v. Opp, 944 F. Supp. 396, 398 (E.D.Pa.1996); Denison v. Kelly, 759 F. Supp. 199, 202-203 (M.D.Pa. 1991). As plaintiff bases his CPL claim upon the defendants' purported "unfair and deceptive practices of concealing their improper conduct" [which] has caused [him] to suffer a loss in that the value of his shares is reduced and at no point avers that defendants' conduct was intended to or caused confusion or misunderstanding as to the company's stock, we conclude that he has failed to state a cause of action under the Act. As a result, Count IV shall be dismissed.
F. Defendants' Motion for Dismissal of Plaintiff's Wage Payment and Collection Law Claim.
Finally, Defendants also seek dismissal of plaintiff's claim under the Pennsylvania Wage Payment and Collection Law, 43 P.S. § 260.1, et seq. as against Michelenia O'Neill and for the reason that there is no independent basis for jurisdiction over this state law cause of action. This latter argument is rejected outright in light of our denial of the motion for dismissal with regard to Counts I through III, V, VI and VII.
Under 43 P.S. § 260.2a, "employer" is defined as including "every person, firm, partnership, association, corporation, receiver or other officer of a court of this Commonwealth and any agent or officer of any of the above-mentioned classes employing any person in this Commonwealth." This definition has been interpreted as requiring, at a minimum, some indication that the defendant employer exercised a policy-making function in the company and/or an active role in the corporation's decision making process. Mohney v. McClure, 390 Pa.Super. 338, 568 A.2d 682, 686 (1990), citing, inter alia, Bowers v. NETI Technologies, Inc., 690 F. Supp. 349 (1988) and Central Pennsylvania Teamsters Pension Fund v. Burten, 634 F. Supp. 128 (E.D.Pa.1986). See Also: Amalgamated Cotton Garment and Allied Industries Fund v. Dion, 341 Pa.Super. 12, 491 A.2d 123 (1985).
In application of these principles, we find that while plaintiff's second amended complaint is silent as to the extent to which Mrs. O'Neill served a policy-making function in the company, it does aver that, upon information and belief, she is either an officer or agent of the Company. Again reading these allegations in context with the others that Michelenia O'Neill was aware of and conspired with her husband to conceal the company's financial condition from plaintiff so as to facilitate defendants' receipt of continued *617 rental and other payments, we find there is sufficient indicia that Mrs. O'Neill is a corporate decision maker to withstand dismissal of plaintiff's wage payment claim at the pleadings stage. For these reasons, defendants' motion to dismiss shall be denied in this regard as well.
Conclusion
For all of the foregoing reasons, defendants' motion to dismiss is granted in part and denied in part and Count IV of the plaintiff's second amended complaint is dismissed. An order follows.
NOTES
[1] Specifically, Rule 1506 states, in pertinent part: (a) In an action to enforce a secondary right brought by one or more stockholders or members of a corporation or similar entity because the corporation or entity refuses or fails to enforce rights which could have been asserted by it, the complaint shall set forth
(1) that each plaintiff is a stockholder or owner of an interest in the corporation or other entity,
(2) the efforts made to secure enforcement by the corporation or similar entity or the reason for not making any such efforts, and
(3) either
(i) that each plaintiff was a stockholder or owner of an interest in the corporation or other entity at the time of the transaction of which he complains or that his stock or interest devolved upon him by operation of law from a person who was a stockholder or owner at that time, or
(ii) that there is a strong prima facie case in favor of the claim asserted on behalf of the corporation and that without the action serious injustice will result.
[2] As Plaintiff's Second Amended Complaint mistakenly proceeds from Count V to Count VII and contains two Counts numbered VII, we shall consider plaintiff's claim for RICO Conspiracy and Aiding and Abetting as Count VI.
[3] According to 18 U.S.C. § 1961,
(1) "Racketeering activity means (A) any act or threat involving murder, kidnaping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in narcotic or other dangerous drugs, which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: .... Section 1341 (relating to mail fraud), section 1343 (relating to wire fraud)...."
. . . . .
(3) "person" includes any individual or entity capable of holding a legal or beneficial interest in property;
(4) "enterprise" includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity;
(5) "pattern of racketeering activity: requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity;
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491 S.W.2d 415 (1973)
Lino Garcia VALDEZ, Appellant,
v.
The STATE of Texas, Appellee.
No. 46435.
Court of Criminal Appeals of Texas.
February 7, 1973.
Rehearing Denied March 28, 1973.
*416 Billy J. Wilkinson, San Antonio, for appellant.
Ted Butler, Dist. Atty., John L. Quinlan, III and Richard D. Woods, Asst. Dist. Attys., San Antonio, Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
ONION, Presiding Judge.
This is an appeal from a conviction for burglary with intent to commit theft where the punishment was assessed at two (2) years.
On January 10, 1972, the appellant waived trial by jury and entered a plea of guilty before the court. He was extremely well admonished by the court as to the consequences of his plea. The court was also careful to inquire, among other things, whether the appellant had been promised probation by his counsel, the District Attorney, the court, or anyone else. The appellant responded, "Nobody has promised me anything."
The evidence offered upon the plea of guilty was properly stipulated. After assessing punishment, the court ordered a pre-sentence report from the probation officer to determine appellant's eligibility for probation.
On February 10, 1972, the court denied the appellant's motion for probation, stating:
"The Court has a comprehensive probation report, and it appears that you had probation on two other occasions in California, plus offenses for robbery, and you had a two-year probation in 1961; you had one year probation in '64 and you have been arrested for other offenses hereand the Court is going to deny your application for probation."
At the sentencing which followed, the appellant claimed he had been placed on probation only one time and that he didn't admit "... none of those crimes that it says I did there."
After hearing appellant's claim that he had only received probation on one occasion, the court proceeded to sentence the appellant.
Appellant, in his sole contention, claims the trial court abused its discretion in refusing to grant probation by failing to cause a more complete investigation of appellant's background. He appears to challenge the accuracy of the pre-sentence probation report.
"... The question of whether an accused is entitled to probation, where the court assesses punishment, rests absolutely with the trial court's discretion under the guideposts of the statute and no authority exists for the accused to require such clemency." Martin v. State, 452 S.W.2d 481, 483 (Tex.Cr.App.1970), and cases there cited.
The decision of the trial court not to grant probation is not appealable. Jackson v. State, 474 S.W.2d 237 (Tex.Cr.App. 1971).
*417 While not required to utilize a pre-sentence report, it is desirable in such cases that the trial court "... use the probation officer's report and take into consideration all of the pertinent information to more intelligently determine if the person convicted is entitled to probation...." McNeese v. State, 468 S.W.2d 800, 801 (Tex.Cr.App.1971). The fact that the court considers the arrest record of a person applying for probation is not error, McNeese v. State, supra, and the court is not required to disregard information in the pre-sentence report because "hearsay statements" are included. Brown v. State, 478 S.W.2d 550 (Tex.Cr.App.1972).
In the instant case, the court did not reveal all that was contained in the presentence report, and was aware of appellant's claim of inaccuracy as to one conviction prior to sentencing. We cannot say that the trial court abused its discretion.
The judgment is affirmed.
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491 S.W.2d 435 (1973)
Antonio Salinas VELA, Appellant,
v.
The STATE of Texas, Appellee.
No. 46501.
Court of Criminal Appeals of Texas.
March 14, 1973.
*436 F. B. Godinez, Jr., Lubbock, Oscar Palacios, Austin, for appellant.
Vernon D. Adcock, Dist. Atty., Lamesa, Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
GREEN, Commissioner.
This is a companion case to No. 46,500, Hilario Vela Quintanilla, 491 S.W.2d 433, this day decided. The appeal is from an order revoking probation.
On April 30, 1968, appellant Vela entered a plea of guilty to the offense of arson and waived a jury. He was convicted and received a five year term, probated. Among the conditions of probation was that he shall commit no offense against the laws of this or any other State or the United States.
On June 8, 1972, the State filed a motion to revoke probation, alleging that on May 28, 1972, appellant committed the offenses of burglary and theft of a pickup truck. These were the same offenses with which Hilario Vela Quintanilla was also charged by separate motion (See No. 46,500, supra), and a joint hearing of the two motions to revoke was had. It was the theory of the State that appellant Vela was guilty as a principal with Quintanilla in the commission of the theft and burglary. The same statement of the evidence is on file in both appeals. As was the case with Quintanilla, the court found that appellant Vela committed the offenses of burglary and theft, reduced the term to four years, and appellant was sentenced accordingly.
Appellant's sole ground of error alleges an abuse of discretion by the trial court, since the evidence was insufficient to show guilt of this appellant.
Since the evidence was fully reviewed in Quintanilla, supra, it is not necessary to restate it. The evidence against appellant Vela is that he accompanied Quintanilla to the homes of Rudy Rios and Henry Rios; that he was picked up by the driver of the Kirbie pickup after it was stolen from the Kirbie home, and that he was with Quintanilla in the '66 Dodge when the men were arrested. There was no evidence of any agreement or conspiracy with Quintanilla on appellant's part to steal the pickup or burglarize the home. No one identified him as being on the Kirbie premises. No stolen property was found in his possession. There was no evidence that appellant committed any overt acts to assist, aid or accompany Quintanilla in the commission of theft or burglary. Appellant made no incriminating statements nor did any evidence link him to the burglary or the theft of the truck.
The State relies partly on the testimony of Deputy Sheriff Woody that as he was passing the Kirbie house shortly before the theft he saw four subjects there, and the testimony of Mrs. Rios that the pickup stopped to get the three companions of Quintanilla (including appellant) and then "turned back." No attempt was made to identify these four "subjects" seen by Woody. At the time Mrs. Rios saw the pickup, it had already been stolen, and no other actions of appellant indicating guilt were proven other than his presence with Quintanilla.
"The mere presence of the accused at the scene of a crime does not of itself justify drawing an inference that he participated therein. Reid v. State, 474 S.W.2d 702 (Tex.Cr.App.1972); Glenn v. United States, 271 F.2d 880 (6th Cir., 1959). Mere presence or even knowledge of an offense does not make one a principal. Ware v. State, Tex.Cr.App., 467 S.W.2d 256." Shortnacy v. State, 474 S.W.2d 713, 716.
We hold that the trial court abused its discretion in revoking appellant's probation.
*437 No motion for rehearing will be entertained or filed with the clerk without leave of the court first being obtained after good cause has been shown.
The judgment is reversed and the cause remanded.
Opinion approved by the Court.
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704 A.2d 455 (1998)
119 Md. App. 93
HOWARD COUNTY, Maryland
v.
ONE 1994 CHEVROLET CORVETTE VIN NO. 1G1YY22P5R5100931.
No. 463, Sept. Term., 1997.
Court of Special Appeals of Maryland.
January 9, 1998.
*457 F. Todd Taylor, Jr., Senior Asst. County Sol. (Barbara M. Cook, Howard County Sol., on the brief), Ellicott City, for appellant.
Gary S. Bernstein, Baltimore, for appellee.
*458 Argued before DAVIS, SALMON and KENNEY, JJ.
*456 SALMON, Judge.
We must consider in this case the question of whether civil forfeiture to Howard County of a 1994 Chevrolet Corvette belonging to Douglas Tennant (Tennant), due to the involvement of the Corvette in violations of the Maryland drug laws, constitutes an excessive fine in violation of Article 25 of the Maryland Declaration of Rights. The trial court (Leasure, J., presiding) concluded that the forfeiture did violate Tennant's right. We agree with the trial judge and shall affirm.
I.
BACKGROUND FACTS
Tennant owned a business in Howard County called Maryland Car Care, Inc. His entire income during all periods here relevant was derived from that corporation. In August 1993, Tennant purchased the Corvette that is the subject of this case with income from the corporation.
Tennant became addicted to cocaine and heroin in June 1995. Tennant's girlfriend, Kimberly Houck,[1] was employed as the bookkeeper for Maryland Car Care, Inc. Ms. Houck also was addicted to cocaine and heroin. Between June 1995 and January 1996, she purchased at least some of the drugs that she used from Rodney Smith (Smith) and Smith's wife, Yvonne Jackson (Jackson). Between June 28, 1995, and the latter part of January 1996, Ms. Houck wrote numerous checks to either Smith or Jackson. The payor of these checks was Maryland Car Care, Inc. The checks bore the signature of Tennant but, according to Tennant's later testimony, he neither signed the checks nor authorized anyone to sign them on his behalf.[2]
On January 24, 1996, Tennant attended a Board of Directors meeting of a familyowned corporation at which he threatened to commit suicide. The family notified the police to be on the lookout for Tennant, who was driving a purple Corvette. Shortly thereafter, Officer Guy Williams, of the Howard County Police Department, saw Tennant pull into the driveway to his home. Tennant emerged from the Corvette and was confronted by Officer Williams who asked for his license and registration. Tennant stepped back into his Corvette and opened a console to retrieve the registration card. When he did so, Officer Williams noticed a home-made crack pipe inside the console. Tennant was arrested for possession of drug paraphernalia. He was then searched. In his pants pocket the police found a baggie and a small box. Police suspected that both items contained cocaine. Later tests confirmed that the small box contained .05 grams of cocaine, but the baggie taken from appellant's pocket contained 2.2 grams of heroin.
Tennant pled not guilty to the criminal charges of possession of drug paraphernalia and possession of controlled dangerous substances.[3] He was found guilty of both charges in the District Court for Howard County. The findings of guilt were stricken, however, and he was given a disposition of probation before judgment pursuant to Article 27, section 641A, of the Maryland Annotated Code (1957, 1992 Repl.Vol.).[4] Tennant was placed on three years active probation.
Approximately six weeks after his arrest on the drug charges, Howard County filed a "Complaint to Acquire a Motor Vehicle." In the Complaint, the County alleged, inter alia, that Tennant's 1994 Corvette was subject *459 to forfeiture to the County pursuant to Article 27, section 297(b)(4),[5] because the vehicle "was used or intended to be used to facilitate the transportation of cocaine, a Schedule II controlled dangerous substance, and controlled paraphernalia, in violation of law."[6]
A trial in the forfeiture case was held in the Circuit Court for Howard County on October 21, 1996. At the trial, very few facts were in dispute. Tennant admitted that on the day of his arrest he did possess both heroin and cocaine together with a crack pipe. Tennant, who was called by the County as an adverse witness, testified that he could not remember if he had used drugs on the day of his arrest. He admitted, however, that he probably had consumed drugs that day because, as of that date, he had a severe drug addiction. He was unable to say for sure if other persons had used drugs while in the 1994 Corvette, but he conceded that Ms. Houck could have done so, possibly "two, three, [or] four [times]." Tennant testified that he could not think of anyone other than Ms. Houck who may have used drugs in his Corvette.
During the course of his testimony, Tennant invoked his Fifth Amendment privilege against self-incrimination and declined to answer questions regarding the identity of his drug supplier(s), whether Ms. Houck ever procured drugs for him, whether Smith ever procured drugs for him, or whether he used the crack pipe found in his car on the day of his arrest.
The parties agreed at trial that the Corvette had a value of approximately $20,000. It was also agreed that Tennant owned a 1988 Ford pick-up truck and a Datsun 300Z in addition to the Corvette.
Tennant argues that the forfeiture of his Corvette, under the circumstances of this case, would violate the excessive fines prohibition set forth in Article 25 of the Maryland Declaration of Rights. Article 25 reads:
Excessive bail, fines and punishment.
That excessive bail ought not to be required, nor excessive fines imposed, nor cruel or unusual punishment inflicted, by the Courts of Law.
The trial judge, relying on the test set forth in Aravanis v. Somerset County, 339 Md. 644, 665, 664 A.2d 888 (1995), cert. denied, ___ U.S. ___, 116 S. Ct. 916, 133 L. Ed. 2d 846 (1996), ruled that the excessive fines provision in Article 25 prevented her from awarding Howard County title to Tennant's vehicle.
II.
STANDARD OF REVIEW
Both this Court and the Court of Special Appeals, when reviewing a case tried without a jury, must "review the case on both the law and the evidence." Maryland Rule 8-131(c) (1995 Repl.Vol.). The Court must "not set aside the judgment of the trial court on the evidence unless clearly erroneous," and must "give due regard to the opportunity of the trial court to judge the credibility of the witnesses." Id. In addition, we must consider the evidence in the light most favorable to the prevailing party and decide not whether the trial judge's conclusions of fact were correct, but only whether they were supported by a preponderance of the evidence.
Urban Site Venture II Ltd. Partnership v. Levering Assocs. Ltd. Partnership, 340 Md. 223, 229-30, 665 A.2d 1062 (1995) (some citations omitted).
III.
ANALYSIS
There are four basic legal propositions that must be kept in mind whenever a forfeiture action is before the Court. First, a forfeiture action is a civil in rem proceeding subject to an "excessive fines" analysis. *460 Aravanis, 339 Md. at 651, 664 A.2d 888. Second, forfeitures are not favored in the law and should be avoided whenever possible. State ex rel. Frederick City Police Dept. v. One Toyota Pick-Up Truck, 334 Md. 359, 375, 639 A.2d 641 (1994). Third, the burden of proof necessary to sustain a forfeiture is that of a preponderance of the evidence. Prince George's County v. Blue Bird Cab Co., 263 Md. 655, 659, 284 A.2d 203 (1971). Fourth, Article 25 of the Declaration of Rights is, "textually and historically, substantially identical to the Eighth Amendment" to the United States Constitution and thus "should be interpreted coextensively with the excessive fines provision of the Eighth Amendment." Aravanis, 339 Md. at 656-57, 664 A.2d 888.
In Aravanis, the petitioner, George Aravanis, owned a farm in Somerset County, Maryland. Id, at 646, 664 A.2d 888. He used the farm as part of a marijuana distribution enterprise. Id. The police received word of Mr. Aravanis's illicit activities, searched the farm, and found approximately two pounds of marijuana within a gas barbeque grill located outside his house. They also found marijuana plants growing near the house and drug paraphernalia in Mr. Aravanis's possession. Id. at 647, 664 A.2d 888. Aravanis pled guilty to one count of possession of a controlled dangerous substance in sufficient quantity to indicate an attempt to manufacture, distribute, or dispense (the marijuana) as prohibited by Article 27, section 286. Id. In Aravanis, Somerset County sought forfeiture of Mr. Aravanis's real property due to Aravanis's violation of Maryland's drug laws. The trial judge concluded that Aravanis's farm was used in connection with the distributing of marijuana and that, because no statutory exceptions applied, the court had no discretion to do anything except order forfeiture of the farm. Aravanis challenged the forfeiture as an excessive fine under both the Eighth Amendment of the United States Constitution and Article 25 of the Maryland Declaration of Rights.
The Aravanis Court reversed the trial court and held that, upon remand, the court should analyze whether Article 25 barred the forfeiture. Aravanis, 339 Md. at 657, 664 A.2d 888. The trial court was directed to apply two separate tests to determine whether forfeiture of Aravanis's property constituted an "excessive fine" within the meaning of Article 25. The first is commonly called the "instrumentality test." Id. at 657-58, 664 A.2d 888. The instrumentality test, among other things, inquires as to whether "the relationship of the property to the offense... [is] close enough to render the property, under traditional standards, `guilty' and hence forfeitable." Austin v. United States, 509 U.S. 602, 628, 113 S. Ct. 2801, 2815, 125 L. Ed. 2d 488 (1993) (Scalia, J., concurring). The second is the "proportionality" test, which compares the enormity of the loss to the owner with the gravity, scope, and duration of the illegal activity, and the degree of the owner's culpability. Aravanis, 339 Md. at 665, 664 A.2d 888.
A. The Instrumentality Test
Chief Judge Robert Bell, writing for the Court in Aravanis, recognized that one of the most important cases articulating the factors to be applied when utilizing the instrumentality test was United States v. Chandler, 36 F.3d 358 (4th Cir.1994). Judge Bell said:
Chandler presents a forceful and well articulated defense of the instrumentality test. The court formulated a three part test for determining the excessiveness of an in rem forfeiture under the Eighth Amendment. That test "considers (1) the nexus between the offense and the property and the extent of the property's role in the offense, (2) the role and culpability of the owner, and (3) the possibility of separating offending property that can readily be separated from the remainder." 36 F.3d at 365.
Aravanis, 339 Md. at 661, 664 A.2d 888.
The Aravanis Court later made it clear that on remand the trial court should use the three factors set forth in Chandler when applying the instrumentality test to the facts of that case. Id. at 665, 664 A.2d 888.
1. The Nexus Prong
A court should first attempt to measure "the strength and extent of the nexus *461 between the property and the offense." Chandler, 36 F.3d at 365. In assessing this factor, a court looks at five items, viz:
(1) the extent to which the use of the property was deliberate and planned or merely incidental and fortuitous; (2) the property's importance to the success of the illegal activity; (3) how long the property was used and the spatial extent of its use; (4) whether the illegal use was isolated or repetitive; and (5) the purpose for acquiring, maintaining or using the property.
Aravanis, 339 Md. at 661, 664 A.2d 888 (citing Chandler, 36 F.3d at 365).
The trial judge in the case sub judice found that the vehicle was being used to transport Tennant home from a Board of Directors' meeting, but that the vehicle was not "deliberately" being used to "transport controlled dangerous substances." In Judge Leasure's words: "The testimony and evidence did not show ... that the subject vehicle had anything other than a de minimis role regarding the offenses of which [d]efendant was convicted." The court noted that the vehicle was acquired by Tennant prior to the date he developed a drug habit and thus, implicitly, the court was of the view that the vehicle was not purchased for purposes connected with the transportation of drugs or drug paraphernalia. The trial judge concluded that the nexus between the Corvette and the offenses charged was so insubstantial that it failed to justify the forfeiture of the vehicle.
2. Owner Culpability Prong
As to the second prong of the instrumentality test (the role and culpability of the owners), the trial court's only comment was that the owner admitted his guilt as to the offenses charged in the forfeiture petition. This factor simply "gives recognition to the fact that the forfeiture statute is a punitive statute and that the person punished is the owner of the property." Aravanis, 339 Md. at 661, 664 A.2d 888 (citing Chandler, 36 F.3d at 364). In regard to the property owner's culpability:
Proof of the relevant factors in a forfeiture case is not limited to a particular offense charged. Proof of the duration and extent of the course of criminal activity and its nexus to the property may be appropriate, and the State may well wish to show the extent of profit to the owner from this course of conduct because that fact bears on the question of how much the owner actually loses by the forfeiture. Profits from the illegal activity may be shown by direct evidence, or indirectly through a showing of net worth of the owner and the absence of other known or demonstrable sources of income.
Aravanis, 339 Md. at 665 n. 16, 664 A.2d 888.
In the case at hand, there was no evidence, direct or circumstantial, from which it could be inferred that Tennant sold drugs or had any connection with the drugs other than as a user. Moreover, there was no indication that Tennant had a prior criminal record. Tennant did not profit by his connection with drugs. Instead, the uncontroverted evidence showed that he, like most drug addicts, paid a heavy financial price for his failure to say "no" to drugs.
3. Possibility of Separating Property
The third prong of the instrumentality test (the possibility of separating offending property from the remainder) had no applicability to this case. Obviously, there was no possibility of dividing the Corvette into "offending" and "non-offending" parts.
Weighing the three factors, the trial judge ultimately opined, "[T]he application of the instrumentality test to the underlying facts of this case does not support forfeiture of the subject vehicle."
B. The Proportionality Test
Proportionality, as that term is used here, does not include the necessity to compare forfeiture laws or practices of other jurisdictionsit means simply that there must be a comparison of the extent of the loss to the relevant factors involved, including the gravity and extent of the illegal activity, the nexus between that conduct and the subject property, and the extent of involvement of the ownerall to determine whether the "fine" is out of all reasonable proportion to the relevant factors. *462 Aravanis, 339 Md. at 665, 664 A.2d 888 (emphasis added).
As can be seen, the proportionality test also includes a nexus prong, which has been already discussed. This test also requires the trial judge to compare the extent of the loss to the property owner with (1) the gravity and extent of the illegal activity and (2) the extent of the involvement of the owner. Judge Leasure carefully examined both these factors. She found that the canceled checks from Tennant's business payable to Smith and Jackson only supported the inference that "substantial funds were expended to support ... Tennant's and/or his girlfriend's drug habits." As to the gravity of the offense, the court stressed that Tennant was not a distributor or manufacturer of illegal drugs. Moreover, in the trial court's view, the value of the Corvette greatly exceeded the value of the drugs and drug paraphernalia that Tennant possessed when he was arrested. Lastly, the court found that the Corvette was not "substantially" used for "illegal purposes." She opined that forfeiture of the $20,000 vehicle was "out of all reasonable proportion to the relevant factors."
C. Appellant's Arguments
Howard County makes four arguments in support of its contention that the judgment of the trial court should be reversed: (1) the trial court erred in not drawing an adverse inference from Tennant's invocation of the Fifth Amendment; (2) appellant had the burden of proof to show that forfeiture amounted to an excessive fine but failed to meet that burden; (3) the principles of Aravanis and Austin, supra, are inapplicable to cases involving forfeiture of personal property; and (4) assuming the Aravanis test is applicable, the trial court "unduly limited itself to the excessive fines cases without considering the facts of the ... [subject] case or the statutory basis for [the] forfeiture."
Appellant says in its brief,
The lower court compounded its error by refusing to consider the effect of Douglas Tennant's repeated assertion of the Fifth Amendment to questions about his drug use, the source of his drugs and the cars used in transporting and use of those drugs.[7] By the assertion of the Fifth Amendment privilege, an adverse inference is drawn and the [c]laimant is precluded from introducing evidence to challenge that inference. See Whitaker v. Prince George's County, 307 Md. 368, 514 A.2d 4 (1986).
First of all, Whitaker does not hold, as appellant implies, that an adverse inference must be drawn merely because a witness invokes his or her Fifth Amendment privilege against self-incrimination. See Whitaker, 307 Md. at 385-87, 514 A.2d 4. The inference is merely permitted. Id. Moreover, the trial judge did not "refuse" to consider the effect of Tennant's invocation of his privilege against self-incrimination. Trial judges are presumed to know the law and to apply it correctly. Beales v. State, 329 Md. 263, 273, 619 A.2d 105 (1993). For obvious reasons, trial judges are not required to spell out every step used in their reasoning process to reach legal or factual conclusions. See Doser v. Doser, 106 Md.App. 329, 356, 664 A.2d 453 (1995).
Because a claim that forfeiture is an excessive fine is an affirmative defense, we agree with appellant's argument that appellee had the burden of proving excessiveness by a preponderance of evidence. See United States v. 152 Char-Nor Manor Boulevard, Chestertown, Md., 922 F. Supp. 1064, 1071-72 (D.Md., 1996), aff'd, 114 F.3d 1178 (4th Cir.1997). This does not help appellant, however, because, taking the evidence in the light most favorable to Tennant, he met that initial burden by his testimony, coupled with *463 the stipulation that the Corvette was worth approximately $20,000, and by appellant's own evidence, which supplied proof that would support the inference that the cocaine mentioned in the forfeiture petition was of minuscule value.
Appellant says in its brief that "[this] case does not involve an attempt to forfeit real property. In a strict sense, the principles of Aravanis and Austin are not applicable." Significantly, appellant fails to say why those cases are inapplicable or why the fact that the subject case does not involve real property is relevant. We hold that the principles set forth in Aravanis and Austin are applicable to cases, such as this one, dealing with personal property. Similarly, in Thompson v. Grindle, 113 Md.App. 477, 688 A.2d 466, cert. granted, 346 Md. 28, 694 A.2d 951, cert. dismissed, 348 Md. 198, 702 A.2d 1272 (1997), we applied Aravanis's excessive fines analysis to the forfeiture of a motor vehicle and other personal property. Id. at 485-86, 688 A.2d 466.
Lastly, appellant contends:
Notwithstanding [the inapplicability of Aravanis and Austin] ... the Court below unduly limited itself to the analysis of the excessive fines cases without considering the facts of this case, or the statutory basis for forfeiture (the seized asset, a car, facilitated the transportation of drugs). In so doing, it implicitly ruled that possession of controlled dangerous substances in a car can never be a basis for forfeiture, contrary to both statutory and existing case law. It is only in rare situations that forfeiture will be excessive in a constitutional sense. See United States v. Wild, 47 F.3d 669 (4th Cir.1995), interpreting in personam criminal forfeiture, pursuant to 21 U.S.C. § 853(a)(3).
Although it is true that the trial judge focused her attention on precedent dealing with the issue of excessive fines, this was understandable because that was the precise issue to be decided. The Aravanis case was authority that the trial court was bound to follow when interpreting and applying Article 25 of the Maryland Declaration of Rights. In applying the Aravanis test, the trial court explicitly recognized that the County had a statutory basis for the forfeiture of the vehicle and implicitly found that the County had established that statutory right. In fact, an "excessive fines" analysis is only necessary after the court finds that the sovereign has the statutory right to exact a "fine." The question the trial court addressed was whether enforcement of the forfeiture statute, under the circumstances of this case, violated a higher law, i.e., Article 25. In answering this question, the trial judge, contrary to appellant's assertion, did consider in detail "the facts of this case."[8] Moreover, the lower court clearly did not "implicitly rule[ ] that possession of controlled dangerous substances in a car can never be a basis for forfeiture." She applied the tests set forth in Aravanis and simply ruled that forfeiture was not warranted under the circumstances of this case.
Appellant's reliance on Wild, 47 F.3d at 675, is misplaced. In Wild, the Court refused to apply the instrumentality test set forth in Chandler, supra, because, unlike Chandler, the case dealt with a fine imposed as part of a criminal prosecution, i.e., an in personam criminal forfeiture pursuant to 21 U.S.C. § 853(a)(2) and (3). Wild, 47 F.3d at 675. Fines imposed in criminal forfeiture cases "are the equivalent of monetary punishment assessed against criminal defendants for the commission of some offense." Id. at 677. In contrast, the case at hand deals with a civil in rem proceeding where "[f]orfeitures are not favored." Commercial Credit Corp. v. State, 258 Md. 192, 199, 265 A.2d 748 *464 (1970) (quoting 36 Am.Jur.2d, Forfeitures and Penalties § 8 (1968), and 3 J. Sutherland, Statutory Construction §§ 603-06 (3d ed. 1943)). Unlike the Wild Court, we are obliged to apply the Chandler test. See Aravanis, 339 Md. at 658, 664 A.2d 888.
SUMMARY
The instrumentality test requires us to consider whether the relationship of Tennant's 1994 Corvette to the offenses committed by Tennant is close enough to render the property "guilty." The vehicle was purchased by Tennant by use of funds legitimately obtained, and he made no illicit profit by use of the Corvette. As in Thompson, supra, in which the police found a "small amount of cocaine and marijuana" in the pocket of a vehicle owner's shirt at the time of arrest, 113 Md.App. at 481, 688 A.2d 466, the relationship between the drugs mentioned in the forfeiture petition and Tennant's Corvette was "incidental and fortuitous." Id. at 489, 688 A.2d 466. This situation contrasts sharply from one where the vehicle owner uses the vehicle to distribute drugs or uses the vehicle as a place from which to make drug sales.
Giving deference as we must to the factual findings of the trial judge, Md. Rule 8-131(c), we hold that the trial judge was not clearly erroneous when she applied the instrumentality test and found, in effect, that the vehicle was "not guilty." As for the proportionality test, it is significant that the drugs possessed by Tennant were in small enough quantities that he was not charged with possession with intent to distribute. He was charged, instead, with two relatively minor misdemeanors. Ultimately his convictions were stricken, and a sentence of probation before verdict imposed. In the grand scheme of things, Tennant's crime was not grave; the value of Tennant's car was great, and it is likely that the County coveted the car for that reason.[9] The trial court was not clearly erroneous in holding that the forfeiture of the $20,000 vehicle was "out of all reasonable proportion" when compared to "the relevant factors."
JUDGMENT AFFIRMED; COST TO BE PAID BY APPELLANT.
NOTES
[1] Ms. Houck is erroneously referred to as "Kimberly Haught" in the trial transcript.
[2] The total of the checks payable to either Smith or Jackson from Maryland Car Care's account was over $250,000. Tennant testified at the forfeiture hearing that he knew that some of the checks were signed, without his permission or consent, by Ms. Houck. As to the remainder, he testified that these too were signed without his permission, but he was unsure as to the identity of the person who signed them. He did note that Ms. Houck had access to a signature stamp bearing his (Tennant's) name during the relevant time period.
[3] The record does not show whether the controlled dangerous substance he was charged with possessing was cocaine or heroin or both.
[4] All references to statutes in this opinion are to Article 27, Maryland Annotated Code.
[5] The County also alleged that the Corvette had been purchased with proceeds from the sale of drugs. The County abandoned this theory at the end of the forfeiture hearing.
[6] Due to the fact that Howard County had not received the test results from the drug lab as of March 5, 1996, the County did not allege in its forfeiture Complaint that the Corvette was used to facilitate the transportation of heroin. Drug tests were not performed until May 29, 1996.
[7] Appellant does not say what inferences it wanted the trial judge to draw from the refusal to answer questions about "his drug use or the source of his drugs." Tennant admitted he was a heavy drug user. Given that admission, the source of his drugs would appear to be irrelevant in applying either the instrumentality or the proportionality test. Tennant did not refuse to answer any question "regarding the cars" he used in transporting the drugs he purchased; instead, he refused, on Fifth Amendment grounds, to answer questions as to whether he had used drugs while in the Corvette.
[8] Appellant points to no fact that the trial court failed to consider other than the fact that exhibits introduced by appellant showed the quantities of drugs found on Tennant's person. The trial judge said in her opinion that "there was no testimony presented regarding the quantity of drugs in [d]efendant [sic] possession at the time of his offense." While technically there was no testimony, there was evidence as to the quantity of drugs. Drug reports introduced by appellant showed that Tennant possessed 2.2 grams of heroin and .05 grams of cocaine. There was no direct evidence as to the value of the drugs. Appellant fails to point out in its brief how the trial court's lapse in overlooking the quantity of drugs might have made any difference in applying either the instrumentality or proportionality test.
[9] That the County's decision to seek forfeiture was probably based on its eagerness to acquire a valuable car rather than on other factors can be inferred from the fact that the County filed its forfeiture complaint before it received test results of the controlled dangerous substance found on appellant's person and thus before it knew what, if any, drugs were transported in the Corvette.
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269 S.W.2d 826 (1954)
MACHANN et ux.
v.
MACHANN.
No. 3185.
Court of Civil Appeals of Texas, Waco.
June 17, 1954.
Rehearing Denied July 8, 1954.
*827 McFarlane & Dillard, Houston, for appellants.
M. S. Munson, Jr., Wharton, for appellee.
McDONALD, Chief Justice.
This is a suit for $1,500, being ¼ of the proceeds of the sale of 80 acres of land, under allegations imposing a parol trust on same. Parties will be referred to as in the Trial Court.
Plaintiff alleged that on or about 28 August 1936 (his father being dead), he, his mother, his two sisters, and his brother (defendant herein) entered into an agreement to place the legal title to the family 80 acre farm in the names of his two sisters and defendant, for the purpose of selling the farm and for managing it until it was sold; and further, that during the lifetime of the mother she was to receive all revenue derived from the place; and upon sale of the farm the proceeds should be divided equally between the 4 children. That in accordance with such agreement plaintiff and his mother executed deeds to the other 3, but that no consideration other than the agreement was paid for such deeds. In 1941 and 1948 the 2 sisters, for a valuable consideration, conveyed their interest in the property to defendant. In 1942 defendant deeded the property to his wife. The *828 mother died in 1944. That on 26 September 1949 appellant and his wife sold the property for $6,000 consideration, all of which has been paid to defendants. Plaintiff alleged that he did not know of the conveyance by defendant to his wife or of their sale for the $6,000 until just prior to filing this case on 20 September 1951.
Defendants answered by voluminous exceptions and pleadings, but contended in the main that the cause was barred by the 2 and 4 year statutes of limitation; that there was no agreement such as alleged by plaintiff; but that plaintiff deeded his interest in the property to defendant and 2 sisters because he had received advancements amounting to his proportionate share of the property and that the conveyance was to offset the advancements he had received.
Trial was before the court without a jury, which, after hearing the evidence, rendered judgment for plaintiff for $1,500 or ¼ of the $6,000 for which the land was sold.
The Trial Court filed Findings of Fact substantially as recited above, and Conclusions of Law to the effect that 1) the agreement between plaintiff, defendant, their mother and 2 sisters was valid and binding on the parties thereto; 2) that the deed from defendants to the purchaser on 26 September 1949, if it could be construed as a repudiation of the agreement, was not discovered by plaintiff until just prior to filing suit, and would not constitute notice to him until his discovery thereof; 3) that under the facts, plaintiff's cause was not barred by either the 2 or 4 year statute of limitation; 4) that plaintiff is entitled to recover $1,500, with interest at 6% from 26 September 1949.
Defendant appeals to this court on 9 Points, but which present only 5 basic contentions: 1) The contract was not enforceable because it was within the Statute of Frauds. 2) The cause of action was barred by the 2 and 4 year statutes of limitation. 3) The contract was not enforceable because it was indefinite of performance. 4) The weight and preponderance of the evidence is against plaintiff's recovering judgment based on the alleged oral trust agreement. 5) The Trial Court erred in finding for plaintiff for the full $1,500 when there was evidence that there was abstract, commission and other expense of $450 in connection with the sale.
Defendants' 1st contention is that the oral trust agreement was not enforceable because it contravened the Statute of Frauds, Vernon's Ann.Civ.St. art. 3995.
The Statute of Frauds was not pleaded by the defendant in the Trial Court, as required by Rule 94, Texas Rules of Civil Procedure, and cannot be raised for the first time on appeal. See Rule 94, T.R.C.P.; Masten v. Masten, Tex.Civ.App., 165 S.W.2d 225, W/E Ref.; Cessac v. Leger, Tex.Civ.App., 214 S.W.2d 860, W/E Ref. N. R. E.; Osborn v. Cone, Tex.Civ. App., 234 S.W.2d 88.
Further, the Statute of Frauds could have no application under the facts in the case at bar in any event. This was not a suit to enforce a contract for the sale of land, but a suit to recover a portion of the purchase price for land conveyed by deed and paid for. Plaintiff has shown such partial performance as to take the contract out of the operation of the Statute of Frauds. The contract was twofold, viz.: 1) that the property should be sold, and 2) that the proceeds should be divided between the 4 named children. The property was sold. Where a contract is executed on one side and nothing remains but the payment of the consideration, this may be recovered notwithstanding the Statute of Frauds. 20 T. J. 322; Texas & Pacific Coal & Oil Co. v. Patton, Tex.Com.App., 240 S.W. 303; Osborn v. Cone, Tex.Civ. App., 234 S.W.2d 88.
Defendants' 2nd contention is that plaintiff's cause of action was barred by both the 2 and the 4 year Statutes of Limitation.
As to the 2 year Statute of Limitation Article 5526, in so far as it affects this suit, bars actions commenced after 2 years in the following instances: a) Actions *829 for detaining personal property of another, and for converting such property to one's own use; b) actions for debt where the indebtedness is not evidenced by a contract in writing. The case at bar is a suit for the recovery of personal property to-wit, a ¼ interest in the proceeds of the sale of land. The land was sold on 26 September 1949 and this suit was filed on 20 September 1951. Until the land was sold plaintiff would have no cause of action and the suit was filed within the 2 years allowed.
As to the 4 Year Statutes of Limitation, Article 5527 could have no application to this case by its very terms, and Article 5529 provides that actions for the recovery of real estate shall be brought within 4 years next after the right to bring it shall have accrued. The only evidence that plaintiff ever received that defendant was claiming the land himself was in a conversation testified to by both parties wherein defendant said he was going to give the land to his children. This conversation took place in 1948and if it be deemed notice to plaintiff that defendant was claiming the land adversely to plaintiff's interest thereinwhich at best is doubtfulit is of no avail to defendant since suit was filed in 1951, within the 4 year period prescribed by the Statute. The fact that defendant theretofore purchased the interest of his sisters is no notice to plaintiff that defendant is claiming the land adversely to his interestor of a repudiation of the trust, since the sisters could only sell their own interest and the Trial Court found that they only intended to sell their individual interests.
Defendants' 3rd contention is that the contract was not enforceable since it was indefinite of performance. This contention invokes the assertion that the agreement was in violation of the rule against perpetuities, which is a limitation tending to take property out of commerce for a longer period than a life or lives in being and 21 years beyond. The agreement of the parties to same in the case at bar was an agreement to sell property and divide the proceeds. There was no restraint of sale whatever for any period of time. From the moment title vested in defendant and his 2 sisters they could have sold it. This was the whole purpose of the deeds to them for the purpose of sale. The rule against perpetuities has no application to the facts in the case at bar.
Defendants' 4th contention is that the weight and preponderance of the evidence is against plaintiff's recovering judgment based on the oral trust agreement. The evidence in the case consisted of the testimony of plaintiff and defendant; the deposition of a sister and the written instruments introduced in evidence. All of the evidence in the case supports the judgment except the testimony of the defendant. It is our view that the weight and preponderance of the evidence sustains the judgment of the Trial Court.
Defendants' 5th contention is that the Trial Court erred in rendering judgment for the full $1,500 when the evidence reflected that there was abstract, commission and other expense in the amount of $450 in connection with the sale of the property, and that plaintiff should be required to bear ¼ of the sale expense if he should recover ¼ of the sale price. Defendant made no pleadings upon the above point; requested no finding on same, and raises the question for the first time in the appellate court. Under these circumstances we must treat the matter as waived. See Rule 94, T.R.C.P.; American Nat. Ins. Co. v. Fox, Tex.Civ.App., 184 S.W.2d 937, W/E Ref. W.M.
All of defendants' Points and the contentions made thereunder have been carefully considered, and no error appearing, the judgment of the Trial Court is affirmed.
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491 S.W.2d 459 (1973)
LUFKIN NURSING HOME, INC., Appellant,
v.
COLONIAL INVESTMENT CORPORATION, Appellee.
No. 8332.
Court of Civil Appeals of Texas, Amarillo.
February 12, 1973.
Rehearing Denied March 12, 1973.
*460 B. L. Collins, Lufkin, for appellant.
J. R. Blumrosen, Lubbock, for appellee.
*461 REYNOLDS, Justice.
The maker of a promissory note has appealed from a summary judgment decreeing liability thereon to the assignee-owner of the note. Modified and affirmed.
Appellant Lufkin Nursing Home, Inc., executed and delivered its promissory note payable to the order of Jack Goodman. The note, dated the day of November, 1965, was in the principal amount of $11,344.00, including interest, payable in twenty-four equal monthly installments of $472.66 each. The first installment was due on November 15, 1965, and succeeding installments became due on the first day of each month thereafter until the note was fully paid. A provisory part of the note stated that a failure to pay any installment when due shall, at the option of the holder, mature the whole note. The note contained a 10% past due principal and interest clause, and a collection fee clause of 15% on principal and interest due and unpaid. The note recited that "(i)t is understood and agreed that this note is executed for certain furniture ... that title to said furniture shall not pass to Lufkin Nursing Home, Inc. until this note is paid in full, and that until such time Jack Goodman shall continue to be the owner of said furniture ...."
The first twelve installments were paid, but no payments were made thereafter. Goodman died and after his death, the administrator of Goodman's estate sold and assigned the note to appellee Colonial Investment Corporation. Alleging default in payment of the note, appellee instituted this suit against appellant on January 7, 1971. Appellant interposed a plea of privilege, as well as a plea to the jurisdiction of the trial court, which were overruled by the trial court, its order being affirmed on appeal;[1] a plea of res judicata grounded on a prior suit involving the same parties,[2] also overruled by the trial court's order which has not been challenged in this appeal;[3] and the affirmative defenses of *462 want and failure of consideration and the four-year statute of limitation.
Responding to a request for admissions of fact and to written interrogatories, appellant's president admitted the note sued on to be one executed by appellant and delivered to Jack L. Goodman, listed the twelve monthly payments made on the note for the installments due from November, 1965, through October 1, 1966, inclusive, and admitted that appellant has in its possession the personal property "... except such thereof which has worn out,...." for which the note was given. Appellee moved for summary judgment, further supporting its motion with an affidavit of its ownership of the note and the tender into court of a bill of sale for the property to appellant. Appellant filed its answer to the motion, attaching an affidavit executed by its president. The affidavit included the contract for the purchase of the personal property from Goodman, to whom the note was given, and affiant stated that payments were made on the note until appellant was advised after the death of Goodman early in October, 1966, that appellee was claiming to be the owner of the personal property. It is averred that "... because of the failure of Jack Goodman to deliver to it [appellant] a good and merchantable title to the property," appellant "... declined to pay any further sums; ...." The affiant further proclaimed that appellee knew these circumstances in October, 1966, more than four years prior to its purchase of the contract sued on from Goodman's estate on January 5, 1971. Appellant then filed its motion for summary judgment, basing its entitlement to judgment on the want and failure of consideration and the four-year statute of limitation pleaded. To the motion were attached correspondence, pleadings and orders pertaining to the prior litigation over the lease agreement mentioned in marginal note 2.
The trial court heard the summary judgment motions and entered its order granting appellee's motion and denying appellant's motion. In granting appellee's motion, the court rendered judgment for appellee against appellant in the sum of $5,672.08 for the principal due on the note, in the sum of $2,557.40 for accrued interest to May 18, 1972, the date of judgment, and in the sum of $1,234.42 for attorney's fees, a total of $9,463.90, with interest thereon from date of judgment until paid at the rate of 6% per annum, and all costs. Appellant has not disputed the calculation of the amount of the judgment, but presents four points assigning as error the granting of summary judgment to appellee and the failure to grant summary judgment for appellant because of the defenses of want and failure of consideration and the four-year statute of limitation.
When appellee Colonial Investment Corporation moved for summary judgment on the note, with its summary judgment proof showing its ownership of the note executed by appellant Lufkin Nursing Home, Inc., that was due and unpaid in a sum certain, appellee was entitled to judgment, unless appellant had established as a matter of law a defense entitling appellant to summary judgment, Anderson v. Industrial State Bank of Houston, 478 S.W.2d 215, 217 (Tex.Civ.App. Houston [14th Dist.] 1972, writ ref'd n. r. e.), or unless appellant had come forward with a showing that a disputed fact issue existed upon its affirmative defenses. Gulf, Colorado & Santa Fe Railway Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492, 500 (1958). The defense of want and failure of consideration is predicated on Goodman's alleged fraud in representing that he had title to the personal property that formed the consideration for the note, and Goodman's failure to deliver title to appellant. The consideration appellant received for the note it gave was the personal property, *463 title to which was not to pass to appellant until the note was fully paid. No complaint is made concerning the kind, quantity or condition of the property appellant accepted, retained and used, and refused to return. Under the terms of his lease contract with appellee, Goodman had the right to purchase the property prior to the time title was contracted to be passed to appellant. The note terms are clear that Goodman did not purport to pass the title to the property to appellant until the note was paid in full, and appellant had no right under the note agreement with Goodman to receive title until the note was paid in full. The note has not been paid in full; nonetheless, appellee has tendered a bill of sale conveying title to appellant. Appellant received all the consideration it contracted to receive when the note was executed, and has been tendered title prior to its payment of the note, the time when appellant had the right to receive title. It follows that appellant did not establish its pleaded defense of want and failure of consideration, or show an issue of disputed fact with respect thereto. Points of error one and three appertaining to the defense are overruled.
Appellant's other affirmative defense was that the four-year statute of limitation, Vernon's Ann.Civ.St. art. 5527, was a bar to appellee's cause of action on the note. This defense is based on the assertion that appellant repudiated its agreement with Goodman in October, 1966, when appellant discovered that appellee was claiming title to the property adverse to Goodman's representations of ownership made when appellant purchased the property. The repudiation was known by appellee in October, 1966, appellant declares, and appellee's cause of action arose at that time, more than four years before appellee purchased the note and brought suit thereon. The contention of repudiation is premised on appellant's declination to make further note payments when appellant discovered that Goodman did not own the property.
The repudiation of an agreement must be clear and unequivocal; but, it is not necessary to decide whether appellant's refusal to pay the note installments as they became due constituted notice to appellee of a repudiation. When one party to an agreement has repudiated it, the other party may then accept the agreement as being terminated or consider the repudiation as a breach of contract and bring suit for damages; or, the other party may treat the repudiation as inoperative, awaiting the time when the agreement is to be executed and, after non-performance under the agreement, hold the repudiator responsible for all consequences of such non-performance. Pollack v. Pollack, 39 S.W.2d 853, 857 (Tex.Comm'n App.1931, holding approved). There is no summary judgment evidence that established, or raised a fact issue, that appellee considered appellant's failure to continue note payments as a termination of the note agreement or as a breach of contract, giving rise to its cause of action at that time. Moreover, there is no evidence that appellee exercised its option to mature the whole note when the November 1, 1966 installment was not paid. The filing of appellee's suit is the only indication of appellee's election, and the suit, filed after the note matured, is to hold appellant responsible for the consequences of its non-performance of payment. On an installment note, the limitation period is computed from the time each installment becomes due because that is the time when action may be brought to recover it. Goldfield v. Kassoff, 470 S.W.2d 216 (Tex.Civ.App. Houston [14th Dist.] 1971, no writ). Consequently, the four-year statute of limitation is not a bar to the suit; however, the burden was upon appellee to establish that none of the monthly installments was barred by the limitation pleaded. At the *464 time suit was filed on January 7, 1971, the unpaid installments on the note were the last twelve that became due on the first day of November, 1966, through October, 1967, inclusive. Thus, the three monthly installments becoming due in November and December, 1966, and in January, 1967, in the total sum of $1,417.98, were barred by the four-year statute of limitation pleaded, and it was error to include this sum, together with interest and attorney's fees computed thereon, in the amount of the judgment. Pollack v. Pollack, supra, 39 S.W.2d at 854-855.
The amount of the judgment is a matter of mathematical calculation; therefore, rather than reverse and remand the cause, this court is empowered to, and should, modify the judgment entered to conform to the judgment the trial court should have rendered. Rule 434, Texas Rules of Civil Procedure; Pickens v. Harrison, 151 Tex. 562, 252 S.W.2d 575 (1952). Accordingly, the judgment is modified to provide that appellee Colonial Investment Corporation recover of and from appellant Lufkin Nursing Home, Inc., the principal note amount of $4,254.10, with 10% interest thereon from November 1, 1967, to May 18, 1972, the date of judgment, in the sum of $1,934.64, and 15% of the principal and interest due in the sum of $928.30 as attorney's fees, for a total judgment of $7,117.04, with interest thereon from the date of judgment at the rate of 6% per annum until paid. Except to the extent that the trial court's judgment is herein modified, appellant did not establish its defense of limitation, or show an existent issue of disputed fact as to that defense, and appellant's corresponding second and fourth points of error are overruled.
The judgment of the trial court is modified as ordered herein, and as modified the judgment is affirmed.
NOTES
[1] Lufkin Nursing Home, Inc. v. Colonial Investment Corporation, 474 S.W.2d 249 (Tex.Civ.App.Eastland 1971, writ dism'd).
[2] The prior action was Cause No. 53,398 brought in the 99th Judicial District Court of Lubbock County by Colonial Investment Corporation, appellee in the present suit, against the Estate of Jack L. Goodman, deceased; Lufkin Nursing Home, Inc., appellant in the present suit; and National Western Life Insurance Company. The suit was founded on an agreement by which appellee leased to Goodman the same property for which the present suit note was given. The lease agreement stipulated for the sale of the property at the end of the lease term on August 31, 1967, at a price determined by the lease provisions. Furthermore, the lease provided that if Goodman made any assignment of his interest in the leased property during the lease term, appellee could, at its option, require Goodman to purchase the property at a predetermined price. The suit, asserting that rental payments had not been paid as contracted by Goodman and that demand for return of the property had been refused by appellant, alleged conversion of the property and appellee's entitlement to judgment against Goodman's estate and appellant for the value of the property as determined by the lease agreement; further, the suit sought to establish appellee's title superior to any held by National Western Life Insurance Company by virtue of its mortgage, given by appellant, on the property. The plea of privilege of appellant to be sued in Angelina County was overruled by the trial court, but sustained on appeal. Lufkin Nursing Home, Inc. v. Colonial Investment Corporation, 425 S.W.2d 439 (Tex.Civ.App. Amarillo 1968, writ dism'd w. o. j.). Subsequently, on December 31, 1970, appellee secured judgment against the Estate of Jack L. Goodman, deceased, for the pleaded value of the property, and dismissed its action against both National Western Life Insurance Company in Lubbock County and Lufkin Nursing Home, Inc., in Angelina County.
[3] The appeal referred to in marginal note 2 established that prior proceeding to involve the lease contract, and not the note involved in this present suit, as did the appeal mentioned in marginal note 1 above, and held that the only connection appellant had with that suit was through the allegation of conversion. Those appeals determined the matter at issue in the prior suit. See Navarro Oil Co. v. Cross, 145 Tex. 562, 567, 200 S.W.2d 616, 619 (1946).
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491 S.W.2d 233 (1973)
Henry JONES, Jr., Movant-Appellant,
v.
STATE of Missouri, Respondent.
No. 57134.
Supreme Court of Missouri, Division No. 1.
March 12, 1973.
Courtney Shands, Jr., St. Louis, for movant-appellant.
John C. Danforth, Atty. Gen., Preston Dean, Assist. Atty. Gen., Jefferson City, for respondent.
WELBORN, Commissioner.
Appeal, filed prior to January 1, 1972, from denial of relief in proceeding under Rule 27.26, V.A.M.R., from 20-year sentence on jury verdict of guilty of robbery in the first degree by means of a dangerous and deadly weapon. The judgment was previously affirmed on direct appeal. State v. Jones, Mo.Sup., 456 S.W.2d 7.
The conviction arose from what the state's evidence showed was a holdup at a pool hall in St. Louis on March 31, 1969. *234 The victim of the robbery, Julius Terrell, testified that defendant Henry Jones, Jr., entered the pool hall in which there were numerous other patrons, sought a game of pool and Terrell obliged him. At the conclusion of the game, on which there was no gambling and on which Terrell "ran out," Jones pulled a gun from his pocket and ordered Terrell to put all of his money on the table. Terrell did so. Jones picked it up and left the pool hall. Terrell and another patron followed Jones from the pool hall, encountered a police officer whose aid they obtained and Jones was arrested shortly, a block from the pool hall.
Jones testified that he entered the pool hall because he had seen dice shooting going on; that he entered the game and won some $57 from Terrell; that he and Terrell argued over defendant's "point" on one roll, and Terrell came at him with a pool stick and he took out his pistol and told Terrell to drop the pool stick. Terrell did so and Jones left the pool hall and shortly thereafter was arrested.
The issue raised on this appeal relates to a claimed inadequate assistance of counsel. Jones was represented by court-appointed counsel. In the course of the trial, Jones objected that his defense counsel was inadequate and sought his withdrawal. The request was denied. At the conclusion of the presentation of evidence, defense counsel informed the court that defendant had continually complained that he had been "framed," was not obtaining a fair trial and was not adequately represented by counsel. Counsel informed the court that the defendant had given him the names and addresses of no witnesses, had suggested no defense other than his taking the stand and telling the story which he told. Counsel said that he had repeatedly asked Jones if he had witnesses to support his story, but Jones had none.
No claim of inadequate representation by counsel was presented by defendant's motion for new trial.
In this proceeding, the claim of inadequate representation is based primarily upon the failure of counsel to make adequate investigation in preparation for trial. Trial counsel testified that he spent some 30 hours in preparing for trial. He talked with Jones four times. Jones asked him to contact his mother for help in obtaining witnesses. Counsel talked to Jones' mother six or eight times. She gave him the names of one or two persons whom he talked to, but they had no information of value. He tried to interview all of the state's witnesses listed on the indictment. He did not go to the pool hall to look for witnesses and he did not check the police records of the state's witnesses.
Jones testified that on at least four occasions he asked his trial counsel to go to the pool room to verify that he and Terrell had been gambling. He said that he specifically asked counsel to talk to the proprietor to whom Jones said he had pawned his watch to obtain money to gamble. At the 27.26 hearing, evidence was adduced on behalf of Jones that police records showed seven arrests of Terrell between 1955 and 1971, on gambling or suspicion of gambling, but there was no record of conviction as a result of any such arrests.
This case was heard and determined in the trial court prior to the determination by the court en banc of McQueen v. State, Mo., 475 S.W.2d 111. McQueen recognizes that defense counsel has a duty to investigate the case against his client. Under McQueen, on counsel's default in that regard, the defendant, when collaterally attacking the conviction, has the burden of showing that such default deprived him of a fair trial. This burden requires the defendant to demonstrate "that on retrial there will be evidence which is substantial and which was not available at the previous trial because of failure of his counsel to properly investigate." 475 S.W.2d 118.
The trial court's finding in this case that defense counsel "did all he could be *235 expected to do in representing his client" is clearly erroneous. The trial court's findings refer to counsel's conferences with defendant, his contact with the state's witnesses and his contacting the two persons to whom defendant's mother referred him. Ultimately, the court's excuse for further investigation is that Jones could provide the names of no witnesses in his behalf.
Such conclusions miss the mark as to the obligation of defense counsel in this case. Although the record does not clearly so indicate, Jones apparently was in jail pending trial. At least, defense counsel's testimony was that he conferred with Jones there. Jones testified that the March 31, 1969 visit was the first time he had ever been in the pool room. The two patrons of the pool room who testified on behalf of the state testified they had never seen Jones before the events in question. Unlike McQueen, where only the defendant and the deceased were present at the time of the crime, the offense here charged took place in a pool room, in which, according to a state's witness, there were 12 people, and according to Jones, 35. Jones did point his counsel to the proprietor of the pool room as a possible source of verification that gambling was going on between him and Terrell. Acknowledging that the likelihood of the proprietor's admission that gambling was going on in the pool room is not great, the proprietor was at least a source of possible verification of some aspect of the defendant's story and certainly a possible source of identification of others on the premises at the time.
Jones' story was not utterly implausible and only an independent effort of defense counsel in these circumstances would have satisified his obligation to his client.
Given the error in the trial court's conclusion that defense counsel did all he could for the defendant, the absence of evidence that investigation could have provided substantial evidence favorable to the defendant at the trial must be reckoned with. Under McQueen, the defendant, on the 27.26, had the burden of providing such proof. Since the 27.26 was heard prior to McQueen, the absence of evidence in this regard is understandable. At least, prior to McQueen, there was reason for argument that the burden in that regard was on the state. See dissent of Seiler, J., in McQueen v. State, 475 S.W.2d 120-124, and cases there cited.
In these circumstances, the defendant should not be precluded from presenting any evidence which he might have to sustain his burden. See United States ex rel. Green v. Rundle, 3rd Cir., 434 F.2d 1112.
The other matters relied upon as evidence of inadequate assistance of counsel do not require extensive discussion. The uncovering of Terrell's police record does not constitute substantial evidence within the McQueen rule. The record of arrests alone was not admissible to impeach or contradict the witness even by way of cross-examination. State v. Sanders, Mo. Sup., 360 S.W.2d 722, 725 [4]; State v. Menz, 341 Mo. 74, 106 S.W.2d 440, 448 [5, 6].
The complaint that investigation might have resulted in evidence corroborative of the state's case and have produced advice to the defendant to change his plea in an effort to work out a lesser sentence is utterly speculative.
The findings and order of the trial court are set aside and the cause remanded to the trial court for further proceedings in accordance with this opinion.
HIGGINS, C., concurs.
PER CURIAM:
The foregoing opinion by WELBORN, C., is adopted as the opinion of the Court.
All of the Judges concur.
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491 S.W.2d 40 (1973)
SYSTEMATICS, INC., Appellant,
v.
Don B. MITCHELL, Appellee.
No. 5-6157.
Supreme Court of Arkansas.
January 29, 1973.
Rehearing Denied March 5, 1973.
*41 Smith, Williams, Friday, Eldredge & Clark, by Jerry T. Light and Lewis H. Mathis, Little Rock, for appellant.
Walter Niblock and Bobby L. Odom of Niblock & Hipp, Fayetteville, for appellee.
GEORGE ROSE SMITH, Justice.
On June 30, 1969, the appellant, Systematics, Inc., a comparatively young company supplying services based upon data processing, issued to the appellee, an employee, 15,000 shares of Systematics stock at a price of ten cents a share. The stock was issued pursuant to a restrictive agreement by which Mitchell was required to offer to resell the stock to Systematics, at the same price, if he were discharged for cause.
About eleven months later Systematics discharged Mitchell for cause, but he refused to resell the stock to the company at the agreed price. Systematics brought this suit for specific performance of the contract. The chancellor found that the price of ten cents a share was not "a fair price" within the terms of the controlling statute. Instead, the chancellor found the fair market value of the stock to be fifty cents a share. This appeal is from a decree giving Systematics the option of repurchasing the stock at a price of fifty cents a share. The one issue argued here is the validity of the restriction upon Mitchell's right to sell his stock to third persons.
The exact language of both the contract and the statute must be considered. The contract, which was executed by the company with a dozen of its employees, contained the following provisions:
"2. A Stockholder shall not have the right to transfer, assign, pledge, encumber or otherwise dispose of the shares subject hereto.
"3. On June 30, 1970, ten (10%) percent of the stock originally subject hereto owned by each Stockholder shall be relieved of and released from the restrictions imposed herein. A like number of shares shall be relieved of and released from the restrictions imposed herein on June 30 of each succeeding year until June 30, 1977, at which time all of the remaining stock shall be relieved of and released from such restrictions.
"4. In the event of the termination of a Stockholder's employment with the Corporation, except by reason of death or mental or physical disability, then the Stockholder shall offer all of his shares of stock then subject hereto for sale to the Corporation at a price of $.10 per share. The Corporation shall exercise its option to purchase by paying the purchase price to such Stockholder in cash within thirty (30) days after such offer. If such option is not exercised by the Corporation, then the Stockholder's stock shall remain subject to all the terms and provisions hereof. These provisions shall not apply when a Stockholder's employment *42 is terminated by action of the Corporation without cause [in which event the stock is released from the restrictions]."
Systematics argues, in effect, that despite the statutory reference to "a fair price," the parties were free to agree upon any price that was fair in the light of the agreement as a whole, without regard to the fair market value of the stock at the time of the exercise of the company's option to repurchase. To support its argument Systematics cites cases from other jurisdictions sustaining the validity of agreements such as this one. It is conceded, however, that all the cases cited were decided without reference to, and in the absence of, pertinent statutes.
The relevant statute is part of our comprehensive Business Corporation Act, adopted in 1965, and reads as follows:
"A corporation may provide, in respect to any of its shares which are to be issued, that the future transfer (whether inter vivos, by inheritance or testamentary gift), hypothecation or other disposition of such shares shall be subject to restrictions (including purchase options) that do not unreasonably restrain alienationwhich restrictions, among other things, may require a prior offering to the corporation or to one or more of its shareholders, at a fair price, before the shares may be otherwise transferred or hypothecated." Ark.Stat.Ann. § 64-211 (Repl.1966).
The appended Committee Note to this section is especially enlightening with respect to the legislative intent:
"The above is original draftsmanship. Lawyers are often asked to prepare by-law provisions creating these restrictions; and it seems that there might as well be some statutory authority therefor. This section permits such restrictions on transfer as do not `unreasonably restrain alienation.' This leaves considerable room for interpretation; but the committee did not want to attempt to spell out in detail what restrictions would unreasonably restrain alienation. As to such restrictions, see Fletcher, Cyclopedia of Corporations, Permanent Edition, Section 5456, Vol. 12, Page 309; also Sections 5457, 5458."
The statute and the committee's note, when read together, make it clear that the draftsmen of the act had at least two points in mind: First, such restrictions upon the transfer of stock must not unreasonably restrain alienation. That such an unreasonable restraint may be invalid is stated in Fletcher's Cylopedia, § 5456, and in Ward v. City Drug Co., 235 Ark. 767, 362 S.W.2d 27 (1962), also cited by the committee. Secondly, the restriction must provide a fair price for the repurchase of the stock. That point is discussed by Fletcher in § 5457, cited by the committee: "The determination of the price to be paid on the transfer of restricted shares is one of the most troublesome questions. . The methods most often used in the valuation of restricted shares are: (1) flat price; (2) book value; (3) a formula expressed as a multiple of average net earnings; (4) par value of shares."
The committee obviously decided to reject the "flat price" and the "par value" methods of price-fixing, because "a fair price" was selected as the approved standard. Moreover, in a law review article discussing the proposed corporation code before its enactment, the author had this to say, almost as if the case at bar had been before him:
"A leading New York case, Allen v. Biltmore Tissue Corp., 2 N.Y.2d 534, [161 N.Y.S.2d 418], 141 N.E.2d 812 (1957), held that a first option restriction is valid even though the price to be paid by the corporation exercising the option is fixed at the price the selling shareholder originally paid for his shares [the exact fact situation now before us]. Query whether this would be `a fair price' within the meaning of the Arkansas *43 statute if the shares have appreciated markedly in value. In order to be certain that first option provisions are not declared invalid because the price at which the shares are to be transferred is unfair, some provision may have to be made for adjusting the price from time to time as the shares change in value." O'Neal, The Small Corporation and the Proposed Arkansas Corporation Code, 17 Ark.L.Rev. 356, 360 (1963).
We are convinced by our study of the statute that (a) the restriction agreed upon must not unreasonably restrain alienation of the stock, and (b) the price agreed upon must be fair at the time of the repurchase, for the statute explicitly refers to "the future transfer" of the stock. Hence a price that was fair when the contract was executed may not necessarily be fair some years later.
In our opinion the restrictive agreement now before us runs counter to both requirements of the statute. That is: First, the restriction unreasonably restrains alienation. Counsel for Systematics argue that the corporation was required to repurchase Mitchell's stock when he was discharged, but we do not so read the contract. Paragraph 4, governing the matter of repurchase, vests the decision to repurchase or not to repurchase in the corporation, with this added language: "If such option is not exercised by the Corporation, then the Stockholder's stock shall remain subject to all the terms and provisions hereof." We see no reasonable interpretation of that language except to take it to mean that if the company decides not to repurchase the stock at ten cents a share, the stockholder still cannot sell the stock to anyone else until the restrictions ultimately expire under paragraph 3 of the agreement. Thus the stockholder may be compelled for years to retain an investment in Systematics even though he has been discharged and has no desire to be connected with the company. We can only regard such a restriction as an unreasonable restraint upon the alienability of the stock.
Secondly, the price is not fair with respect to future sales of the stock, which is what the statute is talking about. The chancellor found the fair value of the stock at the time of trial to be fifty cents a share. That finding is not questioned by Systematics, which elected not to abstract the proof with respect to market value (its position being that that issue is not involved here). It is plain enough that a resale price of only 20% of the market value of the stock is not a fair price and for that reason tends to restrain the alienability of the property. Thus the second requirement of the statute, that the price be fair, is also wanting in the contract under consideration.
In affirming the decree we do no imply that the chancellor was right in fixing the fair market price at which Systematics may repurchase the stock. As we pointed out in Rector-Phillips-Morse v. Vroman, Ark., 489 S.W.2d 1 (1973), it is not the province of the courts to make contracts for the parties. The decree should have gone no farther than to declare the contractual option to be invalid, leaving the parties to their own devices. Mitchell, however, has not cross-appealed from the decree and is accordingly bound to abide by its provisions if Systematics elects to exercise the option recognized by the chancellor's decree.
Affirmed.
HARRIS, C. J., and FOGLEMAN, J., dissent.
FOGLEMAN, Justice (dissenting).
I must respectfully dissent because I do not agree that the statute rejected either of the four means of valuation of shares on an option to repurchase. The wide latitude of interpretation relates to the question whether the restraint on alienation is unreasonable, not on the question of ascertainment of a "fair price." Par value or flat price may, under appropriate circumstances, *44 be a fairer price to all parties in a closely held corporation than book value or a multiple of average net earnings. The price paid by the purchaser to the corporation may be a fairer price to all concerned than either of the four other methods of valuation. In this case this was the par value, because the company was new and no other value had been established.
The agreement afforded employees entering into these contracts the opportunity to share in the profits of the company, if it was successful, and to have certain rights of ownership which could give them a voice in management. This agreement permitted the free alienation of 10% of this stock every year and thus was not unduly restrictive if the market value turned out to be in excess of the purchase price.
In the revised text of Vol. 12, Fletcher, Cyclopedia Corporations, Perm.Ed., § 5461.8 seems to have replaced the section quoted in the majority opinion and points up the reason why the closely held corporation and its stockholder should have great freedom in agreeing upon the method of valuation. The first paragraph of that section reads:
The determination of the price to be paid on the transfer of restricted shares is one of the most troublesome questions. The difficulty, of course, arises from the fact that the shares of a close corporation are not traded in the market and hence their fair market value cannot be readily ascertained. But such contracts as these under consideration usually provide a method for arriving at the value of the stock. In order to induce desired individuals into investing their capital in closely held corporations with stock restrictions often imposed, the price must be attractive as well as the prospects of future earnings. While a precise method of evaluating the stock might be desirable, restrictive agreements often allow a lot of leeway.
I am authorized to state that the Chief Justice joins in this dissent.
SUPPLEMENTAL OPINION ON REHEARING
GEORGE ROSE SMITH, Justice, on rehearing.
Systematics, in a petition for rehearing, argues that we based our opinion solely upon the unreasonableness of the contractual restraint on alienation. It is then contended that this involves a question of fact which was not really in issue between the parties. Upon that reasoning we are asked to remand the case for the taking of additional proof.
We do not find this argument convincing. In its original brief Systematics elected to abstract hardly any of the testimony contained in the 548-page record and to argue almost as a matter of law that the contract price was fair even though it had no relation to market value. It is impossible, however, to consider the issue of fair price, which was argued, without also considering the matter of restraint upon alienation, because the two are so inseparably tied together in the statute as to constitute a single issue. Omitting irrelevant words, here is the language of the statute:
"A corporation may provide, in respect to any of its shares which are to be issued, that the future transfer . . . of such shares shall be subject to restrictions (including purchase options) that do not unreasonably restrain alienation which restrictions, among other things, may require a prior offering to the corporation. . . at a fair price." Ark. Stat.Ann. § 64-211 (Repl.1966).
It is at once apparent that the matter of a fair price cannot be considered in a vacuum. What the statute actually does is to permit restrictions that do not unreasonably restrain alienation. The matter *45 of a fair price is mentioned only in a subordinate clause explaining possible permissible restrictions. But the thrust of the statute is directed against unreasonable restraints on alienability, the requirement of a fair price being merely an incident to the dominant legislative intention.
Systematics was put on notice from the outset that the statute was involved. Mitchell's counterclaim contained this assertion: "That said first option agreement is void in that under Ark.Stat.Anno. Section 64-211, the prior offering to the corporation [or] a stockholder must be made `at a fair price' . . ." As we have indicated, the fairness of the price involves its effect upon alienability; the two cannot be separated. Consequently, the question of a restraint upon alienation was so inherently a part of the dispute from the very beginning that it would not have been possible for us to decide the controversy without taking it into account.
In connection with the petition for rehearing we granted a motion to allow several attorneys to file a supporting brief as amici curiae. That brief raises two issues that are not really involved, but since the opinion might otherwise be misunderstood we think it best to touch upon those issues.
First, counsel point out that Subsections A and B of the statute (§ 64-211) have to do with restraints that are contained either in the articles of incorporation or in the by-laws. It is then asserted that since the restraints in the case at bar were not so authorized, our decision threatens the validity and enforceability of many agreements made under Subsection C of the statute.
It is enough to say that this argument is based upon counsel's unfamiliarity with the record. At the beginning of the case Mitchell pleaded the statute and directed interrogatories to Systematics, asking whether provisions had been made in the articles of incorporation for the restrictions on the transfer of outstanding shares of stock. Systematics answered that the restrictions were contained in by-laws approved June 15, 1967. (Record, pp. 23-24.) Hence our opinion related only to Subsections A and B of the statute, with no reference to Subsection C.
Secondly, the amici curiae brief echoes Systematics' insistence that the factual issue of restraints upon alienability has not been fully developed. In that connection counsel say: "The Record is totally silent with respect to Appellant's motive for this transaction. Depending upon Appellant's motive, these restrictions could well be regarded as `reasonable' under Ark.Stats. § 64-211C."
Apart from the fact that §§ 64-211, subd. C is not involved, this second argument also indicates counsel's unfamiliarity with the record. Far from being "totally silent," the record contains much proof about the background for the contract. The terms of the agreement itself pretty well explain its purpose. Mr. Gattis, one of Systematics' executives, testified that the company used the contract as a "motivator" to show key employees "our intentions to make them a sincere part of our company." Mr. Smiley, another witness for Systematics, gave similar testimony, stating that the plan allowed the company to compensate executives in a fair manner and that it was made available to "the fourteen key people." Smiley also volunteered the information that the plan was no longer available, it having become illegal in July, 1970, under an IRS ruling with reference to capital gains.
In its original brief Systematics elected not to abstract the foregoing testimony, but that omission obviously does not entitle it to argue that the issue was not developed. The opportunity to develop it not only was presented but also was availed of to the extent that Systematics thought best. Our policy against the piece-meal trial of cases rebuts the suggestion that another opportunity for the taking of proof should be afforded.
The petition for rehearing is denied.
*46 FOGLEMAN, J., dissents.
FOGLEMAN, Justice, (dissenting).
I respectfully dissent not only for the reason stated in my original dissent, but because I do not believe that the fact that the type of restriction involved here was authorized by by-laws of the corporation prevents the operation of Ark.Stat.Ann. § 64-211, subd. C (Repl.1966). That subsection starts off with the words "Nothing in this section is intended to prevent the holder or holders of any or all shares of a corporation from subjecting their shares, by their own personal contract or agreement, to restrictions * * *." The words "Nothing in this section" obviously refer to subsections A and B, and the appellee definitely subjected his shares to the restrictions by his personal contract.
I adhere to the position taken on the original disposition of this case regardless of the matters set out in the supplemental opinion.
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491 S.W.2d 762 (1973)
Jack BOSWELL, Appellant,
v.
Burton K. HUGHES and wife, Freda Hughes, Appellees.
No. 6280.
Court of Civil Appeals of Texas, El Paso.
February 28, 1973.
Rehearing Denied March 21, 1973.
*763 Fred C. Chandler, Sr., Pecos, for appellant.
A. R. Archer, Jr., Monahans, for appellees.
OPINION
WARD, Justice.
This is a suit for cancellation of a trustee's deed, injunctive relief, and for actual and exemplary damages arising out of an alleged wrongful foreclosure of real estate. Trial was before a jury which awarded Burton K. Hughes, et ux., Plaintiffs-Appellees, damages against Jack Boswell, Defendant-Appellant. We affirm in part, and in part reverse and render.
The facts briefly stated reveal that Defendant sold Plaintiffs a home, retaining a second and subordinate vendor's lien additionally secured by deed of trust. The controversy arises over a payment Plaintiffs allege was made by check dated February 12, 1970 which was the monthly payment that would have been due on March 7, 1970. The check itself was introduced in evidence, which had not been cashed. Defendant claims that he never received it. By check dated March 14, 1970, Plaintiffs tendered the next monthly installment which would have been in payment for the monthly installment due April 7, 1970. By letter dated March 18, 1970, the Defendant returned the March check enclosed with a letter informing Plaintiffs that notices of foreclosure had already been posted by Defendant's attorney on March 9th and allowing them until April 3rd to pay the balance of the note in full together with delinquent interest and $210.06 attorney's fees. Plaintiffs claim that the February check was also returned with this same letter, but this the Defendant denies, insisting that he never received the February check. In any event, neither check was cashed. Plaintiffs' attorney on March 25, 1970, replied to the Defendant's letter and advised the Defendant that the Plaintiffs were not and had never been delinquent with their payments and offered to pay the Defendant the amount of the two installments that the Defendant claimed were past due in order to avert the foreclosure or litigation. The Defendant did not reply, and on April 7, 1970, the trustee sold Plaintiffs' home under the terms of the deed of trust, and executed a deed to the Defendant as the successful bidder at the sale, reciting in the trustee's deed that the Plaintiffs were in default. The Defendant then filed a forcible detainer suit to evict the Plaintiffs from the property which precipitated the filing of this suit to set aside the trustee's deed and seeking injunctive relief to enjoin the eviction proceedings and for damages.
The Plaintiffs alleged, in addition to their allegations for injunctive relief, that the acts of the Defendant were malicious and fraudulent in returning and refusing to accept the checks in payment of the monthly installments and the resulting foreclosure in an effort to deprive the Plaintiffs of their home. Plaintiffs prayed for damages for loss of income and for physical illness of Mrs. Hughes as a result of the alleged fraudulent foreclosure. The jury, in response to special issues, found that the Plaintiffs tendered the March payment by valid check prior to its due date; that the Defendant was actuated by malice in the foreclosure and awarded Plaintiffs $300.00 actual and $1,646.00 exemplary damages. The trial Court entered judgment for the Plaintiffs cancelling and setting aside the trustee's deed, perpetuating the temporary injunctive relief to prevent eviction, and awarding the Plaintiffs the actual and exemplary damages found by the jury.
The Defendant seeks reversal of the trial Court judgment and assigns four points of error, only one of which is briefed. Therefore, this Court, under Rules 418 and 422, Texas Rules of Civ.Proc., will consider only the one point. This point complains of the exemplary damages for the reason that there is no evidence of a tort committed by the Defendant.
The controlling case is that of A. L. Carter Lumber Co. v. Saide, 140 *764 Tex. 523, 168 S.W.2d 629 (1943), where the general rule is recognized that exemplary damages cannot be recovered for a simple breach of contract, where the breach is not accompanied by a tort, even though the breach is brought about capriciously and with malice. A comprehensive discussion of the general rule and the exceptions was made by Justice Pope in McDonough v. Zamora, 338 S.W.2d 507 (Tex. Civ.App.San Antonio 1960, writ ref'd n. r. e.). He asserts that the cases which apply the correct rule are those in which punitive damages have been allowed, if, and only if, a distinct tort is alleged and proved independent of the contract action. There must be more than a malicious and oppressive breach of contract, for even an intentional breach of a contract is not punishable by punitive damages. This same rule is recognized in Covington v. Burke, 413 S.W.2d 158 (Tex.Civ.App.Eastland 1967, writ ref'd n. r. e.), where the jury found malice and exemplary damages in foreclosure. In the Covington case, the court had before it a fact situation where technically it was said that the mortgagee exercised dominion and control over the property and disturbed the mortgagor's possession after the wrongful foreclosure. Even there the exemplary damages were denied. All we have here is the trustee's sale and the filing of the forcible entry and detainer suit, and at this point the Defendant was enjoined. On these authorities, we can only conclude that the trial Court erred in awarding the exemplary damages.
The judgment of the trial Court is therefore affirmed as to the relief granted Plaintiffs in cancelling and setting aside the trustee's deed and the injunctive relief and the award of $300.00 actual damages, but is reversed and rendered in favor of the Defendant as to the award of $1,646.00 exemplary damages.
RAMSEY, Chief Judge (dissenting).
I respectfully dissent. In A. L. Carter Lumber Co. v. Saide, cited in the majority opinion, the Supreme Court, in denying exemplary damages, commented that "There was no evidence of abusive use of the extraordinary process of court, or of any other tortious conduct." Covington v. Burke, supra, summarily disposes of the exemplary damage point by citing A. L. Carter Lumber Co. v. Saide, supra. It should be noted that in each of those cases, the mortgagee had a basis for foreclosure, either for a delinquency in payment or for a breach of the mortgage covenants. In the case considered here, the question of delinquency was placed in issue which was found by the jury adversely to the Defendant, whereby Plaintiffs were current in their payments. Though we might prefer to assume that the Defendant was merely mistaken, the jury found that he was actuated by malice.
In the disposition of this appeal, the principal concern of this Court should be to determine whether or not the alleged breach is accompanied either by tortious conduct or abusive use of the extraordinary process of the courts. Plaintiffs' pleading alleged fraud and fraudulent conduct and malicious intent of the Defendant with resulting damages. The Defendant also pled malicious and fraudulent conduct on the part of the Plaintiffs in his cross-action and prayed for damages. It thus appears that all the parties, as well as the trial Court, treated the matter as a tort action insofar as their actions for damages were concerned. Briggs v. Rodriguez, 236 S.W.2d 510 (Tex.Civ.App., writ ref'd n. r. e.).
In attempting to classify causes of action, the lines of delineation between tort and contract actions may become somewhat obscure, particularly when contractual relief as well as damages for tortious conduct are sought. In an effort to define a tort, it has been stated that the term "tort" has never been accurately defined and from its nature, the term may be incapable of exact definition. 55 Tex.Jur.2d, Sec. 1, p. 624. in 86 C.J.S. Torts § 40, p. 954, an actionable tort is defined as any intentional invasion of, or interference with, property, property rights, personal rights, or personal liberties *765 causing injury without just cause or excuse. This definition, though quite general in its terminology, has been cited in at least two opinions in this State, namely, Cooper v. Steen, 318 S.W.2d 750 (Tex.Civ. App. n. w. h.) and Marshall v. United Finance & Thrift Corporation of Dallas County, 347 S.W.2d 623 (Tex.Civ.App. n. w. h.). An action for damages based on fraud is an action sounding in tort for which exemplary damages may be recoverable. 26 Tex.Jur.2d, Sec. 136, p. 121.
For these reasons, I would affirm the judgment of the trial Court.
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704 A.2d 1163 (1997)
In re Appeal of Robert and Marie GABORIAULT, et al. (Milton Town School District, Appellant).
No. 97-007.
Supreme Court of Vermont.
November 14, 1997.
*1164 Before AMESTOY, C.J., MORSE, JOHNSON and SKOGLUND, JJ., and GIBSON, J. (Ret.), Specially Assigned.
ENTRY ORDER
The Milton Town School District appeals from a decision of the Environmental Court that denied site-plan approval for a new school addition and parking lot and denied conditional-use approval for the parking lot. The District argues that the court erred (1) by considering the impact of the parking lot on the neighbors rather than on the character of the general area, (2) by failing to give any deference to municipal policies supporting the location of the parking lot, and (3) by finding no special circumstances that warrant site-plan waivers of parking-lot requirements.[*] We affirm.
The Milton Town School District currently operates two elementary schools. The Herrick Avenue School serves grades K-4, and the School Street School serves grades five and six. The School Street School is outdated, and the District has decided to consolidate the two schools by expanding the Herrick Avenue School to accommodate grades five and six. The site consists of two parcels of land, a 30.9-acre parcel on the east side of Herrick Avenue and a smaller parcel directly across from it on the west side. The K-4 school is located on the east side of the street, along with two parking lots, playgrounds, athletic fields and open areas. On the west side, there is a baseball field and an open area.
The District proposed an extension to the current K-4 building covering most of the current parking lot. The western parcel is the proposed location of the new parking lot. Both parcels are in the high-density residential zoning district of the town, which allows schools as a conditional use. Town of Milton Zoning Regulations § 303. Accordingly, the District applied to the Milton Zoning Board of Adjustment (ZBA) for conditional-use approval. See 24 V.S.A. § 4407(2). The District also applied to the Milton Planning *1165 Commission for site-plan approval. See id. § 4407(5). The ZBA approved the conditional use, and the Commission approved the site plan.
Neighbors are nineteen residents of Village Meadows, a residential development located adjacent to and west of the proposed new parking lot. They appealed the decisions of the ZBA and the Planning Commission to the Environmental Court. See id. §§ 4471, 4475. Following a de novo trial, the court denied site-plan approval for the addition, the bus and parent drop-off and the parking lot on the west side of Herrick Avenue. The court also denied conditional-use approval for the parking lot. The District appeals.
The District first argues that the court erred in its conditional-use review by concluding that the location of a parking lot could adversely affect the character of the area. To approve a conditional use, the court must find that the proposed conditional use shall not adversely affect "[t]he character of the area." Id. § 4407(2)(B); see Town of Milton Zoning Regulations § 500.2. The court found that the school addition would not adversely affect the character of the area, which is composed of a school and playing fields surrounded by residential neighborhoods. On the other hand, the court found that the parking lot intruded into the residential neighborhood on the west side of Herrick Avenue and would adversely affect the residential character of that neighborhood; it found that the increase in noise, lights and vehicle exhaust would affect the whole neighborhood.
The District contends that the court construed "area" too narrowly. It maintains that the court should focus on the entire high-density residential zoning district rather than on the immediate neighbors. Under the District's construction, locating a school parking lot anywhere on the District's two parcels would not affect the character of the high-density residential zone because it already contains a school and two school parking lots.
We note that the zoning regulation differs from the statute. Compare 24 V.S.A. § 4407(2)(B) ("character of the area affected") with Town of Milton Zoning Regulations § 500.2 ("character of the area"). The municipal regulation must be read to follow the requirements of § 4407(2), "and those requirements will govern whether or not they are expressly set forth." In re Walker, 156 Vt. 639, 639, 588 A.2d 1058, 1059 (1991) (mem.). Thus, the court was required to consider the character of the area affected. In this light, we cannot conclude that the court's finding that the proposed parking lot would adversely affect the character of the residential neighborhood was clearly erroneous; the residential neighborhood is the area that would be affected. See In re Meaker, 156 Vt. 182, 185, 588 A.2d 1362, 1363 (1991) (we will uphold court's finding of adverse effect unless clearly erroneous).
Second, the District argues that the court acted as a super-planning commission in violation of Chioffi v. Winooski Zoning Bd., 151 Vt. 9, 556 A.2d 103 (1989), by failing to give any deference to the municipal policies that support the site plan and were adopted by the Planning Commission. The District contends that the court erred by failing to consider that the plan was designed to enhance student safety by separating parking from student population and to preserve municipal resources by sparing existing athletic fields. On appeal from a planning commission decision, neighbors were entitled to a de novo trial before the environmental court. See 24 V.S.A. § 4472(a). For a de novo trial, the court must approach a case as if it were the planning commission, without regard to what has been done before the planning commission. In re Stowe Club Highlands, 164 Vt. 272, 275, 668 A.2d 1271, 1274 (1995). Contrary to the District's claim, Chioffi explicitly states that the court is not required to give deference to the decision of a local zoning board. 151 Vt. at 11, 556 A.2d at 105. We find no error.
Third, the District claims the court erred by finding that no special circumstances warranted the requested site-plan waivers from parking-lot regulations. The Town of Milton Zoning Regulations set forth the number of parking spaces required for *1166 specific uses and various other parking-lot requirements such as size of parking spaces and width of aisles. See Town of Milton Zoning Regulations §§ 810-817. Section 817.1 states, however: "The Planning Commission may alter the number of parking spaces and other requirements of this Section when justified in its judgment by special circumstances." The court found no evidence of any "special circumstances" that would justify alterations from the regulatory requirements. The court concluded that the waivers were necessary only because the District decided to build the parking lot on the west side of Herrick Avenue, an area that is not large enough to accommodate a parking lot in compliance with the regulations.
We will uphold the trial court's construction of a zoning regulation unless it is clearly erroneous, arbitrary or capricious, In re Stowe Club Highlands, 164 Vt. at 280, 668 A.2d at 1277, and findings of fact unless clearly erroneous. Meaker, 156 Vt. at 185, 588 A.2d at 1363. The District maintains that the municipal policies relating to student safety and preserving recreational resources are special circumstances that necessitate the requested waivers. It also claims that the reduced number of parking spaces and reduced size were intended to minimize the impact on neighbors, and screening was limited to minimize vandalism. There is no clear error in the court's finding these factors do not constitute "special circumstances," justifying waivers. There was no evidence to show that a conforming lot would jeopardize student safety and recreational resources. The policies may be sound, but the District did not show that the nonconforming lot promoted these policies any more than a conforming lot would. Based on the evidence presented, the location of the parking lot on the west side of Herrick Avenue was the only reason that waivers were necessary.
Affirmed.
NOTES
[*] In its brief, the District also argued that the court erred by rejecting the site plan for bus and parent drop-off areas. At oral argument, the District indicated that it was not pursuing the issues pertaining to the site plan for the east side of Herrick Avenue, in particular the site plan for the bus and parent drop-off areas. Thus, we do not address this issue.
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491 S.W.2d 286 (1973)
Albert BOOTH, Movant-Appellant,
v.
STATE of Missouri, Respondent.
No. 57486.
Supreme Court of Missouri, Division No. 1.
March 12, 1973.
Joseph H. Weyhrich, St. Louis, for appellant.
John C. Danforth, Atty. Gen., Gene E. Voigts, First Asst. Atty. Gen., Jefferson City, for respondent.
*287 HOLMAN, Presiding Judge.
Movant (hereinafter referred to as defendant) has appealed from an order of the circuit court overruling his motion to vacate filed pursuant to Rule 27.26, V.A.M.R. We have jurisdiction since the appeal was taken prior to January 1, 1972. We affirm.
Defendant was convicted of murder in the second degree in the killing of James Bailey. He had shot deceased several times, at about 3 o'clock a. m., on January 11, 1965. The shooting had taken place in a small room; seven men were present at the time of the shooting. The principal witness for the State was Robert Vaughn, a close friend of deceased. Both were heroin addicts.
Under the provisions of § 556.280 RSMo 1959, V.A.M.S., the trial court had fixed defendant's punishment at life imprisonment. Defendant duly appealed and the judgment was affirmed. See State v. Booth, 423 S.W.2d 820 (Mo.1968). The only point raised on the original appeal was whether the testimony of Vaughn constituted substantial evidence in view of the fact that he was a heroin addict and was under the influence of the drug at the time he witnessed the killing. A complete statement of facts appears in the opinion in the case above cited.
The defendant's motion to vacate was filed May 26, 1971. The only allegations therein that were urged in the trial court and here are:
"8(b) The testimony of said Robert Vaughn at movant's trial was false and perjured to the knowledge of the State. Said Robert Vaughn was under the influence of narcotics when he purportedly witnessed the crime and when he testified, and he was not a competent witness.
"8(c) The circuit attorney's comments and allusions to crimes other than the one for which movant was charged during the course of the trial and his closing argument were so inflammatory and prejudicial as to deny movant a fair and impartial trial.
"8(g) Ineffective assistance of his counsel because of his failure to call Earl Davis as a witness."
At the hearing of the motion defendant testified that he and Earl Davis were each charged with the murder of Bailey; that they were both represented by the same attorney; that Davis "was going to testify * * * that the deceased had a gun" ; that he asked his lawyer to call Davis as a witness but he did not do so.
The charge against Davis was nolle prossed by the State subsequent to defendant's trial.
Vaughn also testified for defendant. He stated that he was now serving 4-year and 2-year consecutive sentences for stealing; that he was a heavy drug user at the time of the shooting; that he had not used drugs for two years before this hearing; that because of his use of drugs and having taken a shot 15 minutes before the shooting, and because he had only been "off" drugs four months before the trial, he "didn't believe that he told the truth at the trial"; that he could not now remember what took place at the time of the shooting.
Neither Davis nor defendant's trial attorney was called as a witness.
In overruling the motion the trial court made findings as follows:
"That the testimony of Robert Vaughn at the hearing on the motion in which he stated that he did not believe he told the truth at the original trial is not credible and is not believed by this court; that the allegation that Robert Vaughn was under the influence of narcotics when he purportedly witnessed the crime and when he testified, and that he was not a competent witness, is a matter ruled on by the Supreme Court on appeal and cannot be considered in this collateral proceeding; * * * that the failure of the attorney for the movant to call as a witness in his original trial Earl Davis in support of movant's theory of self-defense was a matter of trial strategy and *288 did not violate any of movant's constitutional rights. Earl Davis was indicted along with movant for the murder of James Bailey. Bailey was the victim of the crime for which movant was convicted. Mr. Morris Hatchett, attorney for movant and Earl Davis, was an experienced criminal trial lawyer. He was employed by movant to defend him and whether to use Earl Davis as a witness for movant was a judgment which Mr. Hatchett had to make."
Defendant's first point is that his attorney "was subject to a conflict of interest and appellant was denied his constitutional right to counsel." This contention is based upon the fact that defendant's attorney also represented Earl Davis who was separately charged with the same offense. The alleged conflict seems to be based upon the fact that the attorney failed to call Davis as a witness although requested by defendant to do so. Defendant says Davis would have testified that deceased had a gun.
We have concluded that the trial court did not err in failing to sustain the motion on this ground. Since defendant did not call the attorney as a witness there is no proof as to why Davis was not called. It may be that it was a matter of trial strategy, or, Davis may have indicated to Mr. Hatchett that he would claim his constitutional right not to testify. At any rate, there is no proof of a conflict of interest. See Mason v. State, 468 S.W.2d 617 (Mo.1971). Moreover, the failure to call Davis would not have been prejudicial to defendant because three witnesses testified in detail in support of defendant's claim of self-defense and therefore the Davis testimony would have been merely cumulative.
We have considered the case of Glasser v. United States, 315 U.S. 60, 62 S. Ct. 457, 86 L. Ed. 680 (1942), cited by defendant, but it does not rule the point because clearly distinguishable on the facts.
The next point briefed is that "the court erred in failing to find that the evidence elicited and arguments made by the State regarding crimes other than the one for which appellant was charged denied appellant a fair and impartial trial." This contention is based on the fact that witness Vaughn testified, without objection, that he and deceased used heroin; that they sometimes purchased it from defendant, and often stole various articles in order to obtain money to pay for the heroin.
In argument the prosecutor, without objection, referred to those matters, and also asked the following questions which may have been construed as referring to defendant: "And who is the fagin? Who is the viper behind the stealing?"
If proper objection had been made to the foregoing matters and ruled adversely to the defendant it may be that such rulings would be considered trial errors. However, errors in admission of evidence and alleged improper argument are not matters which afford a basis for relief on a 27.26 motion. State v. Pope, 411 S.W.2d 212 (Mo.1967), and State v. Garton, 396 S.W.2d 581 (Mo.1965). Defendant seeks to avoid this rule by stating that the evidence and argument in question denied him a fair trial and hence he was not afforded the due process of law guaranteed him by constitutional provisions. The trial court's finding on this point was that "the comments and allusions to other crimes of the movant by the circuit attorney in his final argument were comments on the evidence developed during the trial and were not so inflammatory as to violate any of the movant's constitutional rights." While we agree with the finding of the trial court, we rule the point on the basis that under the facts and circumstances here presented defendant cannot obtain a post-conviction review of alleged trial errors by making a general contention that such denied him his constitutional right to a fair trial. The cited case of Mahler v. State, 465 P.2d 765 (Okl.Cr.1970), does not support defendant's contention because it dealt with erroneous matters reviewed on direct appeal.
*289 The defendant's final contention is that the trial court erred in failing to find that his conviction was based on false testimony. This point relates to the testimony of Vaughn at the hearing of the motion, which has been heretofore stated.
In considering a similar contention we have stated that "`Recantation by a witness called on behalf of the prosecution does not necessarily entitle accused to a new trial. * * * [R]ecanting testimony is exceedingly unreliable, and is regarded with suspicion; and it is the right and duty of the court to deny a new trial where it is not satisfied that such testimony is true. * * *'" State v. Harris, 428 S.W.2d 497, 501 (Mo.1968). See also Batsell v. United States, 403 F.2d 395 (8th Cir. 1969). The trial court did not believe the recantation testimony of Vaughn. We defer to its conclusion in that regard. It necessarily follows that such finding was not clearly erroneous.
Judgment affirmed.
All concur.
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491 S.W.2d 198 (1973)
Judy LIFSON, Appellant,
v.
Sam Y. DORFMAN, Jr., Appellee.
No. 4585.
Court of Civil Appeals of Texas, Eastland.
February 16, 1973.
Rehearing Denied March 9, 1973.
*199 Carter, Jones, Magee, Rudberg, Moss & Mayes, Morton A. Rudberg, Dallas, for appellant.
Daugherty, Bruner, Lastelick & Anderson, Jerry Lastelick and James R. Hilliard, Dallas, for appellee.
BROWN, Justice.
Judy Lifson seeks damages for the decline in value of securities awarded her in divorce proceedings against her former husband, Sam Y. Dorfman, Jr. Dorfman filed a counterclaim against Lifson and also a third party action against R. Guy Carter and Morton Rudbert, attorneys for Lifson, for damages resulting from an alleged wrongful garnishment. At the close of all the evidence in the jury trial, instructed verdicts were granted that denied recovery for either party. Both Lifson and Dorfman appeal.
The controversy between the parties is an outgrowth of the former divorce proceeding. The judgment in the divorce action partitioned numerous properties, both real and personal, including securities. It additionally granted Lifson a money judgment against Dorfman. At that time the securities were either issued in Dorfman's name and held for safe keeping at the office of his stockbroker or held by the broker in "street name" for Dorfman's account. Following entry of the judgment, Dorfman perfected an appeal but being unable to agree with Lifson as to the value of the securities, he posted a supersedeas bond only as to the money judgment. Prior *200 to the posting of the bond and during the appeal, Lifson obtained a writ of execution and a writ of possession in an effort to satisfy the judgment.
Between the time of the judgment of divorce and the issuance of the writ of execution and the writ of possession, the stock market deteriorated and the securities depreciated in value. After Lifson obtained her securities, she filed a writ of garnishment against the stockbroker thereby impounding Dorfman's half of the securities. Shortly thereafter, the supersedeas bond was filed and Dorfman intervened in the garnishment proceedings for the purpose of obtaining a dismissal.
The trial court having instructed a verdict in favor of Dorfman, to be correct, there must be no evidence having probative force upon which a jury could have made a finding in favor of Lifson. Anderson v. Moore, 448 S.W.2d 105 (Tex. Sup.1969). To make this determination all evidence must be considered in the light most favorable to Lifson and every reasonable inference deducible from the evidence is to be indulged in her favor. Seideneck v. Cal Bayreuther Associates, 451 S.W.2d 752 (Tex.Sup.1970); Triangle Motors of Dallas v. Richmond, 152 Tex. 354, 258 S.W.2d 60 (1953).
Lifson contends her right of recovery is supported by either one or all of three theories: (1) conversion; (2) detention of properties pending appeal; or (3) equitable estoppel. The Texas courts in defining conversion and in indicating the elements thereof have stated as follows:
"Conversion is the unlawful and wrongful exercise of dominion, ownership, or control by one person over the property of another, to the exclusion of the exercise of the same rights by the owner," Sunray Enterprises, Inc. v. Rosenaur, 335 S.W.2d 670 (Tex.Civ.App.Dallas 1960, writ ref'd n. r. e.).
"A conversion has been defined as any distinct act of dominion wrongfully exerted over another's property, in denial of his right or inconsistent with it. The test is whether the wrongdoer has exercised a dominion over the property in exclusion or in defiance of the plaintiff's rights." Holland v. Lesesne, 350 S.W.2d 859 (Tex.Civ.App.San Antonio 1961, writ ref'd n. r. e.).
Lifson urges the language in Fenberg v. Fenberg, 307 S.W.2d 139 (Tex.Civ.App. Amarillo 1957, no writ hist.), where the Amarillo Court stated:
"It is not necessary to a conversion that there should be a manual taking of the thing in question by the defendant; it is not necessary that it should be shown that he applied it to his own use. Does he exercise a dominion over it in exclusion or in defiance of plaintiff's right? If he does, this is in law a conversion."
The uncontroverted facts show that during the eleven year marriage Dorfman acted as manager of the community estate. The divorce judgment partitioned the securities among other assets to the parties "share and share alike as tenants in common, and each of the parties hereto is hereby vested with fee simple title to and right of possession in equal undivided interest in such properties." There is no evidence in the record that Dorfman issued any instruction to the stockbroker not to transfer the securities to Lifson nor is there any evidence that Lifson made demand for delivery of the securities. The securities remained with the stockbroker until Lifson availed herself of court process to secure possession of them.
An indispensable element of community property is a joint ownership of such property by a husband and wife. George v. Taylor, 296 S.W.2d 620 (Tex. Civ.App.Fort Worth 1956, writ ref'd n. r. e.). The trial court partitioned the securities share and share alike as tenants in common. In Sparks v. Robertson, 203 S.W.2d 622 (Tex.Civ.App.Austin, writ ref'd), the Court stated:
"An essential element of cotenancy is the present right of possession."
*201 There is no evidence that Dorfman exercised a dominion over the securities in exclusion or defiance of Lifson's rights and there is no evidence that Lifson exercised her immediate right of possession of the securities. Therefore, Lifson's first two theories must fail.
In Barfield v. Howard M. Smith Company of Amarillo, 426 S.W.2d 834 (Tex.Sup.1968), the Texas Supreme Court stated:
"A party claiming an estoppel must have used due diligence to ascertain the truth of the matters upon which he relies in acting to his detriment. * * * One of the requirements of estoppel is that the party claiming the estoppel was without knowledge, or the means of acquiring knowledge, of the facts which the party to be estopped is alleged to have represented by his acts, conduct or silence. * * * `Where the real facts were known to a person or were open for his convenient ascertainment, he was not justified in relying on representation pertaining thereto and he cannot effectively say that he was misled or deceived by such representations.' * * *"
Lifson argues that Dorfman promised to file a supersedeas bond. A bond was filed as to the money judgment. The evidence shows that the amount of the supersedeas bond as to the securities was never agreed upon even after extended negotiations nor was the amount fixed by the court after proper hearings. There is no evidence Dorfman or his representatives ever stated a specific amount for which the bond would be posted. Lifson and her representative knew the real facts including the location of the securities.
In 31 C.J.S. Estoppel § 71, at page 431 it is stated:
"There can be no equitable estoppel where the complainant's act appears to be rather the result of his own will or judgment than the product of what defendant did or represented."
Lifson may not now benefit from her inactivity. We agree with the trial court's action in granting the instructed verdict in favor of Dorfman.
The correctness of the trial court's action in instructing a verdict against Dorfman on his cause of action for wrongful garnishment is determined by the applicability of the doctrine of res judicata.
Prior to the present action, Lifson instituted a garnishment proceeding against the stockbroker. Dorfman voluntarily intervened, alleging Lifson and her attorneys were aware of assets belonging to him sufficient to satisfy the divorce judgment, that sufficient grounds for making the sworn application did not exist and that the allegations were false, that he was damaged by having to incur attorney's fees for which he should recover as well as court costs, and that the garnishment should be dismissed. The garnishment suit was tried, and a dismissal resulted with all costs, including the attorneys' fees for the garnishee, taxed against Dorfman.
Under the doctrine of res judicata, a judgment of a court of competent jurisdiction is final and a bar to another trial as between the parties not only as to matters actually determined but as to every other matter which the parties might have litigated and had decided in the cause. Ellison v. McGlaun, 482 S.W.2d 304 (Tex. Civ.App.Amarillo 1972, writ ref'd n. r. e.). The Amarillo court stated:
"The proper approach in deciding whether a former judgment is res judicata of a later suit between the same parties and those privy to the judgment is to determine from the record what matters of fact and law were involved. The record should speak for itself."
Examination of this record shows only an enlargement of the damage claim *202 of Dorfman as reflected in the garnishment proceedings. We agree that the trial court was correct by instructing a verdict against Dorfman.
Having considered all points of error presented and finding none with merit, the trial court is affirmed.
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491 S.W.2d 202 (1973)
FLESHER CONSTRUCTION COMPANY, INCORPORATED and Carter Management Co., Appellants,
v.
Coffee HAUERWAS, Appellee.
No. 18035.
Court of Civil Appeals of Texas, Dallas.
February 8, 1973.
*203 William M. Mount, Reppeto, Berryman & Mount, Dallas, for appellants.
Gerry N. Wren, Tobolowsky, Schlinger & Blalock, Dallas, for appellee.
CLAUDE WILLIAMS, Chief Justice.
Coffee Hauerwas brought this action against Flesher Construction Company, Inc. (hereinafter called Flesher) and Carter Management Company (hereinafter called Carter) seeking to recover the balance allegedly due him upon an oral contract between the parties pursuant to which Hauerwas agreed to furnish and supervise all labor necessary to perform the masonry construction phase of a building being erected in Dallas by Flesher, as general contractor, for Carter, as owner. The case was tried before the court and a jury and submitted upon nineteen special issues all of which were answered favorably to Hauerwas. Final judgment was granted on April 20, 1972 awarding Hauerwas a judgment against Flesher and Carter, jointly and severally, for $12,844.98 together with attorney's fees of $4,281.66. It was also ordered that Flesher and Carter take nothing from Hauerwas by reason of the counterclaim asserted. From this judgment Flesher and Carter appeal.
MOTION TO DISMISS FOR WANT OF JURISDICTION
At the outset we are confronted with appellee's motion to dismiss this appeal on the ground that this court lacks jurisdiction. Essential to the resolution of this question is the following statement of events set forth in chronological order:
The case proceeded to trial on January 31, 1972. The jury returned its verdict February 1, 1972. Hauerwas filed his motion for judgment on the verdict February 3, 1972. Flesher and Carter filed their motion for judgment non obstante veredicto on February 11, 1972. On March 10, 1972 the court signed and entered a judgment. On March 20, 1972 Flesher and Carter filed "Defendants' Motion for New Trial." On April 10, 1972 Flesher and Carter filed "Defendants' Amended Motion for New Trial." On April 20, 1972 the court rendered "Final Judgment" in which it was recited that the judgment dated March 10, 1972 was interlocutory in that disposition of all parties and actions was not therein made. The court then proceeded to enter a final judgment *204 "in lieu and substitution of and in all things in the place and stead of the above identified Judgment." On May 1, 1972 Flesher and Carter filed "Defendants' Amended Motion for New Trial" which was addressed to the judgment entered on March 10, 1972 "and the judgment entered on April 20, 1972." Thereafter on May 11, 1972 Flesher and Carter filed "Defendants' Amended Motion for New Trial" which was again addressed to the judgment entered on March 10, 1972 and the judgment entered on April 20, 1972. The trial court took no action on either motion. On June 23, 1972 Flesher and Carter filed their appeal and supersedeas bond and thereafter on August 23, 1972 filed a transcript of the appeal in this court.
Appellee contends that having filed their original and one amended motion for new trial prior to the entry of the final judgment on April 20, 1972 that appellants could legally only file one motion for new trial following the entry of such judgment so that the filing of the transcript in this court, pursuant to the rules, would have been required by August 14, 1972. Appellee concedes that if appellants had the right to file two motions for new trial after the entry of the final judgment that the appeal has been validly perfected by the filing of the transcript on August 23, 1972 which would have been within sixty days following the overruling of the second motion for new trial by operation of law forty-five days after the file date thereof. Appellee takes the position that the original motion for new trial and the first amended motion for new trial, having been filed prior to the rendition of the final judgment on April 20, 1972, should be treated as a motion filed pursuant to Rule 306c, Texas Rules of Civil Procedure. Under this contention they argue that such motion or motions could be considered as having been filed on April 20, 1972 following the entry of the final judgment and that, since Rule 329b, Tex.R.Civ.P., only allows one amended motion for new trial, we may not consider more than the first motion filed after the entry of the final judgment.
We cannot agree with appellee's contention. Appellee candidly concedes that there was only one final judgment rendered by the court in this case and that was the one dated April 20, 1972. It is uncontroverted that the judgment dated March 10, 1972 was interlocutory in nature and therefore not a final judgment which was appealable. Accordingly, the original motion for new trial and the first amended motion for new trial, both filed after March 10, 1972 and both being addressed to the March 10 judgment, were not and cannot be considered prematurely filed motions pursuant to Rule 306c, Tex.R.Civ.P. The judgment dated April 20, 1972, being the only final judgment rendered by the court, was subject to be attacked by a motion for new trial and one amended motion for trial. This was accomplished by appellants although they erroneously styled the first motion for new trial attacking the April 20 judgment as "Defendants' Amended Motion for New Trial." We look to the substance rather than the form of the motion and conclude that such motion filed by appellants on May 1, 1972 constituted a timely filed original motion for new trial directed at the April 20 judgment and that the motion thereafter filed on May 11, 1972 was timely filed as an amended motion for new trial. The record was therefore filed in this court within proper time. Our conclusion in this matter is supported by the case of Dubert v. Adkins, 475 S.W.2d 383 (Tex.Civ.App., Corpus Christi 1971, no writ). Appellee's motion to dismiss is overruled.
OPINION ON THE MERITS
The record is undisputed that appellee Hauerwas orally agreed with Mr. Otis Flesher, president of Flesher, general contractor for Carter, that he would provide, pay for and supervise all of the labor necessary for the masonry construction of a building in Dallas which consisted of approximately *205 70,000 square feet. As a part of this agreement appellants agreed to pay appellee the cost of all labor plus 15 per cent of such labor cost to cover payroll expenses and also agreed to pay an additional 10 per cent of such labor cost as profit. Appellee submitted weekly time sheets to appellants' foreman as the work progressed and when the job was completed the total amount that had been claimed by appellee for labor plus the 15 and 10 per cent figures was the sum of $137,003.67. Appellee was paid this amount with the exception of $12,844.99 which is the subject matter of this litigation. During the progress of the work appellee placed his name on the time sheets as a bricklayer and such sheets demonstrate that appellee worked as a bricklayer for approximately the same number of hours per week as the other bricklayers. Appellee testified that in addition to actually doing bricklaying work he supervised the other employees on the job pursuant to his agreement with appellants. Appellants deny that they agreed to pay appellee for personal services other than for supervision. The jury found in answer to special issue No. 7 that appellee performed personal labor on the job as a masonry construction worker in addition to his duties as supervisor; (8) that officers and agents of Flesher knew that appellee was performing such labor on the job; (9) that such officers and agents knew that appellee expected to be paid for his personal labor; (10) that Flesher paid appellee for his personal labor on the job each time it was requested by appellee from the start of the masonry work in September, 1970 until approximately April of 1971; (11) that Flesher did not voice any objection to plaintiff's performing such personal labor on the job and receiving wages therefor until after the job was finished, or substantially so; (12) that an officer of Flesher stated to appellee that if appellee would complete the job without asking for weekly payments as required under the oral agreement he would pay plaintiff in full at the end of the job; (13) that appellee believed and relied on such statements; (14) that appellee would not have completed the masonry work on the building without additional payments but for the promise of Flesher as above found; (15) that Hauerwas actually worked, as a bricklayer, the number of hours listed on the time sheets in evidence. The jury found in answer to special issue No. 6 that the sum of $12,844.98 would compensate appellee for the balance due him on the masonry construction work. The jury also found, in answer to special issue 19, that the sum of $4,281.66 would reasonably compensate appellee for attorney's fees incurred in the prosecution of the suit.
In their first four points of error appellants complain of the action of the trial court in overruling their motion for judgment non obstante veredicto and in refusing to grant their motion for new trial. Points 1 and 4, being "non obstante veredicto" points, base their objection on the "overwhelming weight of the evidence." Points 2 and 3 complain of the court's overruling the motion for new trial "in that the verdict of the jury was so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust" and "there was no evidence or insufficient evidence to support the finding of the jury that Appellee was in any manner misled by the conduct of Appellants' conduct to his detriment." Appellee objects to our consideration of these points because said points do not comply with briefing rules. It is, of course, true that any attack upon the action of the trial court in overruling a motion for judgment non obstante veredicto must, of necessity, constitute a "no evidence" point as opposed to an "insufficiency of the evidence" point. To sustain a judgment notwithstanding the verdict, the reviewing court must determine that there was "no evidence" of probative force on which the jury could have made its findings. Burt v. Lochausen, 151 Tex. 289, 249 S.W.2d 194 (1952); Shelton v. Belknap, 155 Tex. 37, 282 S.W.2d 682 (1955); and Shelton v. Ector, 364 S.W.2d 425 (Tex.Civ.App., Dallas 1963). Furthermore, *206 each of appellants' first four points of error is too general, multifarious and fails to refer to the action of the trial court in such a way that the points of objection can be clearly identified. Rules 321, 322 and 374, Tex.R.Civ.P; Wagner v. Foster, 161 Tex. 333, 341 S.W.2d 887 (1960). Appellants' first point of error is said to be germane to the first three paragraphs of the amended motion for new trial. When we look to these paragraphs we see that they complain of the submission of special issues 3, 4, 5, 6 and 7 on the basis of no evidence, insufficient evidence, and great weight and preponderance of the evidence. Thus the point is multifarious and general.
In view of our long-standing policy of liberal construction of the briefing rules and in an effort to determine from the entire contents of appellants' brief the exact nature of the complaint or complaints set forth, we have carefully reviewed the statement, argument and authorities set forth under appellants' first four points of error and conclude that three complaints are advanced: (1) that the "overwhelming weight" of the evidence shows that it would have been impossible for appellee to have supervised the construction work and also to have labored as a bricklayer for the number of hours he claimed; (2) that the "overwhelming weight" of the evidence shows that appellee was compensated for his services as agreed or was tendered compensation therefor; and (3) that there was "no evidence" or "insufficient evidence" to support the finding of the jury that appellee was in any manner misled by appellants' conduct to his detriment. We have carefully examined the record in the light of these contentions and find that they cannot be sustained.
As to the first contention we find that appellee testified that it was customary for the contractor to not only supervise the work but to perform actual work himself and that on this particular job he did just that. He stated that it was not only possible but that he actually did perform bricklaying work and supervised the work of others on the job. Mr. Pfeffer, an employee of Flesher, and the superintendent in charge of the whole project, testified that he observed appellee doing brick mason work on the job and that he also supervised his personnel in the work being done. Such testimony is more than adequate to support the answers of the jury to the issues submitted.
As to the second contention that appellee was compensated "as agreed" we find the testimony of appellee who said that the unpaid indebtedness due him by Flesher was $12,844.99. Otis Flesher, president of Flesher, testified that he offered Hauerwas a check for $3,000 as "the balance due under the contract" which was refused by appellee. Such testimony creates an issue of fact and was sufficient for the jury to consider in arriving at its verdict.
As to the third contention we find ample evidence to support the finding of the jury in response to special issues 8 through 14 concerning appellee's reliance upon statements and conduct on the part of appellant Flesher. There is abundant evidence from appellants' witnesses that appellants knew that Hauerwas was performing personal labor on the job and that he was making claim in the various time sheets submitted. Mr. Flesher himself testified that even after he discovered that Hauerwas was performing personal labor and getting paid therefor he allowed him to continue and did not tell him to stop. The record is silent with respect to any objection being made by Flesher concerning Hauerwas performing personal labor on the job and receiving wages therefor.
Giving appellants the benefit of every doubt concerning the meaning of their various points of error we find the same to be without merit and overrule them.
In their points 5, 6 and 7 appellants say that the court erred in submitting special issue No. 19 to the jury in that there was *207 no evidence that the contract between appellants and appellee contemplated attorney's fees; that the trial court erred in not granting appellants' motion for judgment non obstante veredicto and their motion for new trial in that there was no evidence or insufficient evidence to support the jury's award of attorney's fees; and that the trial court erred in refusing to grant appellants' motion for new trial in that the jury's award of attorney's fees was grossly excessive.
Again, these points of error are general, multifarious, and not in compliance with briefing rules. However, we have, as we did before, carefully examined the statement under such points in an effort to determine the real thrust of the objection advanced by appellants.
At the outset it must be observed that appellants filed no pleadings or special defenses directed against the claim of attorney's fees. The only evidence introduced concerning attorney's fees was offered by appellee. In this regard he testified concerning the services rendered and labor done by him; that he submitted his claims to appellants for payment more than thirty days before suit was filed; that appellants refused to pay his claims; that he employed an attorney to represent him in the suit; that he agreed to pay a reasonable fee. There was evidence that the attorneys for appellee performed 111.7 hours of work and that the State Bar of Texas fee schedule justified them in asking for $40 per hour for their services.
The "non obstante veredicto" point is obviously without merit because, as stated heretofore, such is a "no evidence" point and since there is ample evidence of probative value to the effect that appellee actually performed work and labor as well as evidence concerning the reasonableness of attorney's fees, such point is without merit. Pursuant to art. 2226, Tex.Rev.Civ.Stat. Ann., and the opinion of the Supreme Court in Tenneco Oil Co. v. Padre Drilling Co., 453 S.W.2d 814 (Tex.Sup.1970), appellee Hauerwas, an individual, who performed labor and services and who obtained a judgment for any amount thereof, is entitled also to recover a reasonable amount as attorney's fees. The statute expressly provides that "The amount prescribed in the current State Bar Minimum Fee Schedule shall be prima facie evidence of reasonable attorney's fees."
The record is undisputed that appellee furnished labor and services to appellants which the jury found, based upon evidence, to be valued at $12,844.98. Appellee's claim was presented more than thirty days before the suit was filed and upon refusal appellee employed an attorney and did obtain a judgment. Thus the statutory requirements have been complied with. Appellants' contention that the amount of the fee is excessive obviously cannot be sustained.
We have carefully examined all of appellants' points of error and overrule same.
The judgment of the trial court is affirmed.
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491 S.W.2d 574 (1973)
Leroy TIGUE, Appellant,
v.
CADDO MINERALS COMPANY et al., Appellees.
No. 5-6209.
Supreme Court of Arkansas.
March 5, 1973.
Rehearing Denied April 9, 1973.
Hugh L. Brown, Little Rock, for appellant.
Wright, Lindsey & Jennings, Little Rock, for appellees.
*575 JONES, Justice.
This is an appeal by Leroy Tigue from a circuit court judgment affirming a denial by the Workmen's Compensation Commission of Mr. Tigue's claim for compensation benefits. The question before the Commission was whether Mr. Tigue's chronic diarrhea was the result of antibiotic medication he received in the course of surgery and treatment for a ruptured disc sustained in the course of his employment by the appellee-employer, Caddo Minerals Company. The question before us on appeal is not whether there is substantial evidence in the record to sustain Mr. Tigue's claim; the question before us on this appeal is whether there is any substantial evidence to sustain the Commission's finding in favor of the employer. Arkansas Foundry Co. v. Cody, 251 Ark. 57, 470 S.W.2d 812. In arriving at an answer to this question we must give the evidence its strongest probative force in favor of the Commission's findings. Bentley v. Henderson, 251 Ark. 203, 471 S.W.2d 548.
The facts in this case appear as follows: In January, 1966, the appellant-claimant, Leroy Tigue, sustained a compensable injury resulting in the surgical removal of a ruptured disc. Mr. Tigue was given some antibiotics in connection with the disc surgery and within a few days after he was released from the hospital he developed a rather severe case of diarrhea. He attempted to control the diarrhea with Pepto-Bismol and other patent medicines and he was seen and treated for the condition by Dr. Jones, his hometown physician, for approximately two years. Following the onset of Mr. Tigue's diarrhea it was necessary for him to have another disc operation which was performed in December, 1967. The evidence indicates that the diarrhea would subside during periods of hospitalization or bed rest, but would recur at frequent intervals of from one to seven days duration when Mr. Tigue was up and about. The usual episodes were described as beginning about midmorning with intense abdominal pain followed by loosely formed or fluid bowel movements growing smaller and smaller in amounts and terminating in the passage of mucus which usually contained blood.
The issues before the Commission were apparently confined to whether or not Mr. Tigue's present diarrhea, which has become chronic, is a continuation of the diarrhea he suffered following his first disc operation and more particularly, whether the diarrhea was caused by the medication administered to him during the course of his disc operation. It was Mr. Tigue's theory and contention that the antibiotic therapy administered during the course of his disc surgery destroyed the normal bacteria in his intestinal tract resulting in the growth of yeast and the chronic diarrhea. The Commission, in effect, found that Mr. Tigue had failed to prove that his chronic diarrhea was a result of his antibiotic therapy and his claim was denied.
Mr. Tigue testified that his diarrhea was at its worse stage when he first went to Dr. Garratt of Hot Springs in the spring of 1967; that his condition improved under the treatment of Dr. Garratt but then "just seemed to reach a standstill." He testified that he has experienced no improvement in the condition since sometime in 1968.
Two medical bills from Dr. W. J. Jones were introduced in evidence. One of them dated June 12, 1967, shows a diagnosis: "Diarrhea of undertermined etiologyDuration of 5 months." The subsequent bill dated August 14, 1968, indicates the same diagnosis and contains the statement: "This patient was referred to Dr. Burton for further treatment on the above diagnosis on March 1, 1967."
Apparently Mr. Tigue was seen and examined by Dr. Frank M. Burton of Hot Springs who in turn referred him to Dr. Charles E. Garratt. After a considerable period of treatment by Dr. Garratt, Mr. Tigue was referred back to Dr. Burton for additional examinations requiring hospitalization. There is no report or testimony *576 from Dr. Burton as to his initial examination of Mr. Tigue, but in the October, 1971, deposition of Dr. Garratt he testified that he first saw Mr. Tigue March 8, 1967, upon referral from Dr. Burton, and at that time Dr. Burton reported he found no problem in the colon and that the stool showed only yeast cells.
Under date of May 13, 1967, Dr. Garratt reported to adjuster White as follows:
"X-ray examination of colon by Dr. Burton was reported to be negative and stool examination showed no parasites or ova of parasites. Yeast was found.
There was a history of a large amount of antibiotic therapy by mouth following surgery in another city for a ruptured disc in the lumbar spine. Prior to this the bowel pattern had been normal.
He stated that he had a high fever for some days following surgery and presumably the antibiotics were used to combat infection.
Mr. Tigue is gradually improving, to the extent of going for several successive days without bowel disturbance. He has not completely recovered and comes to the office now about once a week.
He has been told the nature of his trouble which probably is the bacterial flora change subsequent to antibiotics."
Later, on March 18, 1968, Dr. Garratt reported to Mr. Tigue's attorney in part as follows:
"It is my opinion that Mr. Tigue's complaint originated from the use of antibiotics given following the original surgery on his lumbar spine. The condition which followed is an irritable colon manifested by attacks of frequent stooling with accompanying inflammation and tenderness of the membrane of the anal outlet. The chronicity of the annoying problems has tended to make the patient nervous, and often times, weak.
* * * * * *
The basic situation which was set up is an irritable colon. As a progress report, he has shown gradual improvement which has been interrupted at irregular intervals by acute attacks of diarrhea. These attacks have been of late less frequent and he has had relative freedom from the symptoms for periods as much as two consecutive weeks."
While in the Baptist Hospital in Little Rock from July 14, 1966, through July 23, 1966, Panalba, an antibiotic, was given to Mr. Tigue on July 18 and the same medication was continued for three days. It was discontinued on July 21.
The deposition of Dr. Garratt was introduced into evidence. He testified that the only abnormalities in Dr. Burton's findings, as reported to him, were watery stool and blood and yeast cells. Dr. Garratt then testified as follows:
"Q. I beleive you did mention that yeast was found in examination?
A. That's right.
Q. What is the significance
A. * * * yeast is a secondary invader and comes at, oftentimes when the normal bacteria in the intestine have been killed or depleted, the yeast begins to grow in abnormal amounts.
Q. Was there an abnormal amount of yeast found on this examination?
A. Dr. Burton didn't say. He just said yeast cells.
Q. Would you normally expect to find some yeast cells?
A. As a rule, not enough for comment unless they were in excess. You wouldn't comment on them unless they are in excess.
Q. You assume there was some unusual level of yeast cells at the time of the examination?
*577 A. That's right.
Q. All right, sir. Did you conduct any other type of examination, make any other findings which are noted in your records?
A. You mean of this initial
Q. * * * on the initial examination.
A. No, sir.
Q. All right, sir. Did you come to any conclusion at that time what the cause of Mr. Tigue's problem was, his diarrhea?
A. Taking into account the laboratory work which had been done I based my conclusion on the fact that his antibiotics had destroyed the normal flora of bacteria in the bowel and produced dysentery or diarrhea.
Q. What are some of the other possible causes of diarrhea, of chronic diarrhea such as Mr. Tigue was experiencing?
A. Tumor, parasites, laxatives, irritants, that may be taken by mouth. That pretty well covers it.
Q. Irritants which may be taken by mouth?
A. That would be in the form of irritant laxatives.
Q. What about nerves, muscular problems, can that sometimes cause diarrhea?
A. Yes.
Q. Now, is there any way, Doctor, to positively determine that the normal flora or balance in the intestine has been upset by antibiotic therapy?
A. I do not know of one. It's an assumption to some extent but all of us have seen it so frequently that we look for it when patients develop a diarrhea during antibiotic therapy."
Dr. Garratt testified that he had treated other patients suffering chronic diarrhea as a result of antibiotic therapy and that "all of them either responded and overcame the problem in a shorter time than Mr. Tigue or else some other problem was found to be the background of the trouble." He testified that Mr. Tigue's case was definitely unusual in that it was of much longer duration than he had ever seen. Dr. Garratt then testified that the antibiotic drug "Lincocin" is an antibiotic having tremendous power to kill bacteria and unfortunately that type of medication kills the favorable as well as the unfavorable bacteria. He testified that the bacteria in some people might be highly sensitive to antibiotics and in others not so sensitive, and that the quantity of antibiotics necessary to kill the bacteria differs tremendously with individuals. Dr. Garratt then testified as follows:
"Q. All right, sir. Doctor, in those cases which, in your experience you have dealt with chronic diarrhea resulting apparently from antibiotic therapy and where no other contributing cause was found can you tell us what the average time of recovery is excluding Mr. Tigue's case?
A. Yes. His case is unique. It might be anywhere from three weeks to three months.
Q. But three months in your experience pretty much would have been a maximum?
A. That's right, have been a maximum."
On cross-examination Dr. Garratt testified that Mr. Tigue was referred to him by Dr. Burton and that he did not duplicate the examinations done by Dr. Burton because of expense. He testified that he did a direct inspection of the bowels through a "hollow tube" and also a digital examination. He testified that both of these examinations were negative except for a "spastic type bowel." He said instead of remaining soft the bowel would have a tendency to close. Dr. Garratt then testified that he advised Mr. Tigue as to diet and *578 suggested things that might put bacteria back into his bowels, such as churned buttermilk or cultured buttermilk and a tablet called Lactinex, which is acidophilus itself. He then testified as follows:
"Q. Now, there was some discussion a moment ago about motility of the muscles, is that correct?
A. Yes (witness indicating by nod of head.)
Q. And that is, seemed to be an increase, do you know what would cause such an increase, what could cause it?
A. Yes, any irritation that produces increase and also certain nervous factors can produce increase. Shock can. Pain or any number of factors can produce increased motility while the principal ones would be some irritation to the membrane in the colon."
Dr. Garratt was then asked whether or not the increased motility of the muscles in the bowel showed a big problem in the condition he observed in Mr. Tigue and he answered as follows:
"Yes, I think it did. I think that was really the background, whatever the reason was, the increased motility made the bowels move too much."
Dr. Garratt was then asked questions and answered them as follows:
"Q. Doctor, talking about the use of antibiotics sometimes a disruption of normal bacteria balance certain drugs somewhat restore the balance, do any laboratory tests reflect whether the balance has been restored or is there any way of telling this other than by observation of symptoms?
A. Yes, there would be. If he went through a more or less a research type institution like might be at the University of Arkansas Medical School where they would make specific cultures for these particular bacteria.
Q. But routine laboratory tests would not reflect these?
A. No, the one in St. Vincent and the one in St. Joseph's and the ones in our medical offices they wouldn't.
* * * * * *
Q. Since we don't have any specific diagnostic tools at hand to determine the balance of the bacterial balance in the intestines can you with reasonable medical certainty say whether disruption of the bacterial balance was disrupting the balance as opposed to anxiety and nervousness resulting from his financial and general physical condition?
A. No, sir.
Q. Other than by his history?
A. I couldn't with accuracy."
On redirect examination Dr. Garratt testified that he had given a lot of thought to the question of whether or not Mr. Tigue's diarrhea could have been caused by anxiety and he testified that he gave Mr. Tigue tranquilizers to calm him but the diarrhea still persisted and that was the reason he "stuck to his guns" on the bacteria depletion theory. He testified that he could not honestly say how much of a factor the anxiety played in the condition as opposed to bacterial deficiency. He testified that in his opinion it could be easily one or the other or a combination of both. Dr. Garratt testified that Mr. Tigue was still having diarrhea when he stopped treating him in March, 1970, and in this connection he stated:
"When I quit treating him he was still having diarrhea and I contacted Dr. Burton and suggested that he see him with the idea of checking him over independently and he put him in St. Joseph's to do colon x-ray and to do Proctoscopic examination and various things and then Mr. Tigue I saw him in St. Joseph's on a friendly basis while he was in there under Dr. Burton and the diarrhea had *579 stopped then. What happened later I don't know.
Dr. Garratt then again recommended a clinical work-up on Mr. Tigue's condition and stated:
"It would be a fine thing for him and that could be possibly done at the University of Arkansas through the diagnostic set-up or Barnes Hospital, in St. Louis, or Ochner at New Orleans, and they would have men who would do this, especially a teaching institution where they would go down to the very bottom and determine the background."
He then testified that if Mr. Tigue was still having the same trouble, his only suggestion would be that he be sent to some medical center and "treatednot treated but examined by a Gastroenterologist to go through him completely and also whatever consultation they want, so on. I would suggest that that be done."
Apparently Mr. Tigue did return to Dr. Burton as directed by Dr. Garratt. As already stated, there is no report or testimony in the record from Dr. Burton but records from St. Joseph Hospital in Hot Springs were introduced into evidence which show that Mr. Tigue was admitted to the hospital on March 5, 1970, with Dr. Frank M. Burton as attending physician, and that he was discharged from the hospital on March 12, 1970. As a final diagnosis on the hospital record, signed by Dr. Burton, is the statement: "No disease found." The discharge summary, apparently in the handwriting and over the signature of Dr. Burton, contains the following statement:
"Patient admitted with complaint of recurring diarrhea for over two years. No diarrhea during this 7 day stay in hospital. All x-rays negative. There may be certain foods that cause the diarrhea and patient was discharged with instructions to keep accurate record of foods taken and the occurrence of diarrhea in an effort to find the offending foodsto see Dr. Garratt."
Mr. Tigue also underwent examination at the Little Rock Diagnostic Clinic and under date of December 20, 1971, in a letter-report to the attorneys for the workmen's compensation carrier, Dr. James H. Abraham reported as follows:
"Enclosed you will find a copy of my narrative summary concerning my work-up on Mr. Tigue. You will notice that my final impression is that Mr. Tigue has spastic, or irritable colon syndrome.
I have reviewed the records you enclosed, and the deposition obtained from Dr. Charles E. Garratt, dated October 14, 1971.
With regard to the question you asked in your letter of November 2, 1971, let me just say that in my opinion the chronic diarrhea that he suffers from at the present time is probably unrelated to the diarrhea that developed after his discharge from the hospital. It may have been that the diarrhea at that time may have been initiated by antibiotic therapy, however, it is not possible that that is still a causative factor. We have cultured Mr. Tigue's stool, found an abundance of normal organisms, so that the previous questions concerning overgrowth of yeast in the stool is no longer important.
I repeated the x-ray studies I thought necessary to confirm my impression about Mr. Tigue's case, and they were all normal. I sigmoidoscoped Mr. Tigue, and found the rectal membrane to be healthy in appearance. A tiny biopsy was made of the rectal mucosa, and the pathologist report is of non specific chronic inflammation. This is not to be construed as indicating that Mr. Tigue has `chronic colitis.' I believe this to be a non specific finding.
Mr. Tigue's problem is certainly a troublesome one. It apparently has resisted *580 all attempts to cure it. I am afraid he is stuck with it."
In the narrative summary of the work-up done at the clinic under "Past History" is a statement as follows:
"Drug reactions 1965penicillin caused rash, fever, and joint swelling, he has no other drug reactions to his knowledge."
Except for carious teeth and ichthyosis of the skin, the remainder of the clinical examination was reported as normal.
Both sides recognize that Mr. Tigue had the burden of proving before the Commission that his chronic diarrhea was connected with his occupational back injury and more specifically that it was caused by the antibiotic therapy administered him in 1966. Both sides also recognize that on this appeal, the burden rests on Mr. Tigue to show that there is no substantial evidence to support the findings of the Commission. Substantial evidence has been defined as "evidence furnishing a substantial basis of fact from which the fact in issue can reasonably be inferred; and the test is not satisfied by evidence which merely creates a suspicion or which amounts to no more than a scintilla or which gives equal support to inconsistent inferences." Wigmore on Evidence, vol. IX, 3rd ed., § 2494, p. 300, footnote 18.
Apparently when Dr. Garratt learned from Dr. Burton upon initial examination of Mr. Tigue in March, 1967, that yeast cells were contained in Mr. Tigue's stool, Dr. Garratt concluded that beneficial bacteria were depleted or absent and with a history from Mr. Tigue of antibiotic therapy, Dr. Garratt concluded that the diarrhea experienced by Mr. Tigue was precipitated by the destruction of normal bacteria followed by the growth of yeast in the colon and the intestinal tract. Dr. Garratt was far from positive as to the accuracy of his initial diagnosis and certainly he appeared mystified by the duration of Mr. Tigue's malady. He readily recognized many things and combination of things other than bacterial deficiency that could be the cause of Mr. Tigue's colon irritation and resulting diarrhea.
The Commission may have noted that Dr. Garratt obtained his information as to the presence of yeast cells from a report he received from Dr. Burton in 1967 and that in the examination conducted by Dr. Burton as reported on the hospital chart in March, 1970, he made no mention of yeast cells, but did indicate the possibility of diet as a causative factor. Apparently Mr. Tigue's condition remained practically the same from the time Dr. Garratt last saw him in March, 1970, until he was examined by Dr. Abraham at the Diagnostic Clinic about November 8, 1971. Dr. Abraham found, through the only cultural process conducted, that the bacteria count was normal and that yeast was no longer important. If the bacteria count was subnormal when the presence of yeast was found by Dr. Burton and reported to Dr. Garratt in 1967, the record is silent as to what point in time the bacteria count returned to normal. There is evidence that Mr. Tigue's diarrhea was associated with blood in the stool and violent cramping and muscle motility in the intestinal tract but other than diarrhea for a maximum period of three months, there is no evidence in the record as to what symptons would normally follow the absence of bacteria and presence of yeast in the intestinal tract. There is no direct evidence that bacterial deficiency and the presence of yeast would cause chronic irritation of the colon, but there is evidence that irritation of the colon, regardless of the cause, will result in diarrhea and that many things, other than the absence of bacteria and presence of yeast, would result in such irritation and such symptoms.
We are unable to say that there is no substantial evidence in the record to support the Commission's finding that Mr. Tigue's spastic colon syndrome and chronic diarrhea are not a result of the antibiotic therapy administerd to him in 1966.
The judgment is affirmed.
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431 B.R. 324 (2010)
In re Ross R. CALIGURI, Debtor.
No. 09-75657-ast.
United States Bankruptcy Court, E.D. New York.
March 17, 2010.
*325 Jeffrey Herzberg, Esq., Zinker & Herzberg, LLP, Smithtown, NY, Attorneys for Ross R. Caliguri.
Michael L. Moskowitz, Esq., Weltman & Moskowitz, LLP, New York, NY, Attorneys for Pentagon Federal Credit Union.
MEMORANDUM OPINION DENYING MOTION TO AVOID LIEN
ALAN S. TRUST, Bankruptcy Judge.
Issues Before the Court and Summary of Ruling
Pending before the Court is the Motion of Debtor seeking to avoid a consensual second priority mortgage lien under Section 506(d) of the Bankruptcy Code, 11 U.S.C. § 506(d) (the "Motion"). For the reasons herein, this Court denies the Motion.
Jurisdiction
This Court has jurisdiction over this core proceeding pursuant to 28 U.S.C. §§ 157(b)(2)(A), (B), (K) and (O), and 1334(b), and the Standing Order of Reference in effect in the Eastern District of New York.
Procedural History
On July 31, 2009 (the "Petition Date"), Debtor, Ross R. Caliguri ("Debtor") filed a voluntary petition for relief (the "Petition") under Chapter 7 of the United States Bankruptcy Code (the "Bankruptcy Code"). [dkt item 1] This case was filed as a no asset case.
Along with his Petition, Debtor filed, inter alia, his Schedules ("Schedules") and Statement of Financial Affairs ("SOFA"). The Schedules disclose that Debtor is the owner of and resides at the property located at 377 Chase Drive, Bridgehampton, New York 11932 (the "Property"). The Schedules also disclose that the Property serves as collateral for two different mortgage debts: a first mortgage lien held by JPMorgan Chase Bank, National Association successor-by-merger to Washington Mutual Bank f/k/a Washington Mutual Bank FA ("Chase"), and a second mortgage lien held by Pentagon Federal Credit Union ("Pentagon"). Debtor valued his home at $1.65 million, against which he listed mortgage debts of $1,284,000.00 to Chase and $296,100.00 to Pentagon.
On August 5, 2009, the Clerk of this Court issued a notice of the commencement of this case, which, inter alia, notified creditors not to file claims unless subsequently notified to do so. [dkt item 10] Thus, no bar date for the filing of claims was set.
On November 10, 2009, this Court entered an Order granting Debtor a discharge. [dkt item 39]
On December 10, 2009, the Chapter 7 Trustee (the "Trustee") filed a "No Asset Report," advising parties-in-interest that the Trustee had neither received any property to distribute, nor paid any money on account of this estate, and that, after a diligent inquiry, he had determined that no property was available for distribution from the estate over and above property which Debtor was entitled to exempt.[1] The Trustee further certified, pursuant to Rule 5009 of the Federal Rules of Bankruptcy Procedure, that this estate has been fully administered. This bankruptcy case remains open only because one party commenced an adversary proceeding against Debtor seeking a determination that an alleged debt is nondischargeable.
*326 The Motions for Relief from the Stay
On September 17, 2009, Pentagon filed a motion for relief from the automatic stay, seeking authority to continue a mortgage foreclosure action against Debtor and the Property which Pentagon had commenced prior to the Petition Date (the "Stay Relief Motion"). [dkt item 20] In its Stay Relief Motion, Pentagon alleged the value of the Property was $1.25 million, and that Debtor had no equity above the first lien debt. Pentagon asserted it was entitled to stay relief under both Bankruptcy Code Section 362(d)(1) and (d)(2). [dkt item 20-1]
A hearing on the Stay Relief Motion was scheduled and noticed for October 8, 2009. Debtor did not file any response to the Stay Relief Motion, nor did Debtor appear at the scheduled hearing. By Order dated October 13, 2009 (the "Stay Order"), Pentagon was granted relief from the automatic stay to exercise its remedies against the Property. [dkt item 27] In the Stay Order, this Court, inter alia, determined that Debtor had no equity in the Property, terminated the stay under both Section 362(d)(1) and (d)(2), and authorized Pentagon to "take any and all action under applicable state law to exercise its remedies against the" Property. [dkt item 27]
On October 15, 2009, Chase filed a motion for relief from the automatic stay, seeking authority to continue its prepetition foreclosure action against Debtor and the Property (the "Chase Motion"). [dkt item 28] A hearing on the Chase Motion was scheduled and noticed for November 24, 2009. Debtor did not file any response to the Chase Motion, nor did Debtor appear at the hearing. On November 30, 2009, an Order was entered granting Chase relief from the automatic stay to exercise any and all of its remedies against the Property. [dkt item 42]
Background of the Present Motion
On December 11, 2009, Debtor filed the present Motion. [dkt item 45] Pentagon filed an objection to the Motion on January 7, 2010. [dkt item 48] A hearing on the Motion was held on January 12, 2010 (the "Hearing"). In the Motion, Debtor argues that the Pentagon mortgage debt is wholly undersecured and that, as such, any lien which secures the mortgage should be avoided pursuant to § 506(d).
Analysis
A Chapter 7 Debtor May Not Avoid a Wholly Undersecured Lien in a Chapter 7 Case
In support of his Motion, Debtor relies on a statutory interpretation of § 506(d), and the decision in In re Lavelle, No. 09-72389-478, 2009 WL 4043089 (Bankr.E.D.N.Y.2009). In Lavelle, the Court determined that a chapter 7 debtor may avoid a subordinate mortgage lien if that lien is wholly unsecured, based on an analysis of Section 506.[2]Id. at *5-6.
While this Motion was under consideration, Judge Grossman of this Court issued an opinion in In re Pomilio. See Pomilio v. MERS, et al. (In re Pomilio), 425 B.R. 11 (Bankr.E.D.N.Y.2010). In Pomilio, Judge Grossman determined that *327 a lien may not be avoided[3] by a chapter 7 debtor even if the party benefitted by such lien would not hold an allowed secured claim for § 506 purposes, citing the United States Supreme Court's decision in Dewsnup v. Timm, 502 U.S. 410, 112 S. Ct. 773, 116 L. Ed. 2d 903 (1992), and several circuit level and lower court decisions thereafter. Id. This Court adopts the analysis in Pomilio and concludes that a chapter 7 debtor may not avoid the lien of a wholly undersecured, consensual mortgage lien holder.
In Pomilio, the Court began its analysis with Bankruptcy Code Sections 506(a) and (d),[4] and the Supreme Court's holding in Dewsnup that a chapter 7 debtor cannot bifurcate a secured creditor's claim into a secured claim to the extent of the fair market value of the subject real property and an unsecured claim for the remaining balance. This process, referred to "stripping down" the secured creditor's claim, was held simply to not be available to a chapter 7 debtor. Pomilio, 425 B.R. at 15-16 (citing Dewsnup, 502 U.S. at 417, 112 S. Ct. 773).
Post-Dewsnup courts have generally interpreted Dewsnup to prohibit chapter 7 debtors from avoiding (stripping off) liens which are wholly undersecured for the same reasons that a chapter 7 debtor may not reduce a secured mortgage claim to the fair market value of the property (stripping down). See id.; see also generally In re Grano, 422 B.R. 401 (Bankr. W.D.N.Y.2010). Such a reading or extension of Dewsnup is a proper and consistent application of Section 506, and not inconsistent with the Second Circuit's decision in In re Pond, 252 F.3d 122 (2d Cir.2001). Grano, 422 B.R. at 403.
In Pond, the Second Circuit held that a chapter 13 debtor may avoid (strip off) a wholly undersecured second mortgage lien against the debtor's residence. Pond, 252 F.3d at 127. If there is no collateral value to support the inferior mortgage lien, the claim is not secured for Section 506(a) purposes, and the lien is, therefore, wholly undersecured. Id. at 126. As such, the mortgagee is not the holder of a claim secured by a security interest in the debtor's principal residence, and, therefore, its rights are not protected under the anti-modification provision of Section 1322(b)(2)[5]. Id. at 127.
The claims adjudication process, in part, differentiates the chapter 7 and chapter 13 implications of Section 506(a) and (d). "Without the occurrence of a prior allowance process, a lien cannot be avoided under [§ 506(d)]." Pomilio, 425 B.R. at 17 (internal footnote omitted). Because this is a no asset case, creditors were instructed not to file claims. As such, the claims adjudicative process would not be invoked because claims did not need to be filed, and the allowance or disallowance of claims will not affect creditor distributions. Even if Pentagon had filed a claim, which it did *328 not, and Debtor objected, a determination of the extent to which the Pentagon mortgage is a secured claim would not be a meaningful controversy for this Court to determine because there are no assets available to be distributed to creditors. Thus, Section 506 is not a viable means of avoiding (stripping off) a wholly undersecured lien in a no asset case.
Further, as the Pomilio court stated, and as the Supreme Court noted in Dewsnup, in a Chapter 7 case, "a bankruptcy discharge extinguishes only one mode of enforcing a claimnamely, an action against the debtor in personam while leaving intact anothernamely, an action against the debtor in rem.'" Id. (quoting Dewsnup, 502 U.S. at 418, 112 S. Ct. 773). A post-discharge mortgage foreclosure action may allow a mortgagee to exercise its rights to sell the property in accordance with applicable state law, but no deficiency can be sought against or collected from the debtor. Allowing a chapter 7 debtor to avoid the mortgage lien would result in extinguishing the creditor's in rem rights against the property. This would be contrary to a primary purpose of Chapter 7, which is to give the debtor a fresh start, but not a head start. See id.
Similarly, Section 522(f) does not provide a viable statutory basis to avoid a wholly undersecured lien. "Section 522(f) specifically confers upon Chapter 7 debtors the authority to avoid . . . the fixing of a lien on an interest of the debtor in property to the extent that such lien impairs an exemption to which the debtor would have been entitled under" Section 522(b). Id. at 17 (citing 11 U.S.C. § 522(f)). Section 522(f) confers standing upon chapter 7 debtors that is limited to avoidance of nonconsensual liens which impair the debtor's applicable exemption, and, as such, do not apply to consensual mortgage liens. Id.
This Case Is Factually Distinguished From Lavelle
The facts of this case also differ from those in Lavelle. The evidence before this Court demonstrates that the Pentagon lien may be partially secured and partially undersecured, as opposed to wholly unsecured. Although Pentagon may have made a contrary allegation in its Stay Relief Motion, in its response to the present Motion, Pentagon noted that Chase may actually have been owed $1,088,026.36 as of the Petition Date, which is substantially less than Pentagon previously believed. Using the same $1.25 million appraisal used to support the Pentagon Stay Motion, Pentagon would hold a partially undersecured mortgage. In that circumstance, lien stripping would not be available under Lavelle, which limited its holding to avoiding a lien held by a wholly undersecured creditor. See Lavelle, No. 09-72389-478, 2009 WL 4043089 at *4 (acknowledging Dewsnup's holding "that a chapter 7 debtor may not `strip down' a first mortgage to the fair market value of the property.").
Further, the Motion is not procedurally correct. Debtor acknowledged at the Hearing that a valuation issue would have to be determined through an adversary proceeding, and not in a contested matter. Compare FED. R. BANK. P. 7001(2)(providing that an adversary proceeding includes "a proceeding to determine the validity, priority, or extent of a lien or other interest in property, other than a proceeding under Rule 4003(d).") with FED. R. BANK. P. 4003(d)(allowing a debtor to proceed by contested matter to seek to avoid a lien which impairs the debtor's claim of exemption in certain circumstances, pursuant to Section 522(f)). As noted, Section 522(f) is not available here, and therefore an adversary proceeding would be the proper vehicle, if the type of relief sought by Debtor were lawfully available.
*329 Finally, this Court is concerned about the potential collateral attack implications of allowing Debtor to even seek to avoid Pentagon's lien. By entering the Stay Order and granting stay relief, this Court has already determined that Pentagon has a colorable claim of a lien against the Property, and the amount of all liens against the Property exceed the value of the Property. "If the Bank has no lien then relief from the stay is unwarranted because the Bank is entitled to no more than is any other general, unsecured creditor." In re Pandeff, 201 B.R. 865, 870 (Bankr. S.D.N.Y.1996).
In Lavelle, the request to avoid the lien was brought in opposition to a motion for relief from stay. Lavelle, No. 09-72389-478, 2009 WL 4043089 at *1. Here, Debtor did not oppose stay relief, and stay relief was granted by an order which is now final. Debtor, however, would now seek to avoid the Pentagon lien to prevent Pentagon from obtaining foreclosure of its mortgage lien through the state court foreclosure process. Such an approach may constitute a collateral attack on the Stay Order.
Summary of Ruling
The Motion should be and is hereby denied. An order consistent herewith shall issue.
NOTES
[1] In the Eastern District of New York, chapter 7 trustees may electronically upload a no asset report on the Court's CM/ECF system; this upload is not assigned a docket event number, but appears in full text format in the Court's official CM/ECF records.
[2] For terminology purposes, this Court refers to a consensual mortgage lien which is not supported by any value in the collateral as wholly undersecured; other courts may use the terminology wholly unsecured. By virtue of § 506(a), a lien may be wholly undersecured or wholly unsecured if the debts secured by liens with priority over the subject lien exceed the value of the collateral. Section 506(a) provides, inter alia, that a claim is a secured claim if there is a grant or creation of a lien, and the value of the secured claim is limited to "the extent of the value of the secured creditor's interest in the estate's interest in such property." 11 U.S.C. § 506(a).
[3] Again, for terminology clarification, some courts refer to lien avoidance in these circumstances as lien stripping or as voiding a lien.
[4] Bankruptcy Code § 506(d) provides:
To the extent that a lien secures a claim against the debtor that is not an allowed secured claim, such lien is void, unless(1) such claim was disallowed only under section 502(b)(5) or 502(e) of this title; or (2) such claim is not an allowed secured claim due only to the failure of any entity to file a proof of such claim under section 501 of this title.
11 U.S.C. § 506(d).
[5] Section 1322(b)(2) provides that a chapter 13 plan may "modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims." 11 U.S.C. § 1322(b)(2).
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491 S.W.2d 472 (1973)
Dale HARLOW, Appellant,
v.
SWIFT AND COMPANY, Appellee.
No. 4539.
Court of Civil Appeals of Texas, Eastland.
February 23, 1973.
Rehearing Denied March 16, 1973.
*474 Hammett, Hammett & Cavness, James A. Builta, Lampasas, Senterfitt & Adams, Reuben Senterfitt, San Saba, for appellant.
Johnson, Slagle & Bell, L. B. Slagle, Brownwood, for appellee.
McCLOUD, Chief Justice.
Plaintiff, Dale Harlow, sued defendant, Swift and Company, for damages allegedly suffered because Swift sold and delivered to plaintiff lamb feed which was unfit for the use for which it was intended. The jury answered all liability issues in favor of defendant. Judgment was, however, entered for plaintiff for $5,973.10. This amount was determined by deducting a sum, owed to Swift by Harlow for feed, from an amount owed to Harlow by Swift for the purchase of lambs. Defendant admitted in its answer it owed the $5,973.10. The judgment further provided that all other relief prayed for by plaintiff was denied. Court costs were adjudged against plaintiff, Dale Harlow, and he has appealed. We affirm.
Plaintiff contends that Swift sold and delivered feed which was unreasonably dangerous and unfit to be used as a self-feeding, free-choice, complete lamb starter. He says that after eating the feed, 1,017 lambs died and many others became sick and he was required to expend money for medication and veterinarian bills. Swift argues that its feed was not unfit and any loss suffered by plaintiff was occasioned by misuse of its product by Harlow. Defendant contends it had advised Harlow that certain feeding directions were to be followed, that the directions were not followed, and that plaintiff voluntarily and unreasonably proceeded to encounter a known danger or a danger which plaintiff should have known.
Plaintiff contends first that the judgment should be reversed because of jury misconduct. At the hearing on motion for new trial, juror Jacobs testified that juror Jordan told her, during the trial while the jury was assembled in the jury room, that he had a conversation with a lady in San Saba or San Saba County who told him that Dale Harlow was not entitled to anything because everything he had he had gotten from suing other companies.
Jordan testified that he did have a conversation with juror Jacobs similar to the conversation she related but that such conversation took place after the trial was over and not during the trial. He testified further that the conversation with the lady took place in Mills County, not San Saba, while he was on official social security business, during a trial recess. He testified the statement was made by the wife of a man he had gone to interview; that he was talking to the lady while waiting for her husband; that he didn't mention he knew anything about who she was talking about; that the lady said something about the trial in Brownwood and that Harlow had sued another company before, but he couldn't recall exactly how she said it; that evidently Harlow had been successful in a suit with a feed company, or something of this sort, and she was just kind of rambling about it and he changed the subject. *475 He testified further that it was a thing of short duration and if she had gone into it and discussed it, he would have had to tell her he was on the jury; that she kind of made a catch-all statement; and, that he thought it would be over quicker if he just ignored it and went on to something else. He stated the essence of what she said was that Harlow had come into some amount of money through lawsuits and that was the money he was not entitled to. Jordan testified he did not report the incident to the trial judge; that in the course of his business he was often chewed out, stomped, discussed, and so forth by everybody in the country, and that he heard an awful lot of hearsay. He also stated that the remarks made by the outsider did not influence him in any way in reaching his verdict. We cannot consider this statement by Jordan because it is not permissible to allow a juror to preserve or destroy his verdict by testifying to the mental processes used in reaching his verdict. Barrington v. Duncan, 140 Tex. 510, 169 S.W.2d 462 (1943).
Each of the remaining jurors testified and none heard the alleged conversation between jurors Jacobs and Jordan or any similar information discussed by any of the jurors at any time.
Plaintiff also argues that statements made by juror Beaird show the juror was biased and prejudiced against Harlow. Vernon Jacobs, husband of the juror Jacobs, testified by deposition that he talked with juror Beaird shortly after the trial ended and Beaird stated to him "A man that'll do that, I wouldn't give him nothing if he had it coming." Juror Beaird testified the first knowledge he had that Harlow had other claims against other feed companies was four to six days after the trial. Further, he testified he did not make the statement testified to by Vernon Jacobs.
A review of the testimony given at the hearing on the motion for new trial shows that it is uncontroverted that during a recess a lady in Mills County stated to juror Jordan that Harlow had gotten a lot of money he was not entitled to by suing some other company. It is, however, highly controverted as to whether Jordan told Jacobs about the conversation during the trial. Jacobs said that her conversation with Jordan took place during the trial, but Jordan said the conversation occurred after the trial. Also, the alleged remark by juror Beaird is controverted. Beaird said he made no such remark to Vernon Jacobs and further that he knew nothing about Harlow's prior lawsuits until after the trial was over.
The trial court did not file express findings of fact and conclusions of law even though requested by plaintiff. Plaintiff argues that such failure constituted error. We disagree. When confronted with this argument, we think the Court in Warner v. Plummer, 355 S.W.2d 817 (Tex.Civ. App.Waco 1962, writ ref'd n. r. e.), correctly stated the rule as follows:
"We are asked to reverse because the court failed to file findings of fact and conclusions relating to alleged jury misconduct and communications of counsel in the hearing on their motion for new trial as requested by appellants under Rule 296, Texas Rules of Civil Procedure. That Rule applies to a `trial by the court.' In Eichelberger v. Rankin, Tex.Civ.App., 278 S.W.2d 278, writ ref. n. r. e., Justice Norvell wrote that under the Rule `a trial judge is not required to file findings and conclusions as to matters raised upon a motion for new trial in a jury case, Connor v. Heard & Heard, Tex.Civ.App., 242 S.W.2d 205.' See also Viking Construction Co. v. Beaird, Tex. Civ.App., 337 S.W.2d 699, 704. We are urged to overturn the rule. We think it is sound."
Where the trial court does not file express findings it is presumed on appeal that the trial court found all controverted facts in support of its judgment overruling the motion for new trial and *476 that no misconduct occurred. If the evidence offered at the hearing on the motion for new trial is conflicting as to whether misconduct occurred, the decision of the trial court on the question is binding on appeal. Brawley v. Bowen, 387 S.W.2d 383 (Tex.Sup.1965); In re Estate of Moore, 464 S.W.2d 428 (Tex.Civ.App.Eastland 1971, writ ref'd n. r. e.).
Here, the trial court impliedly found that the alleged conversation between jurors Jacobs and Jordan did not take place during the trial as related by Jacobs. The court also impliedly found that juror Beaird did not make the statement testified to by Vernon Jacobs. Since these alleged acts of misconduct were controverted we are bound by the trial court's implied finding that such alleged misconduct did not occur. It is, however, uncontroverted that the lady in Mills County made the statements to juror Jordan.
One complaining of jury misconduct has the burden to prove not only the overt act of misconduct, but also that it was material misconduct, and from the record as a whole that injury probably resulted. Rule 327, Texas Rules of Civil Procedure; Fountain v. Ferguson, 441 S.W.2d 506 (Tex.Sup.1969). Whether misconduct did in fact occur is a fact question and whether injury probably resulted is a question of law. City of Houston v. Quinones, 142 Tex.282, 177 S.W.2d 259 (1944).
We have carefully examined the entire record and hold that plaintiff has not sustained his burden of showing probable injury. We must judge the degree of misconduct. Pope, Jury Misconduct and Harm, 12 Baylor L.Rev. 362. The trial court impliedly found that only one juror, Jordan, was involved. No other juror heard or participated in the misconduct. The remark made by the outsider was unsolicited, of short duration, somewhat general, and the subject was changed by Jordan. We overrule plaintiff's jury misconduct points. St. Louis Southwestern Railway Company v. Gregory, 387 S.W.2d 27 (Tex.Sup.1965); Putnam v. Lazarus, 156 Tex. 154, 293 S.W.2d 493 (1956); Trousdale v. Texas & New Orleans Railroad Co., 154 Tex. 231, 276 S.W.2d 242 (1955).
Plaintiff next complains of the failure of the jury to find the feed was unfit for use as a self-feeding, free-choice, complete lamb starter. Plaintiff also attacks jury findings that he knew or should have known that the feed was unusually dangerous for feeding free-choice as a complete starter feed; that he voluntarily and unreasonably proceeded to feed such feed free-choice to the lambs; and that he sustained no damages as a result of using the feed. Plaintiff says there is no evidence to support the findings; the evidence conclusively establishes contrary findings; the evidence is factually insufficient, and the findings by the jury are against the great weight and preponderance of the evidence.
Swift contended there was nothing wrong with the feed and the problems encountered by plaintiff resulted from his failure to follow instructions as to the proper manner of using the feed.
There is evidence in the record that the feed was fit but that Harlow failed to restrict the amount of feed fed the first few days and also that he failed to provide hay for the lambs. There is evidence Harlow was told that the feed had to be restricted and hay provided for the first few days. There was testimony that the watering facilities were not adequate. There was testimony that the lambs were under stress and many had "dry mouth". There was evidence the lambs would have been under stress on the day they were brought to the feed lot and stress included an element of hunger. The record contains testimony that plaintiff would have had no problem feeding the feed if he had followed the directions given by Swift's employee and described on the feed tags. There is testimony that the feed itself would not create a problem and if a problem were created by feeding the feed, it would be management or disease or some other factor.
*477 The statement of facts contains over 2,000 pages. Numerous expert as well as lay witnesses testified. The issue of whether plaintiff's damages resulted from unfit feed or unwise practices was hotly contested. The jury decided the issue in favor of Swift.
It is the peculiar and exclusive province of the jury to pass upon the credibility of witnesses and the weight to be given their testimony. Lockley v. Page, 142 Tex. 594, 180 S.W.2d 616 (1944). Also, the general rule is that evidence given by an interested witness, even though uncontroverted, presents an issue to be determined by the jury. Flack v. First Nat. Bank of Dalhart, 148 Tex. 495, 226 S.W.2d 628 (1950); Texas Employers' Ins. Ass'n v. Roberts, 135 Tex. 123, 139 S.W.2d 80 (Tex.Com.App.1940).
We hold that there is some evidence of probative force to support the jury findings. We further hold, after reviewing the entire record as required by In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951), that the evidence is not factually insufficient to support the jury findings under attack, nor are the jury findings against the great weight and preponderance of the evidence.
Plaintiff also argues that while testifying the witness Hoyle violated a previous order of the court granting plaintiff's motion in limine. The order in limine prohibited mention of "any other litigation by the plaintiff against any feed company involving alleged defective ... feeds, ... or regarding any claims, judgments or trials relative thereto..." Hoyle testified he went to see plaintiff about collecting an account owed Swift. When asked about his conversation with plaintiff, Hoyle stated: "He said that he wouldn'the wouldn't pay us because hebecause he wanted some settlement on some bad feed he had gotten." A few minutes later Hoyle testified: "I asked him why he didn't just go ahead and pay us, and he said that he'd rather not, he could get a better settlement if heif he owed us. Said he'd been through this before.". Plaintiff says the emphasized portion of Hoyle's statement violates the order in limine. We disagree. The context of Hoyle's statement is that plaintiff was seeking a settlement because of some bad feed. He was not going to pay Swift because he could get a better settlement if he owed Swift. He said he had been through this before. This statement, in our opinion, does not disclose to the jury that plaintiff has had prior claims or suits against a feed company for defective feed.
Immediately after the statement was made by Hoyle, the attorneys approached the bench and the jury was retired. The Court and attorneys discussed briefly the statement and the order in limine. Plaintiff did not object to the evidence before the jury, move for a mistrial, request the court to instruct the jury not to consider the evidence, or file a motion to strike the statement from the record. Assuming the statement was inadmissible, plaintiff waived his right to complain. Bituminous Casualty Corporation v. Jordan, 351 S.W.2d 559 (Tex.Civ.App.Waco 1961, no writ hist.); Pressley v. Smith, 288 S.W.2d 893 (Tex.Civ.App.San Antonio 1956, writ ref'd n.r.e.). Furthermore, if we are in error, and Hoyle's statement constituted error, then we hold that such error was not reversible error because the statement was not calculated to cause and probably did not cause the rendition of an improper judgment. Rule 434, T.R.C.P.; Bridges v. City of Richardson, 163 Tex. 292, 354 S.W.2d 366 (1962).
Plaintiff further complains of the trial court adjudging court costs against him. Plaintiff argues that he was the successful party under Rule 131, T.R.C.P., as evidenced by a judgment in his favor for $5,973.10. We do not agree that plaintiff was the "successful" party. Plaintiff sought damages for $121,512.00 because of the alleged defective and dangerous feed. After an extensive trial the jury denied *478 this requested relief. Defendant admitted in its answer that it owed plaintiff $5,973.10 and alleged a draft for such sum had been previously delivered to but not accepted by plaintiff. Defendant alleged that it stood ready to honor such draft. Plaintiff says the trial court failed to state "on the record" the reason for adjudging costs against him. We disagree. The judgment recited: "And the Court further finding from the pleadings of both parties and from the undisputed evidence including the admission of the Defendant in open court that it is indebted to plaintiff in the sum of ... $5,973.10 ..." We hold that the trial court did not abuseits discretion in adjudging court costs against plaintiff. Rules 131 and 141, T.R.C.P.; Martin v. J. S. Hunt Lumber Co., Inc., 180 S.W.2d 956 (Tex.Civ.App.Waco 1944, no writ); Bush v. Bush, 265 S.W.2d 676 (Tex.Civ. App.E1 Paso 1954, writ dism.).
We have considered all points of error and all are overruled. The judgment of the trial court is affirmed.
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431 B.R. 914 (2010)
In re Jennifer Lynn ROBERTS, Debtor.
Tiffany Woods, Plaintiff,
v.
Jennifer Lynn Roberts, Defendant.
Bankruptcy No. 08-15099-JKC-13. Adversary No. 09-50267.
United States Bankruptcy Court, S.D. Indiana, Indianapolis Division.
January 26, 2010.
*915 Daniel Townsend McAfee, Katzman & Katzman, Indianapolis, IN, Fred L. Cline, James P. Moloy, Dann, Pecar, Newman & Kleiman, PC, Indianapolis, IN, for Plaintiff.
Mark S. Zuckerberg, Law Office of Mark S. Zuckerberg, P.C., Indianapolis, IN, for Defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW ON CROSS-MOTIONS FOR SUMMARY JUDGMENT
JAMES K. COACHYS, United States Bankruptcy Judge.
This matter comes before the Court on Plaintiff Tiffany Woods and Debtor/Defendant Jennifer Lynn Roberts' Cross Motions for Summary Judgment. Having reviewed the parties' respective submissions and considered the arguments presented at a hearing on December 17, 2009, the Court issues the following Findings of Fact and Conclusions of Law.
Findings of Fact
On October 3, 2004, Plaintiff Tiffany Woods ("Woods")a police officer for the Indianapolis Metropolitan Police Department who at the time was working off-duty as a private security guard for an Indianapolis tavernwas involved in an altercation with Debtor/Defendant Jennifer Lynn Roberts ("Roberts") as Woods attempted to subdue and handcuff Roberts during a disturbance at the tavern. Roberts later plead guilty to Battery, as a Class D felony, and to Disorderly Conduct, as a Class B Misdemeanor, in a subsequent criminal proceeding. On September 30, 2006, Woods filed a personal injury action against Roberts. Prior to judgment being entered in that action, Roberts filed a Chapter 13 bankruptcy petition, in which she listed Woods as a creditor. Woods then filed a nondischargeability action against Woods pursuant to 11 U.S.C. § 1328(a)(4).
Conclusions of Law
Under Federal Rule of Civil Procedure 56(c), made applicable to adversary proceedings by Federal Rule of Bankruptcy Procedure 7056, summary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986). With a motion for summary judgment, the burden rests on the moving party to demonstrate that there is an absence of evidence to support the nonmoving party's case. Id. at 325, 106 S.Ct. at 2554. After the moving party demonstrates the absence of a genuine issue for trial, the responsibility shifts to the non-movant to *916 "go beyond the pleadings" to cite evidence of a genuine factual dispute precluding summary judgment. Id. at 324, 106 S.Ct. at 2553. If the nonmovant does not come forward with evidence that would reasonably permit the finder of fact to find in its favor on a material question, then the court must enter summary judgment against it. Waldridge v. American Hoechst Corp., 24 F.3d 918, 920 (7th Cir. 1994) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986)).
In her Complaint, Woods alleges that Roberts' indebtedness to herfor personal injuries allegedly sustained during the parties' 2004 altercationare excepted from discharge pursuant to § 1328(a)(4).[1] That section excepts from discharge debts "for restitution, or damages, awarded in a civil action against the debtor as a result of willful or malicious injury by the debtor that caused personal injury to an individual or the death of an individual." Woods bears the burden of proving, by a preponderance of the evidence, that Roberts alleged indebtedness to her is excepted from discharge. See Grogan v. Garner, 498 U.S. 279, 111 S. Ct. 654, 112 L. Ed. 2d 755 (1991). Exceptions to discharge "are confined to those plainly expressed in the Code . . . and are narrowly construed in favor of the debtor." DeKalb County Div. of Family & Children Servs. v. Platter (In re Platter), 140 F.3d 676, 680 (7th Cir.1998) (internal citations omitted).
On summary judgment, Woods argues that she is entitled to judgment in her favor as a matter of law based on Roberts' guilty plea for battery. In her cross motion for summary judgment, Roberts counters that she is entitled to judgment in her favor as a matter of law because there has yet to be any damages "awarded in a civil action" to Woods. In other words, Roberts insists that for a debt to be nondischargeable under § 1328(a)(4), there must be a pre-petition civil judgment for restitution or damages. In the alternative, Roberts argues that there is a genuine issue of material fact as to whether her conduct was "willful or malicious" for purposes of § 1328(a)(4).
The meaning of "awarded" as used in § 1328(a)(4)
In 2005, Code § 1328 was amended to expand the types of debt that are nondischargeable under Chapter 13. In particular, the amendment added subsection (a)(4) which, as stated above, excepts from the Chapter 13 discharge debts "for restitution, or damages, awarded in a civil action against the debtor as a result of willful or malicious injury by the debtor that caused personal injury to the individual or the death of an individual." Section 1328(a)(4) is similar, but not identical, to § 523(a)(6), which excepts from discharge debts for "willful and malicious injury by the debtor to another entity or to the property of another entity. . . ." Thus far, only a handful of courts have examined § 1328(a)(4). Most recently, the Bankruptcy Appellate Panel for the Ninth Circuitin Waag v. Permann (In re Permann), 418 B.R. 373 (BAP 9th Cir.2009)offered a thorough analysis of § 1328(a)(4) and the only other published opinions discussing the provision: Parsons v. Byrd (In re Byrd), 388 B.R. 875 (Bankr.C.D.Ill. 2007), and Buckley v. Taylor (In re Taylor), 388 B.R. 115 (Bankr.M.D.Pa.2008).[2]
*917 As explained in Permann, the "diametrically opposed" courts in Byrd and Taylor disagreed about the grammatical role of "awarded" in section 1328(a)(4), with the Byrd court treating it as a past tense verb and the Taylor court treating it as a past participle modifying "restitution" and "damages." Permann, 418 B.R. at 378. Further explaining Byrd's holding, Permann states:
In Byrd, the court held that the "new section 1328(a)(4) is worded in the past tense . . . . Thus, a pre-petition award of restitution or damages for willful or malicious injury is a prerequisite to a finding of non-dischargeability under § 1328(a)(4)." Byrd, 388 B.R. at 877 (emphasis added), citing 8 Collier on Bankruptcy ¶ 1328.02[3][k] (Alan N. Resnick & Henry J. Sommer, eds., 15th ed. rev.2006); and Keith M. Lundin, Chapter 13 Bankruptcy (3rd ed. 2000 & Supp.2006). The Byrd court also observed:
"Section 1328(a)(4) is clearly worded differently than 11 U.S.C. § 523(a)(6), and, had Congress intended a different meaning, it could easily have worded § 1328(a)(4) to include restitution or damages as being non-dischargeable regardless of the entry of a judgment in a civil proceeding prior to the filing of a Chapter 13 bankruptcy petition. Given the plain meaning of § 1328(a)(4), the Court must find that the debt of the Plaintiff in the instant case is simply a contingent, unliquidated debt that is allowable in the Debtor's Chapter 13 bankruptcy, and not subject to exception from discharge."
Id. (internal footnotes omitted) (quoting Byrd, 388 B.R. at 877).
As Permann further explains, the bankruptcy court in Taylor rejected this analysis:
"Whether Congress intended to distinguish between claims for personal injury that had been reduced to judgment before a petition is filed and claims that are disputed on the date of filing must be considered within the context of § 1328(a) as well as within the Bankruptcy Code as a whole. After analyzing this provision in the context of exceptions to discharge listed in § 1328(a) and the Code as a whole, I must disagree with the interpretation of § 1328(a)(4) that the Nuttall and Byrd courts find to be plain. Nuttall and Byrd hold that because Congress used the word "awarded," it must have intended to provide one treatment for a judgment entered before a petition is filed and a different treatment for a claim that is disputed or contingent on the date of the petition. However, I believe this interpretation is erroneous and ignores the grammatical structure of § 1328(a)(4)."
Id. at 378-79 (quoting Taylor, 388 B.R. at 119) (italics added). Permann offers this additional summary of Taylor's reasoning:
The Taylor court then examined the use of the word "awarded" both grammatically and in the context of the entire subsection. Unlike the Byrd and Nuttall courts, the court found that "awarded"-like the "included" in subsection 1328(a)(3)-was not being used as a past tense verb, but as a past participial phrase as an adjective modifying the nouns "restitution" and "damages." "A past participle is simply the form of the verb used in the phrase and does not suggest past action." Taylor, 388 B.R. at 119. As noted in one leading grammar treatise, both present and past participles *918 "can be used for referring to past present or future time" and the past participle "signifies `perfectiveness' or completion, but is not restricted to past time." S. Chalker and E. Weiner, The Oxford Dictionary of English Grammar at pages 282 and 286-87 (1994) (emphasis added).
As a past participle, "awarded" merely signifies "completion" or an entry of a restitution or damages award at the time of the determination of nondischargeability. Taylor, 388 B.R. at 119. Nothing in phraseology of section 1328(a)(4) requires, either implicitly or explicitly, entry of a prepetition judgment. Id. The contention by Debtor and the holding of Byrd that "awarded" is a past tense verb requiring a prepetition judgment is not convincing.
Id. at 379.
Taylor found support for its grammatical construction of § 1328(a)(4) in Code § 1328(a)(3), That provision provides that restitution and criminal fines "included in a sentence on the debtor's conviction of a crime" are not dischargeable. "If `awarded' in § 1328(a)(4) requires that a judgment be entered before a petition is filed, the same logic would apply in § 1328(a)(3) when the phrase `included in the debtor's sentence upon conviction of a crime is considered.'" Taylor, 388 B.R. at 120. Significantly, however, the court was unable to find any reported cases in the sixteen years since § 1328(b)(3) was added to the Code holding that restitution or fines in a criminal proceeding are dischargeable simply because a debtor filed a bankruptcy petition before the criminal sentence was imposed. Id. As such, the court concluded that:
[T]he words "included" and "awarded" do not function as past-tense verbs, but are past participles in phrases that define and limit the types of restitution, fines and damages that are non-dischargeable. Restitution and criminal fines are non-dischargeable under § 1328(a)(3) only if they are part of a debtor's sentence. Likewise, restitution and damages are non-dischargeable under § 1328(a)(4) only if they arise from a willful or malicious injury that causes personal injury or death. By reading "awarded" as part of a participial phrase, the word is not rendered mere surplusage, but part of a phrase that describes what types of "restitution" and "damage" awards are protected from discharge.
Id. at 119.
The Taylor court found even further support in two cases that interpreted a prior version of Code § 523(a)(9). Id. at 120 (citing Young v. Rose (In re Rose), 86 B.R. 86 (Bankr.E.D.Mich.1988), and Burch v. Tyler (In re Tyler), 98 B.R. 396 (Bankr. N.D.Ill.1989)). The 1984 version of that exception to discharge applied to "any debt.. . to the extent that such debt arises from a judgment . . . entered in a court of record against a debtor wherein liability was . . . a result of the debtor's operation of a motor vehicle while illegally intoxicated." Both Rose and Tyler held that the judgment referred to in § 523(a)(9) could be obtained postpetition. See id. The Permann court cites to yet another casethe Ninth Circuit's decision in Stackhouse v. Hudson (In re Hudson), 859 F.2d 1418, 1420 (9th Cir. 1988)which reached the same conclusion. See Permann, 418 B.R. at 380. In the Hudson court's opinion, any other interpretation of § 523(a)(9) would lead to an absurd result and a "race" to the courthouse that "would give the debtor a clear advantage since it takes considerably longer to obtain a judgment than it does to file bankruptcy." Id. (quoting Hudson, 859 F.2d at 1420). As the Hudson court further noted, "adherence to *919 a requirement that a creditor first obtain a `judgment or consent decree' would effectively nullify the statute. Such an interpretation would merely encourage drunk drivers to file preemptively for bankruptcy once it became clear that they would be held civilly accountable for their actions." Id. (quoting Hudson, 859 F.2d at 1420).
"Based on the grammatical structure of § 1328(a)(4), the context in which it is used, and its policy and object," the Permann court ultimately agreed with Taylor that § 1328(a)(4) does not differentiate between a judgment entered prepetition and one entered postpetition. Id. at 381. This Court also so agrees. A construction which treats "awarded" as a past participle rather than a past tense verb is not only supported by the statute's plain language but also leads to a result that is consistent with the addition of the provision to § 1328. A contrary holding would essentially nullify § 1328(a)(4). This is hardly what Congress intended.
Accordingly, the Court concludes that Roberts' indebtedness to Woods is not dischargeable solely because Woods had not yet obtained a civil judgment for her alleged personal injuries. Roberts' request for summary judgment on that issue is, therefore, denied.
"Willful or Malicious"
Having determined that a prepetition judgment is not required under § 1328(a)(4), the Court next considers whether there is a genuine issue of material fact as to whether Roberts' conduct was "willful or malicious" as a matter of law. To analyze that question, the Court begins with the meaning of "willful."
There are no published opinions on the meaning of that term as it is used in § 1328(a)(4). There is, however, a significant body of case law as to its meaning as used in Code § 523(a)(6). In Kawaauhau v. Geiger (In re Geiger), 523 U.S. 57, 118 S. Ct. 974, 140 L. Ed. 2d 90 (1998), the United States Supreme Curt answered the "pivotal question" of whether § 523(a)(6) covers "acts, done intentionally, that cause injury . . . or only acts done with the actual intent to cause injury." Id. at 61, 118 S.Ct. at 977. In answering that question, the Court concluded that "[t]he word `willful' in (a)(6) modifies the word `injury,' indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." Id. (emphasis in the original). In other words, there must be an "actual intent to cause injury." See id.
While this may seem like a fairly straightforward holding, it has been suggested that "Geiger seems to have created almost as much consternation as it set out to resolve." ABF, Inc. v. Russell (In re Russell), 262 B.R. 449, 452 (Bankr. N.D.Ind.2001). This is in part because:
[T]he Court never said what "willful" is; only what it is not-it is not negligence, recklessness or a breach of contract. Geiger, 523 U.S. at 61-62, 118 S.Ct. at 977. Although the Court observed that the language of § 523(a)(6) "triggers in the lawyer's mind the category `intentional torts,'" Geiger, 523 U.S. at 61, 118 S.Ct. at 977, this recognition of a logical association is not the same as saying the two are one and the same. In re Miller, 156 F.3d 598, 604 (5th Cir.1998). Furthermore, while Geiger clearly requires a "deliberate or intentional injury," Geiger, 523 U.S. at 61, 118 S.Ct. at 977, the Court never explained what is necessary to satisfy this requirement. In re Baldwin, 245 B.R. 131, 135 (BAP 9th Cir.2000).
Id. As a result, courts have grappled with Geiger in an attempt to divine its meaning. For instance, the Fifth Circuit Court of Appeals in Miller, cited above, identified at *920 least three possible readings of the Supreme Court's insistence on actual intent to cause injury: "The standard might be met by any tort generally classified as an intentional tort, by any tort substantially certain to result in injury, or any tort motivated by a desire to inflict injury." Miller, 156 F.3d at 603.
The meaning of "willful" is especially critical in the case at hand. On summary judgment, Woods emphasizes that Roberts pled guilty to Battery, as a Class D felony, and further admitted to "battery" in responding to Woods' Second Request for Admissions. As defined by the Indiana law, however, battery does not require that the defendant intend the injury. Indiana Code § 35-42-2-1 provides in relevant part that:
(a) a person who knowingly or intentionally touches another person in a rude, insolent, or angry manner commits battery, a Class B misdemeanor. However, the offense is:
(1) a Class A misdemeanor if:
(A) it results in bodily injury to any other person;
* * * * * *
(1) a Class D felony if it results in bodily injury to:
(A) a law enforcement officer or a person summoned and directed by a law enforcement officer while the officer is engaged in the execution of the officer's official duty . . . .
Thus, while Roberts' plea conclusively establishes that Roberts' actions were intentional, they do not necessarily compel the Court to conclude that Roberts intended the injuries they caused.
The fact that battery is an "intentional tort" under Indiana law does not compel a different conclusion. See Wallace v. Rosen, 765 N.E.2d 192, 196 (Ind.Ct.App.2002) ("Battery is an intentional tort.") (citing Boruff v. Jesseph, 576 N.E.2d 1297, 1300 (Ind.Ct.App.1991)). Miller is again instructive on this point:
Merely because a tort is classified as intentional does not mean that any injury caused by the tortfeasor is willful. This case illustrates the distinction, since misappropriation of proprietary information and misuse of trade secrets are wrongful regardless of whether injury is substantially certain to occur. See, e.g., Restatement (Third) Unfair Competition § 40(b) cmt. c ("[A]ny exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a `use' under this section."). Misuse of trade secrets is not precisely like stealing funds from a till, because the tortfeasor's gain is not inevitably a loss to the legal owner of the secret.
Miller, 156 F.3d at 604. Similarly, batteryat least as a misdemeanor under Indiana lawdoes not require that there be any injury. Clearly, then, the mere classification of a battery as an "intentional tort" is not, in itself, conclusive for purposes of § 523(a)(6).
What state of mind, then, is required under Geiger? In answering that question, the Fifth Circuit "equated intending actual injury to a situation in which `the debtor intentionally took action that necessarily caused, or was substantially certain to cause, the injury.'" Id. at 604 (quoting Corley v. Delaney (In re Delaney), 97 F.3d 800, 802 (5th Cir.1996)). In other words, an objective intent to injure is sufficient. The Restatement (Second) of Torts § 8Aa comment of which the Supreme Court favorably cites to in Geigerprovides further support for that conclusion in stating that "intent" "denotes that the actor desires to cause consequences of his act, or that he believes the consequences *921 are substantially certain to result from it."[3]
The bankruptcy court in Russell, however, rejected Miller's reliance on objective intent and, instead, offered this analysis:
The creditor's true injury occurs on an abstract level. It is the debtor's invasion of the creditor's legally protected right. The court should focus on this injury, as opposed to the resulting damage, when it asks whether the injury was intentional. When it does so, the answer will usually be relatively obvious because the debtor's action is the injury. For example, in a case involving assault and battery, the true injury is not the creditor's broken jaw, but rather, the unconsented to touching that produced the broken jaw. Consequently, the question to ask is not whether the debtor intended to break the creditor's jaw, but instead, whether the debtor intended to hit the creditor. In defamation cases, the true injury is not the damage to the creditor's reputation; it is the publication of falsehoods about the creditor that led to the damaged reputation. Consequently, the proper question is not whether the debtor intended to injure the creditor's reputation, but instead, whether the debtor intended to publish the defamatory remarks. Similarly, in the conversion of collateral scenario, the true injury is not that the creditor's debt goes unpaid. The true injury is that the creditor's collateral was wrongly or improperly disposed of and that the proceeds were used for purposes other than payment of the obligation that property secured. . . . Consequently, the proper question is not whether the debtor intended that its secured creditor would go unpaid. Instead, the question to ask is whether the debtor intended to improperly use the creditor's collateral and/or its proceeds for purposes other than the payment of the debt that property secured. If so, there is an intentional injury.
Russell, 262 B.R. at 453-54 (internal citations omitted) (italics added).
At least in the case at hand, the Court need not choose which of the two standards is a better articulation of "actual intent to cause injury." As explained below, the Court concludes that Roberts' actions under either standard resulted in a "willful injury" for purposes of § 1328(a)(4) as a matter of law.
Beyond Roberts' guilty plea for Battery and her admission that she battered Woods, the only other evidence before the Court bearing on Roberts' state of mind is testimony from Woods' deposition. In it, she states:
Then I yelled, stop. [Roberts] said no, and kept going, and then I gained control of her, and we were on the ground.
* * * * * *
I was trying to get her in handcuffs, and then I was finally able to get her in one handcuff. She was pushing, flailing, bucking me off her back, pushing me off of her, and just out of control. And I'm trying to hold onto her because if she gets away I'll have to run again, and chase her some more. So I got one cuff on her right arm, yeah, her right arm, and then the left one she kept curling underneath her body and she kept spinning underneath her body and she kept spinning around and pushing me off. I had to get back on her, and this went on *922 for several minutes, at least three minutes. And then I was just cranking on her left arm to get it out from underneath her body with my arm, nonstop, nonstop as she's still fighting and resisting, bucking me and laying on her stomach. I'm trying to hold her head down, to keep her down to the ground so I can keep hertrying to get control of her left arm, and I'm still waiting for my backup to get there.
Woods alleges that she sustained injuries to her shoulder as a result of Roberts' above-described conduct. Clearly, by her guilty plea, Roberts has admitted to the "touching" that caused those alleged injuries. Under Russell's logic, then, the Court concludes that Roberts' alleged indebtedness to Woods arose from a "willful injury."[4]
The undisputed evidence also satisfies Miller's "substantially certain to cause injury" standard. In resisting arrest by "pushing, flailing, bucking," "fighting" and holding her arm underneath her body to avoid being handcuffed, Roberts should have known that injury to Woods was "substantially certain" to occur, as it is reasonable to assume that a police officer will take whatever action is necessary, short of excessive force, to make an arrest. Roberts failed to offer any evidence on summary judgment that would support a different conclusion.
Conclusion
Based on the foregoing, the Court concludes, first, that Roberts' alleged indebtedness to Woods is not dischargeable simply because Woods did not obtain civil judgment prior to the filing of Roberts' bankruptcy petition and, second, that Roberts alleged indebtedness to Woods was caused by a "willful injury" such that any judgment awarded Woods for her personal injuries is excepted from discharge as a matter of law.[5] Based on those conclusions, the Court grants summary judgment in favor of Woods and against Roberts. A judgment order consistent with this opinion will be entered contemporaneously herewith.
NOTES
[1] The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 157(a) and 1334(b). This is a core proceeding pursuant to 28 U.S.C. § 157(b).
[2] There is another case that discusses this issue, In re Nuttall, 2007 WL 128896 (Bankr. D.N.J.2007), that is cited and discussed in both Byrd and Taylor. Nuthall, however, was designated as "Not for Publication."
[3] According to Miller, "a subjective motive to injure would alternatively be sufficient to trigger § 523(a)(6)," as "it would seem peculiar to deem an action causing injury not `willful' when the tortfeasor's action was in fact motivated by a desire to cause injury." Id.
[4] The Court does have some reservations about Russell's logic, at least to the extent it applies to § 523(a)(6). In stating that "the action is the injury," Russell seems to contradict Geiger's holding that "nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury." That said, the Court notes that § 1328(a)(4)'s distinct wording"for restitution, or damages, awarded . . . as a result of willful or malicious injury by the debtor that caused personal injury"arguably supports Russell's logic in that the willful or malicious injury appears to be distinct from the personal injury for which damages were awarded.
[5] Having concluded that the Roberts' indebtedness to Woods arose as a result of a "willful injury," the Court need not examine whether such injury was also "malicious." Section 1328(a)(4) requires a "willful or malicious" injury in contrast to § 523(a)(6), which requires a "willful and malicious" injury.
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431 B.R. 18 (2010)
Dean REA, Plaintiff,
v.
FEDERATED INVESTORS, Defendant.
Civil Action No. 09-1205.
United States District Court, W.D. Pennsylvania.
January 29, 2010.
*19 Joseph H. Chivers, Pittsburgh, PA, for Plaintiff.
Gregory A. Miller, Ryan W. Colombo, Buchanan Ingersoll, Pittsburgh, PA, for Defendant.
MEMORANDUM and ORDER
GARY L. LANCASTER, Chief Judge.
This is an employment action brought under the U.S. Bankruptcy Code, 11 U.S.C. § 525(b). Plaintiff, Dean Rea, alleges that defendant's, Federated Investor's, refusal to hire him solely because he went through bankruptcy violates § 525(b) of the Bankruptcy Code which prohibits such discrimination. Plaintiff seeks monetary relief from, and placement with, defendant.
Defendant moves to dismiss plaintiff's amended complaint under F.R.Civ.P. 12(b)(6), arguing that plaintiff's bankruptcy discrimination allegations fail to state a claim under 11 U.S.C. § 525(b). Specifically, defendant contends that § 525(b) of the Bankruptcy Code does not prohibit private employers, such as defendant, from refusing to hire individuals who have declared bankruptcy. Defendants conclude that because no prohibition exists, plaintiff's *20 case must be dismissed for failure to state a claim upon which relief could be granted.
In response, plaintiff argues that statutory interpretation principles require this court to broadly interpret the express language of § 525(b). If interpreted broadly as plaintiff suggests, the statute would provide plaintiff with a viable cause of action for bankruptcy discrimination. For the reasons that follow, defendant's motion to dismiss will be granted and this case will be dismissed.
I. BACKGROUND
The following facts are uncontested. Plaintiff filed for bankruptcy in 2002, and his debts were discharged in 2003. On August 13, 2009, plaintiff interviewed for a project manager job with defendant through a placement firm, Infinity Tech Services ("ITS"). Plaintiff admits he was told that defendant's interviewer would determine his skill fit and interest level and if the interviewer was interested in hiring him, he would need to pass a credit and criminal background check.
Following the interview, ITS essentially informed plaintiff that: (1) defendant wanted to hire him, (2) his start date would be August 24, 2003, and (3) his salary would be $80,000. Plaintiff admits he accepted the offer with the understanding that he would need to pass a third-party investigation into his criminal and credit histories. Plaintiff admits that he executed authorizations to this end, and further, he disclosed his bankruptcy. Shortly thereafter, ITS told plaintiff that defendant considered the bankruptcy to be a "deal killer."
On August 18, 2003, ITS informed plaintiff that defendant refused to hire him and further, refused to authorize ITS to hire plaintiff for placement with defendant because of the bankruptcy. Plaintiff filed this lawsuit claiming defendant's refusal to hire him due to his bankruptcy constituted discrimination in violation of 11 U.S.C. § 525(b) and caused him to sustain wage loss, future earning ability, and suffer from emotional distress.
In response to plaintiff's bankruptcy discrimination claim, defendant timely filed a motion to dismiss arguing that 11 U.S.C. § 525(b) does not prohibit defendant, a private employer, from refusing to hire an individual if the individual has filed for bankruptcy. Plaintiff counters by arguing that a broad reading of § 525(b) provides him with legal recourse.
II. LEGAL STANDARD
In considering a Rule 12(b)(6) motion, we must be mindful that federal courts require notice pleading, as opposed to the heightened standard of fact pleading. Federal Rule of Civil Procedure 8(a)(2) requires only "`a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to `give the defendant fair notice of what the ... claim is and the grounds on which it rests.'" Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 2 L. Ed. 2d 80 (1957)).
To survive a motion to dismiss, plaintiff must allege sufficient facts that, if accepted as true, state "a claim to relief that is plausible on its face." Ashcroft v. Iqbal, ___ U.S. ___, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S. Ct. 1955). A claim has facial plausibility when a plaintiff pleads facts that allow the court to draw the reasonable inference that the defendant may be liable for the misconduct alleged. Iqbal, 129 S.Ct. at 1949. However, the court is "`not bound to accept as true a legal conclusion couched as a factual allegation.'" *21 Iqbal, 129 S.Ct. at 1950 (quoting Twombly, 550 U.S. at 555, 127 S. Ct. 1955); see also Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009).
Therefore, when deciding a motion to dismiss under Rule 12(b) (6), we apply the following rules. The facts alleged in the complaint, but not the legal conclusions, must be taken as true and all reasonable inferences must be drawn in favor of plaintiff. Iqbal, 129 S.Ct. at 1949; Twombly, 550 U.S. at 555, 127 S. Ct. 1955. We may not dismiss a complaint merely because it appears unlikely or improbable that plaintiff can prove the facts alleged or will ultimately prevail on the merits. Twombly, 550 U.S. at 556, 563 n. 8, 127 S. Ct. 1955. Instead, we must ask whether the facts alleged raise a reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556, 127 S. Ct. 1955. In short, the motion to dismiss should not be granted if plaintiff alleges facts which could, if established at trial, entitle him to relief. Id. at 563 n. 8, 127 S. Ct. 1955.
It is on this standard that the court has reviewed defendant's motion. Based on the pleadings of record and the briefs filed in support of and opposition thereto, the court is persuaded that plaintiff has not alleged facts that "raise a right to relief above the speculative level ... on the assumption that the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555, 127 S. Ct. 1955 (citations and emphasis omitted).
III. DISCUSSION
The parties concede there are no factual disputes. As such, our decision turns on whether these undisputed facts state a claim for "relief that is plausible on its face." Iqbal, 129 S.Ct. at 1949. The matter before this court, simply stated, is whether 11 U.S.C. § 525(b) prohibits a private employer from refusing to hire an individual who has filed for bankruptcy.
Section 525(b) of the Bankruptcy Code states:
No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt
(1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act;
(2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or
(3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.
11 U.S.C. § 525(b).
The preceding subsection, 11 U.S.C. § 525(a), states that when the government is the employer, it may not:
... deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title ... solely because such ... debtor is or has been a debtor under this title or under the Bankruptcy Act. ...
11 U.S.C. § 525(a).
Due to the fact that no binding precedent exists with respect to the comparative interpretation of these two subsections, this court relies upon the basic principles of statutory construction to resolve the matter. Statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose. See, *22 Engine Mfrs. Assn. v. South Coast Air Quality Management Dist., 541 U.S. 246, 252, 124 S. Ct. 1756, 158 L. Ed. 2d 529 (2004). "The best evidence of that purpose is the statutory text adopted by both Houses of Congress and submitted to the President." West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83, 98, 111 S. Ct. 1138, 113 L. Ed. 2d 68 (1991).
When interpreting a statute, the Court looks first to the statute's plain meaning and, if the statutory language is clear and unambiguous, the inquiry comes to an end. See, Conn. Nat'l Bank v. Germain, 503 U.S. 249, 253-54, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992) ([I]n interpreting a statute a court should always turn first to one, cardinal canon before all others ... When the words of a statute are unambiguous, then, this first canon is also the last; "judicial inquiry is complete."). When the plain meaning cannot be derived, the provision at issue must be viewed in the context of the statute as a whole. See Dolan v. U.S. Postal Serv., 546 U.S. 481, 486, 126 S. Ct. 1252, 163 L. Ed. 2d 1079 (2006) ("A word in a statute may or may not extend to the outer limits of its definitional possibilities. Interpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis.")
Where Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion. Russello v. U.S., 464 U.S. 16, 23, 104 S. Ct. 296, 78 L. Ed. 2d 17 (1983); accord, Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 452-53, 122 S. Ct. 941, 151 L. Ed. 2d 908 (2002) (Where Congress wanted to provide for successor liability in the Coal Act, it did so explicitly, as demonstrated by other sections in the Act that give the option of attaching liability to "successors" and "successors in interest.")
The Court of Appeals for the Third Circuit in Kapral v. United States, thoroughly analyzed the canon set forth in Russello and noted as follows:
The way in which the canon was employed in Russello illustrates how it may properly be used.
* * *
Russello ... was a case in which the statutory language at issue had a plain meaning, an argument was made that the statutory language should be interpreted more narrowly than that plain meaning, another provision of the same statute used different language to convey that narrower meaning, and the Court therefore presumed that the provision at issue meant what its language plainly stated and did not have the artificially narrow meaning explicitly set out in the other, more narrowly crafted statutory section.
Kapral v. United States, 166 F.3d 565, 579 (3d Cir.1999).
Applying the foregoing case law, we begin by noting that 11 U.S.C. § 525(a) plainly and unambiguously indicates that when the government is the employer, it may not "deny employment to, terminate the employment of, or discriminate with respect to employment against," a person who "is or has been a debtor" under the Bankruptcy Act. In contrast, 11 U.S.C. § 525(b) pertains to private employers, and prohibits a private employer from "terminat[ing] the employment of, or discriminat[ing] with respect to the employment against" a person who "is or has been a debtor" under the Bankruptcy Act.
*23 Notably, subsection 11 U.S.C. § 525(b) fails to include the phrase, "deny employment to" like subsection 11 U.S.C. § 525(a). Plaintiff argues that the phrase "discriminate with respect to employment" found in both subsections (11 U.S.C. § 525(a) and (b)), should be broadly interpreted to encompass the phrase "deny employment to" which Congress explicitly set forth in 11 U.S.C. § 525(a) but opted not to include in subsection (b).
Subsection (a) of section 525 plainly and explicitly prohibits the government from denying an individual employment simply because he or she has either filed for bankruptcy protection or been declared bankrupt, while subsection (b) lacks the same language prohibiting private employers from doing so. Thus, the general tenets of statutory construction lead us determine that "where Congress ... has carefully employed a term in one place and excluded it in another, it should not be implied where excluded." Marshall v. Western Union Tel. Co., 621 F.2d 1246, 1251 (3d Cir.1980). We therefore decline to impose the prohibition set forth in subsection 525(a) upon subsection 525(b), because Congress clearly opted to exclude it.
Moreover, both subsections contain the phrase "discriminate with respect to employment"; however, subsection 525(a) specifically prohibits a government-employer from denying employment to an individual who filed for bankruptcy, whereas subsection 525(b) does not explicitly prohibit that same action with respect to private employers. Thus, plaintiff's suggestion that the phrase "discriminate with respect to employment" found in both subsections 525(a) and (b) be read to encompass the phrase "deny employment to," found only in subsection 525(a), lacks merit.
Accordingly, we concur with defendant that plaintiff lacks a statutorily cognizable cause of action under 11 U.S.C. § 525(b) against the defendant, a private employer, for denying plaintiff employment when plaintiff readily admits to having filed for bankruptcy and was declared to have been bankrupt.
Defendant's motion to dismiss will be granted. An appropriate order follows.
ORDER
AND NOW, this 29th day of January, 2010, IT IS HEREBY ORDERED THAT Defendant's motion to dismiss for lack of personal jurisdiction is GRANTED.
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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/1530642/
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704 A.2d 499 (1998)
119 Md. App. 181
MARYLAND STATE DEPARTMENT OF EDUCATION
v.
Douglas SHOOP.
No. 614 Sept. Term, 1997.
Court of Special Appeals of Maryland.
January 13, 1998.
*501 Joann G. Goedert, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for Appellant.
Thomas P. Lydon (J. Edward Davis & Associates, on the brief), Towson, for Appellee.
Argued before DAVIS, HOLLANDER and EYLER, JJ.
*500 DAVIS, Judge.
The Maryland State Department of Education (MSDE) appeals from the judgment of the Circuit Court for Washington County reversing the decision of an Administrative Law Judge (ALJ) of the Office of Administrative Hearings (OAH).[1] The ALJ's decision upheld appellee Douglas Shoop's suspensions and subsequent termination from employment as an automobile mechanics instructor in the Maryland Correctional Training Center (MCTC). The suspensions and termination were based on multiple infractions *502 of a regulatory policy designed for the security and safety of inmates, personnel, and the general public. Originally, appellee received a one-day suspension for allowing inmate students to have unsupervised access to tools in the auto mechanic shop where he taught. After further investigation, MSDE found that the violations were not isolated and more egregious than previously thought and appellee was suspended without pay pending charges for removal. He was eventually terminated. Appellee separately appealed the suspensions and the termination with all being affirmed through the administrative process. On appeal in the circuit court, however, appellee prevailed. The circuit court reversed the second suspension and termination on res judicata and due process grounds. This appeal followed, in which MSDE presents two issues that we reframe below:
I. Whether proceedings for employment termination based on two policy violations are precluded by res judicata when there has already been an informal proceeding for suspension based on the same two violations.
II. Whether appellee received adequate procedural due process before being terminated.
FACTS
On January 25, 1995, the State Superintendent of Schools permanently removed appellee from his position as a vocational auto mechanics instructor at MSDE's correctional education program at MCTC. MSDE sought appellee's termination on the grounds of misconduct, insubordination, and willful neglect of duty. All grounds were based on appellee knowingly violating tool security policies by allowing inmates unsupervised access to the tools and equipment in his auto-mechanic shop.
When terminated, appellee had been employed by MSDE for approximately six years and was designated as unclassified Instructional Personnel-Auto Mechanics. In that capacity, he was assigned to teach vocational automotive mechanics to inmate students at MCTC, a Division of Correction (DOC) institution within the Department of Public Safety and Correctional Services.
Appellee was generally assigned approximately fifteen inmates per twenty-six week program. He generally used two inmate aides for assistance in shop activities. Appellee was responsible for the inmates' vocational training and for adherence to all security precautions prescribed by the DOC.
On April 7, 1993, the MCTC Correctional Security Chief issued the following tool control policy:
In light of recent concerns regarding the legitimacy of Required changes to the Tool Control Procedures in the Vocational Shops, it appears necessary to reduce to writing the essence of those changes.
By way of this memo, I am therefore giving notice of the following requirements:
1. Whenever a tool crib storage area is opened, the instructor must be present.
2. Instructors must be physically present in tool cribs during the issue and receipt of any tool.
3. An inmate may be present in the tool crib to assist the instructor, however, the instructor must provide direct supervision and must personally account for all tools issued and received.
4. The instructor will sign for all tools issued and received.
5. No inmate is allowed to be left alone in the tool crib.
6. The tool crib is to be locked at all times when the instructor is not in it.
Whether or not you personally agree with these Tool Control Regulations, compliance is mandatory. These regulations are a direct result of DOC Headquarters decision and denial of requested variances.
A new Institutional Directive on Tool Control is being formulated. Until the new directive is issued, Sgt. Gregory (Tool Control Officer) is charged with interpretation and implementation of all tool control practices. Utilize him as a resource person. He is, in effect, the final authority at the institutional level. *503 (Items 5 and 6 were added as of April 7, 1993. The other requirements were already in effect.) The policy was issued to all vocational instructors, including appellee.
On August 10, 1993, during a routine inspection of MCTC's vocational education facilities, MCTC Tool Control Officer, Sergeant Craig Gregory, discovered three unsupervised inmates in the unlocked tool crib in appellee's auto shop. He found appellee outside the shop smoking a cigarette. Sergeant Gregory warned appellee that further tool control violations would not be tolerated. According to Sergeant Gregory, appellee nodded in response, but expressed no regret for the violation.
The next day, Sergeant Gregory again inspected the shop. Upon entering, he observed one inmate speaking to someone in the direction of the tool crib and another inmate leaving the tool crib. The inmates were unsupervised. Sergeant Gregory found appellee sitting in the shop office with his feet on his desk and reading a newspaper. When Sergeant Gregory approached appellee to discuss the unsupervised inmate in the tool crib, appellee belligerently told Sergeant Gregory to "write [him] up!"
Sergeant Gregory filed an incident report recounting appellee's tool control violations with MCTC Warden Joseph Sacchet and MCTC Principal Carolyn Suman. Upon receipt of the report, Principal Suman confronted appellee with the violations. He responded that on August 10, 1993 the inmates were in the tool crib in contravention of his instructions. He stated further that no inmate was in the tool crib unsupervised on August 11, 1993. He also denied reacting belligerently to Sergeant Gregory on August 11, 1993.[2] He contended that he regularly enforced the tool security policy, and that the incident of August 10, 1993 was the result of his inmate tool aide's disobedience of his instructions.
Based on Sergeant Gregory's report and appellee's explanation, Principal Suman recommended to John Linton, Director of the Correctional Education Program, that appellee be suspended for one day. Linton approved that recommendation. Appellee served that one-day suspension on August 17, 1993. Nevertheless, he appealed the suspension and a grievance hearing was held on August 25, 1993. The hearing officer affirmed the one-day suspension. Appellee appealed that decision on an untimely basis and it was dismissed accordingly.
Meanwhile, MSDE closed the MCTC auto shop and temporarily re-assigned appellee to low-level clerical duties at another correctional education facility. In that position, he had no contact with the tool crib or any duties with respect to tool control procedures.
Because of appellee's assertion that the inmates in the tool crib on August 10, 1993 were acting in violation of his instructions, Principal Suman confronted the inmate tool aide. The inmate admitted that he was in the tool crib unsupervised on August 10, 1993 and August 11, 1993. He stated that he often worked alone or with other inmates in the tool crib unsupervised. He confirmed that this was done with appellee's knowledge and, sometimes, by his instruction. Principal Suman informed the warden of these new disclosures.
Because of the inmate's allegations, MCTC's Chief of Investigations, Lieutenant Robert Tichnell, began an investigation of tool control procedures and practices in appellee's shop. Between August 17 and 19, 1993, Lieutenant Tichnell reviewed shop documents and investigated the shop facility. He interviewed appellee, Principal Suman, and nine inmates who had been students or aides in the auto shop from April to August 1993. Eight of the nine interviewees confirmed that inmates had unsupervised access to appellee's tool crib. Most of the interviewees characterized the unsupervised access as a regular occurrence that happened with appellee's knowledge and approval. Additionally, the interviewed inmates confirmed the existence of fabricated wire "keys" that were available for inmates to unlock the tool crib.
*504 During his interview with Lieutenant Tichnell, appellee gave contradictory responses to questions regarding the accessibility of the tool crib to inmates and the availability of wire "keys."
Lieutenant Tichnell's review of the August 1993 tool sign-out logs revealed that various individuals other than appellee were signing tools out of the tool crib. Upon inspection of the auto shop, Lieutenant Tichnell determined that the tool crib could be opened with a simple wire device and such devices were found in the tool crib area.
Based on the investigation, Lieutenant Tichnell concluded that appellee had violated DOC standards for personal conduct, control of tools, performance of duties, handling of State property, reports, and attitude toward inmates, and "blatantly disregarded the tool control policy." Lieutenant Tichnell submitted his investigation report to MCTC Warden Sacchet.
Linton also interviewed appellee after the suspension. He found that appellee gave inconsistent and evasive responses to questions as to whether he allowed inmates in the tool crib unsupervised. Linton testified at the OAH hearing that appellee's explanations for his failure to supervise activities adequately in his shop on August 10 and 11, 1993, were not credible. Linton also testified that appellee refused to accept responsibility for his conduct or to demonstrate that he understood the importance of the tool security policies or could be trusted to uphold them in the future.
On August 22, 1993, Warden Sacchet telephoned Linton to inform him of the content of Lieutenant Tichnell's investigatory report, request that appellee be barred from the MCTC facility, and request that appellee's employment be terminated.
On October 14, 1993, MSDE filed charges for removal of appellee and suspended him without pay pending resolution of the charges. He was sent a copy of those charges along with a letter explaining the reasons for the charges and the accompanying suspension. The charges included detailed descriptions of the August 10 and 11, 1993 incidents, noting appellee's failure to supervise the inmates in his classroom, and to enforce the tool control policies on those dates, and his defiance of Sergeant Gregory on August 11, 1993. The charges concluded that "[t]hese incidents are in direct violation of written procedures regarding Tool Control... made known to appellee on March 2, 1993 and April 7, 1993."
Appellee appealed the suspension pending charges for removal. At the hearing, appellant presented evidence regarding the August 10 and 11, 1993 incidents, as well as Lieutenant Tichnell's report and Linton's post-suspension interview with appellee. The suspension was upheld.
Appellee also appealed his termination. On June 6, 1994, appellant gave written notice to appellee's attorney of the witnesses it planned to call and the documents it intended to introduce as evidence at the termination hearing. The list of witnesses included Lieutenant Tichnell, and the document list included his August 1993 report and all of its exhibits. Before the termination hearing, appellee's counsel requested to inspect all documents in appellant's files that appellant deemed relevant to the termination proceedings. Those documents were made available to appellee's counsel for inspection on or about June 6, 1994, and they included Lieutenant Tichnell's report.
The termination hearing occurred on June 13, 1994, and resulted in a finding that appellee's appeal was without merit. Appellee filed exceptions to the State Board of Education and, after a January 24, 1995 exceptions hearing, appellee's employment was terminated.
Appellee filed a timely appeal to the circuit court seeking reversal of his termination on the following grounds: (1) his termination, based on the same August 10 and 11, 1993 violations of tool security policies as his oneday suspension, was barred by the prohibition against double jeopardy, (2) he lacked proper notice that the charges for removal were founded, in part, on the results of Lieutenant Tichnell's investigative report, and (3) evidence contained in that report regarding inmate statements was inadmissible hearsay.
*505 At the hearing in circuit court, appellee's attorney argued that the attorney at the OAH termination hearing was unaware, until the day of the hearing, that MSDE intended to introduce any evidence regarding the investigative report. MSDE objected to this argument, averring that it was a misrepresentation.
On August 31, 1995, the circuit court issued an opinion and order reversing appellee's termination. In response to appellee's double-jeopardy argument, the court first held that collateral estoppel barred MSDE from seeking appellee's removal for reasons arising from the same events that led to the one-day suspension. Second, the court held that the termination should be overturned because MSDE's written charges for removal failed to include charges related to incidents other than the August 10 and 11, 1993 infractions. Specifically, the court stated that "[h]ad [appellee] been notified that there would be charges of improprieties beyond those specifically described in the notice, he would have been given an opportunity to prepare a response."
On August 21, 1995, shortly before the trial court filed its opinion and order, the Court of Appeals issued a slip opinion in an employee termination case with facts and legal issues almost identical to those of the case at bar. Ward v. Dep't of Public Safety, 339 Md. 343, 663 A.2d 66 (1995). In Ward, the Court of Appeals held that a DOC employee who had been suspended on numerous occasions and then subsequently terminated based on the same infractions did not have a double-jeopardy defense. Specifically, the Court stated that "[b]ecause the discipline is not imposed for the purpose of punishment, the principles of double jeopardy do not apply." Ward, 339 Md. at 351, 663 A.2d 66.
MSDE filed a Motion to Alter or Amend the Judgment based on the decision in Ward. The Motion was also grounded on the argument that appellee's counsel had misrepresented whether appellee had actual notice of appellant's intention to present evidence regarding Lieutenant Tichnell's investigation report at the June 13, 1994 termination hearing. The court held a hearing on November 21, 1995.
On March 5, 1997, the circuit court issued an opinion and order, again reversing appellee's termination, but on different grounds. In its March 5, 1997 order, the trial court held that the doctrine of res judicata, as opposed to collateral estoppel, barred appellee's removal for the August 10 and 11, 1993 conduct. In support of its opinion and order, the circuit court reasoned as follows:
Appellant should not be required to repeatedly defend against suits based on the same cause of action. He should be entitled to believe that the one day suspension was the sanction imposed for the alleged violations and that the litigation had ended. Finality is needed in every case and this one is no exception. Therefore, based on res judicata and the related prohibition against splitting a cause of action, the removal proceeding should be reversed.
The circuit court also suggested that its previous opinion and order reversing the termination because the charges of removal did not specifically refer to Lieutenant Tichnell's report was moot because MSDE conceded, in its hearing on its motion to alter or amend the judgment, "that the sole basis for the removal from employment was the tool control policy violations of August 10 and 11." The court noted, however, that "if [MSDE] attempts to review this issue on appeal, this court reaffirms" its earlier decision with respect to notice.
This appeal followed.
DISCUSSION
Standard of Review
An employee may "appeal" disciplinary suspensions, suspensions without pay pending filing of charges for removal, and charges for removal to the OAH. CODE OF MARYLAND REGULATIONS (COMAR) 06.01.01.57, 06.01.01.61, 06.01.01.65. An ALJ from that office conducts a hearing and issues a "written proposal for decision," that is subject to approval by the Secretary of the Department of Personnel (Secretary). Id. If the employee is dissatisfied with the proposed decision, the employee may file exceptions with the Secretary and present oral argument. Id. *506 The Secretary (or designee of the Secretary) issues a final decision that is subject to judicial review in a circuit court, pursuant to the Administrative Procedure Act. Id.; MD.CODE ANN. (1994 Repl.Vol.), State Gov't (S.G.), § 10-222.
When exercising such judicial review, a circuit court may:
(1) remand the case for further proceedings;
(2) affirm the final decision; or
(3) reverse or modify the decision if any substantial right of the petitioner may have been prejudiced because a finding, conclusion, or decision:
(i) is unconstitutional;
(ii) exceeds the statutory authority or jurisdiction of the final decision maker;
(iii) results from an unlawful procedure;
(iv) is affected by any other error of law;
(v) is unsupported by competent, material, and substantial evidence in light of the entire record as submitted; or
(vi) is arbitrary or capricious.
S.G. § 10-222. "A court's role is limited to determining if there is substantial evidence in the record as a whole to support the agency's findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law." United Parcel v. People's Counsel, 336 Md. 569, 577, 650 A.2d 226 (1994).
Because this is an appeal from a circuit court's review of an agency's final decision, our role in this appeal " `is precisely the same as that of the circuit court.' " Dept. of Human Resources v. Thompson, 103 Md. App. 175, 188, 652 A.2d 1183 (1995) (quoting Dept. of Health & Mental Hygiene v. Shrieves, 100 Md.App. 283, 303-04, 641 A.2d 899 (1994)). Accordingly, we have the same recourse given to the circuit court by S.G. § 10-222(h).
A reviewing court may not make its own findings of fact, Board of County Comm'rs v. Holbrook, 314 Md. 210, 218, 550 A.2d 664 (1988), or supply factual findings that were not made by the agency. Ocean Hideaway Condo. Ass'n v. Boardwalk Plaza, 68 Md.App. 650, 662, 515 A.2d 485 (1986). Findings of fact are essential in order for the reviewing court meaningfully to review the agency's decision. See Gray v. Anne Arundel Co., 73 Md.App. 301, 307-09, 533 A.2d 1325 (1987). Moreover, it is the agency's function to determine the inferences to be drawn from the facts. On review, neither the circuit court nor this Court may substitute its judgment for that of the agency. Eberle v. Baltimore County, 103 Md.App. 160, 165, 652 A.2d 1175 (1995).
To the extent that issues on appeal turn on the correctness of an agency's findings of fact, such findings must be reviewed under the substantial evidence test. Thompson, 103 Md.App. at, 190, 652 A.2d 1183 (citing State Election Bd. v. Billhimer, 314 Md. 46, 58-59, 548 A.2d 819 (1988)). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Id. at 191, 652 A.2d 1183 (quoting Caucus Distributors, Inc. v. Md. Securities Comm'r, 320 Md. 313, 323-24, 577 A.2d 783 (1990)). See also Relay Improvement Ass'n v. Sycamore Realty Co., Inc., 105 Md.App. 701, 714, 661 A.2d 182 (1995), aff'd, 344 Md. 57, 684 A.2d 1331 (1996) (stating that "substantial evidence means more than a `scintilla of evidence,' such that a reasonable person could come to more than one conclusion."). In other words, the question on appeal becomes whether a reasoning mind could reasonably have reached the agency's factual conclusion. Eberle, 103 Md.App. at 166, 652 A.2d 1175. We may not uphold the agency's decision `"unless it is sustainable on the agency's findings and for the reasons stated by the agency.'" United Parcel Serv., Inc. v. People's Counsel, 336 Md. 569, 577, 650 A.2d 226 (1994) (quoting United Steelworkers v. Bethlehem Steel, 298 Md. 665, 472 A.2d 62 (1984)).
In contrast to factual challenges, when the question before the agency involves one of statutory interpretation or an issue of law, our review is more expansive. Liberty Nursing Center, Inc. v. Dept. of Health & Mental Hygiene, 330 Md. 433, 624 A.2d 941 (1993). Under this more expansive review, we may substitute our judgment for that of *507 the agency. Thompson, 103 Md.App. at 190, 652 A.2d 1183. This standard of review is aptly named the "substituted judgment standard." Id. Consequently, we are not bound by the agency's statutory or legal conclusions. Id.; Dep't. of Health & Mental Hygiene v. Reeders Memorial Home, Inc., 86 Md.App. 447, 452, 586 A.2d 1295 (1991).
Lastly, "modification or reversal of the agency's decision is only appropriate when the petitioner has demonstrated that substantial rights of the petitioner have been prejudiced by one or more of the causes specified in [S.G.] § 10-222(h)." Thompson, 103 Md.App. at 191, 652 A.2d 1183 (citing Bernstein v. Real Estate Comm'n, 221 Md. 221, 230, 156 A.2d 657 (1959), appeal dismissed, 363 U.S. 419, 80 S. Ct. 1257, 4 L. Ed. 2d 1515 (1960)).
Accordingly, we must examine the record to determine whether the ALJ applied the correct law and whether there was substantial evidence from which a reasonable mind could arrive at the factual conclusions reached by the ALJ.
I
Appellant asserts that the circuit court erred when it reversed appellee's termination on res judicata grounds. We agree. In determining whether collateral estoppel or res judicata[3] principles apply to the findings of an administrative proceeding, "the threshold inquiry is whether the earlier proceeding [was] the essential equivalent of a judicial proceeding." Batson v. Shiflett, 325 Md. 684, 704, 602 A.2d 1191 (1992)(quoting Sugarloaf Citizens Ass'n v. Northeast Maryland Waste Disposal, 323 Md. 641, 659 n. 13, 594 A.2d 1115 (1991)). An administrative hearing may be deemed "the essential equivalent of a judicial proceeding" only if it "embraced elements of adjudicatory procedure consistent with established principles of due process." Id. at 705, 602 A.2d 1191 (quoting Restatement (second) of Judgments §§ 83-84 (1982)). Collateral estoppel should not attach when the process is "very informal." Id. (quoting Restatement (second) of Judgments, § 84 comment c, (1982)). There is no question that, "when an administrative agency is acting in a judicial capacity and resolves disputed issues of fact properly before it, the courts have not hesitated to apply res judicata to enforce repose." Astoria Federal Savings and Loan Assoc. v. Solimino, 501 U.S. 104, 107, 111 S. Ct. 2166, 2169, 115 L. Ed. 2d 96 (1991) (quoting United States v. Utah Construction and Mining Co., 384 U.S. 394, 86 S. Ct. 1545, 16 L. Ed. 2d 642 (1966)).
Despite appellee's assertions to the contrary, we are not convinced that appellant was acting in a "judicial capacity" when it suspended appellee. Appellee's appeal of the suspension and termination does not alter our belief.
Internal MSDE proceedings are "very informal." Indeed, after receiving Sergeant Gregory's incident report, Principal Suman requested that appellee be given a one-day disciplinary suspension for the tool control policy violations of August 10 and 11, 1993. In response, Kristin Williams, Director of Human Resource Management Branch, notified appellant that a one-day suspension was approved to occur on August 17, 1993. The letter notified him of his right to appeal this decision. Although the appeal process proceeds in similar fashion to judicial proceedings, it, too, is very informal.
In 1993, when the infractions took place, State regulations only required that the representative of the agency hold a conference with the employee and others present to ascertain whether the grievance had merit. COMAR 06.01,01.56(C) (1993).[4] Such hearings *508 were conducted by Assistant Superintendents of Schools, not judicial officers. They were not trained in civil procedure. The proceedings were not recorded in any way. No rules of evidence or trial procedure were recognized. Internal grievance decisions were so informal that the OAH heard appeals de novo and were required to give no deference to the fact-finding of the grievance officer.
The circuit court was apparently persuaded by the employee's ability to be represented by counsel, call witnesses, and introduce exhibits at the internal grievance hearing. We agree that in some situations an administrative appeal has res judicata effect. We do not agree, however, that the decision to suspend appellee or the hearing that resulted from appellee's appeal of that decision bars a subsequent proceeding to terminate appellee, especially when there are subsequent findings that indicate the original violations are more serious than previously thought.
Additionally, the Court of Appeals has specifically held that the termination of a State employee is executive in nature, not judicial or quasi-judicial. Eliason v. State Roads Commission, 231 Md. 257, 260-61, 189 A.2d 649 (1963). In Eliason, the Court stated that even though the decision to discharge an employee required the determination of facts and the exercise of judgment and discretion the ultimate decision was not judicial or quasi-judicial. Id.
The doctrine of res judicata is intended to prevent "multiplicity of litigation and to avoid the vexation, costs and expenses incident to more than one suit on the same cause of action." Jones v. Speed, 320 Md. 249, 258, 577 A.2d 64 (1990). It generally precludes "the relitigation of matters that have been fully and fairly litigated and finally decided between the parties, by a tribunal of competent jurisdiction," University of Maryland v. Boyd, 93 Md.App. 303, 308, 612 A.2d 305 (1992) (citing Murray Int'l Freight Corp. v. Graham, 315 Md. 543, 547, 555 A.2d 502 (1989)). We do not believe, however, that res judicata is intended to curtail a public agency's executive discretion in disciplining employees.
Indeed, res judicata principles "are justified on the sound and obvious principle of judicial policy that a losing litigant deserved no rematch after a defeat fairly suffered, in adversarial proceedings, on an issue identical in substance to the one he subsequently seeks to raise." Astoria, 501 U.S. at 107, 111 S.Ct. at 2169. They are grounded in the ideas that "there should be an end to litigation" and that "no man should be twice sued for the same cause." Jones, 320 Md. at 258, 577 A.2d 64 (citing, inter alia, Whitehurst v. Rogers, 38 Md. 503 (1873)). MSDE did not twice sue appellee, split causes of action, or seek a rematch on unsuccessful litigation. Rather, acting in its executive capacity, appellant conducted an informal grievance conference regarding the one-day suspension based on what it believed were two discrete and isolated policy transgressions. Later, upon learning that these violations were the proverbial tip of the iceberg, appellant discovered additional evidence in support of termination at the removal hearing.
Under the circuit court's reasoning, appellant's defense of its disciplinary suspension in the informal agency grievance proceeding requested by appellee, bars appellant from later seeking termination based on information it learned after the suspension. We believe that result to be illogical.
In a similar vein, as stated supra, the Court of Appeals held in Ward, that double jeopardy is inapplicable to public employee disciplinary proceedings.[5] Indeed, the Court *509 rejected an argument almost identical to the one raised by appellee in the instant case.
In Ward, a correctional officer received a five-day suspension for not timely notifying his superior that he had received a criminal summons, as required by regulation. Months later, the officer failed to report to work or notify his superior in a timely manner that he would not report. He received a reprimand for this infraction. Approximately two months later, Ward failed to report for duty because he overslept. He never telephoned to tell his supervisor that he would not be able to work that day. For this infraction, he received another five-day suspension. Three months later, Ward failed to report for duty because he reportedly had difficulty with his car. He did not timely notify his supervisor, according to the established procedure, that he could not work that day. For this infraction, he received another five-day suspension. Simultaneous with that suspension, Ward was informed that charges for removal were going to be filed against him with the Secretary. The removal charges were based on the four disciplinary infractions described above, even though Ward had already received suspensions for those violations.
Ward appealed the reprimand, suspension, and charges for removal to the OAH. An ALJ affirmed all of the disciplinary sanctions, including the charges for removal. Ward filed an action for judicial review in the Circuit Court for Wicomico County. The circuit court judge rejected a double-jeopardy argument and upheld the disciplinary sanctions, including the removal. Ward appealed to this Court. While the case was still pending, the Court of Appeals granted certiorari on its own motion.
Ward argued that he could not be suspended for an incident and then removed based on "exactly the same incident." This, he maintained, violated the double-jeopardy principle. Rejecting this argument, the Court held that the disciplinary sanctions imposed on Ward were remedial in nature, not punitive. In support of its holding the Court stated:
The Division of Correction, like any employer, must maintain control over its employees. To this end the division has established standards of conduct and published them to its employees. The standards would have no meaning, force or effect if there were no penalty for their violation. Thus, the Division has established a system of progressive discipline. Common sense dictates that this discipline is imposed to ensure that employees adhere to the established standards of conduct.... Because the discipline is not imposed for the purpose of punishment, the principles of double jeopardy simply do not apply.
This conclusion is supported by Attorney Griev. Comm'n v. Andresen, 281 Md. 152, 379 A.2d 159 (1977), in which we held that "`disbarment is intended not as a punishment, but as protection to the public.'" Id. at 155, 379 A.2d 159 (quoting Maryland St. Bar Ass'n v. Sugarman, 273 Md. 306, 318, 329 A.2d 1 (1974), cert. denied, 420 U.S. 974, 95 S. Ct. 1397, 43 L. Ed. 2d 654. (1975)). Accordingly, we held that disbarment was not punishment for the purposes of Double Jeopardy. Id.
Ward, 339 Md. at 350, 663 A.2d 66 (emphasis added).
To bind an agency's ability to terminate an unsatisfactory employee simply because that employee chose to appeal a suspension based on the unsatisfactory behavior is illogical, and we are hesitant to render such a holding. Appellant had numerous reasons to terminate appellee's employment even after the first suspension. Correctional officials testified *510 that they would be uncomfortable working in an institution where appellee was responsible for the supervision of inmates. The assistant warden testified that he received calls from other correctional officers who were concerned that appellee's return would increase their workload and levels of fear. Clearly, appellee's termination was justified.
Appellee urges this Court to address an issue raised by the trial court. Specifically, appellee notes that the first disciplinary suspension was remedial in nature. As for the termination, however, appellee asserts that it could have amounted to punishment because the necessary remedial effects were supplied by the original suspension. Nevertheless, appellee's position lacks merit. Double jeopardy applies when there are two punishments. Appellee admits that the first suspension was remedial, not punitive. Consequently, it does not matter if the second suspension or termination amounts to punishment.
II
Appellant contends that the circuit court erred when it reversed appellee's termination on the grounds that he had not received adequate notice of the evidence that appellant intended to use to support the charges for removal at the termination hearing.[6] We agree.
MSDE RESOLUTION 1983-46 provides that the State Superintendent must file charges for removal which shall state the causes for said action. The resolution further provides that the affected employee must be informed of the right to a hearing and that, if elected, the MSDE must bear the burden of establishing the legitimacy of its cause by a preponderance of the evidence. Unquestionably, the aforementioned procedural requirements of the MSDE were satisfied through the October 14, 1993 correspondence to appellee.
"[T]he requirement of notification purposed to inform may be satisfied by proof of actual notice." State v. Barnes, 273 Md. 195, 210, 328 A.2d 737 (1974); see also Clark v. Wolman, 243 Md. 597, 600, 221 A.2d 687 (1966) (stating that there is no due process violation when the party received actual notice).
Appellee received actual notice that appellant intended to use Lieutenant Tichnell's investigation report during an interview with Linton held shortly after the report's release. It was released at the October 1993 hearing regarding his suspension pending charges for removal, during pretermination hearing discovery, and in prehearing correspondence from appellant's counsel. The correspondence specifically listed the report as an exhibit that appellant would introduce into evidence and Lieutenant Tichnell, the report's author, as one of appellant's witnesses.[7] One "who has actual notice of circumstances sufficient to put a prudent man upon inquiry as to a particular fact, and who omits to make such inquiry, with reasonable diligence, is deemed to have notice of the fact itself." Baltimore v. Perticone, 171 Md. 268, 274, 188 A. 797 (1937).
Accordingly, we reverse the judgment of the circuit court. We conclude that MSDE's imposition of the suspensions and termination proceedings were disciplinary/remedial rather than punitive. As such, principles of double jeopardy do not apply.
*511 We also conclude that appellee had actual notice that appellant would call Lieutenant Tichnell as a witness and use his investigatory report. Consequently, the circuit court's finding of a due process violation must be reversed.
JUDGMENT OF THE CIRCUIT COURT FOR WASHINGTON COUNTY REVERSED; CASE REMANDED WITH INSTRUCTIONS TO REMAND THE CASE TO THE ADMINISTRATIVE AGENCY FOR APPROPRIATE ACTION CONSISTENT WITH THIS OPINION.
COSTS TO BE PAID BY APPELLEE.
NOTES
[1] OAH's decision was adopted by the Maryland State Board of Education.
[2] On August 18, 1993, however, appellee admitted in a memorandum to MCTC Warden Sacchet that he had indeed reacted to Sergeant Gregory in a threatening and unprofessional manner. (E.53).
[3] In Parklane Hosiery Co. v. Shore, 439 U.S. 322, 99 S. Ct. 645, 58 L. Ed. 2d 552 (1979), the Court discussed the distinction between res judicata and collateral estoppel, stating that:
Under the doctrine of res judicata, a judgment on the merits in a prior suit bars a second suit involving the same parties or their privies based on the same cause of action. Under the doctrine of collateral estoppel, on the other hand, the second action is upon a different cause of action and the judgment in the prior suit precludes relitigation of issues actually litigated and necessary to the outcome of the first action.
Id. at 326 n. 5, 99 S.Ct. at 649 n. 5
[4] In 1996, State employee grievance procedures were amended substantially as part of a major Personnel Reform Act. MD.CODE ANN., State Pers. § 11-101 et seq. (1996). These amendments, as they apply to employee grievance hearing procedures, were recently implemented in State regulations at COMAR 06.01.01.57 (1996). This new regulation was cited erroneously as the procedure governing appellee's challenge to his 1993 suspension in the circuit court's March 5, 1997 Opinion and Order.
[5] The Double Jeopardy Clause of the Fifth Amendment provides that no person shall "be subject for the same offense to be twice put in jeopardy of life or limb." This clause not only protects against multiple prosecutions for the same offense, but also protects against multiple punishments. The United States Supreme Court has determined that, for the purposes of a multiple punishments inquiry, the government can impose punishment, not only in a "criminal" proceeding, but also in a "civil" proceeding. Indeed, "the labels `criminal' and `civil' are not of paramount importance." Rather, "the determination whether a given civil sanction constitutes punishment in the relevant sense requires a particularized assessment of the penalty imposed and the purposes that the penalty may fairly be said to serve." If the purpose of the penalty is retribution or deterrence, it is punishment. If, however, the purpose of the penalty is remedial, it is not punishment. Accordingly, the United States Supreme Court has stated that "a civil sanction that cannot fairly be said solely to serve a remedial purpose, but rather can only be explained as also serving either retributive or deterrent purposes, is punishment as we have come to understand the term."
Ward, 339 Md. at 350, 663 A.2d 66 (citations omitted).
[6] In its second memorandum and order, the circuit court claims that this issue is moot because appellant conceded at the hearing on the motion to alter or amend the judgment that the only basis for termination was the two incidents. The circuit court, however, stated that, if the issue were raised on appeal, then the lower court's first opinion and order would be revived on this issue. In any event, we are required to review the decision of the agency, not that of the circuit court. At the agency level, appellant relied on Lieutenant Tichnell's testimony and report as well as evidence of the August 10 and 11, 1993 incidents. Consequently, we address the issue of notice because it is not moot.
[7] Apparently, appellee's counsel in circuit court was standing in for counsel that represented appellee during the administrative hearings. Consequently, it seems that original counsel failed to inform fully new counsel on the status of the case. Therefore, new counsel represented to the trial court that appellee had not received notice of Lieutenant Tichnell's testimony and report.
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704 A.2d 747 (1997)
BOURDON'S, INC.
v.
ECIN INDUSTRIES, INC., et al
No. 95-486-Appeal.
Supreme Court of Rhode Island.
December 16, 1997.
*749 Wayne Kezirian, Cranston, for Plaintiff.
Edward J. Mulligan, Lincoln, for Defendant.
Before WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS and GOLDBERG, JJ.
OPINION
LEDERBERG, Justice.
This case came before the Supreme Court on the appeal of the plaintiff, Bourdon's, Inc., from a judgment in favor of the defendants, Ecin Industries, Inc., Harvey J. Bigelow, and Patricia M. MacMillen, on the plaintiffs claim of breach of contract, and in favor of the defendants on their counterclaim for misrepresentation, fraud, and/or deceit. For the reasons set forth below, we affirm the judgment of the Superior Court. In doing so, we hold that the applicable period of limitations for actions for fraud and deceit is the ten-year period found in G.L.1956 § 9-1-13(a), and we further hold that the Statute of Frauds, § 9-1-4, is inapplicable to a claim of misrepresentation, fraud, and/or deceit. The facts insofar as pertinent to this appeal follow.
Facts and Procedural History
The plaintiff is a New Hampshire corporation whose president and majority stockholder is John D. Bourdon (Bourdon). In 1986, plaintiff, which was engaged in the "manufacture and sale of mattresses, institutional bedding, and sleep equipment," owned three subsidiary corporations (collectively Subsidiary) that sold mattresses primarily to retail furniture stores. The plaintiff, Subsidiary's corporate parent, supplied bedding to such institutions as hospitals, nursing homes, and hotels.
In August of 1986, defendants Patricia M. MacMillen (MacMillen) and Harvey J. Bigelow (Bigelow) began negotiating with Bourdon for the purchase of Subsidiary, having previously incorporated Ecin Industries, Inc. (Ecin), for the purpose of selling bedding and other products. MacMillen was sole shareholder and president of Ecin, while Bigelow served as vice president and secretary. The parties executed an agreement of sale (Agreement), and a closing was held on December 16, 1986.
Pursuant to the Agreement, Ecin agreed to pay a total purchase price of $200,000, with a $1,000 down payment and $199,000 financed without interest by plaintiff, to be paid in monthly installments of $3,500. Ecin executed a promissory note (Note) to plaintiff; the purchase price was secured by Ecin's newly acquired inventory, machinery, and equipment, MacMillen's car and residence, Ecin's casualty insurance, and the personal guarantees of MacMillen and Bigelow. Part of the purchase price was allocated by the parties to Subsidiary's customer lists (customer lists), which were supposed to be appended to the Agreement as Exhibit C. The customer lists, however, were not attached to the Agreement at the closing, and the parties introduced conflicting versions of the list into evidence at the trial. The most important customers in dispute were the State of Rhode Island (State) and Johnson & Wales University (J & W). The Agreement also contained the following noncompetition clause:
"For a period of fifty-seven (57) months from the date hereof, or until Buyer shall no longer be in business, whichever shall come first, Seller shall not sell to customers on the Customer Lists or to retail furniture dealers in Rhode Island or Massachusetts south of Boston, except that Seller may sell to [enumerated furniture stores] and any hospital and nursing home accounts."
A handwritten insertion point and the term "(Exhibit C)" appeared after the word "Lists."
*750 Following the closing, Ecin moved the Subsidiary operation to its Fall River, Massachusetts facility. Bourdon visited the facility at least monthly to collect payment in accordance with the Note. MacMillen and Bigelow testified that during negotiations prior to the execution of the Agreement, Bourdon orally agreed that he would use Ecin as a subcontractor to manufacture mattresses and futons to be sold by plaintiff. Bigelow claimed that Bourdon had agreed to furnish such business for "[f]ive years at least." Relying on this alleged representation, Ecin purchased futon-production equipment from plaintiff, for which Ecin otherwise had no use. MacMillen and Bigelow also testified that Bourdon had represented to them that the business derived from plaintiffs subcontracting would yield Ecin at least $800,000 per year. During Bourdon's visits to collect payment on the Note, MacMillen and Bigelow claimed that, in response to their inquiries about the promised subcontracting orders, Bourdon would answer that plaintiffs business was slow, that the work was forthcoming, or that Ecin's production capacity was not large enough to handle plaintiffs orders. In order to accommodate the alleged promised larger orders, and with Bourdon's knowledge that they were doing so, defendants expanded the Ecin factory by 18,000 square feet in September of 1987. Ecin, however, never received more than $40,000 annually in business from plaintiff, and in 1989 the amount was only $72. Bourdon, on the other hand, denied making any oral representations.
On January 1, 1989, less than twenty-five months after the execution of the Agreement, plaintiff sold its institutional-mattress business to a corporation formed by two longterm plaintiff employees. This new corporation, Bourdon's Institutional Sales, Inc. (BIS), bought and leased equipment and premises from two other corporations of plaintiffs, Diversified Products, Inc., and J.D. Bourdon Realty. Pursuant to the contract of sale, BIS agreed to hire "Bourdon" as a consultant for the sum of $30,000 per year until 1994. Bourdon was listed on the BIS articles of incorporation as a director, and "John D. Bourdon, d/b/a J.D. Bourdon Realty" was listed as a party to the contract of sale. Bourdon testified that it was plaintiff corporation, and not himself personally, that was hired as the BIS consultant, and he claimed that he never performed any consulting work for BIS, never did any sales work for BIS, and never received notice of or attended any board meetings of the new corporation.
Beginning in 1990, the owners of BIS began making bids on State contracts. Mac-Millen testified that Bourdon, when reminded of the noncompetition clause in the Agreement, informed her that he had sold the mattress portion of plaintiff corporation to BIS, and that plaintiff itself was therefore not competing against Ecin for the State contracts. In August 1989, BIS also began doing business with J & W after purchasing plaintiffs institutional mattress supply business. In November 1990, Ecin stopped making monthly payments pursuant to the Note because, in MacMillen's words, "[Bourdon] sold the business that he promised to us to someone else." The parties stipulated at trial that a principal balance of $36,882 remained on the Note at the time payments ceased.
On March 25, 1992, plaintiff filed suit against defendants in Superior Court, alleging that defendants had failed to pay on the Note, and had breached the Agreement by having failed to pay for machinery and goods delivered to them. On April 27, 1992, defendants filed an answer to the complaint, setting forth the affirmative defenses of failure to state a claim upon which relief could be granted, lack of personal jurisdiction, improper service of process, and breach of contract. On June 1, 1995, defendants moved to file an amended answer and counterclaims, seeking to add both the affirmative defense of fraud and/or deceit, and two counterclaims, the first for misrepresentation, fraud, and/or deceit (hereafter referred to as the counterclaim for fraud), and the second for deceptive trade practices. Over plaintiffs objection, the trial justice granted defendants' motion on June 9, 1995.
After the close of evidence, the trial justice granted judgment as a matter of law for plaintiff on defendants' counterclaim of deceptive *751 trade practices. Following deliberations, the jury returned with a special verdict form prepared by the trial justice, finding for defendants on plaintiffs claim of breach of contract, and for defendants on their counterclaim for fraud. With damages set at $59,600, plus interest at 12 percent per annum, in the amount of $23,039.89, plaintiff was adjudged to owe defendants the sum of 2,639.89. Judgment on the verdict was filed on June 14, 1995.
The plaintiff filed a motion for a new trial on June 20, 1995, claiming that the verdict was against the preponderance of the evidence, that the verdict form was defective and misleading, that the trial justice had committed an error of law in refusing to give certain jury instructions, and that the trial justice had committed an error of law in permitting defendants to amend their answer and to add their counterclaims. The motion for a new trial was heard on July 5, 1995, although the record before us contains no transcript of that hearing. The motion was denied, and plaintiff filed a timely notice of appeal.
Defendants' Motion to Amend Their Answer and to File a Counterclaim
The plaintiff has argued that it was reversible error for the trial justice to allow defendants to amend their answer and to add a counterclaim for fraud after the trial had begun. Rule 15(a) of the Superior Court Rules of Civil Procedure provides that a party may amend its pleading once, within enumerated time periods, as a matter of right. After either that opportunity has been taken or the applicable time period has lapsed, a pleading may be amended "only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." Id. As Professor Kent has pointed out:
"Rule 13(f) provides that by leave of court a party may set up by amendment a counterclaim which he has omitted through `oversight, inadvertence, or excusable neglect, or when justice requires.' Justice has been held to require the allowance of an amendment to plead a compulsory counterclaim, even though the neglect involved was characterized as `inexcusable.' * * * Such liberality is justified where the omitted counterclaim is compulsory, as a judgment in the main action will preclude an independent action on the omitted claim." 1 Kent, R.I. Civ. Prac. § 13.8 at 133-34 (1969).
This Court has favored liberality in allowing amendments and "has consistently held that trial justices should liberally allow amendments to the pleadings." Serra v. Ford Motor Credit Co., 463 A.2d 142, 150 (R.I.1983). In Inleasing Corp. v. Jessup, 475 A.2d 989, 992 (R.I.1984), for example, we observed that this permissive rule promotes the important goal of resolving disputes on their merits rather than through blind adherence to procedural technicalities. The granting or the denial of a motion to amend is within the discretion of the trial justice, and this Court will not disturb such a ruling absent a clear showing that such discretion was abused. Id. (citing Ricard v. John Hancock Mutual Life Insurance Co., 113 R.I. 528, 540, 324 A.2d 671, 677 (1974)). Moreover, this Court has consistently permitted amendments to pleadings "even after trial `absent a showing of extreme prejudice.'" Mikaelian v. Drug Abuse Unit, 501 A.2d 721, 722 (R.I.1985) (quoting Inleasing Corp., 475 A.2d at 993).
The plaintiff in the case before us claimed that it was prejudiced by the allowance of the amendment because fraud was alleged after three trial notices had been issued and more than three years after the commencement of the case. The plaintiff further argued that allowing the amendment dramatically changed the tenor of the case, converting it from a "rather straight-forward collection action on a note" into a complicated, fact-intensive case involving allegations of fraud and oral agreements.
This Court has held that "mere delay is not enough to deny [an] amendment." Inleasing Corp., 475 A.2d at 992. In Inleasing Corp., for instance, we concluded that it was an abuse of discretion for the trial justice not to allow the defendant to amend his answer even though the motion to amend was made after a thirty-day trial notice had been issued *752 and more than three years after the initial answer was filed. Id.; see also Ricard, 113 R.I. at 539, 324 A.2d at 677, (determining that trial justice abused his discretion by denying motion to amend when his only reason was that "the case had gone on too long on the basis of the [original] pleadings"; Wilkinson v. Vesey, 110 R.I. 606, 633-34, 295 A.2d 676, 692 (1972) (allowing amendment after start of trial).
In the case at bar, defendants moved to amend their pleading and add their counterclaim a week before the trial commenced. The plaintiff claimed that it was prejudiced by this late amendment, but at no point did it request a continuance in order to pursue additional discovery or otherwise prepare a defense to the counterclaim. See Mikaelian, 501 A.2d at 723 (noting as significant the plaintiffs failure to request continuance following granting of a defendant's motion to amend). Although plaintiff asserted that it was unfairly prejudiced by the change in the course of the trial resulting from the amendment, the trial justice noted that "[s]ome evidence seems to support legitimate inferences that the plaintiff should have expected defendants' defense; and, therefore, the allowance of the amendment, even at this late date, does not prejudice the plaintiff."
The plaintiff averred more specifically that it was prejudiced by the late amendment because the trial justice postponed ruling on the motion to amend until after the start of the trial. In addition, plaintiff claimed it suffered a tactical disadvantage because it had made its opening statement prior to the trial justice's determination to allow the counterclaim, whereas defendants had reserved their opening and were able to present the fraud issue to the jury for the first time. But our examination of the record disclosed the following exchange:
"THE COURT: [Plaintiffs counsel] indicated to me that the lateness of the filing of the motion would put him in a position of being prejudiced thereby. What I suggested was rather than have a trial within a trial or a trial before a trial, that I should listen to some of the evidence and I would decide on the motion at that time. Is that correct?
"[DEFENSE COUNSEL]: Yes, your Honor.
"THE COURT: [Plaintiff's counsel], is that a fair statement?
"[PLAINTIFF'S COUNSEL]: Yes, your Honor.
"THE COURT: You had no objection, either one of you, to my doing that?
"[PLAINTIFF'S COUNSEL]: No, your Honor.
"[DEFENSE COUNSEL]: No, your Honor."
It is well settled that a litigant cannot raise an objection or advance a new theory on appeal if it was not raised before the trial court. Hydro-Manufacturing, Inc. v. Kayser-Roth Corp., 640 A.2d 950, 959 (R.I.1994). Because plaintiff did not request a continuance to prepare a defense or to seek further discovery, we hold that plaintiffs objection to the amendment was waived. Therefore, the trial justice did not abuse his discretion in granting the motion to amend, and hence we shall not disturb his ruling. We are of the opinion, however, that had plaintiff requested it, plaintiff would have been entitled to a continuance because the amendment here completely modified the cause of action.
Statute of Limitations for Fraud
The plaintiff also asserted that the one-year period of limitation provided by § 9-1-14 for "words spoken" should govern defendants' counterclaim for fraud because defendants alleged that Bourdon had defrauded them through oral misrepresentations. In its brief to this Court, plaintiff set forth an extended analysis of the interplay between a statute of limitations and the prosecution of a claim governed by that limitations period, depending on whether the claim is posed as a counterclaim seeking affirmative relief or merely as an affirmative defense. The plaintiff then urged this Court to adopt the rule, apparently followed by a majority of other jurisdictions, that in the event a defendant's claim would be barred by the applicable statute of limitations if it were raised as an independent cause of action, then that claim may be used only as an affirmative defense *753 or offset and should be time-barred if raised as a counterclaim seeking affirmative relief.
Our analysis calls for a different conclusion: we hold that the statute of limitations for fraud and deceit is the general tenyear period for civil actions pursuant to § 9-1-13(a), which period clearly had not run at the time the suit was filed or even when defendants moved to amend their pleadings and to add their counterclaim.
Under the section heading, "Limitation of actions for words spoken," § 9-1-14(a) provides, "Actions for words spoken shall be commenced and sued within one (1) year next after the words spoken, and not after." The official headnotes of earlier compilations of the General Laws also provide under the section on limitation of actions, the period of limitations for slander actions. For example, in G.L.1938, ch. 510, § 1, we find, "Slander, 1 year"; in G.L.1923, ch. 334, § 1, "Slander, one year"; and in G.L.1909, ch. 284, § 1, "Slander, one year." In fact, even the 1857 "Revised Statutes" restricted "[a]ctions of slander" "for words spoken" to two years. Rev. Stat. 1857, ch. 177, § 1. Thus, as past generations of state lawmakers apparently have presumed, and as we suggested in Mikaelian, 501 A.2d at 723-24, the reference to "words spoken" in § 9-1-14(a) does not broaden the statute's application beyond slander but precisely limits it to oral rather than written defamation. Therefore, because § 9-1-14(a) applies only to actions for defamation by spoken word, it is inapplicable to the instant allegation of fraud.
At oral argument before this Court, counsel for plaintiff also argued in the alternative that an action for fraud in the inducement should be governed by the three-year period of limitations of § 9-1-14(b), which applies to actions for "injuries to the person." In Commerce Oil Refining Corp. v. Miner, 98 R.I. 14, 20-21, 199 A.2d 606, 610 (1964), this Court suggested that
"the phrase `injuries to the person' as used in [§ 9-1-14(b) ] is to be construed comprehensively and as contemplating its application to actions involving injuries that are other than physical. Its purpose is to include within that period of limitation actions brought for injuries resulting from invasions of rights that inhere in man as a rational being, that is, rights to which one is entitled by reason of being a person in the eyes of the law * * * [as] distinguished from those which accrue to an individual by reason of some peculiar status or by virtue of an interest created by contract or property."
In this case, defendants' counterclaim asserted that plaintiff had fraudulently induced defendants to enter the Agreement by promising that "a substantial amount of business would be given to [defendants] in order to make [their newly acquired mattress business] solvent and profitable." Fraud in the inducement is defined as "[m]isrepresentation as to the terms, quality or other aspects of a contractual relation, venture or other transaction that leads a person to agree to enter into the transaction with a false impression or understanding of the risks, duties or obligations she has undertaken." Black's Law Dictionary 661 (6th ed.1990). The damages suffered by defendants, and thus their compulsory counterclaim for the fraud that gave rise to those damages, were inseverable from their contractual relationship with plaintiff. Under the analysis of Commerce Oil Refining Corp., defendants' counterclaim is not an action for "injuries to the person." Hence, because the Legislature has not specified a period of limitations for actions for fraud in the inducement to a contract, it is our conclusion that the general ten-year period of § 9-1-13(a) applies to actions for fraud or deceit.
Form for Special Verdict
The plaintiff next contended that the verdict form prepared by the trial justice was materially misleading in respect to the issues to be decided by the jury. Pursuant to Rule 49(a) of the Superior Court Rules of Civil Procedure, the trial justice gave the jurors a special verdict form that asked the following questions:
"1. Has Plaintiff, Bourdon's Inc., proven by a fair preponderance of the evidence that Defendants, Ecin Industries, Inc., Harvey Bigelow and Patricia MacMillen without justification breached their agreement *754 and guarantees to make payments for the sale of the assets from Bourdon's, Inc. to Ecin Industries, Inc.? * * *
"If your answer to question 1 is No, then go on to answer question 2. If your answer to question 1 is Yes, your deliberations will cease and you will return a verdict for Bourdon's on its claim and a verdict for Bourdon's on Ecin Industries, Inc., Harvey Bigelow and Patricia MacMillen's counterclaim.
"2. Have Defendants, Ecin Industries, Inc., Harvey Bigelow and Patricia MacMillen proven by clear and convincing evidence that Plaintiff, Bourdon's Inc., through its principal, John Bourdon, made material representations intending that Defendants, Ecin Industries, Inc., Harvey Bigelow and Patricia MacMillen rely upon them and they in fact did rely upon them?
* * *
"3. What is the total amount of damages sustained by Defendants, Ecin Industries, Inc., Harvey Bigelow and Patricia MacMillen?"
The plaintiff argued that this verdict form was replete with errors including, inter alia, the fact that question No. 1 failed to limit the jury in its consideration of defendants' breach to "legally sufficient justification" rather than mere "justification" and misled the jury into believing that it would not be allowed to consider defendants' offsets if it found that defendants had wrongfully breached. The plaintiff charged question No. 2 with the most serious deficiency because it read "material representations" rather than the legally correct phrase "material mis representations." This typographical error, plaintiff asserted, seriously prejudiced its case because defendants were not held to their burden of proving both that plaintiff knew the representations it had made to defendants were false and that plaintiff had intentionally induced defendants to rely on those misrepresentations to their detriment.
We indicated in H.J. Baker & Bro., Inc. v. Orgonics, Inc., 554 A.2d 196 (R.I.1989), that in order to preserve an objection to the form of special interrogatories under Super. R. Civ. P. 49(a), a party must either submit requested interrogatories to the court and have them denied or object to particular interrogatories before the jury retires to reach a verdict. Id at 201 (citing Stewart & Stevenson Services, Inc. v. Pickard, 749 F.2d 635, 641 (11th Cir.1984)). The plaintiff acknowledged that it knew the trial justice would be presenting special interrogatories to the jury and that the trial justice and the parties' attorneys discussed the contents of the verdict form in chambers. Yet, plaintiff did not avail itself of the opportunity to submit requested interrogatories, nor did it object to those that the trial justice sent to the jury. Although plaintiff claimed that it had no opportunity to object to the verdict form, the record revealed that after charging the jury but before the form was sent out, the trial justice convened a sidebar conference and specifically asked the parties' lawyers if either had any objections. The plaintiff's counsel indicated that he had none other than his objection to the trial justice's refusal to charge the Statute of Frauds. A second opportunity to object to the verdict form on the record arose just shortly after this colloquy, when the trial justice instructed the lawyers for the parties to inspect the materials that would be sent to the jury room to ensure that only those exhibits marked "full" were included. The plaintiff's counsel did not object but, rather, expressed that plaintiff was "satisfied." Because plaintiff failed to comply with the Rule 49(a) requirements for preserving an objection to a special verdict form, we consider this issue waived on appeal.[1]
Jury Instruction on Statute of Frauds
The plaintiff next argued that the trial justice committed reversible error in refusing *755 to charge the jury on the Statute of Frauds, and that such a charge was necessary because defendants "contended that the [plaintiff] had made certain oral promises to them concerning referral of future business which the [defendants] testified was to take place over a five year period, and was not to be performed within one year."[2] Specifically, plaintiff maintained that "[t]he jury had an obligation to determine whether the alleged oral agreements [defendants] asserted as defenses to [plaintiffs] claim and as an independent action in their counterclaim were enforceable, in light of the statute of frauds."
Section 9-1-4 provides in pertinent part:
"Statute of Frauds.No action shall be brought:
* * *
(5) Whereby to charge any person upon any agreement which is not to be performed within the space of one (1) year from the making thereof * * *
unless the promise or agreement upon which such action shall be brought, or some note or memorandum thereof, shall be in writing, and signed by the party to be charged therewith, or by some other person by him thereunto lawfully authorized."
It is well established that the purpose of the Statute of Frauds "is to guard against perjury by one claiming under an alleged agreement." Smith v. Boyd, 553 A.2d 131, 132 (R.I.1989) (citing Peacock Realty Co. v. E. Thomas Crandall Farm, Inc., 108 R.I. 593, 601-02, 278 A.2d 405, 409-10 (1971)).
The special verdict form furnished to the jury by the trial justice revealed that only three questions were to be decided. See ante. The defendants' affirmative defense of breach of contract was not placed before the jury.[3] Properly construed, the question before this Court is whether the Statute of Frauds precluded defendants from offering proof of alleged oral representations by plaintiff to substantiate their counterclaim for fraud,[4] or whether the trial justice was correct in his reasoning that the jury should not be charged on the Statute of Frauds because the charge "[wasn't] applicable under the circumstances and the evidence." (Emphasis added.)
The question of whether the Statute of Frauds precludes an individual from offering proof of an oral promise or representation to substantiate a claim of fraud in situations like the one before us appears to have been last addressed in Barry v. Wixon, 22 R.I. 16, 46 A. 42 (1900) (per curiam). The defendant in that case allegedly made oral misrepresentations regarding the mortgage on a piece of real estate. The plaintiffs purchased the property in reliance thereon. The Court held that the plaintiffs' subsequent action for deceit was precluded by the Statute of Frauds, explaining that
"[i]f [the alleged oral misrepresentation] was made, and was relied on by the plaintiffs as a material inducement to the purchase of the land, they should have had it put into writing, and made a part of the contract of purchase of the land from the defendant, as required by the statute of frauds." Id. at 17, 46 A. at 42
*756 Barry, however, has never been cited in any subsequent case by this Court.[5] Decades after the Barry decision, we examined the issue of false and fraudulent misrepresentation in Berberian v. Martin, 100 R.I. 227, 214 A.2d 189 (1965), in which the complainant alleged that the respondent had fraudulently induced him to purchase the respondent's refreshment stand business by making misrepresentations about the amount of business and gross income generated by the business. Although it denied the complainant's contentions of error in the trial court's evidentiary rulings, the Court observed that, "[w]here fraud is alleged, the court has a wide discretion with respect to the admission of evidence either to prove or disprove that allegation." Id. at 228, 214 A.2d at 190 (citing International Shoe Co. v. Berick, 55 R.I. 333, 335, 181 A. 297, 298 (1935)).
The First Circuit Court of Appeals has, however, squarely addressed the question of whether the Statute of Frauds prohibits evidence of an oral promise or representation to substantiate a claim for misrepresentation, fraud, and/or deceit in a context analogous to the one presented in the instant case. In LaBarre v. Shepard, 84 F.3d 496 (1st Cir. 1996), the defendants had instituted foreclosure proceedings against the plaintiffs following the plaintiffs' default on their mortgage. Id. at 497. According to the plaintiffs, prior to foreclosure the parties' attorneys had orally agreed that the plaintiffs would deliver a deed in lieu of foreclosure, and in return defendants would credit $150,000 toward any mortgage deficiencies. The defendants denied that any such agreement was reached. Id. at 498. When the defendants refused to honor this alleged agreement and foreclosed on the property, the plaintiffs brought a diversity action in federal court. The plaintiffs' complaint contained five counts: (1) unfair and improper foreclosure; (2) breach of contract; (3) intentional misrepresentation; (4) fraud; and (5) unfair trade practices under New Hampshire law. Id. The defendants moved in limine to exclude all evidence of the alleged oral agreement to accept a deed in lieu of foreclosure, relying on New Hampshire's Statute of Frauds.[6] The trial court denied the motion, ruling that, under state law, the Statute of Frauds did not apply to oral settlement agreements between attorneys. The jury, answering special interrogatories, subsequently returned a verdict for the plaintiffs on all five counts. The defendants argued on appeal that the trial court erred, inter alia, in allowing evidence of the alleged oral agreement. Id. at 499.
The First Circuit Court of Appeals affirmed the trial court's evidentiary ruling, based not on an exception to the Statute of Frauds, but, rather, on the inapplicability of the Statute of Frauds. The court, noting that the parties to the action had, as in the instant case, misconstrued the issue, reasoned:
"[T]he parties miss the real issue and misunderstand the operation of the Statutes of Frauds.
"There is no need here to decide the existence, scope, or applicability of the asserted common-law exceptions to the Statute of Frauds (the so-called `oral settlement agreement between attorneys' exception and the part-performance exception). We hold instead that, under New Hampshire law, the Statute of Frauds is only a bar to the enforcement of certain oral contracts; it is not a rule of evidence. Evidence of the oral agreement in this case was relevant to the counts alleging improper foreclosure, misrepresentation, fraud, and unfair trade practice * * *.
* * *
"Because the evidence of the alleged oral agreement was admissible for purposes *757 other than enforcing that agreement, i.e., to prove the four non-contract counts, and because the breach of contract count did not affect the judgment, there is no reversible error * * * ." (Emphases added.) 84 F.3d at 500-01.
See also Munson v. Raudonis, 118 N.H. 474, 387 A.2d 1174, 1176-77 (1978) (holding that Statute of Frauds does not bar action in deceit to recover on oral promise, although it would bar action to enforce alleged contract); Brown v. Founders Bank and Trust Co., 890 P.2d 855, 865 (Okla.1994) ("[a] statute of fraud does not abolish the common law remedy for fraud merely because the fraudulent misrepresentation is not in writing"); 37 C.J.S. Frauds, Statute of § 27 (1997) ("[t]he fact that false representations are made in connection with a contract which the general statute of frauds requires to be in writing does not render it necessary that such representations shall be in writing in order that they may sustain an action of deceit * * * where plaintiff does not seek to enforce the contract or sue for a breach thereof") (emphasis added); Restatement (Second) Contracts § 143 (1981) ("[t]he Statute of Frauds does not make an unenforceable contract inadmissible in evidence for any purpose other than its enforcement in violation of the Statute").
In the instant case, as noted ante, plaintiff disavowed making any oral representations; it was defendants' counterclaim for fraud in the inducement of the contract that was presented to the jury and answered by an interrogatory in the verdict form. The defendants' affirmative defense of breach of contract was never placed before the jury. Because proof of plaintiffs alleged oral representations was relevant to the counterclaim, we hold explicitly for the first time that § 9-1-4 is inapplicable to a claim of misrepresentation, fraud, and/or deceit, and thus overrule Barry v. Wixon to the extent that it holds to the contrary. It is our opinion that invoking the Statute of Frauds in cases like the one at bar would exploit the statute as an engine of fraud and would "sanction rather than * * * prevent an injustice," Peacock Realty Co., 108 R.I. at 602, 278 A.2d at 410. Accordingly, we conclude that the trial justice's refusal to charge the jury on the Statute of Frauds was not error.
Evidentiary Objections
The plaintiffs fifth claim of error was that the trial justice erred in admitting certain documents into evidence over its objections. Specifically, plaintiff maintained that the admission of defendants' version of the customer list was erroneous because defendants had failed to establish a proper foundation for the list. In addition, plaintiff argued that the admission of the BIS sales catalogues for 1994 and 1995 (defendants' exhibit Nos. B and C, respectively), and of an envelope with a distinctive ticking pattern on it (defendants' exhibit No. D), constituted error because the items were not relevant to the case and because an adequate foundation had not been laid for their admission.
Following an exchange between Bigelow and defendants' attorney regarding defendants' customer list, the list was admitted as a full exhibit, over plaintiffs objection that Bigelow "never said where it came from or who deliveredor who had given it to him." Although Bigelow admitted at trial that he was uncertain how he acquired defendants' version of the list, he was unequivocal in his assertion that the proffered list was identical in content to that which he had been shown prior to the closing. The record further suggested that Bigelow testified that defendants' proffered list was not the original list that he had been shown prior to the closing because it included asterisks; Bigelow never testified that the contents of the proffered list were different from those of the original.
The plaintiff also argued that the admission of the BIS sales catalogues for 1994 and 1995 constituted error because there had been no showing that BIS "is related to Mr. Bourdon or to this action." The trial justice explained, however, that the catalogues were admissible because Bigelow "testified that both of these catalogues were similar to [plaintiffs catalogues that] he reviewed prior to entering into the agreement with Mr. Bourdon."
Finally, plaintiff claimed error in the admission of an envelope with a distinctive ticking *758 pattern on it after Bigelow testified that the envelope was "[e]xactly the same" as the envelopes in which defendants would receive correspondence from plaintiff. The envelope's pattern apparently matched the pattern on an invoice that BIS sent to J & W. Although plaintiff objected to the admission of the envelope on the ground that Bigelow had testified that the envelope was of the kind received from "Mr. Bourdon," and, as such, was not relevant to the instant action since Bourdon was not a named party, the transcript revealed that Bigelow responded in the affirmative when asked, "Is that the type of envelope you'd receive from Bourdon's over this period of time?" (Emphasis added.)
It is well established that "the admissibility of evidence is within the sound discretion of the trial justice, and this Court will not interfere with the trial justice's decision unless a clear abuse of that discretion is apparent." Soares v. Nationwide Mutual Fire Insurance Co., 692 A.2d 701, 701-02 (R.I.1997) (mem.) (citing Cuddy v. Schiavonne, 568 A.2d 1387, 1389 (R.I.1990)). We have held that this standard is applicable to a trial justice's determinations with respect to both the relevancy of proffered evidence and the adequacy of the foundation laid for its admission. See, e.g., Montecalvo v. Mandarelli, 682 A.2d 918, 927 (R.I.1996) (relevancy); Puccio v. Diamond Hill Ski Area, Inc., 120 R.I. 28, 38, 385 A.2d 650, 656 (1978) (foundation).
The record before us is devoid of any evidence of an abuse of discretion on the part of the trial justice in admitting defendants' proffered documents, albeit over plaintiffs objections. In the absence of such a showing, we conclude that no error occurred in their admission.
Weight of the Evidence
The plaintiff's final argument on appeal was that the jury's verdict was against the fair preponderance of the evidence. The plaintiff essentially argued that (1) the jury could not have considered defendants' affirmative defense of breach of contract and counterclaim for fraud as offsets to the amount defendants owed on the Note had the statute of limitations and the Statute of Frauds been applied to bar these claims or, in the alternative, (2) even if the affirmative defense and the counterclaim were considered, they could only be used to offset the amount owed on the Note, and not, as the jury had done, to assess additional damages. This claim was raised, and presumably addressed, at the July 5 hearing on plaintiffs motion for a new trial.
In Morgera v. Hanover Insurance Co., 655 A.2d 698, 698 (R.I.1995) (mem.), this Court succinctly articulated the role of the trial justice in ruling upon a motion for a new trial based on the alleged inadequacy of evidence:
"[T]he trial justice must consider, in the exercise of his independent judgment, all the material evidence in the case, in the light of his charge to the jury and pass on its weight and the credibility of the witnesses, determine what evidence is believable, and, decide whether the verdict rendered by the jury responds to the evidence presented and does justice between the parties. In ruling on a motion for a new trial if his or her independent judgment persuades the trial justice that the verdict is wrong because it fails to respond truly to the merits and to administer substantial justice between the parties or is against the fair preponderance of the evidence, he should set aside the verdict and order a new trial. Cartier v. State, 420 A.2d 843 (R.I.1980)."
Moreover, "the trial justice need not engage in an exhaustive review and analysis of all of the evidence and testimony presented at trial * * * [but] need only make reference to such facts disclosed by the testimony as have motivated his or her conclusion." Kwarciak v. Star Market, 506 A.2d 545, 547 (R.I.1986) (citing Zarrella v. Robinson, 460 A.2d 415 (R.I.1983); Yammerino v. Cranston Tennis Club, Inc., 416 A.2d 698 (R.I.1980)). (Emphases added.)
Our review of the record reveals that the plaintiff has failed to provide this Court with a transcript of the July 5 hearing. Rule 10(b)(1) of the Supreme Court Rules of Appellate Procedure requires an appellant to *759 order "a transcript of such parts of the proceedings not already on file as the appellant deems necessary for inclusion in the record." The plaintiff's failure to order a transcript of the hearing on the motion for a new trial precludes meaningful review by this Court of the factors that prompted the denial of the plaintiffs motion. State v. Mattera, 671 A.2d 1227, 1229 (R.I.1996) (per curiam) (citing Chariho Regional High School District v. Town Treasurer of Hopkinton, 109 R.I. 30, 45, 280 A.2d 312, 320 (1971)). In such circumstances, we have "no choice but to uphold the trial justice's findings." In re Kimberly and James, 583 A.2d 877, 879 (R.I.1990). Therefore, the plaintiffs appeal on this issue must fail.
In summary, for the foregoing reasons, we deny and dismiss the plaintiffs appeal and affirm the judgment of the Superior Court, to which we return the papers in this case.
NOTES
[1] We agree with plaintiff that the wording of the questions on the special verdict form was erroneous. We note, however, that our concern over potential injustice or error in the verdict is allayed because, in the accompanying charge to the jury, the trial justice painstakingly reviewed the legal definition and importance of "material misrepresentation." In light of the attention given to this issue by the justice, it is unlikely that the jury misunderstood plaintiff to be liable for damages because of any truthful representations that Bourdon made to defendants. The trial justice also specifically and carefully reviewed defendants' burden with respect to proving their counterclaim for fraud.
[2] The trial justice refused to charge the jury in accordance with plaintiff's charge No. 9, which read:
"Need for a Written Contract. In order for you to find that there was any agreement which existed between the Plaintiff and the Defendants with regard to purchasing of products by the Bourdon's, Inc. [sic ] from the defendants for a period which was to exceed one year, there must be some written note or memorandum of that agreement signed by Bourdon's, Inc. to that effect. In addition, to prove that there was such a long term agreement between the parties, the signed memorandum must contain all of the material substantive terms of the contract, so that it is not necessary to resort to oral testimony to support one or more of such terms and to make it complete and definite."
[3] In their respective briefs to this Court, both plaintiff and defendants argued the jury charge issue as though defendants' breach-of-contract claim had been placed before the jury. Neither party addressed the counterclaim of fraud in its discussion of the Statute of Frauds.
[4] The defendants also raised the affirmative defense of fraud and/or deceit. We confine our discussion and analysis to the counterclaim for fraud because the record reveals that the trial justice placed only the counterclaim before the jury.
[5] Our research revealed that Barry v. Wixon, 22 R.I. 16, 46 A. 42 (1900), has been cited by only one court on one occasion. In Alletson v. Powers, 72 Vt. 417, 48 A. 647 (1900), the Supreme Court of Vermont cited Barry for a proposition not at issue in this case.
[6] New Hampshire Rev.Stat.Ann. § 506:1 (1955) (1997 Replacement ed.) provides in pertinent part that Ink, action shall be maintained upon a contract for the sale of land unless the agreement upon which it is brought, or some memorandum thereof, is in writing and signed by the party to be charged, or by some person authorized by him in writing."
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491 S.W.2d 497 (1973)
ST. LOUIS COUNTY, Missouri, Plaintiff-Respondent,
v.
UNIVERSITY CITY et al., Defendants-Appellants,
The City of St. Ann, Intervenor-Defendant-Appellant,
St. Louis County Municipal League, Amicus Curiae.
No. 57998.
Supreme Court of Missouri, En Banc.
March 12, 1973.
George F. Gunn, Jr., St. Louis County Counselor, Thomas W. Wehrle, Deputy County Counselor, Clayton, for respondent.
Robert C. Jones, Clayton, for City of Webster Groves.
Gregory M. Sheehan, Jr., University City, for University City.
A. E. Nick, Ferguson, for City of Ferguson.
*498 V. Jack Muehlenkamp, Dellwood, for City of Florissant.
Edgar G. Boedeker, Clayton, for City of Clayton.
Robert E. Murray, Crestwood, for City of Crestwood.
Donald U. Biemdiek, St. Louis, for City of Richmond Heights.
William R. Dorsey, Clayton, for City of St. Ann.
Robert C. Jones, Ziercher, Tzinberg, Human & Michenfelder, Clayton, for St. Louis County Municipal League, amici curiae.
Robert E. Staed, Kappel, Neill, Staed & Wolff, St. Louis, for City of Kirkwood, amici curiae.
William R. Dorsey, Clayton, for City of St. Ann, intervenor-appellant.
MORGAN, Judge.
In a proceeding for declaratory judgment, St. Louis County requested the trial court to declare the rights of the county, and the ninety-six municipal corporations lying wholly or partially within said county, to the tax funds realized from the special road and bridge tax levied against property located in said county for the year 1971. (Mo.Const. Art. X, § 12(a); § 137.555, RSMo 1969.) The uncertainty stemmed from the adoption of House Bill No. 306 by the 76th General Assembly at its first session in 1971, which, in so far as of interest here, changed the percentage of revenue to which the county and such municipalities were entitled. The trial court determined that the new method of distribution called for by House Bill No. 306 (now Section 137.558, RSMo 1969) did not apply to the proceeds of such tax for the year 1971. Defendants have appealed. We affirm.
The basic facts, to which the parties agree, are as follows: (1) That plaintiff is a county of the first class, operating under a charter form of government pursuant to the provisions of Article VI, Section 18, of the 1945 Missouri Constitution, and that defendants are municipal corporations situated within St. Louis County, and are fairly representative of the ninety-six (96) municipal corporations lying wholly or partially within the county and adequately and fairly represent the whole class of municipalities that receive funds from the county's special road and bridge tax that is levied upon property situated within the corporate limits of each of the municipalities; (2) That under the provisions of Section 137.558 (as originally enacted in 1965 and before amendment by House Bill No. 306), defendants, and every other city lying wholly or partially within St. Louis County, were entitled to a refund from the county's special road and bridge tax of 50% of the amount accruing to the county from the first 18 cents per $100.00 assessed valuation of the tax levied upon property situated within the limits of any such city; (3) That the 76th General Assembly, at the session which ended on June 30, 1971, enacted House Bill No. 306, which amended Section 137.558 to provide that the county would refund to said cities 100% of the amount accruing to the county from the first 18 cents per $100.00 assessed valuation by virtue of said tax; and (4) That House Bill No. 306 became part of the statutory law of this state on September 29, 1971, by virtue of Sections 20a and 29 of Article III of the 1945 Missouri Constitution.
In addition, the record reflects that the county, in compliance with existing laws, did approve its budget for the year 1971, and levy the road and bridge tax, now in dispute, for the year 1971 during the month of December, 1970.
Several briefs have been submitted on behalf of the different municipalities, and each tends to emphasize a different argument why the trial court erred. However, they may be summarized fairly as follows: (1) That House Bill No. 306 contained neither an emergency clause nor an effective date in the future, and it became law *499 on September 29, 1971; (2) That the statutory language refers to taxes "accruing" and would be applicable to those 1971 taxes then in the "process of maturing"; (3) That the trial court ruling, in effect, called for the county ordinances (those adopted in December, 1970, setting the 1971 budget and levying the questioned tax) to supersede the legislative enactment found in House Bill No. 306; (4) That the county did not rely on the previous method of distribution while approving the budget for 1971; and, (5) That the trial court erred in concluding that changing the method of distribution, in September of 1971, of taxes levied prior thereto would be violative of the restrictions against retroactive laws.
In contrast thereto, the county takes an opposite approach to each argument noted.
Since we believe that the law controlling disposition of this case is well established, this opinion need not be extended by detailed consideration of the validity of each and every reason given by the trial court for its ruling.
First, legislative action by the General Assembly in this taxing area is generally controlling. As said in Padberg v. Roos, (Mo. banc 1966) 404 S.W.2d 161 at l.c. 171: "A county or a city, charter or otherwise, is imperium in imperio, that is, a government within a government. The people of a county or city, as such, are not sovereign. A non-charter county or city has the powers conferred on it by the Constitution and statutes of the state. A charter does not transform a county or city into a government apart from and superior to the state." More specifically, in a case actually involving a road and bridge tax, State v. Burton, 266 Mo. 711, 182 S.W. 746, l.c. 748-749 (1916), this court concluded that: "The legislative power to tax being inherent, the creation of agencies or instrumentalities for the levy, collection, and disbursement of such taxes follows as a necessary consequence, and hence the right of the Legislature to enact a law delegating in this case the disbursement of the taxes collected to a board of commissioners of a special road district is not an improper exercise of such power." See also State v. Atchison, T. & S. F. Ry. Co., 270 Mo. 251, 192 S.W. 990 (1917), and State v. Pemiscot Land & Cooperage Co., 317 Mo. 41, 295 S.W. 78 (banc 1927). "Subject to constitutional restrictions, the legislature has full power and control over the disposition of taxes." 85 C.J.S. Taxation § 1057. As was said in State ex rel. St. Louis Police Commissioners v. St. Louis County Court, 34 Mo. 546, at l.c. 570 (1864): "Its [General Assembly's] determination and direction may operate unwisely, harshly and unjustly, but that is no argument against its power to direct." The latter case involved a legislative enactment calling for the county to be "chargeable with one-fourth of the whole expense of the police force of said city of St. Louis for the year 1864, and for each year thereafter. . .." The act in question was enacted and became effective in 1864, and it was held to apply to that current year. However, that case involved express language specifying the time county funds were to be affected; and, we are left with the question, over and above the legislative power to act, as to what tax revenues were to be subjected to the new percentage of distribution established by House Bill No. 306.
What was the intent of the lawmakers? As a general rule ". . . statutes are construed to operate prospectively unless the legislative intent that they be given retrospective or retroactive operation clearly appears from the express language of the acts, or by necessary or unavoidable implication." State v. Jensen, 363 S.W.2d 666, 670 (Mo. banc 1963.) See also Green City v. Martin, 237 Mo. 474, 141 S.W. 879 (banc 1911), which involved the same road and bridge tax, wherein this court, at l.c. 882 [3], expressed a strong reluctance to apply a new enactment to the current year (1909) absent express "legislative sanction."
*500 At the time House Bill No. 306 was passed, the assessments against property located in the county had been made and the rate of tax thereon had been levied for the year 1971. Section 137.075, RSMo 1969, provides: "Every person owning or holding real property or tangible personal property on the first day of January, including all such property purchased on that day, shall be liable for taxes thereon during the same calendar year." Nothing remained but the collection of the tax proceeds later in the year. Did the General Assembly intend to change the recipient of such funds for the year 1971? We think not. The net effect of such a change, in the middle of the taxing process, would be to repeal the questioned tax in so far as the county is concerned and to enact a new tax for the benefit of the municipalities. We have noted the general rule, suggested by defendants, as announced in 16A, C.J.S. Constitutional Law § 417 (Laws impairing state or municipal rights) p. 106, that: "As long as private rights are not infringed, the state may constitutionally pass retrospective laws waiving or impairing its own rights, or those of its instrumental subdivisions or of the public generally . . .." However, in this case we need not consider the rule or possible limitations placed thereon by this court in Green City v. Martin, supra, for there is no legislative "sanction", express or implied, that there was an intent to pass a law, retroactive in effect, by the enactment of House Bill No. 306.
The county submits that it must be able to estimate future revenue from taxation in order to budget for any forthcoming year. Such an obvious truth would be applicable to any governmental unit, and we do not believe we should place the General Assembly in the position of having disrupted such an orderly procedure absent an expressed or necessarily implied intent to do so. We are further persuaded by the provisions of Section 50.060, RSMo 1969, which, in part, authorizes the county to borrow ". . . in anticipation of the collection of taxes and revenues for the current fiscal year. The amount of such loans shall at no time exceed ninety per cent of the estimated collectible taxes and revenues for the year yet uncollected." Had the General Assembly intended to undermine the procedure called for by the borrowing authority noted, we believe it would have said so. In passing, an interesting question could be posed as to whether or not Section 50.060 makes the rule quoted from C.J.S., supra, reference a liberality toward retroactive laws which affect only governmental units, inapplicable in this state. For instance, could a lender under the statute claim that its security (tax revenues) constituted a vested right even though anticipated revenue might not be considered as such in favor of the county?
We can not attach the same significance to the statutory use of the word "accruing" (taxes) as do the cities involved. The same word was used in the statute before and after the changed percentage of distribution, and it was merely descriptive of any current tax obligation becoming payable. In addition, we need not consider any alleged trial errors in connection with the county's effort to show it had relied on the revenues in question while preparing its budget for the year 1971.
In view of the established rule of statutory construction that new enactments, and particularly those pertaining to taxation, are to be given a prospective application, we are convinced, absent an express or clearly implied sanction otherwise, that the General Assembly intended for House Bill No. 306 (now Section 137.558 as amended) to apply to said tax that might be levied for the year 1972 and thereafter.
The judgment is affirmed.
All concur except SEILER, J., who concurs in result.
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994 F. Supp. 111 (1997)
Patricia WORTHINGTON
v.
CITY OF NEW HAVEN.
No. 3:94CV609 (JBA).
United States District Court, D. Connecticut.
September 23, 1997.
Diane Polan, Williams, Polan & Pattis, New Haven, CT, Donna Chance Dowdie, Office od Corp. Counsel, New Haven, CT, for Plaintiff.
Jerald S. Barber, Corp. Counsel's Office, New Haven, CT, for Defendant.
ORDER
ARTERTON, District Judge.
After full review and absent any objection, the Recommended Ruling is APPROVED and ADOPTED as the ruling of this Court, pursuant to 28 U.S.C. § 636 (b)(1)(B) and rule 2 of the Local Rules for United States Magistrate (D.Conn. 1994.)
IT IS SO ORDERED.
*112 RULING ON DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS
FITZSIMMONS, United States Magistrate Judge.
Patricia Worthington brings this action against her former employer, the City of New Haven, claiming that the City refused to reasonably accommodate her disability, in violation of the Americans with Disabilities Act of 1990; 42 U.S.C. § 12131 et seq. ("ADA"), Federal Rehabilitation Act 29 U.S.C. § 794 ("Section 504"); and Article First, § 20 of the Connecticut Constitution. Since defendant answered plaintiff's Amended Complaint [Doc. # 24] prior to filing the pending Motion to Dismiss [Doc. ¶ 29], the Court shall construe defendant's Motion to Dismiss as a Motion for Judgment on the Pleadings pursuant to Fed.R.Civ.P. 12(c). The parties have presented no evidence outside the pleadings for the Court to consider on this Motion.
Defendant seeks dismissal of Counts Four through Six of the Amended Complaint, arguing that plaintiff is not a qualified handicapped individual as defined in the ADA and Federal Rehabilitation Act.[1] The parties stipulate that the "sole purpose of defendant's Motion to Dismiss is to challenge, as a matter of law, the plaintiff's entitlement to damages on her total inability to work allegedly resulting from the defendant's failure to accommodate her disability." [Doc. # 31]. For the reasons that follow, defendant's Motion for Judgment on the Pleadings [Doc. # 29] is DENIED.
STANDARD
The standards applicable to a motion for judgment on the pleadings under Rule 12(c) are identical to those for a Rule 12(b)(6) motion to dismiss. Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.) (citation omitted), cert. denied, 513 U.S. 816, 115 S. Ct. 73, 130 L. Ed. 2d 28 (1994). When considering a Rule 12(b) motion to dismiss, the court accepts as true all factual allegations in the complaint and draws inferences from these allegations in the light most favorable to the plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974); Easton v. Sundram, 947 F.2d 1011, 1014-15 (2d Cir. 1991), cert. denied, 504 U.S. 911, 112 S. Ct. 1943, 118 L. Ed. 2d 548 (1992). Dismissal is warranted only if, under any set of facts that the plaintiff can prove consistent with the allegations, it is clear that no relief can be granted. Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S. Ct. 2229, 81 L. Ed. 2d 59 (1984); Frasier v. General Elec. Co., 930 F.2d 1004, 1007 (2d Cir.1991). "The issue on a motion to dismiss is not whether the plaintiff will prevail, but whether the plaintiff is entitled to offer evidence to support his or her claims." United States v. Yale New Haven Hosp., 727 F. Supp. 784, 786 (D.Conn. 1990) (citing Scheuer, 416 U.S. at 232). Judgment on the pleadings should be granted if the movant "is entitled to judgment as a matter of law." Burns Int'l Security Servs. v. International Union, 47 F.3d 14, 16 (2d Cir.1995).
ALLEGATIONS OF FACT[2]
1. Plaintiff was hired as an Account Clerk I in the Tax Office of the City of New Haven in December, 1991. [Doc. # 20, Amend. Compl. Paragraph 3 (hereafter "¶")].
2. From December, 1991 to present, plaintiff has been a "qualified individual with a disability" as defined under the ADA, and a person with a "handicap" as defined by the Rehabilitation Act of 1973. [¶ 3].
3. Defendant City of New Haven is a "public entity" as defined by the ADA and is a recipient of "federal financial assistance" as defined by the Rehabilitation Act of 1973. [¶ 4].
4. At the time plaintiff was hired by defendant in December, 1991, plaintiff was suffering from a physical disability and handicap, arising from multiple fractures which resulted from a previous automobile accident. Prior *113 to her employment, plaintiff was required to undergo a pre-employment physical examination. [¶ 5].
5. At the time she was hired, plaintiff was able to perform her job duties. [¶ 6].
6. On or about February 2, 1992, plaintiff fell on a slippery floor near an elevator in the building where she works. As a result of the fall she suffered injuries to her back, neck and knee. [¶ 7].
7. After the accident plaintiff's treating physician prescribed physical therapy, which plaintiff participated in several times a week for three months. [¶ 8].
8. After the accident, plaintiff began to experience lower back pain after sitting for long periods of time, and was unable to perform certain motions without pain. [¶ 9].
Counts one through Three
9. Between April, 1992 and April, 1994, plaintiff made numerous requests to defendant, its agents and employees to accommodate her disability which were refused. [¶¶ 11-24].
10. Plaintiff filed this action on April 13, 1994. [¶ 25].
11. Shortly thereafter, defendant provided plaintiff with the ergonomic chair she had requested and which her physician had prescribed almost two years earlier. [¶ 26].
Counts Four through Six
12. On or about June 1, 1994, plaintiff underwent a cervical spinal fusion procedure. [¶ 25]. She returned to work on a part-time basis on November 13, 1994. [¶ 26].
13. From November 13, 1994 through March 20, 1995, plaintiff made numerous requests to defendant to accommodate her disability which were refused [¶ 27-28], in particular that she be permitted to do her work sitting down, without having to walk around the office, stand or change positions frequently, and without having to reach for files and other materials. [¶ 27].
14. On or about February 13, 1995, and again in mid-March, 1995, plaintiff's treating physician advised her to stop working. [¶ 30].
15. Plaintiff attempted to continue working but was unable to do so. She left her position with the City of New Haven at the end of March, 1995. [¶ 31].
16. Plaintiff's inability to work is the direct result of the defendant's repeated course of conduct in refusing to accommodate her disability during the period between April, 1992 and March, 1995. [¶ 32].
17. As a direct and proximate result of the discriminatory actions of the defendant, its agents and employees, the plaintiff has suffered irreversible and disabling deterioration in her physical condition, is now totally disabled and unable to work, and has suffered and will continue to suffer physical pain and emotional suffering, as well as a total loss of her ability to earn a living. [¶ 34].
DISCUSSION
As a preliminary matter, the parties stipulate that, for purposes of this Motion for Judgment on the Pleadings, "the causal relationship between defendant's alleged failure to accommodate plaintiff's disability, and her inability to work as of March, 1995 ... is not disputed." [Doc. # 31]. The parties further stipulate that the issue presented on this motion is whether plaintiff is entitled to damages based on her total inability to work resulting from defendant's failure to accommodate her disability. Id.
Construing the facts in a light most favorable to the plaintiff and in light of the stipulation of the parties, the Court must therefore assume that plaintiff returned to her job in November, 1994 able to perform her job.[3] Thereafter, plaintiff made numerous requests for reasonable accommodations of her disability but defendant refused. Defendant concedes for purposes of this motion that its failure to accommodate caused her total disability. Accordingly, defendant's claim that *114 plaintiff was not an "otherwise qualified handicapped individual" must fail.[4]
Thus, the question presented is whether plaintiff may seek damages for becoming totally disabled due to the City's refusal to accommodate her disability while she was its employee. The Court concludes that this is a viable claim of damages flowing from the failure to accommodate. Langon v. Department of Health and Human Services, 959 F.2d 1053, 1061 (D.C.Cir.1992).
Defendant makes a separate argument that Counts Four through Six should be dismissed because they do not state a separate violation of the ADA, Rehabilitation Act and Connecticut Constitution. Rather, defendant argues that this allegation "support[s] a claim for damages for harm caused." [Doc. # 30] (citing Langon, 959 F.2d at 1061-62 and August v. Offices Unlimited, Inc., 981 F.2d 576, 583 (1st Cir. 1992)). The Court disagrees. In Langon, plaintiff alleged only one violation of the ADA. Thus the Langon Court concluded that "allegations concerning [defendant's] denial of her promotion request and its termination of her are like allegations of special damages: while they may affect the nature of the relief received, they do not establish that [defendant] committed separate violations of [the Act]." 959 F.2d at 1061. Similarly, in August, the Court concluded that the plaintiff failed to present competent evidence to prove that defendant's failure to accommodate his disability rendered him totally disabled. 981 F.2d at 583 (ruling on summary judgment).
In contrast, plaintiff here alleges two violations: one in early 1992 (Counts One through Three) and the other after her surgery, from November, 1994 to March, 1995. (Counts Four through Six), "first by refusing to provide her with an ergonomic chair for two years after it was requested, and then by failing to modify her jobsite and duties ... after she returned from surgery in November, 1994." [Doc. # 33 at 12]. Because the alleged violations are separate, each may give rise to a claim for damages.
CONCLUSION
For the reasons stated, defendant's Motion for Judgment on the Pleadings [Doc. # 29] is DENIED.
Any objections to this recommended ruling must be filed with the Clerk of the Court within ten (10) days of the receipt of this order. Failure to object within ten (10) days may preclude appellate review. See 28 U.S.C. § 636(b)(1); Rules 72, 6(a) and 6(e) of the Federal Rules of Civil Procedure; Rule 2 of the Local Rules for United States Magistrates; Small v. Secretary of H.H.S., 892 F.2d 15 (2d Cir.1989) (per curiam); F.D.I.C. v. Hillcrest Assoc., 66 F.3d 566, 569 (2d Cir.1995).
Sept. 3, 1997.
NOTES
[1] Judge Arterton referred this motion to a magistrate judge on October 28, 1996. [Doc. # 34].
The Court has considered: defendant's Motion to Dismiss [Doc. # 29], Memorandum in Support [Doc. # 30], Stipulation of the Parties [Doc. # 31] and plaintiff's Memorandum in Opposition [Doc. # 33].
[2] The following facts set forth in the Complaint are accepted as true.
[3] Nevertheless, defendant is free to challenge this assumption and engage in further discovery regarding plaintiff's treating physician's contention that her "knees had deteriorated because she had to walk around at work to the point where she had become totally disabled." [Doc. # 33 at 3 n. 3].
[4] Of course, at trial defendant will be free to argue that plaintiff was totally disabled upon her return to work and, thus, was not a "qualified handicapped individual" under the ADA. Defendant may also challenge plaintiff's allegation that its failure to accommodate caused her disability. However, on the present record, and in light of the stipulation of the parties, the Court must assume that plaintiff was qualified to perform the requirements of her job.
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72 B.R. 528 (1987)
FIRST NATIONAL BANK OF SMITH CENTER, KANSAS, Appellant,
v.
Robert E. NUGENT, III, Trustee in Bankruptcy, Appellee.
No. 85-6119-C.
United States District Court, D. Kansas.
April 21, 1987.
*529 James L. Bush, Smith Center, Kan., for appellant.
Robert E. Nugent, III, Weinlood, Cole, Shaffer, Lee & Nugent, Hutchinson, Kan., pro se.
MEMORANDUM AND ORDER
CROW, District Judge.
This case is on appeal from the bankruptcy court order of November 27, 1985, which sustained the Trustee's objection to the secured claim of The First National Bank of Smith Center, Kansas (Bank).
Debtor operated in Esbon, Kansas, a facility buying, selling and storing grain and other supplies. Debtor's business practice was to issue warehouse receipts and scale tickets to those grain producers delivering their grain. Many of the warehouse receipts were designated "open storage." This designation permitted the debtor to commingle the grain of a particular producer with that grain owned by the debtor or other grain depositors. Grain producers either kept their grain with debtor for a storage charge or sold their grain outright to the debtor upon deliver or at a later date. Debtor typically financed its purchases through the Bank. Debtor executed a security agreement and financing statements giving the Bank a security interest in "all grain, or contract rights now owned or hereafter acquired." Debtor filed for Chapter 7 relief on February 28, 1985. As of that date, the quantity of grain on hand in debtor's storage was substantially less than the total represented by outstanding receipts, scale tickets and lien pledges to the Bank.
The bankruptcy court ordered on April 15, 1985, that the grain assets in the Trustee's possession were subject to the expedited proceedings under 11 U.S.C. § 557, and that Trustee's plan for immediate sale of the grain and distribution of proceeds was proper and to be executed forthwith. The Bank filed its proof of claim asserting it had a secured claim and should share in the distribution of sales proceeds pursuant to 11 U.S.C. § 725. The Trustee objected to the Bank's claim arguing that the debtor's account of its grain was overdrawn and that the Bank was not a depositor, but a secured party to the extent of debtor's interest in the proceeds.
Construing the 1984 Bankruptcy Amendments in light of the Senate report to Senate Bill 445, 98th Cong. 1st Sess., the bankruptcy court concluded:
By reason of that legislation a grain producer/depositor's rights no longer may be treated on a parity with those of a secured creditor. The expedited procedures of section 557 were intended to preclude any such "forced sharing" by producer/depositor with secured lenders. Bankruptcy courts are mandated to order *530 distribution of the stored grain (or proceeds) to the producer/depositor before distribution to debtor's secured creditors. (emphasis in original.)
In re Esbon Grain Co., Inc., 55 B.R. 308, 314 (Bankr.D.Kan.1985). The bankruptcy court's order of distribution is affirmed for the reasons stated below.
In reviewing the bankruptcy court's decision, this court must accept the factual findings of the bankruptcy court unless they are clearly erroneous, but the court may review de novo the bankruptcy court's legal conclusions. In re Branding Iron Motel, Inc., 798 F.2d 396, 399-400 (10th Cir.1986). The conflicting legal claims to the sale proceeds of the grain is a question of law for this court's de novo review.
Rather than a controversy regarding priorities in the distribution of proceeds, the issue before the court is one of ownership rights to the grain/proceeds. State law is determinative of ownership rights in estate property. State of Mo. v. U.S. Bkrtcy Court, Etc., 647 F.2d 768, 774-75 (8th Cir.1981), cert. denied, 454 U.S. 1162, 102 S. Ct. 1035, 71 L. Ed. 2d 318 (1982); In re Clemens, 472 F.2d 939, 942 (6th Cir.1972); In re Glinz, 46 B.R. 266, 271 (Bankr.D.N.D.1984). Under well-established Kansas law, owners of grain who deposit it with warehouses to be commingled with grain of similar kind and quality are tenants in common of the entire mass. Central States Corp. v. Luther, 215 F.2d 38, 45 (10th Cir.1954), cert. denied, 348 U.S. 951, 75 S. Ct. 438, 99 L. Ed. 743 (1955); Flour Mills of America v. Burrus Mills, 174 Kan. 709, 719, 258 P.2d 341 (1953). See Preston v. United States, 696 F.2d 528, 535 (7th Cir.1982), and K.S.A. 84-7-207(2). The relationship between the warehouseman and depositor is that of bailee and bailors. Luther, 215 F.2d at 45; Moses v. Teetors, 64 Kan. 149, 151, 67 P. 526 (1902). A warehouseman's right "to sell or make other disposition from the common mass is limited to the excess thereof over and above the quantity necessary to redeem the receipts or other commitments issued to the depositors." Luther, 215 F.2d at 45 (citations omitted). The grain depositor/owner "is protected from the creditors of the warehouseman, who may not take upon execution against him grain in store to such an extent that the owner may not obtain his own." Moses v. Teetors, 64 Kan. at 157, 67 P. 526 The Kansas Legislature has recently enacted a provision which clarifies and extends the depositor's ownership interest:
The owner of grain held in storage by a public warehouseman, as defined in K.S.A. 34-223, in this state, whether such grain is held under open storage or pursuant to the issuance of a warehouse receipt, shall have a prior right to such grain against any other person, subject only to the payment of accrued warehouse charges and the satisfaction of any lien or liens upon such grain and valid against the owner thereof, until the grain is either removed from storage by the owner or sold by the owner.
As used in this section, the term "open storage" means the storage of grain pursuant to the issuance of a scale ticket regardless of whether the grain is retained in the warehouse or elsewhere; and the term "owner" means the holder of any warehouse receipt or receipts or of any scale ticket or tickets for grain held in storage by a public warehouseman.
K.S.A. 34-2,107 (1981).
These authorities support the conclusions that depositors/owners of grain are tenants in common as to the commingled mass and that the warehouseman or his creditors cannot take, sell or execute upon grain to the extent that the ownership interest of the depositors/owners cannot be met from the warehouse inventory. In other words, the warehouseman's ownership interest in the commingled mass is subject to this responsibility to redeem and deliver upon the receipts and tickets. It necessarily follows that where a deficiency exists in the warehouse inventory such that all receipts and tickets of grain depositors/owners cannot be satisfied, the warehouseman cannot claim any ownership interest in the commingled mass until the other ownership interests of grain depositors/owners have *531 been met. The Bank's secured claim exists to the extent of the "creditor's interest in the estate's interest in such property." 11 U.S.C. § 506(a). In the present case, the debtor/warehouseman lacked any ownership interest in the commingled grain because of the extent of the established deficiency. Consequently, the bankrupt estate does not include an ownership interest in the commingled grain which would entitle the secured claim asserted against any such interest to share pro rata in the distribution of the proceeds from the grain sale.
The Bank argued before the bankruptcy court that it stepped into the shoes of a depositor as to that grain owned by the debtor and, therefore, was entitled to share pro rata with all other depositors. In support of that argument, the Bank cited Flour Mills of America v. Burrus Mills, 174 Kan. at 719, 258 P.2d 341. That decision of the Kansas Supreme Court is silent as to the right of a warehouseman to share in any pro rata distribution. The deficiency in grain inventory in that case was created by flood damage and was not caused by anything for which the warehouseman was responsible. Being distinguishable from Burrus Mills, the present case fits the following rule:
A warehouseman who puts his own fungible goods into a mass of similar deposited goods becomes as to such goods a tenant in common of the mass. However, if a deficiency occurs in the amount of property in the mass, from any cause for which the warehouseman is responsible, the remaining goods are appropriated for the benefits of holders of other warehouse receipts.
78 Am.Jur.2d § 183 (1975). When the Bank stepped into the debtor's shoes as to the commingled grain, it acquired no ownership interest.
In light of the above discussion, the court finds it unnecessary to discuss the judicial construction given by the bankruptcy court to the 1984 Bankruptcy Code amendments. As it appears from the record that the producers/depositors must share pro rata the grain sale proceeds, the court need not address the question of priorities under 11 U.S.C. § 507(a)(5).
IT IS THEREFORE ORDERED that the bankruptcy court's order of November 27, 1985, is affirmed for the above stated reasons.
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550 Pa. 202 (1997)
704 A.2d 617
Barbara MORGAN and Joseph Morgan, her husband, Appellants,
v.
John A. MacPHAIL, M.D., Appellee.
Kathleen Breslin WALKER and James Walker, Appellants,
v.
Albert ROSE, D.P.M., and Curt D. Miller, M.D., Appellee.
Supreme Court of Pennsylvania.
Argued March 5, 1997.
Decided December 24, 1997.
*203 Jeffrey Pribanic, Vincent A. Coppola, White Oak, for Barbara and Joseph Morgan.
John A. Bass, Pittsburgh, for John A. MacPhail, M.D.
Stanley B. Gruber, Philadelphia, for Kathleen and James Walker.
James I. Devine, Philadelphia, for Curt D. Miller, M.D.
Edward Griffith, Wayne, for Albert Rose, D.P.M.
*204 Before FLAHERTY, C.J., and ZAPPALA, CAPPY, CASTILLE, NIGRO and NEWMAN, JJ.
OPINION OF THE COURT
CASTILLE, Justice.
The sole issue before this Court in these consolidated appeals is whether the doctrine of informed consent should be expanded to include the non-surgical administration of medication where the claimed injury results from the method and location of administration of the medication rather than the medication itself. Because we find that the doctrine of informed consent applies only to surgical procedures, we affirm the Superior Court holdings in both cases.
A. Morgan
On October 20, 1988, appellant Barbara Morgan fell and fractured two ribs. The pain of the injury did not subside with time; therefore, Mrs. Morgan sought treatment from Dr. MacPhail. On December 14, 1988, Dr. MacPhail performed an intercostal nerve block[1] in an effort to alleviate Mrs. Morgan's pain. Later that day, Mrs. Morgan experienced weakness and shortness of breath and telephoned appellee. She then reported to the hospital emergency room where she learned that she suffered a right pneumothorax[2] as a result of the intercostal nerve block procedure.
Mrs. Morgan and her husband filed suit against Dr. MacPhail claiming that he failed to obtain informed consent prior to performing the procedure. Dr. MacPhail filed preliminary objections in the nature of a demurrer arguing that informed consent is necessary only for surgical or operative procedures, and the trial court granted a demurrer. Mrs. Morgan appealed to the Superior Court, and the Superior Court affirmed.
B. Walker
On February 12, 1991, appellant Kathleen Breslin Walker began treatment with appellee Albert Rose, D.P.M., for complaints *205 of pain in her right heel. Dr. Rose injected a long-acting steroid into Mrs. Walker's right superficial adventitious bursa.[3] On April 15, 1991, Dr. Rose administered a second steroid injection into Mrs. Walker's right superficial adventitious bursa. Mrs. Walker's pain had not subsided by June 6, 1991 when she consulted appellee Curt Miller, M.D., an orthopedic surgeon. He diagnosed "Achilles tendonitis" and treated the condition. In August of 1991, Mrs. Walker's Achilles tendon ruptured. Dr. Miller surgically repaired the tendon, and Mrs. Walker developed a skin slough over the incision behind her right heel.[4]
Mrs. Walker and her husband filed suit against Drs. Rose and Miller claiming that Dr. Rose failed to obtain informed consent prior to injecting the steroids into Mrs. Walker's right superficial adventitious bursa and that Dr. Miller failed to inform Mrs. Walker that she could develop a skin slough as a result of the surgery. Following a three-day trial, the jury returned a defense verdict. Specifically, the jury found that Dr. Rose was negligent, but his negligence was not a substantial factor in causing the injury. The jury also determined that no reasonable person in Mrs. Walker's position would have considered the risk of a skin slough in her decision to undergo the surgery and, therefore, found in favor of Dr. Miller. Post-trial relief was denied. Mrs. Walker appealed to the Superior Court, and the Superior Court affirmed.
It has long been the law in Pennsylvania that a physician must obtain informed consent from a patient before performing a surgical or operative procedure. See Sinclair v. Block, 534 Pa. 563, 633 A.2d 1137 (1993); Gray v. Grunnagle, 423 Pa. 144, 223 A.2d 663 (1966). Informed consent, however, has not been required in cases involving non-surgical procedures.[5]
*206 Neither the Pennsylvania legislature nor courts have defined surgical or operative procedure; however, "operate" is defined in Taber's Cyclopedic Medical Dictionary 1256 (16th ed.1989) as "[t]o perform an excision or incision, or to make a suture on the body or any of its organs to restore health." "Surgery" is defined in Black's Law Dictionary 1442 (6th ed.1990) as "that branch of medical science which treats of mechanical or operative measures for healing diseases, deformities or injuries." "Operation" is defined as "an act or succession of acts performed upon the body of a patient, for his relief or restoration to normal conditions, by the use of surgical instruments as distinguished from therapeutic treatment by the administration of drugs or other remedial measures." Id. at 1092.
The procedures involved in the instant appeals do not fall within the definition of surgical or operative procedures because neither involved an excision or incision or the use of surgical instruments; rather, they involved the therapeutic administration of drugs. In fact, the procedures are more closely analogous to the introduction of medication through an intravenous needle or line because the instant procedures and the intravenous use of medication both involve the use of needles to inject medication rather than the use of surgical instruments. Courts applying Pennsylvania law have not required informed consent in cases involving intravenous administration of medication. Wu v. Spence, 413 Pa.Super. 352, 605 A.2d 395 (1992)(no informed consent needed for *207 intravenous administration of antibiotics). Accord, Karibjanian v. Thomas Jefferson University Hospital, 717 F. Supp. 1081 (E.D.Pa.1989)(doctrine not applicable to intravenous administration of prescription drugs).
The rationale underlying requiring informed consent for a surgical or operative procedure and not requiring informed consent for a non-surgical procedure is that the performance of a surgical procedure upon a patient without his consent constitutes a technical assault or a battery because the patient is typically unconscious and unable to object. Gray v. Grunnagle, 423 Pa. at 155, 223 A.2d at 668-69. Appellants here argue that the traditional battery or assault-based theory should be abandoned in favor of a negligence standard. The basis for their argument is their assertion that a patient has the right to determine the scope and direction of medical treatment no matter which form the treatment takes, whether surgical or non-surgical. The patient, appellants urge, has the right to make an informed choice as to electing to undergo a medical procedure after having been presented with the alternatives and the risks attendant to each alternative. This argument, however, flies in the face of the traditional battery theory. It is the invasive nature of the surgical or operative procedure involving a surgical cut and the use of surgical instruments that gives rise to the need to inform the patient of risks prior to surgery. Id. Neither of the procedures performed in the instant appeals were invasive in nature as both involved the injection of medication which does not rise to the same level of bodily invasion as surgery.[6]
*208 Given that prior case law mitigates against the application of the doctrine of informed consent to the instant cases, and adding to that the recent legislation embodying the legislative branch's codification of the law of informed consent which would not require informed consent in these cases, we can conceive of no sound reason to expand the doctrine of informed consent judicially to cover these cases, only to have the recent legislation effectively overturn such a decision as of January 25, 1997. Accordingly, the decisions of the Superior Court in both cases are affirmed.
NIGRO, J., files a dissenting opinion.
NIGRO, Justice, dissenting.
The majority today perpetuates an unfounded distinction in the law of informed consent between surgical and non-surgical procedures. Our lower courts have urged the Court to abolish this distinction and the legislature has enacted legislation superseding lower court precedent based upon it. Since there is no basis to require informed consent before surgery but not before other medical procedures, I would reverse the lower courts' decisions and allow Appellants to pursue their claims.
The Court discussed the doctrine of informed consent in Gray v. Grunnagle, 423 Pa. 144, 223 A.2d 663 (1966). The Gray case produced a plurality opinion with a majority of the *209 Court holding that whether a patient consented to surgery was a question for the jury. Even if the Court's plurality opinion were binding precedent, it in no way limits the doctrine of informed consent to surgical procedures. While Gray involved an operation, the plurality reasoned that a doctor must obtain consent because otherwise he would commit a battery upon the patient. Since a battery is an intentional touching without consent, under Gray, other touchings should also require informed consent.
This principle was recognized in Cooper v. Roberts, 220 Pa.Super. 260, 286 A.2d 647 (1971), where the Superior Court evaluated a jury instruction addressing a doctor's duty to disclose risks to a patient who underwent a gastroscopic examination. The court held that a doctor must disclose risks that a reasonable man would consider material to his decision to undergo treatment. While there was a dispute as to whether the examination was a surgical procedure, the court stated that the duty to disclose applied whether or not the treatment at issue was technically operative. Id. at 266-67 n. 2, 286 A.2d at 650 n. 2.
It appears that the notion that informed consent is not required for non-surgical procedures developed from the opinion of a Superior Court judge in Malloy v. Shanahan, 280 Pa.Super. 440, 421 A.2d 803 (1980). The court rejected a claim that informed consent was required when prescribing a therapeutic drug. In the opinion, the authoring judge quoted the trial court's statement that "the doctrine of informed consent has been applied only to suits involving surgical operations. . . ." Id. at 443, 421 A.2d at 804. The second judge on the panel concurred in the result and the third wrote a dissenting opinion maintaining that informed consent was required.
Presented again with the issue raised in Malloy, the Superior Court stated in Boyer v. Smith, 345 Pa.Super. 66, 72, 497 A.2d 646, 649 (1985), that informed consent "should continue to be limited" to cases involving surgery. Like Malloy, Boyer involved a patient who was allegedly not informed of the risks of oral medication. The court stated that to expand the *210 application of informed consent to such a case would depart from the battery rationale espoused in Gray. Id.
In discussing Boyer, a district court found that the Boyer court went beyond the facts before it in stating that informed consent is only required for surgical procedures. Karibjanian v. Thomas Jefferson Univ. Hosp., 717 F. Supp. 1081, 1084 (E.D.Pa.1989). The Boyer court found that informed consent was not required when prescribing oral medication because there was no touching implicating a battery. Thus, the district court aptly stated that:
The middle ground over which the Boyer court leapt includes a case like the plaintiff's [in Karibjanian] in which the patient is injected with a substance. A touching occurs, perhaps a painful one, yet it is something less than surgery.
Id. The district court concluded that it was reasonable to impose a duty of informed consent when a patient challenges the need for an injection. Id.
Nonetheless, as the majority recognizes, the Superior Court has repeatedly held that informed consent is only required for surgical procedures.[1] The majority fails to mention that the Superior Court has also stated that it finds the surgical/ nonsurgical distinction without basis. See, e.g., Hoffman v. Brandywine Hosp., 443 Pa.Super. 245, 661 A.2d 397 (1995)(noting the artificiality of the distinction and one judge concurring solely to emphasize her discomfort with it); Stover v. Assoc. of Thoracic and Cardiovascular Surgeons, 431 Pa.Super. 11, 635 A.2d 1047 (1993)(noting the court's trouble with the distinction); *211 Wu v. Spence, 413 Pa.Super. 352, 605 A.2d 395 (1992)(stating that it may be time for this Court to reconsider the battery theory in Gray). I agree with our lower court that the surgical/non-surgical distinction is unfounded. Many non-surgical procedures involve a touching and may be technical batteries without informed consent just like surgery. Thus, under the current battery theory of informed consent, informed consent should be required for medical procedures beyond surgery. This is especially true today with technological advances that are invasive but no longer require a surgical cut.
The legislature's recent amendments to the Healthcare Services Malpractice Act, 40 Pa. Stat. §§ 1301.101 1301.1006, support that the Court should abolish the distinction between surgical and non-surgical procedures. The amendments in part require informed consent before the administration of radiation or chemotherapy, blood transfusions, and experimental medication. Id. § 1301.811-A. This legislation supersedes Superior Court precedent that held that informed consent was not required for radiation or blood transfusions because they are non-surgical. See Hoffman v. Brandywine Hospital, 443 Pa.Super. 245, 661 A.2d 397 (1995)(informed consent not required for blood transfusion after surgery); Dible v. Vagley, 417 Pa.Super. 302, 612 A.2d 493 (1992), appeal denied, 535 Pa. 619, 629 A.2d 1380 (1993)(informed consent not required for radiation). Thus, the legislature has implicitly rejected a distinction between surgical and non-surgical procedures in imposing a statutory duty to provide informed consent.
Other states have imposed informed consent requirements based upon a negligence theory rather than a battery theory.[2] These states have generally recognized that the failure to get informed consent is not a technical battery because the doctor's omission is not due to a willful intent to injure the *212 patient. See Malloy v. Shanahan, 280 Pa.Super. 440, 421 A.2d 803 (1980)(Hoffman, J., dissenting and citing cases). In addition, the faulty conduct the failure to inform is not a touching. See id. Thus, other states have decided that a doctor's duty to disclose the risks of medical treatment to the patient is an element of the duty of reasonable care. See id. This view comports with the concept underlying informed consent that the patient has the right to determine what shall be done to his body. I agree that a negligence theory provides a stronger basis for the informed consent doctrine than a battery theory.
In sum, there is no basis to distinguish between surgical and non-surgical procedures in the law of informed consent. I would thus abolish this distinction and in addition, I would join other jurisdictions and adopt a negligence theory to support informed consent requirements.[3]
NOTES
[1] An intercostal nerve block is a procedure whereby a local anesthetic is injected into the area around the ribs.
[2] A pneumothorax is a collapse of the lung.
[3] The right superficial adventitious bursa is located behind the Achilles tendon between the tendon and the skin.
[4] A skin slough is an area of the skin that becomes necrotic and does not heal.
[5] See, e.g., Sinclair v. Block, 534 Pa. 563, 633 A.2d 1137 (1993)(informed consent doctrine does not apply to obstetrician's use of forceps during natural childbirth); Hoffman v. Brandywine Hospital, 443 Pa.Super. 245, 661 A.2d 397 (1995)(informed consent not required for a blood transfusion); Matukonis v. Trainer, 441 Pa.Super. 570, 657 A.2d 1314, appeal granted, 542 Pa. 648, 666 A.2d 1057 (1995)(doctrine inapplicable to chiropractic manipulation of patient's neck); Dible v. Vagley, 417 Pa.Super. 302, 612 A.2d 493 (1992), appeal denied, 535 Pa. 619, 629 A.2d 1380 (1993) (informed consent not required for radiation treatments); Wu v. Spence, 413 Pa.Super. 352, 605 A.2d 395 (1992)(no informed consent needed for intravenous administration of antibiotics); Boyer v. Smith, 345 Pa.Super. 66, 497 A.2d 646 (1985)(doctrine not applicable to oral administration of prescription drugs). See also, Karibjanian v. Thomas Jefferson University Hospital, 717 F. Supp. 1081 (E.D.Pa.1989)(doctrine not applicable to intravenous administration of prescription drugs).
[6] Recently, our legislature codified the law of informed consent in the Healthcare Services Malpractice Act which states:
(a) Except in emergencies, a physician owes a duty to a patient to obtain the informed consent of the patient or the patient's authorized representative prior to conducting the following procedures:
(1) Performing surgery, including the related administration of anesthesia.
(2) Administering radiation or chemotherapy.
(3) Administering a blood transfusion.
(4) Inserting a surgical device or appliance.
(5) Administering an experimental medication, using an experimental device or using an approved medication or device in an experimental manner.
40 P.S. § 1301.811-A, effective January 25, 1997.
This legislation expands in several material ways the applicability of the doctrine of informed consent to cover procedures and treatments not previously included in case law. For example, prior to this legislation, courts had held that the informed consent doctrine did not to apply to radiation or chemotherapy (Dible v. Vagley, 417 Pa.Super. 302, 612 A.2d 493 (1992), appeal denied, 535 Pa. 619, 629 A.2d 1380 (1993)), or to blood transfusions unless incident to surgery (Hoffman v. Brandywine Hospital, 443 Pa.Super. 245, 661 A.2d 397 (1995)). Such procedures, however, now require informed consent under the new statute.
While this new legislation is not applicable to the instant appeals because the injuries complained of occurred prior to the effective date, even under this legislation informed consent would not be required in these cases. Informed consent under the statute is only required for the administration of medication where the medication being administered is experimental or is administered in an experimental manner. Neither appellant has asserted either of these situations which would arguably require this Court to look to the statute for guidance.
[1] The Supreme Court has addressed issues related to informed consent twice in cases involving surgeries and once in a case involving a nonsurgical procedure. In the surgery cases, Gouse v. Cassel, 532 Pa. 197, 615 A.2d 331 (1992) and Moure v. Raeuchle, 529 Pa. 394, 604 A.2d 1003 (1992), the Court did not consider the application of informed consent to non-surgical procedures. In the non-surgery case, Sinclair v. Block, 534 Pa. 563, 570-71, 633 A.2d 1137, 1140-41 (1993), the Court held that informed consent is not required to use forceps in delivering a baby. In rejecting the patient's argument that the use of forceps involves a touching, the Court stated that informed consent presumes that the patient has a choice to make. Since labor is inevitable, the Court held that the informed consent doctrine does not apply to the natural delivery process. To the extent Sinclair also required a surgery for informed consent to apply, I disagree with the Court's decision.
[2] See, e.g., Gorab v. Zook, 943 P.2d 423 (Colo.1997); Wecker v. Amend, 22 Kan. App. 2d 498, 918 P.2d 658 (1996); Carr v. Strode, 79 Hawai`i 475, 904 P.2d 489 (1995); Faya v. Almaraz, 329 Md. 435, 620 A.2d 327 (1993); Arato v. Avedon, 5 Cal. 4th 1172, 23 Cal. Rptr. 2d 131, 858 P.2d 598 (1993); Jacobs v. Painter, 530 A.2d 231 (Me.1987); Wilkinson v. Vesey, 110 R.I. 606, 295 A.2d 676 (1972).
[3] I further disagree with the majority's statement that a judicial expansion of the doctrine of informed consent today would be "effectively overturn[ed]" by the amendments to the Healthcare Services Malpractice Act. The legislature's decision to impose a statutory duty upon doctors to obtain informed consent before certain procedures does not preclude the Court from imposing a duty to disclose for other procedures under a negligence theory of liability.
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491 S.W.2d 681 (1973)
Theodore SHADRICK, Jr., Appellant,
v.
The STATE of Texas, Appellee.
No. 45826.
Court of Criminal Appeals of Texas.
March 21, 1973.
Walter Wolfram, Amarillo, for appellant.
Tom Curtis, Dist. Atty. and Kerry Knorpp, Asst. Dist Atty., Amarillo, Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
JACKSON, Commissioner.
Appellant was convicted of robbery by assault by a jury on his plea of not guilty; the punishment, twenty (20) years.
No question is raised as to the sufficiency of the evidence. It was amply shown that appellant and another man came into *682 the office of the Southwestern Investment Company in Amarillo, about 9:30 A.M. on December 11, 1968, and by displaying a pistol, robbed the manager thereof, Fred Harvey, of approximately $1000 in cash, besides the personal wallets taken from the manager and the female employees. The manager and the three employees identified appellant as the man who displayed the pistol, said this is a stick-up and proceeded to execute the robbery. Appellant's confession was also admitted in evidence.
The first ground of error urged by appellant is:
"The trial court erred in admitting appellant's confession which was taken by police in violation of the warning requirements of Articles 15.17 and 38.22, V.A.C.C.P. of Texas and Miranda v. Arizona."
The court conducted a hearing in the absence of the jury on the voluntariness of the confession and thereafter admitted the confession in evidence.
The evidence relating to the taking of the confession, the warnings given, and the confession was shown by the testimony of Policeman Dale F. Lawless of Denver, as follows:
"Q I will ask you whether or not in connection with your official duties as you described them during the month of December 27, 1968, you had occasion to take a written statement from a person you see in this courtroom?
"A Yes, sir, I did.
"Q Would you tell me what person that is?
"A The gentleman seated at the front table with a blue suit on.
"Mr. Curtis: Let the record reflect that the witness had indicated the defendant in this case, Theodore Shadrick, Jr.
"Q I will hand to you what has been marked as State's Exhibit Number 5, and I will ask you to state whether or not the signature you see at the bottom of that purporting to be the signature of Theodore Shadrick, Jr.... did you see the defendant in this case sign that as that signature?
"A Yes, sir, I did.
"Q Had you theretofore read him the warnings that are printed on that instrument before that signature?
"A Yes, sir, I did.
"Q Would you tell me the date that took place?
"A This one took place December 17, 1968.
"Mr. Curtis: Do you want to see them, Mr. Wolfram?
"Mr. Wolfram: No.
"Mr. Curtis: We offer this into evidence, your honor.
"The Court: Admitted.
"Q Would you, please, read to the jury those warnings on that document, please, sir?
"A Just the warnings, sir?
"Q Just read to the jury the instrument. It has been put into evidence, so read the entire instrument to the jury.
"A The top of the statement states: `Advisement Form' ...."
* * * * * *
"File No. 68-18420 (Amarillo) Crimes Against Persons Section, Police Building, 13th & Champa Streets, Denver, Colorado.
"Dated December 27, 1968.
"Statement taken in the Crimes Against Persons Section, Room 301, Police Building, 13th & Champa Streets, Denver, Colorado, December 27, 1968, at approximately 1:45 P.M. in the presence of the following witnesses:
*683 "Dale F. Lawless, City Detective, C. B. McCormick, Jr., City Detective and Stella Bailey, Hearings Reporter.
"Statement made by THEODORE SHADRICK, JR.
"Questioning directed by Detective Lawless:
"Q What is your name?
"A Theodore Shadrick, Jr.
"Q What is your date of birth?
"A December 15, 1936.
"Q Ted, you have been advised of certain rights, that you have a right to remain silent; anything you say can be used as evidence against you in court?
"A Yes, sir.
"Q You have a right to talk to a lawyer before questioning, and have him present during questioning, and if you cannot afford a lawyer, one will be appointed for you before questioning. You have signed one of these forms, is that right?
"A Yes, sir.
"Q Ted, at this time would you like to tell us about the robbery in Amarillo, Texas on December 11, 1968?
"A Yes, sir.
"Q O. K. In your own words go ahead and tell us.
(Here follows in the confession a full account of the robbery, in question and answer form, as taken by the court reporter and signed by appellant, corresponding in all details with the testimony of the state's witnesses.)
"A I guess that's about it as far as the robbery is concerned.
"Signed, Theodore Shadrick, Jr.
"Witness: Detective D. F. Lawless and C. B. McCormick.
"Further statement reads: `I have read the attached statement which is signed by me, and consisting of three pages and was told and given an opportunity to make any corrections I wished before signing it.
`Before making this statement, I was warned that I had a right to remain silent and that any statement I might make could be used as evidence against me.
`I was further advised that I had a right to the presence of an attorney, either retained or appointed.
`I made the statement voluntarily without any force, threats, or promises by anyone.
`No one told me I had to make a statement or what to say in a statement.
`I knew what I was doing and what I said when I made and signed this statement.
`Signed, Theodore Shadrick, Jr.
`Witness, Detective D. F. Lawless.'"
It is clear that the warnings required by Miranda v. Arizona, 384 U.S. 436, 16 L. Ed. 2d 694, 86 S. Ct. 1602, and by Article 38.22, Vernon's Ann.C.C.P., were given to appellant before he gave and signed this confession.
It is argued by appellant that the confession was invalid because Art. 15.17, V.A.C.C.P., was not complied with, in that he was not immediately taken before a magistrate after his arrest and given the prescribed warnings, including the addition added by the amended Act of 1967, that he should be told of "his right to terminate the interview at any time."
Nowhere in the interrogation by the officers nor in his testimony before the court on the admissibility of the confession did he ever express a wish to terminate the interview. This statute relates to the duty of the arresting officer and the magistrate, and does not purport to invalidate a confession if not complied with. Miranda *684 does not require that such a warning be given.
It was held by this Court that if the warning as required by Art. 38.22 be given, the failure to comply with Art. 15.17, V.A. C.C.P., does not invalidate the confession. Dunlap v. State, Tex.Cr.App., 462 S.W.2d 591.
It is also urged that since the confession was made some 10 or 11 days after appellant's arrest, during which time he was not taken before a magistrate on this charge, the confession is rendered inadmissible.
The record is entirely silent of any evidence that failure to take him before a magistrate caused appellant to confess. To avail himself of this complaint, appellant must show a causal connection between such failure and his confession. Black v. State, Tex.Cr.App., 432 S.W.2d 951; Easley v. State, Tex.Cr.App., 448 S.W.2d 490.
Appellant further argues that the confession was shown to be involuntary because he was under investigation for killing a police officer in Dallas and wanted to avoid going to Dallas on that charge. He did not testify to any mistreatment by the Denver police, and did not at any time indicate that he did not give the confession of his own free will. The officer who took the confession testified it was freely and voluntarily given, and it is so recited in the instrument itself.
Appellant had just escaped from the Texas Department of Corrections, and it was developed by the State at the punishment phase of the trial that he had been before convicted in three separate instances of robbery. He was not without experience in criminal matters.
It was said by this Court that the motive of a person in confessing, expressed for the first time at trial, is of no importance provided the particular confession does not result from threats, fear, promises or other improper inducements made by persons in actual or seeming authority. Steel v. State, Tex.Cr.App., 459 S.W.2d 649.
There was no claim or evidence before the court that threats, fear, promises or other improper inducements caused the making of this confession.
The findings of the court that the confession was voluntarily made and that it was admissible in law and in fact are amply supported by the evidence, and appellant's first ground of error is overruled.
For his second ground of error appellant argues that the trial court did not immediately enter an order on the admissibility of the confession.
The court, after the hearing in the absence of the jury, simply admitted the confession, and belatedly entered an order thereon.
While such delay in entering the order is not to be commended, no harm to appellant having been shown by the delay, such orders will be accepted. Clewis v. State, Tex.Cr.App., 415 S.W.2d 654; Gaston v. State, Tex.Cr.App., 435 S.W.2d 858.
Appellant's second ground of error is overruled.
Finding no reversible error, the judgment is affirmed.
Opinion approved by the Court.
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72 B.R. 431 (1987)
In re James E. TWITCHELL, Jeanine P. Twitchell, Debtors.
OREM POSTAL CREDIT UNION, Plaintiff,
v.
James E. TWITCHELL, Defendant.
Bankruptcy No. 85A-01773, Adv. No. 85PA-922.
United States Bankruptcy Court, D. Utah, C.D.
April 15, 1987.
*432 *433 Bruce L. Richards and Marcie E. Schaup, Bruce L. Richards & Associates, Salt Lake City, Utah, for Orem Postal Credit Union, plaintiff.
El Ray Baird, Provo, Utah, for James E. Twitchell, defendant.
MEMORANDUM OPINION
JOHN H. ALLEN, Bankruptcy Judge.
PROCEDURAL BACKGROUND
This matter came before the Court on plaintiff's Motion for a New Trial or to Amend the Findings of Fact, Conclusions of Law, and Judgment.
The material facts giving rise to this controversy are as follows.
FACTS
James and Jeanine Twitchell filed a petition for relief under Chapter 7 of the Bankruptcy Code on June 3, 1985. Subsequently, Orem Postal Credit Union ("plaintiff") filed an adversary proceeding against James Twitchell ("defendant") seeking a determination that the debt owed to it by the defendant was nondischargeable pursuant to 11 U.S.C. § 523(a)(2), (4) and (6).
Trial was held on June 19, 20, and 23, 1986. At the conclusion of the trial, the Court made findings of fact and conclusions of law on the record. As part of the decision, the Court found that the defendant, as president and treasurer of Orem Postal Credit Union, was obligated to the plaintiff in the amount of $20,958.37 for the failure to apply all of the proceeds from the sale of his home to satisfy his obligation to the plaintiff, the unauthorized payment of payroll checks, the failure to withhold payroll taxes from his payroll checks, the improper approval of a loan to W. LeGrand Ellison and himself, and the unauthorized release of the plaintiff's lien on his property. Despite this finding, the Court held that the obligation was dischargeable because the plaintiff failed to prove reasonable reliance under section 523(a)(2)(A), the necessary fraud under section 523(a)(4), and the requisite intent under section 523(a)(6). On July 29, 1986, the Court entered Judgment in favor of the defendant dismissing the complaint and awarding defendant attorneys' fees and court costs.
On August 22, 1986, the Court heard plaintiff's Motion for a New Trial or to Amend the Findings, Conclusions, and Judgment. After considering the arguments and memoranda of counsel and the applicable statutes and case authorities, the Court denies the plaintiff's motion for a new trial but amends the findings, conclusions, and judgment.
DISCUSSION
Under section 523, certain kinds of debts are excepted from discharge. Such exceptions are essentially there to prevent a debtor from avoiding, through bankruptcy, the consequences of his wrongful conduct. These exceptions are to be narrowly construed so as to assure that the basic bankruptcy policy of giving an honest debtor a fresh start is not frustrated. Gleason v. Thaw, 236 U.S. 558, 562, 35 S. Ct. 287, 289, 59 L. Ed. 717 (1915); In re Black, 787 F.2d 503 (10th Cir.1986); In re Huff, 1 B.R. 354 (Bkrtcy.D.Utah 1979).
One exception is set forth in section 523(a)(4) which provides:
(a) A discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt . . .
(4) for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny. . . . [1]
This section creates an exception for a debt based on fraud or defalcation while acting in a fiduciary capacity, and embezzlement or larceny whether or not acting in a fiduciary *434 capacity. 3 COLLIER ON BANKRUPTCY § 523.14 at 523-88 (15th ed. 1986).
To obtain a determination that a debt is nondischargeable under section 523(a)(4), the complaining creditor must prove two elements: (1) that the defendant was acting in a fiduciary capacity and (2) that while acting in a fiduciary capacity, the defendant committed a defalcation.
Fiduciary Capacity
The term "fiduciary capacity" as used in section 523(a)(4) applies only to technical trusts, express trusts, or statutorily imposed trusts and not to fiduciary relationships which arise out of equitable or implied trusts or trusts implied by law arising out of a contract. In re Owens, 54 B.R. 162, 164 (Bkrtcy.D.S.C.1984). The elements for an express trust include (1) sufficient words to create a trust, (2) a clearly defined trust res, and (3) an intent to create a trust relationship. In re Kwiat, 62 B.R. 818, 821 (Bkrtcy.D.Mass.1986).
Furthermore, the trust or fiduciary duty must have existed prior to the wrongdoing from which the debt arose. Ragsdale v. Haller, 780 F.2d 794, 796 (9th Cir. 1986); In re Romero, 535 F.2d 618, 621 (10th Cir.1976); In re Owens, 54 B.R. at 164; In re Schwartz, 36 B.R. 355, 358 (Bkrtcy.E.D.N.Y.1984).
The question of who is a fiduciary for purposes of section 523(a)(4) is one of federal law. In re Black, 787 F.2d at 506. However, state law is an important factor in determining when a trust relationship exists. Id.
Title 7 of the Utah Code, entitled Financial Institutions, governs the creation and regulation of financial institutions. Article 7 of this Title, which governs savings and loan associations, provides that officers of associations occupy a fiduciary relationship. Utah Code Ann. § 7-7-15 (1953). In contrast, Article 9, which governs credit unions, has no similar provision. Nevertheless, this Court is of the opinion that an officer of a credit union should also logically be considered to occupy a fiduciary relationship. Furthermore, Article 1 authorizes the commissioner of financial institutions to remove any officer of an institution who has breached his fiduciary duty. Utah Code Ann. § 7-1-308 (1953). By implication, therefore, to be removed for breach of a fiduciary duty, officers of financial institutions governed by this Title must be considered to occupy a fiduciary relationship.
Furthermore, the Fourth Circuit in Harper v. Rankin, 141 F. 626 (1905) held:
The rights and powers of a vice president of a bank, having the management and control of its affairs, are such as he is bound to exercise for the benefit of others. His relation to the funds of the bank is that of a fiduciary, and an indebtedness arising from the embezzlement or misappropriation of such funds by him is incurred in that capacity.
Id. at 630.
At trial in this case, the Court found that the defendant had been acting in a fiduciary capacity within the meaning of section 523(a)(4) while serving as president and treasurer of Orem Postal Credit Union.
Defalcation
The term "defalcation" as used under section 523(a)(4) does not have a precise definition and no legislative history or comment exists to aid the interpretation.
The semantical difficulties concerning defalcation were first addressed in Central Hanover Bank & Trust v. Herbst, 93 F.2d 510 (2nd Cir.1937) wherein Judge Leonard Hand wrote:
Colloquially perhaps the word, "defalcation," ordinarily implies some moral dereliction, but in this context it may have included innocent defaults, so as to include all fiduciaries who for any reason were short in their accounts. . . .
. . . .
. . . We do not hold that no possible deficiency in a fiduciary's accounts is dischargeable; in In re Bernard, 87 F.2d 705, 707, we said that "the misappropriation must be due to a known breach of duty, and not to mere negligence or mistake." Although that word probably carries a larger implication of misconduct *435 than "defalcation," "defalcation" may demand some portion of misconduct; we will assume arguendo that it does.
. . . .
All we decide is that when a fiduciary takes money upon a conditional authority which may be revoked and knows at the time that it may, he is guilty of a "defalcation" though it may not be "fraud" or an "embezzlement," or perhaps not even a "misappropriation."
Id. at 511-512. After Central Hanover, however, case law under the former Bankruptcy Act was not in agreement as to the scope of conduct constituting defalcation.
The Court in Kadish v. Phx. Scotts Sports Co., 11 Ariz.App. 575, 466 P.2d 794 (1968) held that "[a] defalcation clearly requires acts amounting to misconduct or reflecting bad faith, and not merely inadvertence, mistake or negligence (citations omitted). But the conduct does not have to be criminal or malicious, only willful and wrongful. Bannon v. Knauss, 57 Ohio App. 288, 13 N.E.2d 733 (1937)." See also, Western Surety Co. v. Reed, 79 N.M. 647, 447 P.2d 672 (1968); Ivy v. Plyler, 246 Cal. App. 2d 678, 54 Cal. Rptr. 894 (1966).
The Sixth Circuit in In re Johnson, 691 F.2d 249 (6th Cir.1982), applied an objective standard in determining whether a contractor's failure to make payment of funds entrusted to him in accordance with the Michigan Building Contract Fund Act constituted defalcation. The court reasoned that "[h]ad Congress intended to reach only intentional or bad faith defalcation, it could have easily narrowed the sweep of the definition by requiring a special mental element." Id. at 254. Furthermore, defalcation was a "more encompassing term than embezzlement or misappropriation." Id. In defining the scope of conduct falling within the definition of defalcation, the court held:
The objective fact that monies paid into the building contract fund were used for purposes other than to pay laborers, subcontractors or materialmen first is sufficient to constitute a defalcation under section 17(a)(4) so long as the use was not the result of mere negligence or a mistake of fact; subjective intent to violate a known fiduciary duty or bad faith is irrelevant.
Id. at 257.
Several other courts concluded that defalcation also included innocent or simple defaults or mere failures to account for funds. See, Carey Lumber Co. v. Bell, 615 F.2d 370 (5th Cir.1980); Matter of Kawczynski, 442 F. Supp. 413 (W.D.N.Y. 1977); First Citizens Bank & Trust Co. v. Parker, 225 N.C. 480, 35 S.E.2d 489 (1945).
Unlike the case law under the Bankruptcy Act, the courts interpreting the scope of defalcation under the Bankruptcy Code are in agreement on several points. First, defalcation is the failure to account for money or property that has been entrusted to one. See, In re Wolfington, 48 B.R. 920, 923 (Bkrtcy.E.D.Pa.1985); In re Owens, 54 B.R. 162; In re Cowley, 35 B.R. 526 (Bkrtcy.D.Kan.1983); In re Waters, 20 B.R. 277 (Bkrtcy.W.D.Tex.1982). Second, defalcation is a broader term than either embezzlement or misappropriation.[2]See In re Wolfington, supra; In re Weaver, 41 B.R. 649 (Bkrtcy.W.D.Okla.1984); In re Cowley, supra; In re Waters, supra. Third, defalcation is evaluated by an objective standard and no element of intent or bad faith need be shown. See In re Gonzales, 22 B.R. 58 (Bkrtcy. 9th Cir.1982); American Ins. Co. v. Lucas, 41 B.R. 923 (D.W.D.Pa.1984); Martino v. Brown, 34 B.R. 116 (D.N.M.1983); In re Petersen, 51 B.R. 486 (Bkrtcy.D.Kan.1985); In re Gagliano, 44 B.R. 259 (Bkrtcy.N.D.Ill.E.D.1984); In re Waters, supra.
However, uncertainty regarding the scope of conduct constituting defalcation still exists. Courts have used a variety of *436 terms to describe the kind of conduct constituting defalcation. For example, the court in Cowley wrote that defalcation "is the slightest misconduct, and it may not involve misconduct at all. Negligence or ignorance may be defalcation." 35 B.R. at 529. The Wolfington court concluded that "[i]t is irrelevant that the default by the fiduciary was innocent." 48 B.R. at 923. In Waters, the court found that a "simple failure to account for funds . . . will render the ensuing debt nondischargeable. . . ." 20 B.R. at 280.
Section 523(a)(4) excepts from discharge a debt arising from "defalcation while acting in a fiduciary capacity." Defalcation is the failure to account for funds entrusted to one; fiduciary capacity cannotes the idea of trust or confidence. In re Romero, 535 F.2d 621. The failure to account for funds results in a breach of this trust or confidence. Negligence is defined as the breach of a duty recognized by the law which requires a person to conform to a certain standard of conduct. W. Prosser, LAW OF TORTS § 30, at 143 (1971). Therefore, in the opinion of the Court, negligence would be a more accurate term to use to describe this failure to account for funds as a fiduciary. Nevertheless, this Court accepts the use of such terms as "innocent," "ignorant," or "simple" default or failure to the extent that they are intended to describe this breach of duty.
In this case, the defendant, as president and treasurer of the credit union, failed to properly turnover all of the proceeds from the sale of his home to the plaintiff, issued unauthorized payroll checks to himself, neglected to withhold payroll taxes from his paychecks, approved a loan to W. LeGrand Ellison and himself in violation of the policies and practices of the credit union, and released the plaintiff's lien against his property without approval. Clearly, the defendant's conduct constituted a defalcation while acting in a fiduciary capacity within the meaning of section 523(a)(4). The breaching of this fiduciary duty is a sufficiently bad act to except the ensuing debt from discharge. The requisite "badness," to conform with the spirit of the bankruptcy laws, is supplied by the special legal status of a fiduciary and the breach of the attendant duties and higher standard of dealing. In re Johnson, 691 F.2d at 256.
CONCLUSION
In accordance with the foregoing, the Court finds that the amount of $20,958.37 is nondischargeable as a debt arising out of the defendant's defalcation while acting in a fiduciary capacity, under Section 523(a)(4).
Furthermore, the previous Judgment entered in this case is set aside. Counsel for the plaintiff is directed to prepare and submit a new judgment in accordance with this memorandum opinion.
NOTES
[1] Although Section 523(a)(4), unlike its predecessor, "does not specify that debts arising from misappropriation by a fiduciary shall be excepted from discharge, the term `defalcation' subsumes misappropriation." In re Materetsky, 28 B.R. 499, 502 (Bkrtcy.S.D.N.Y.1983).
[2] Embezzlement under section 523(a)(6) has been defined as "the fraudulent appropriation of property by a person to whom such property has been entrusted or into who hands it has lawfully come, and it requires fraud in fact, involving moral turpitude or intentional wrong, rather than implied or constructive fraud." In re Black, 787 F.2d at 507. Misappropriation has been defined as involving "a known breach of the duty and not to mere negligence or mistake." In re Bernard, 87 F.2d 705, 707 (2nd Cir.1937).
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491 S.W.2d 728 (1973)
STATE FARM COUNTY MUTUAL INSURANCE COMPANY OF TEXAS, Appellant,
v.
Wesley H. PLUNK and Wilbur McCoy, Appellees.
No. 17984.
Court of Civil Appeals of Texas, Dallas.
March 1, 1973.
Rehearing Denied March 22, 1973.
*729 Gordon H. Rowe, Jr., Gardere, Porter & DeHay, Dallas, for appellant.
Mark A. Troy, Jr., May, Troy & Block, Dallas, for appellees.
ON MOTION FOR REHEARING
GUITTARD, Justice.
This suit was brought by the insured, Wesley Plunk, and a third party claimant, Wilbur McCoy, against State Farm County Mutual Insurance Company to establish coverage under an automobile liability policy. Our principal question is whether the evidence supports the jury's finding in answer to the only special issue submitted that the insured gave written notice of the accident to the insurance company "as soon as practicable," as required in the policy.[1]
*730 Appellant contends under its first, second and fourth points that the court erred in rendering judgment on the verdict because the evidence shows as a matter of law that written notice was not given "as soon as practicable." This contention requires a review of the evidence.
The accident occurred January 23, 1968, when an automobile driven by the insured Wesley Plunk struck the rear of an automobile driven by Wilbur McCoy. At the time McCoy did not complain of any personal injury. Both drivers agreed that the damage to McCoy's vehicle was minor and they decided not to call the police, but they exchanged insurance information, and Plunk admitted that the accident was his fault and said that he would pay for any damages to McCoy's car.
There is some dispute as to when Plunk first became aware of McCoy's injury. Plunk testified that McCoy telephoned him "about a week or two weeks after the accident," and said he was hurt. McCoy testified by deposition that the accident happened Tuesday, January 23, and that on the following Friday, January 26, he called Plunk and told him that he was making a claim for personal injury and that Plunk said that he would get in touch with his insurance company.
Admittedly, Plunk gave no written notice to the company until February 28, 1968, thirty-six days after the accident and thirty-three days, or perhaps less, after he learned of McCoy's injury. Plunk testified that he tried to call State Farm's agent William Busby the same day McCoy called him, and that he tried to get in touch with Busby "about three times," but never was able to do so until "about the third or fourth time." He said that on one of these occasions he went by Busby's office, but no one was there, and that on another occasion when he telephoned Busby's office a woman answered, and he told her he wanted to talk to Busby and report an accident, but she said Busby was not in, and he told her he would call back later. He testified that he gave her no information because he wanted to talk with Busby, and that he did not remember leaving any message. He acknowledged that the policy showed Busby's office and residence telephone numbers, and he said that he tried to talk to Busby at his home but was unable to do so.
Meanwhile, McCoy had employed a lawyer, who wrote a letter to Plunk dated February 20, 1968, with a copy to the State Farm claims office, advising of McCoy's intention to file suit and suggesting that Plunk get in touch with his insurance agent.
The testimony of Plunk and Busby differed concerning the circumstances of the notice on February 28. Plunk denied that Busby contacted him first. Busby testified that he received a telephone call from State Farm's claims office and he then called the Plunk residence and talked to Mrs. Plunk. He said that he asked her if Plunk had been involved in an accident, and that on the same evening Plunk came to the office and filled out an accident report form. Busby further testified that his office was open five and one-half days a week, that the hours were from 8:30 a. m. to 6:30 p. m., and that the office practice in case of any claim reported by telephone was that the secretary would immediately get as much information as possible down on paper and then get the insured to come in and sign an accident report.
The record shows that Plunk had completed only the third grade in public school, but he was thirty-seven years of age, had a wife and three children, had attended machinists' school, and had worked twelve years as a machinist. On deposition he said that he could read and write, but he testified at the trial that he could read very little and could not read the insurance *731 policy. At this job he never worked in the office and never saw any contracts. He explains his failure to leave a message for Busby by saying that he worked ten hours a day five days a week and five hours on Saturday, and was not permitted to receive telephone calls during working hours.
Appellant insists that the case is controlled by Klein v. Century Lloyds, 154 Tex. 160, 275 S.W.2d 95 (1955), in which the Supreme Court held that a policyholder's delay of thirty-two days in giving notice of an accident established as a matter of law that the notice was not given "as soon as practicable." The court recognized that this question was ordinarily one of fact, but said that it became a question of law under the undisputed facts of that case, since the testimony of the insured was not procured and there was no showing that he was unable physically or mentally to give notice. In Klein the delay was wholly unexplained, whereas in the case now before us the insured testified that on learning of McCoy's injury three days or more after the accident he made a prompt attempt to contact the agent of the insurance company and persisted until he succeeded in reaching the agent and in making a written report.
We hold that this testimony raises a fact issue as to whether notice was give "as soon as practicable." This contractual language is relative rather than precise and must be construed in favor of the insured. So construed, it has been held equivalent to "within a reasonable time"[2] and to invoke the standard of ordinary prudence.[3] Questions of "reasonableness" and "ordinary prudence" are ordinarily matters of fact and must be determined in the light of all the circumstances, including the experience and understanding of the person whose conduct is in question.[4] The insured is not excused by ignorance of the requirements of the policy, whether or not he was able to read it,[5] but his lack of education and experience in business matters may be considered in determining whether he acted reasonably in attempting to comply with it. Likewise, the insurer need not show prejudice from the delay,[6] but absence of prejudice to the insurer may be considered on the issue of unreasonableness of the time taken to give notice.[7] Reasonableness becomes a question of law when only one reasonable inference can be drawn from the evidence, as where no circumstances tending to excuse the delay are shown.[8] We hold that the insured's testimony of his unsuccessful efforts to reach the agent was some evidence tending to excuse his delay under the circumstances shown, and that the jury might reasonably *732 have drawn more than one inference concerning sufficiency of that excuse. Consequently, appellant's first, second and fourth points are overruled.
In its third point appellant contends that the verdict is so against the great weight and preponderance of the credible testimony as to be clearly wrong and unjust. This point also is overruled. Although Plunk's testimony concerning his efforts to contact the insurance company was not strong, we cannot say that it was against the great weight and preponderance of the evidence. The only contrary testimony was that of the agent Busby, who merely described the practice of his office and denied knowledge of any attempt by Plunk to get in touch with him. This testimony did not directly contradict Plunk's testimony that he did make such attempts.
Appellant's fifth point complains that the special issue inquires only as to the timeliness and not as to the adequacy of the notice given by the insured. It argues that the issue "failed to accurately track the policy language" with respect to the contents as well as the timeliness of the notice. This point is overruled. The agent testified that on February 28, the day on which telephone contact was finally made, the insured came to the agent's office and "completed an automobile accident report form." The agent further testified that the practice of his office in such cases was to "get as much information as possible." The report itself was not in evidence but was presumably in possession of the appellant. We think this evidence was sufficient to show, at least prima facie, that the content of the written notice of February 28 was in compliance with the requirements of the policy, and to cast on appellant the burden to introduce the notice in evidence if it seriously contended that such notice was inadequate.
Appellant's sixth, seventh and eighth points complain of the instruction, italicized below, which followed the single special issue and its accompanying definition, as follows:
"Do you find from a preponderance of the evidence that written notice of the accident in question was given to State Farm County Mutual Insurance Company of Texas by or for Wesley Plunk as soon as practicable, as that phrase is defined hereunder, under the circumstances?
"You are instructed that the phrase `as soon as practicable' means as soon as notice would have been given by an ordinary prudent person in the exercise of ordinary care in the same or similar circumstances. The circumstances may be the lack of intelligence, if any, inexperience, if any, and incapacity for understanding, if any, on the part of Wesley Plunk." (Italics added.)
The sixth point asserts that this instruction permitted the jury to speculate that plaintiff's ignorance of the contractual requirement of notice would justify his failure to comply with it. We agree that the instruction was erroneous in this respect. However, we find no language in appellant's objections to the charge pointing this error out clearly to the trial court. The objection which comes closest complains only, "The instruction as given is too narrow in scope, in that the last sentence is prejudicial and inflammatory to the rights of this defendant, in that it takes away from the jury the reasonable or prudent person concept and allows the jury to speculate or draw upon conjecture." This was not a clear and distinct specification of the error as required by Texas Rules of Civil Procedure, rule 274.
Appellant's seventh point complains that the quoted instruction is erroneous because there is no evidence to support the circumstances mentioned in the last sentence. This point is overruled because we conclude that the jury was entitled to draw the inference from Plunk's *733 lack of education, his limited capacity to read, and the largely manual character of his business experience, as well as from the jury's own observation of his conduct in the courtroom and the manner of giving his testimony, that he had at least a relative lack of experience and understanding, which, though not excusing him from compliance with the notice requirement, was nevertheless proper for consideration in determining the reasonableness of his conduct in attempting to give the notice.
Appellant's eighth point asserts that the instruction in question "contained a clear comment on the weight of the evidence by the trial court that Wesley Plunk was lacking in intelligence, experience, and capacity for understanding." We find this point also to be unsupported by any objection distinctly making this complaint in the trial court. The objections were "that such sentence constitutes a comment by the Court and permits the jury to speculate and draw upon conjecture and to infer that Mr. Plunk has a lack of intelligence or experience or any capacity for understanding, for which there is no evidence," and further "that such statement by the Court constitutes a comment in that it fails to specify what circumstances the Court has reference to, and, therefore, allows the jury to speculate and draw upon conjecture." The objection that the instruction "constitutes a comment" is too general in itself and must be considered as limited by the more particular language of the objection. Consequently, it cannot be taken as pointing out specifically that the instruction amounted to an indication of an opinion by the court that Plunk was lacking in intelligence, experience and capacity for understanding.
By its ninth point appellant complains that the trial court refused to let it counteract the effect of the insured's testimony that he did not know that he was "supposed to report a collision within a certain period of time" by testimony of the agent concerning the notice requirement of the standard Texas automobile policy. This point is not preserved for appeal, since the witness' answer is not given in the statement of facts or by bill of exceptions.[9]
Appellee's motion for rehearing is granted, our former opinion is withdrawn, our judgment of reversal is set aside, and the judgment of the trial court is affirmed.
NOTES
[1] This policy requirement is as follows:
"3. Notice. In the event of an accident, occurrence or loss, written notice containing particulars sufficient to identify the insured and also reasonably obtainable information with respect to the time, place and circumstances thereof, and the names and addresses of the injured and of available witnesses, shall be given by or for the insured to the company or any of its authorized agents as soon as practicable."
[2] National Surety Corporation v. Diggs, 272 S.W.2d 605 (Tex.Civ.App., Fort Worth 1954, writ ref'd n. r. e.); Houck v. State Farm Mutual Automobile Ins. Co., 394 S.W.2d 222 (Tex.Civ.App., Beaumont 1965, writ ref'd n. r. e.).
[3] Utica Mutual Ins. Co. v. State Farm Mutual Automobile Ins. Co., 280 F.2d 469 (4th Cir. 1960); Young v. Travelers Ins. Co., 119 F.2d 877 (5th Cir. 1941); Allstate Ins. Co. v. Darter, 361 S.W.2d 254 (Tex.Civ.App., Fort Worth 1962, no writ); Figueroa v. Puter, 84 N.J.Super. 349, 202 A.2d 195 (1964).
[4] Atteberry v. Allstate Ins. Co., 461 S.W.2d 219 (Tex.Civ.App., El Paso 1970, writ ref'd n. r. e.); Central Surety & Ins. Corp. v. Anderson, 446 S.W.2d 897 (Tex. Civ.App., Fort Worth 1969, no writ); Figueroa v. Puter, 84 N.J.Super. 349, 202 A.2d 195 (1964).
[5] Indemnity Ins. Co. v. W. L. Macatee & Sons, 129 Tex. 166, 101 S.W.2d 553 (1937); Darnell v. Southwestern American Ins. Co., 240 S.W.2d 509 (Tex.Civ. App., Dallas 1951, no writ); Pickett v. Riley, 149 S.W.2d 990 (Tex.Civ.App., Waco 1941, no writ).
[6] Members Mutual Ins. Co. v. Cutaia, 476 S.W.2d 278 (Tex.1972).
[7] Figueroa v. Puter, 84 N.J.Super. 349, 202 A.2d 195 (1964).
[8] Klein v. Century Lloyds, 154 Tex. 160, 275 S.W.2d 95 (1955); Hartford Accident & Indemnity Co. v. Day, 359 F.2d 484 (10th Cir. 1964); State Farm Mutual Automobile Ins. Co. v. Douglas, 207 Va. 265, 148 S.E.2d 775 (1966).
[9] Bell v. Bradshaw, 342 S.W.2d 185 (Tex. Civ.App., Dallas 1960, no writ); Gass v. Baggerly, 332 S.W.2d 426 (Tex.Civ.App., Dallas 1960, no writ).
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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/382691/
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631 F.2d 1190
Robert L. PIGRENET, Sr., Petitioner,v.BOLAND MARINE & MANUFACTURING COMPANY and The Director ofthe Office of Workers' Compensation Programs ofthe Department of Labor, Respondents.
No. 79-1782.
United States Court of Appeals,Fifth Circuit.
Dec. 3, 1980.
Pitard, Pitard & Porobil, Michael L. Lash, New Orleans, La., for petitioner.
Stewart E. Niles, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, New Orleans, La., for Boland Marine, etc.
Carin A. Clauss, Mary A. Sheehan, Solr. of Labor, U. S. Dept. of Labor, for Director, O.W.C.P.
Petition for Review of an Order of the Benefits Review Board.
Before TJOFLAT, POLITZ and HATCHETT, Circuit Judges.
HATCHETT, Circuit Judge:
1
Petitioner seeks review of an administrative determination that he did not sustain a compensable injury under the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. § 901. The administrative finding is not supported by substantial record evidence. We reverse and remand.
2
On June 30, 1972, the petitioner sustained an injury to his back while working for his employer, Boland Marine & Manufacturing Company (Boland Marine). The injury occurred when the petitioner fell on a catwalk while attempting to dislodge a large nut on a boom outside of the catwalk rail. Three days after the accident, the petitioner saw his family physician for treatment. It is this injury for which the petitioner sought disability benefits under the Act. After a formal hearing, an administrative law judge held that the petitioner was permanently and totally disabled as a result of an injury to his back. On Appeal, the Benefits Review Board concluded that the petitioner was permanently and totally disabled, but remanded the case to the office of administrative law judges for a determination as to any causal relationship. Due to the death of the first hearing examiner, a different administrative law judge was assigned to hear the case on remand. This administrative law judge (second judge) only reviewed the written record and briefs submitted by the parties.
3
The written record establishes that on July 16, 1972, the petitioner was admitted to a hospital for treatment of a back injury. The hospital records indicate that an injury was sustained just four days prior to admission, when petitioner carried a desk to an upstairs office while working for another employer. The second administrative law judge accepted the employer's contention that it was this incident which caused the petitioner's disability rather than the June 30, 1971 accident. The petitioner's injury, therefore, did not arise out of the course of his employment with Boland Marine. This conclusion precludes the petitioner's recovery under the Act. The conclusion is based on numerous inconsistencies which the second administrative law judge found to reflect adversely on the petitioner's credibility.
4
The petitioner was treated by various doctors on occasions subsequent to June 30, 1972 at hospitals and out-patient treatment centers. The documented medical history obtained from those centers indicates that the petitioner complained of back injury resulting from several occurrences including involvement in an automobile accident on February 24, 1973. On May 7, 1973, petitioner underwent surgery after a physician determined that he had a "degenerative disk." This condition was attributed to aging. Additional x-rays demonstrated that the petitioner had "spina bifida acculta S-1" which is a congenital abnormality.
5
According to the second administrative law judge:
6
"The credible evidence in this case supports the conclusion that Claimant did not suffer a compensable injury while working for this Employer on June 30, 1972. Instead, it proves that he suffered an injury while lifting a desk on or about July 13, 1972, which aggravated a pre-existing degenerative disk and, which, in turn, was further aggravated by injuries sustained lifting tires, twisting his back on his boat, and an automobile accident."
7
On a second appeal to the Benefits Review Board, the second administrative law judge's finding was upheld.
8
We are guided by well-settled principles in the discharge of our appellate responsibility. In cases arising under the Longshoremen's and Harbor Workers' Compensation Act, our duty is to determine whether the administrative findings of fact are supported by substantial evidence in the record, considered as a whole, or if there is an error of law. Petro-Weld, Inc. v. Luke, 619 F.2d 418 (5th Cir. 1980); Equitable Equipment Co., Inc. v. Hardy, 558 F.2d 1192 (5th Cir. 1977); Presley v. Tinsley Maintenance Service, 529 F.2d 433 (5th Cir. 1976).
9
The issue of credibility is inextricably intertwined with whether substantial evidence supports the ultimate administrative finding that there was no causal connection between the petitioner's disability and the injury sustained while in Boland Marine's employ. The administrative law judge, on remand, arrived at this determination after merely reviewing the written record of the proceedings before the first administrative law judge. The petitioner, however, failed to state an objection to the credibility evaluation upon only the printed word and failed to request a hearing for oral testimony. This does not preclude our consideration of the point on this appeal. Questions not presented to or passed on by the fact finder may be considered on appeal under exceptional circumstances where a miscarriage of justice would otherwise result. See D. H. Overmyer Co. v. Loflin, 440 F.2d 1213 (5th Cir.), cert. denied, 404 U.S. 851, 92 S. Ct. 87, 30 L. Ed. 2d 90 (1971).
10
Normally, a proper credibility evaluation requires that the fact finder hear and observe the witness. Credibility is not readily discernable by one who merely reads a cold record. Lacking specific Fifth Circuit precedent concerning whether a substituted fact finder may properly rely on a written record alone to make a credibility determination, we seek the wisdom of other circuits. The Second, Fourth, and Eighth Circuits have implied that where credibility of the witness is crucial to resolving a factual dispute, a substituted fact finder must engage in a de novo hearing of the evidence. Appalachian Power Company v. Federal Power Commission, 328 F.2d 237 (4th Cir.), cert. denied, 379 U.S. 829, 85 S. Ct. 59, 13 L. Ed. 2d 38 (1964); Art National Manufacturers Distributing Co. v. Federal Trade Commission, 298 F.2d 476 (2nd Cir.), cert. denied 370 U.S. 939, 82 S. Ct. 1588, 8 L. Ed. 2d 808 (1962); Gamble-Skogmo, Inc. v. Federal Trade Commission, 211 F.2d 106 (8th Cir. 1954). Thus, we find in this instance that the failure by the substituted administrative law judge to conduct a de novo hearing of the evidence constitutes manifest injustice.
11
In reviewing whether there is substantial evidence in the record, as a whole, to support the administrative determination on the causal connection issue, we remain mindful of the generous spirit of congressional concern in the policy of the Act. The Act must be construed "broadly and liberally so as to effectuate fully the legislature's remedial purpose." Longmire v. Sea Drilling Corp., 610 F.2d 1342, 1351 (5th Cir. 1980). "In deciding each appeal, we must remember that the Act is to be liberally construed in favor of injured workers." Jacksonville Shipyards, Inc. v. Perdue, 539 F.2d 533, 541 (5th Cir.), cert. denied, 433 U.S. 908, 97 S. Ct. 2967, 53 L. Ed. 2d 1088 (1979). "(A)ll doubtful questions of fact are to be resolved in favor of the injured employee." Strachan Shipping Co. v. Shea, 406 F.2d 521, 522 (5th Cir.), cert. denied, 395 U.S. 921, 89 S. Ct. 1773, 23 L. Ed. 2d 238 (1969).
12
We hold that the proximate cause determination in this case is unsupported by substantial evidence. It rests upon an evaluation of credibility and the drawing of inferences from the written record alone. Therefore, we reverse the judgment of the Benefits Review Board upholding the administrative law judge's conclusion, and remand for a formal evidentiary hearing to determine whether the petitioner's disability arose out of the injury sustained while working for Boland Marine.
13
REVERSED AND REMANDED.
14
TJOFLAT, Circuit Judge, dissenting.
15
Since I think it essential to an understanding of the issues before us, I begin this dissent by sketching out what actually occurred at the administrative level:
16
Mr. Pigrenet initially litigated this case before an administrative law judge, who concluded that Pigrenet was entitled to benefits. The Benefits Review Board, however, remanded the case to the law judge for further factual findings. In the interim, the first administrative law judge had died, and after remand a second judge was appointed. The substituted judge, after reviewing the record-which consisted largely of conflicting testimony-determined that he could resolve the remaining factual issues on the basis of the then-existing record. He informed the parties of this determination, giving them the opportunity to request an evidentiary hearing at which they could try the case anew or offer additional testimony to supplement the previous record. Neither Pigrenet nor the employer, however, requested such a hearing, obviously for strategic reasons. Accordingly, the administrative law judge decided the case on the record prepared by the first law judge and proposed a decision, adverse to Pigrenet, which the Benefits Review Board subsequently adopted.
17
Although Pigrenet failed to request a new evidentiary hearing, he now raises as error the administrative law judge's failure to hold one. Pigrenet argues that an evidentiary hearing was required because it was impossible for the administrative law judge to resolve credibility issues on a cold record; the logical extension of his argument is that it was also impossible for the judge to weigh the evidence and make the findings of fact necessary to decide the case. The majority, in a holding I consider as dangerous as it is novel, agrees with Pigrenet.
18
Pigrenet, it is true, had a right to reproduce oral testimony before the substituted administrative law judge. My brothers Politz and Hatchett, however, ignore that Pigrenet chose not to do so, and thus, in effect, selected the very procedure he now claims was fundamentally defective. In truth, both Pigrenet and the employer, received all of the process they were due. Given this, the only explanation for the majority's holding is that the process of administrative fact-finding is unable to tolerate the resolution of credibility issues on the basis of a written record. It is the system itself, then, rather than the right of the litigant to procedural fairness, that somehow requires vindication; this case merely serves as the vehicle to achieve that end.
19
As I have indicated, I think the majority's position that a fact-finder can never decide credibility issues by examining a cold record carries with it dangerous implications. Moreover, and contrary to the majority's perception, the law is settled in this circuit (and every other circuit that has considered the question) that a party waives his right to reproduce oral testimony before a substituted fact-finder if he fails to request a new hearing, and that he cannot reclaim that right on appeal. W. R. B. Corp. v. Geer, 313 F.2d 750, 752-3 (5th Cir. 1963), cert. denied, 379 U.S. 841, 85 S. Ct. 78, 13 L. Ed. 2d 47 (1964).1 See also Anaya v. Romero, 627 F.2d 226 (10th Cir. 1980); N. L. R. B. v. Dixie Shirt Co., Inc., 176 F.2d 969, 971 (4th Cir. 1949). This is, of course, consistent with the general rule that "procedural objections to the action of an administrative agency or trial court must be timely made to give the tribunal an opportunity to correct the error, if error there be." Brotherhood of R. R. Trainmen v. Central of Georgia Ry. Co., 415 F.2d 403, 417 (5th Cir. 1969) (citing Brotherhood of R. R. Trainmen v. Chicago, M., St. P. & P. R. Co., 380 F.2d 605, 608 (D.C.Cir.1967).
20
In W.R.B. Corp., v. Geer, supra, a master had been appointed to ascertain damages in a complex trial. Before the master could finish his report, however, he became ill and was replaced. The second master based his report on the record prepared by the first master. The trial court adopted this report. On appeal, it was argued that the court should have rejected the second master's report because he did not rehear the transcribed testimony. We held that this objection could not be raised for the first time on appeal, since the "trial judge would have made appropriate provision for the appearance or re-appearance of any critical witnesses for oral examination or reexamination before the successor Master had ... the parties ... informed (the court) that this was advisable or necessary." 313 F.2d at 752. The holding in Geer was recently adopted by the Tenth Circuit in Anaya v. Romero, 627 F.2d 226 (10th Cir. 1980).
21
The majority either ignores Geer and this circuit's prior panel rule, or perceives some unarticulated basis by which Geer can be distinguished from the case before us. Putting aside the legal issue of whether a litigant may waive his right to a new evidentiary hearing before a substituted fact-finder, I think it important to consider the implications of the majority's holding that "where credibility of the witness is crucial to resolving a factual dispute, a substituted fact-finder must engage in a de novo review of the evidence." Supra at 1192 (emphasis added). This necessarily requires every fact-finder personally to hear all disputed testimony. The practical impact of such a requirement on the administrative and judicial tribunals over which we exercise the power of review is inescapable. Longshoreman's and Harbor Worker's Compensation Act cases are tried to administrative law judges in much the same manner as non-jury cases are tried to district judges and state courts. The rules of practice and procedure allow, universally I think, the reception of highly disputed testimony in such forms as depositions, prior trial transcripts and tape recordings. Critical credibility questions are often resolved on a cold record. If such a process of litigation is, suddenly, so intolerable in the trial of cases before administrative law judges that we must intervene when the parties, themselves, did not object and received the very process they requested and were due, then it follows inexorably that in order to vindicate the litigation process in the countless other forums whose decisions we are called upon to review, we must intervene whenever appellants in any type of forum discover too late that they made the wrong tactical decision at trial.
22
The conclusion my brothers have reached is simply at odds with the way factual disputes are resolved in our adversarial system. It is the litigant's right, and indeed responsibility, to decide what evidence to present to the fact-finder and to choose the form that evidence should take. The litigant is bound only by procedural and evidentiary strictures and the limits of his judgment. In the case before us, Pigrenet decided to rely on a written record as evidence, but the fact-finder was not persuaded by it. Unhappy with the result, Pigrenet now, on appeal, requests a fresh opportunity to put on additional evidence, an opportunity the majority accords him since the fact-finder could not, in the majority's view, make a reasoned or fair or accurate determination about credibility.
23
Aside from the unfairness to the employer, who must now relitigate a case it had every reason to believe was completed, the majority's holding, at least in my view, will create considerable doubt in the minds of the lawyers and judges in this circuit about the continued use in any forum, administrative or judicial, of transcribed testimony as evidence. For example, in light of the majority's holding, can litigants stipulate to the use of depositions of witnesses whose testimony is in conflict, as Pigrenet and the employer did before both administrative law judges in this case, when the trier of fact must determine the deponents' credibility? What if the witnesses' testimony can be presented only by deposition, as the rules of procedure provide for in certain circumstances? If an exception is carved out of the majority's rule to permit the use of depositions in limited situations, will it make a difference if it is later discovered that the deponent was actually available to testify? And if depositions of unavailable witnesses may be used, I must wonder how a witness' nonavailability somehow endows the finder of fact with sufficient perspicacity to make a credibility choice he could not otherwise make.
24
Or consider a mistrial or an appellate reversal in a jury case. Quite commonly, the litigants will stipulate, on retrial, to the use of transcripts of significant portions of the first trial rather than incur the expense and effort involved in restaging every minute of live testimony. This practice, of course, requires the fact-finder to make credibility determinations on the basis of testimony it reads rather than observes. Under the majority's holding, this would be impermissible.
25
The majority's decision would also, but for a recent Supreme Court decision, call into question district court affirmances of a magistrate or special master's findings of fact whenever the magistrate or master was confronted with an issue of credibility. The Supreme Court case, a habeas petition, held that the district court was correct in denying the petitioner's request to readduce oral testimony (presented to the magistrate) for the benefit of the ultimate fact-finder, the district judge. United States v. Raddatz, --- U.S. ----, 100 S. Ct. 2406, 65 L. Ed. 2d 424 (1980). I think Raddatz reflects the view that a finder of fact can competently, and in consistence with due processrequirements, make a determination about the credibility of witnesses based on written transcripts alone.
26
In light of the foregoing, and because I find that the Benefit Review Board's decision was supported by substantial evidence in the record, I would affirm the Board's decision.
1
The majority cites several cases to support its holding that "where credibility of the witness is crucial to resolving a factual dispute, a substituted fact finder must engage in a de novo review of the evidence." Supra at 1192. Not one of these cases, however, even remotely suggests that a party may raise as error a fact-finder's decision not to hold such a hearing when the party fails to object to the procedure at the fact-finding level. In fact, in Gamble-Skogmo, Inc. v. FTC, 211 F.2d 106, 115 (8th Cir. 1954), cited by the majority, supra at 1191-92, which held that a substituted hearing examiner erred in refusing a party's request to conduct a de novo hearing, the Eighth Circuit distinguished seemingly contrary cases by noting that in those cases, the parties failed to request a de novo hearing
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01-03-2023
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08-23-2011
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383 Pa. 120 (1955)
Jones
v.
Sedwick, Appellant.
Supreme Court of Pennsylvania.
Argued September 26, 1955.
November 14, 1955.
Before STEARNE, JONES, CHIDSEY, MUSMANNO and ARNOLD, JJ.
William W. Knox, with him Adam A. Gorski, for appellants.
Will J. Schaaf, with him James E. Marsh, and Marsh, Spaeder, Baur & Spaeder, for appellees.
*121 OPINION BY MR. JUSTICE ALLEN M. STEARNE, November 14, 1955:
The appeal is from a decree in equity enjoining the obstruction of a fifty foot roadway and ordering the removal of an encroaching structure.
Bruce R. Lyle and wife, in 1947, owners of land in Washington Township, Erie County, decided to subdivide it into lots; for this purpose, they engaged a surveyor who went on the premises and laid out the lots as directed by the owners; the surveyor placed iron pipes in the ground marking the location of each lot and a fifty foot drive or street which was designated "Lyle Drive"; he made a plan or blueprint of the land so subdivided; the owners then secured from the surveyor a description of lot No. 3, as shown on the plan, for the purpose of having the lot conveyed to Nelson Jones and wife (plaintiffs). The description in the deed reads: "All that certain piece or parcel of land. . . bounded and described as follows, to-wit: Beginning at the Southeast corner of the piece at an iron pipe in the Westerly line of Lyle Drive, distant thereon, North 00[°] 37' East, 145 feet from its intersection with the center-line of U.S. Route No. 6N and South line of Tract 447; thence West along Lot No. 2, parallel with U.S. Route No. 6N, one hundred twenty (120) feet to an iron pipe in the easterly line of land heretofore conveyed by Bruce R. Lyle to Hazel M. Bull; thence along said land, North 00[°] 37' East, parallel with and 300 feet distant from Easterly line of the whole piece, sixty (60) feet to an iron pipe; thence east along Lot No. 4, one hundred twenty (120) feet to an iron pipe in the Westerly line of Lyle Drive; thence South 00[°] 37' West along the westerly line of Lyle Drive, sixty (60) feet to the place of beginning and having a one-story frame dwelling erected thereupon." In this description "Lyle Drive" is twice mentioned *122 as a boundary, and while lot No. 3 is not named as such, lots Nos. 2 and 4 are stated to be boundaries. Iron pipes are named as monuments in conjunction with given courses and distances. When the surveyor plotted and laid out the lots and drive, and placed the iron pipes as monuments, plaintiff Jones and owner Lyle were present; they observed the marking of the fifty foot street. Lyle took the surveyor's description of lot No. 3, about to be conveyed to plaintiffs, to a lawyer for the purpose of having a deed drawn. The description contained the notation "Description of Lot No. 3 as shown on Plot for Bruce R. Lyle . . ." The plan or blueprint of the subdivision has never been recorded. On October 12, 1948, the residue of the land was conveyed by the Lyles to Clarence C. Horst and wife, excepting and reserving therefrom the premises conveyed to plaintiffs. This deed recited the date of the plaintiffs' deed and also the book and page wherein the plaintiffs' deed is recorded. On January 15, 1951, the Horsts conveyed their property to Chester Sedwick and wife, the defendants. The deed between the Horsts and Sedwicks contained the identical reservation and exception which appeared in the Horsts' deed. Defendants have erected an addition or extension to a building on their land, which addition extended twenty-eight feet into Lyle Drive.
The deeds of both plaintiffs and defendants put the defendants on notice of the existence of the drive and plaintiffs' rights therein. Defendants, however, proceeded with the construction of the extension, ignoring the record notices and repeated written and verbal protests by plaintiffs against such erection. Defendants' chief contention is that since the plan of subdivision has not been recorded they are not bound by it. They further maintain that plaintiffs' use of the drive is limited to one of necessity, confined to its reasonable use as a *123 means of ingress and egress. Defendants arbitrarily fix the width of such use at eighteen or twenty feet, instead of fifty feet as shown on the plan and which was marked by iron pipes on the ground when plaintiffs purchased their lot.
The contention of defendants that they are not bound by the plan since it was not recorded is without merit. In McKee v. Perchment, 69 Pa. 342, Justice SHARSWOOD said (p. 350): "Though [the] plan was not recorded, the reference to it in this deed was notice to the defendant of its existence and of the alley laid down on it." In Detwiler v. Coldren, 101 Pa. Super. 189, a conveyance referred to a prior deed of a portion of the land which had not been recorded. It was held that mention of the prior deed was sufficient notice to put plaintiff on inquiry as to his title, and the unrecorded deed was not void as to him. In Baltimore & Ohio R.R. v. Wilson Snyder Mfg. Co., 279 Pa. 219, 123 A. 858, this Court said (p. 225): "All of the deeds mention the plan, and convey by lot numbers. This necessitated an inquiry as to the property meant, and compelled the purchaser to investigate the plan, or be bound by what it would have disclosed on examination, though it was not a matter of record. . . ."
The exception and reservation in defendants' recorded deed and that of their immediate title predecessor, was sufficient notice to require defendants to investigate what interests or rights the plaintiffs possessed in the street in question: Pyles v. Brown, 189 Pa. 164, 42 A. 11; Finley v. Glenn, 303 Pa. 131, 154 A. 299.
That plaintiffs acquired an easement of fifty feet in width for the entire length of Lyle Drive, as shown on the plan, is amply supported by our cases. In a conveyance of land where a street or roadway is a named boundary, the grantee acquires an easement to *124 the use of such street or roadway if the grantor owns the fee: Transue v. Sell, 105 Pa. 604; Quicksall v. Philadelphia, 177 Pa. 301, 35 A. 609; Osterheldt v. Philadelphia, 195 Pa. 355, 45 A. 923; Maier v. Walborn & High, 84 Pa. Super. 522. See also: Fidelity-Philadelphia Trust Company, Trustee, v. Forster, 346 Pa. 59, 29 A.2d 496; Hogan v. Burneson, 44 Pa. Super. 409; Tursi v. Parry, 135 Pa. Super. 285, 5 A.2d 399.
The learned court below, in a carefully considered adjudication, with findings of fact amply supported by the evidence, approved by the court in banc, entered the correct and appropriate decree.
Decree affirmed at the cost of appellants.
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72 B.R. 156 (1987)
PIED PIPER CASUALS, INC., Plaintiff,
v.
INSURANCE COMPANY OF the STATE OF PENNSYLVANIA, Defendant.
No. 85 Civ. 0782 (RWS).
United States District Court, S.D. New York.
April 3, 1987.
*157 Otterbourg, Steindler, Houston & Rosen, P.C. New York City, for plaintiff; Richard J. Rubin, Marc A. Abrams, of counsel.
Speyer & Perlberg, New York City, for defendant; Dennis M. Perlberg, Paul M. Weidenbaum, of counsel.
SWEET, District Judge.
Defendant Insurance Company of the State of Pennsylvania ("ICSP") has moved in this court to withdraw the above captioned adversary proceeding, which is presently pending in the Bankruptcy Court, to this court for further proceedings and trial. The motion is made pursuant to 28 U.S.C. § 157(d) on the grounds that it has been adjudicated that the captioned action is a "related" or "non-core matter" as defined in the Bankruptcy Amendments and Federal Judgeship Act of 1984 and that there is cause for withdrawal for the reason that a jury trial was demanded by ICSP. For the reasons stated below, the motion to withdraw is granted.
Prior Proceedings
Plaintiff Robert Fisher, Chapter 7 Trustee of Pied Piper Casuals, Inc. ("Pied Piper"), commenced this suit in the Bankruptcy Court in October, 1984 to recover the proceeds of an insurance policy issued by ICSP, to which Pied Piper claims it is entitled. The complaint alleges that between the period of April, 1982 to January, 1984, approximately 1.4 million dollars of merchandise was stolen from the premises of Pied Piper. During this period, Pied Piper was insured by ICSP through various insurance policies. In response to the complaint, ICSP filed an answer on December 3, 1984, in which it asserted eight affirmative defenses, all based on state law, and demanded a jury trial.
Shortly thereafter, ICSP filed a motion in Bankruptcy Court to withdraw this action to the federal district court on the grounds that the action was a non-core proceeding. At a conference on the return date of the motion, the Honorable Harold Buschmann informally discussed with counsel the procedural questions related to the motion. Although 28 U.S.C. § 157 indicated that the district court shall make the decision as to whether the action shall be withdrawn from the Bankruptcy Court, the statute provided that the bankruptcy judge was to make the threshhold decision as to whether the case is a core or a non-core proceeding. Judge Buschmann suggested that the motion be made in district court.
ICSP then moved in the district court for withdrawal of the action on the grounds that it was a non-core proceeding. This court denied the motion with leave to renew if the Bankruptcy Court determined that this action was non-core. The defendant then moved in the Bankruptcy Court for such a determination. The motion was denied by Judge Buschmann. Upon reargument, Judge Buschmann reaffirmed his decision that the action was a core proceeding.
ICSP then moved in the district court for permission to take an interlocutory appeal of Judge Buschmann's order on the grounds that the case raised a novel issue under the recently amended statute and that ICSP would not have an adequate remedy if it was required to await the final determination of the action to seek a reversal of this decision. The motion for leave to take an interlocutory appeal was granted. On appeal, the Honorable Richard Owen reversed the Bankruptcy Court's decision *158 and held that the subject matter was a non-core proceeding. 65 B.R. 780.
ICSP now moves pursuant to 28 U.S.C. § 157(d) to withdraw the reference from Bankruptcy Court for further proceedings and trial in the district court on the grounds that the Bankruptcy Court is not authorized under the Bankruptcy Act or permitted under Article III to preside over a jury trial in non-core proceedings. In the alternative, ICSP contends that although the Bankruptcy Court may be permitted to conduct a jury trial, if either party objected to the outcome a de novo jury trial in the district court would be required. As such a result would cause a waste of judicial resources, ICSP urges this court to exercise its sound discretion and withdraw the reference from the Bankruptcy Court for a trial in the district court.
Conclusions
The Bankruptcy Amendments and Federal Judgeship Act of 1984 (the "1984 Amendments") were enacted in response to the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982), which found unconstitutional the 1978 Bankruptcy Reform Act's broad delegation of Article III powers to the Article I Bankruptcy Court. In Northern Pipeline, the Supreme Court held that the power given to the Bankruptcy Court to finally adjudicate claims or causes of action based on state or common law was not constitutionally permissible under Article III.
The 1984 Amendments attempted to redress the constitutional infirmities by distinguishing between "core" proceedings and claims under Title 11, and "non-core" proceedings or claims "related" to Title 11 cases, that is, claims arising under traditional state law. Under 28 U.S.C. § 157(b)(1), bankruptcy judges may hear and enter final orders in all cases under Title 11 and in all core proceedings, subject to review under section 158. That review is made using the traditional standard of appellate review.[1]
Under section 157(c),[2] bankruptcy judges may also hear proceedings that are not core proceedings but are otherwise related to a case under Title 11. Non-core proceedings, however, are subject to provisions similar to those governing references to magistrates under the Federal Magistrates Act, 28 U.S.C. §§ 631-639 (1982). Under section 157(c), a bankruptcy judge may hear a non-core proceeding but may not enter a final order unless the parties consent. If they do not consent, the bankruptcy judge enters a final order of judgment after considering the bankruptcy judge's proposed findings and must submit proposed findings of fact and conclusions of law to the district court. Then the district judge enters a final order of judgment after considering the bankruptcy judge's proposed findings and conclusions and after "reviewing de novo those matters to which any party has timely and specifically objected." 28 U.S.C. § 157(c)(1).
*159 28 U.S.C. § 157(d) permits the district court to withdraw either core or non-core proceedings from the Bankruptcy Court on its own motion or upon a motion of a party, and sets forth the circumstances under which such a withdrawal is compelled. The provision states that:
[t]he district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce.
28 U.S.C. § 157(d).
ICSP brings this motion to withdraw based on the assumption that the bankruptcy court will conduct a jury trial in this non-core proceeding. Although both parties assume that ICSP has a right to a jury trial in the Bankruptcy Court, there is no indication in the papers before this court, other than ICSP's demand for a jury trial in its answer, that the Bankruptcy Court intends to go forward with a jury trial. The issue of a Seventh Amendment right to a jury trial in Bankruptcy Court has apparently not been raised in the Bankruptcy Court, and neither party has briefed it in the papers presented with this motion.
Nevertheless, this court agrees that ICSP has a right to a jury trial on these state law issues. Since ICSP would have a right to a jury trial in this court, had the action been brought here, ICSP is entitled to a jury trial. A trustee should not be permitted to abrogate a party's Seventh Amendment right by suing in Bankruptcy Court rather than district court.
The reasoning of In re Lombard-Wall, Inc., 48 B.R. 986 (S.D.N.Y.1985) supports this result. In that core proceeding, the Honorable Gerald L. Goettel held that a right to a jury trial existed because the case involved primarily state law claims that would have been tried in a court of law.[3] The present action presents an even stronger case for finding a right to a jury trial. Because it is a non-core proceeding, it involves by definition only matters of state law. Although one commentary has suggested that a right to a jury trial does not exist in bankruptcy proceedings, see 1 Collier on Bankruptcy ¶ 3.01[7][b][i], at 3-88 (15th ed. 1987), its reasoning is not persuasive. It argues, first of all, that parties in a core proceeding are not entitled to a trial by jury because the proceeding is inherently one in equity. With relation to non-core proceedings, it concludes that it would be "easier" to conclude there is no right because the procedure set up by Congress for non-core proceedings, does not readily lend itself to proceeding by jury. Even accepting that as true, Congress cannot abrogate a party's Seventh Amendment right to a trial by jury by creating difficulties in exercising that right.
Since this court concludes that ICSP does have a right to a jury trial, it must next determine whether Congress intended that bankruptcy judges preside over jury trials in non-core proceedings. The 1984 Amendments do not specifically address the use of juries in any kind of bankruptcy proceeding.[4] Although the circumstances surrounding the enactment of the 1984 Amendments lead to the conclusion that Congress wished to delegate powers as broad as constitutionally permissible under Northern Pipeline, the jurisdictional provision for non-core proceedings by its terms envisions a bench trial rather than a trial *160 by jury. See 28 U.S.C. § 157(c)(1). The bankruptcy judge is required to make proposed findings and conclusions of law to the district court. There is no evidence in the legislative history that Congress intended to change the jury practices as they now are in the district courts to require a jury to make extensive findings of fact. Furthermore, the provisions for de novo review seem incompatible with the concept of a right to a jury trial. If a jury must find on all issues, then a judge cannot reverse their findings. Instead, if the district court judge decides to reject any findings of fact, it would seem that he must submit the disputed issues to yet another jury. See Matter of Reda, Inc., 60 B.R. 178, 182 (Bankr.N.D.Ill.1986); In re Shaford Companies, Inc., 52 B.R. 832, 837 (Bankr.D.N.H.1985); In re Smith-Douglass, Inc., 43 B.R. 616 (Bankr.E.D.N.C. 1984). But see In re Price-Watson Co., 15 B.C.D. 72 (Bankr.S.D.Tex.1986). Such a course would appear to waste judicial resources. Since the procedures governing non-core proceedings are antithetical to a Congressional intent to authorize jury trials in such proceedings and in the absence of any direct authorization, the Bankruptcy Court is not authorized to conduct a jury trial in this non-core proceeding. The necessity of preserving ICSP's right to a jury trial constitutes "good cause" for withdrawal under 28 U.S.C. § 157(d).[5]
Pied Piper argues that the motion for withdrawal was not timely made as required under Section 157(d). The procedural history of this case indicates that ICSP has been attempting for two years to get this action withdrawn to this court on the grounds that it is a non-core proceeding. While it has now added the additional ground that a jury trial was demanded in the Bankruptcy Court, the various determinations over the past two years concerning whether this action is non-core were necessary to the present motion. The delay in obtaining determinations on its motions and appeals cannot be attributed solely to ICSP. Therefore, Pied Piper's objection on the ground of timeliness is not persuasive.
The motion to withdraw is granted. Should either party wish to submit papers on the right to a jury trial, a motion to reconsider will be entertained if filed within ten (10) days.
IT IS SO ORDERED.
NOTES
[1] Section 158 provides:
(a) The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees, and, with leave of the court, from interlocutory orders and decrees, of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title. . . .
(c) An appeal under subsections (a) and (b) of this section shall be taken in the same manner as appeals in civil proceedings generally are taken to the courts of appeals from the district courts and in the time provided by Rule 8002 of the Bankruptcy Rules.
[2] Section 157(c) provides:
(1) A bankruptcy judge may hear a proceeding that is not a core proceeding but that is otherwise related to a case under title 11. In such proceeding, the bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district court, and any final order or judgment shall be entered by the district judge after considering the bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters to which any party has timely and specifically objected. (2) Notwithstanding the provisions of paragraph (1) of this subsection, the district court, with the consent of all the parties to the proceeding, may refer a proceeding related to a case under title 11 to a bankruptcy judge to hear and determine and to enter appropriate orders and judgments, subject to review under section 158 of this title.
[3] Judge Goettel relied in part on 28 U.S.C. § 1480(a), which provides that:
This Chapter and Title 11 do not affect any right to trial by jury . . . that is provided by any statute in effect on September 30, 1979.
Even at that time § 1480(a) had been repealed with the 1984 Amendments. Nevertheless, this provision does not purport to deal with the Seventh Amendment right to a jury trial. Even if it did, Congress cannot in any way take away a party's Seventh Amendment right to a jury trial.
[4] While Bankruptcy Rule 9015 authorizes the Bankruptcy Court to conduct jury trials of issues triable by a jury of right, it does not specifically address the availability of jury trials in non-core proceedings.
[5] This court recognizes that this result leads to automatic withdrawal of any non-core proceeding where a jury trial is timely demanded. While this might seem to contradict Congress' intent to permit the Bankruptcy Court to hear non-core proceedings, this court is persuaded that, had Congress specifically addressed the jury issue, it would have explicitly withdrawn jury proceedings to the district court.
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37 N.J. Super. 529 (1955)
117 A.2d 675
WILLIAM SMOOTZ, PLAINTIFF,
v.
OCTAVIO IENNI, DEFENDANT AND THIRD-PARTY PLAINTIFF,
v.
CONCETTA MARTINO AND NICHOLAS MARTINO, THIRD-PARTY DEFENDANTS.
Superior Court of New Jersey, Essex County Court Law Division.
Decided October 27, 1955.
*530 Mr. Melvin B. Cohen argued for the motion (Messrs. Lowenstein & Cohen, attorneys for third-party defendant).
Mr. Abraham L. Friedman argued against the motion (Mr. Samuel O. Offen, attorney for defendant and third-party plaintiff).
No appearance on behalf of plaintiff.
*531 FOLEY, J.C.C.
This matter comes before the court on the motion of a third-party defendant for a summary judgment on a complaint filed against him purporting to set forth a claim for relief under the Joint Tortfeasors Contribution Law (N.J.S. 2A:53A-1 et seq.). The plaintiff did not appear.
The facts are these: The primary plaintiff, William Smootz, brought an action against Octavio Ienni, alleging that while a passenger in the taxicab of the latter he was injured as a result of Ienni's negligently causing it to collide with a vehicle operated by Nicholas Martino. Ienni traversed the allegation of his default and by leave of court filed the instant complaint against Martino and his alleged master, Concetta Martino. The Martinos bring on the motion for summary judgment under R.R. 4:58-2, 3, supporting it with an uncontroverted showing that prior to the institution of the main case they settled out their liability to the plaintiff by the payment of a sum of money for which they received a covenant not to sue.
The movants argue that their right to dispose of their differences with the plaintiff and to thereby buy their peace remained unimpaired, notwithstanding the Contribution Law and that the present action constitutes an invasion of that right. Contra, it is urged: firstly, that the claim must be presented herein if the non-settling defendant is to obtain an adjudication that the settler is a joint tortfeasor and so answerable to him for contribution; cf. Sattelberger v. Telep, 14 N.J. 353 (1954); secondly, that the right of the defendant to such an adjudication cannot be obliterated by a composition privately arrived at by the plaintiff and the settler; and finally, that the status of tortfeasor cannot be legally established by private accord but must wait upon a legal adjudication of fault in the person alleged to be a tortfeasor.
While the third-party plaintiff's contentions are not without some logical appeal they must fall before the reasoning of the Supreme Court in Judson v. Peoples Bank & Trust *532 Co. of Westfield, 17 N.J. 67 (1954), wherein a guide to the solution of the problem is found. There the plaintiffs brought action against five alleged tortfeasors. During the pendency of the matter they settled with two and an order was entered dismissing the action against the settlers without prejudice to the prosecution of it against the non-settlers. The latter then moved for and obtained summary judgments upon the grounds that the allegations of the complaint were untrue and that the settlement in the circumstances outlined operated as a release of all defendants. This judicial action was reversed, the Supreme Court holding that factual questions concerning the bona fides of the allegations were presented and that the dismissal did not have the legal effect attributed to it. In anticipation of the problem arising from the Contribution Law, Justice Brennan, speaking for the majority (dissent on grounds inapplicable hereto), wrote a lengthy dictum which I take to express the thinking of the court as to the mechanics of granting to all alleged tortfeasors in situations such as that here presented the intended benefits of the legislation in question. In this regard the justice said (17 N.J., at page 92):
"The basic purpose of the statute is to achieve the `sharing of the common responsibility according to equity and natural justice,' Sattelberger v. Telep, 14 N.J. 353, 367 (1954); Pennsylvania Greyhound Lines, Inc. v. Rosenthal, 14 N.J. 372, 386 (1954). This end is attained by allowing actions among the joint tortfeasors to assure that none pays in excess of his pro rata share of the total damage. When one tortfeasor settles with the injured party for an amount which is less than the settler's pro rata share, equality between him and his co-wrongdoers may be realized in one of two ways: first the injured person may be required to credit upon any verdict against the others not the consideration received in settlement but the settler's pro rata share of the amount of the verdict, or, second, the injured party may have a judgment for his total damage less the consideration received in settlement, and the judgment tortfeasor who pays in excess of his pro rata share may have his action against the settler for contribution."
Pointing out the distinction between the New Jersey act and the draft act recommended by the National Conference of *533 Commissioners on Uniform State Laws, 9 U.L.A. 156, he went on (17 N.J., at pages 92, 93):
"The second alternative is the one adopted in sections 4 and 5 of the draft of uniform law. It may lead to some undesirable results: If the injured party is required to credit only the amount received in settlement, Gelsmine v. Vignale, 11 N.J. Super. 481 (App. Div. 1951), he may be tempted to make collusive settlements a mischief incident to the denial of contribution which was one of the strongest reasons for the statutory change allowing a right of contribution. Also, the settlement then lacks finality because the settler cannot count on his adjustment with the injured person as ending the matter but must apprehend a suit at the hands of his co-tortfeasors. This would have a stifling effect upon efforts at compromise and settlement, contrary to the policy of our law which strongly favors disposition of disputes by compromise and settlement. Rynar v. Lincoln Transit Co., Inc., 129 N.J.L. 525, 528 (E. & A. 1942).
If, then, as said by Justice Rutledge, `The problem is to blend the themes of compromise and contribution, maintaining the essential integrity of each as far as possible,' McKenna v. Austin, supra [77 U.S. App. D.C. 228, 134 F.2d 659, 148 A.L.R. 1253], the first alternative is clearly preferable. Collusive settlements are wholly ineffective when a credit of the settler's pro rata share is the required result of any settlement, and this helps attain one of the objectives of the contribution statute. And, thereby the settling tortfeasor is assured of the finality of his settlement, and impairment of the public policy favoring compromise is avoided. The injured party should not be discouraged from settlement by such a rule. He cannot complain of unfairness, since `* * * the reduction would be a direct result of his own act in accepting less than (the settler's pro rata share of) the total recoverable damages in settlement with the compromising wrongdoer.' McKenna v. Austin, supra. Thus, if the settlement is not collusive, he makes it upon the basis of his own appraisal of the risks of recovery and will hardly be deterred from it because it may later eventuate that he accepted less than the settler's pro rata share.
Our Legislature's rejection of sections 4 and 5 of the draft act clearly indicated its preference for the first alternative. True, the statute contains nothing whatever expressly dealing with the effect of a settlement, but the first alternative is a logical incident of the created right of contribution and no provision expressly stating that effect was necessary. The aim of the statute to make a settler responsible for his pro rata share is realized when the credit on the total damage is in the amount of that pro rata share, and provisions for a right of action against him at the hands of his co-tortfeasors were unnecessary."
*534 Clearly then the enunciated rule is that an injured person who settles his case with one of several defendants will, for the purpose of giving effect to the design of the Joint Tortfeasors Contribution Law, be deemed to have thereby relieved the remaining solvent tortfeasors of the necessity of seeking contribution from the settler of his proportionate share of the injured's judgments against them by crediting such share against the judgment before it is finally entered.
In the present case the parties to the third-party action are the only ones who might have been held answerable to the plaintiff as joint tortfeasors, and by operation of the Contribution Law the contributive shares are reduced to two, since the statute accounts a master and servant as a single tortfeasor.
It follows that the judgment herein should contain a directive to the clerk to enter a judgment against the third-party plaintiff, if one is recovered against him by the initial plaintiff, in the amount of 50% of the verdict.
The motion for summary judgment is granted, but without costs. An appropriate order may be presented.
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681 S.W.2d 256 (1984)
A. Behrooz RAMESH et al., Appellants,
v.
Gerald A. JOHNSON et al., Appellees.
No. A14-83-856-CV.
Court of Appeals of Texas, Houston (14th Dist.).
November 1, 1984.
*257 B. Edward Williamson, Houston, for appellants.
Daniel F. Shank, Houston, for appellees.
Before J. CURTISS BROWN, C.J., and CANNON and DRAUGHN, JJ.
OPINION
J. CURTISS BROWN, Chief Justice.
This is an action for broker's commissions by Gerald A. Johnson (Johnson or appellee) against A. Behooz Ramesh (Ramesh or appellant), a buyer of real estate. The trial court entered judgment for $28,000 in favor of appellee Johnson (the broker). Ramesh asserts two points of error on appeal, both of which challenge the application by the trial judge of the law of "procuring cause" to the facts of the case. We affirm.
The facts are largely undisputed. In January of 1979, Ramesh asked appellee Johnson to find an apartment complex in Houston with which Ramesh could effectuate a tax-deferred exchange of real estate. Ramesh had already contracted to sell an apartment complex in Dickinson, Texas which would serve as the "front end" of the exchange. His broker for the Dickinson transaction was Mr. Eugene Rushton.
*258 Johnson succeeded in locating an apartment complex called the Alta Vista apartments, then owned by the Municipal Engineering Company (Municipal). After a period of negotiations, Johnson brought Ramesh and Municipal together on terms under which Ramesh would pay a $532,000 purchase price for the apartments and $28,000 in commissions to Johnson "at closing." This agreement was reduced to writing in a contract dated March 29, 1979.
The contract granted the buyer the right to rescind the transaction if, on physical inspection of the apartments, he found them unsatisfactory. Dr. Ramesh conducted such an inspection and found that the roof of the complex was in need of repair.
Concerned that the total purchase price, and especially his immediate cash outlays, should reflect the cost of roof repairs to him, Ramesh asked Johnson to submit an offer to Municipal lowering the purchase price from $532,000 to $500,000. One effect of this new offer, if accepted, would have been to lower Johnson's commission.
Johnson did not carry through with this offer. He did, however, draft a letter on behalf of Ramesh rescinding the original contract according to the terms of the inspection clause. Appellant signed the letter, which Municipal received and accepted.
Almost immediately thereafter, and without Johnson's knowledge, Ramesh contacted Eugene Rushton, the broker for the Dickinson transaction, and asked him to submit a $500,000 offer to Municipal which provided for a $10,000 commission to Rushton. Rushton did so, and the offer was rejected by Municipal, as was a later offer of $510,000.
A sale was finally consummated on April 18, 1979, one week after the signing of the letter terminating the first contract. The purchase price under the final agreement was $532,000 payable under a split financing structure (partly an assumption of Municipal's indebtedness, partly a new note payable to Municipal).
This differed from the original (March 29) contract in that the original contract contemplated a unified "wraparound" note payable over a longer term, and at slightly higher interest, than the two notes later agreed upon. Thus Ramesh assumed a significantly lower overall interest obligation under the second contract. Ramesh agreed to pay Eugene Rushton $10,000, only $2,000 of which was in cash, for Rushton's role in the post-termination negotiations.
The jury's findings based on the above facts can be summarized as follows:
1) that appellee had been the efficient, procuring cause of the purchase by Ramesh of Alta Vista;
2) that Ramesh had not terminated the original contract in bad faith in order to deprive appellee of a commission;
3) that the terms of the original (March 29) contract and those of the April 18 contract were not substantially the same;
4) that appellee had not abandoned or waived his right to a commission.
Appellant contends in his first point of error that even with a finding by the jury that the broker was the procuring cause of the purchase, he is not entitled to a commission because the contract of March 29, having been terminated, does not satisfy the statutory requirement of a writing.[1] While it is true that Art. 6573a, § 20(b) requires that an action by a broker for commission must be founded on a written agreement, we believe that the contract of March 29 fully meets appellee's burden under the statute.
Appellant urges us to rule that a broker's right to a commission hinges on his continued employment through the time of the final consummation of the purchase. *259 This contention is contrary to well-established Texas law. Goodwin v. Gunter, 109 Tex. 56, 185 S.W. 295, 296 (Tex.1916); Volkmann v. Wortham, 189 S.W.2d 776, 779 (Tex.Civ.App.San Antonio 1945, writ dism'd); McPherson v. Osborn, 475 S.W.2d 804 (Tex.Civ.App.Amarillo 1971, no writ); Kelley v. Dunn, 620 S.W.2d 825, 829 (Tex. Civ.App.Tyler 1981, no writ); Fuess v. Mueller, 630 S.W.2d 715, 717 (Tex.App. Houston [1st Dist.] 1982, no writ).
The validity of a written agreement under Art. 6573a § 20(b) is to be determined as of the time of procurement, not consummation. Unless otherwise agreed, the broker has satisfied the statutory requirement of a writing and is entitled to a commission according to the contract if, while it is in force, he procures a seller from whom his client directly makes a purchase on terms satisfactory to himself, though different from those limited to the broker. Fuess v. Mueller, 630 S.W.2d 715, 717 (Tex.App.Houston [1st Dist.] 1982, no writ). In the instant case such procurement is evidenced by both the March 29 contract which, while it was in force, bound Municipal to sell, and the April 18 contract by which Ramesh directly purchased the property.
Where, as here, the requirements of a procurement and a writing have been satisfied, the courts have regularly treated the broker's rights under the contract as continuing in existence for a reasonable time after its termination by mutual rescission of the purchaser and owner so as not to deprive the broker of the commission he has earned. See, e.g., Fuess v. Mueller, 630 S.W.2d 715, 717-8 (Tex.App.Houston [1st Dist.] 1982, no writ) (17 days); Stitt v. Royal Park Fashions, 546 S.W.2d 924, 926-7 (Tex.Civ.App.Dallas 1977, writ ref'd n.r.e.) (the entire duration of an 8-year lease where commission was payable concurrently with rentals); Zeller v. Chipman, 474 S.W.2d 755, 756-8 (Tex.Civ.App. San Antonio 1971, no writ) (24 days; court remanded case on other grounds); Cass v. Hurst, 329 S.W.2d 450 (Tex.Civ. App.San Antonio 1959, no writ) (5 months; reversal of a summary judgment in favor of owner); Morgan v. Letellier, 677 S.W.2d 165 (Tex.App.Houston [1st Dist.] 1984, writ requested) (3 months). Cf. Edwards v. Parker, 438 S.W.2d 141 (Tex. Civ.App.Dallas 1969, no writ) (delay in excess of one year precludes recovery by broker); Maberry v. Julian, 479 S.W.2d 770 (Tex.Civ.App.Dallas 1972, no writ) (2 years delay precludes recovery).
In the present case only a week separated the termination of the March 29 contract and the consummation of the purchase. We therefore believe these facts fall within the group of cases which extend the duration of the broker's rights.
Appellant further contends, however, that the March 29 contract was subject to a condition and, that condition not having been met, appellee is not entitled to a commission. We agree with appellant that where the parties to a contract make the payment of a commission expressly contingent on a closing or other event, and that event does not occur, no obligation exists to pay the commission. This rule, however, is inapplicable to the present case.
The phrase in the March 29 contract making the commission payable "at closing" did not, in our opinion, make the commission contingent on consummation, but instead merely fixed a time for payment. The court in McPherson v. Osborn, 475 S.W.2d 804 (Tex.Civ.App.Amarillo 1971, no writ) faced precisely this question and interpreted "at closing" exactly as we do. In McPherson, as in this case, the defendant himself admitted that the closing fixed a time for payment. McPherson, 475 S.W.2d at 807.
Finally, this case is unlike those cases cited by appellant in which the broker had not earned a commission because a condition necessary to the formation of a contract failed to occur.[2] Here, a valid contract *260 existed between purchaser and owner which adequately evidenced a successful procurement as found by the jury. Accordingly, appellant's first point of error is overruled.
In his second point of error appellant challenges the form in which the instruction regarding "procuring cause" was given to the jury.
The trial court, in submitting special issue number one, defined procuring cause as follows:
"that cause which in a natural and continued sequence, unbroken by any new independent intervening cause, produces the event without which it would not have occurred."
The court thereupon defined "new independent intervening cause":
"the act or omission of a separate and independent agency not reasonably foreseeable by a party exercizing reasonable care, which destroys the causal connection, if any, between the act or omission inquired about and the occurrence in question, and thereby becomes the immediate cause of such occurrence."
Appellant contends that the trial court erred in excluding foreseeable intervening events or causes from its definition of "new and independent intervening cause." Specifically he states that the court's definition of "new and independent intervening cause" prevented the jury from considering the good-faith termination by Ramesh of the original contract and his subsequent purchase of Alta Vista through another broker as elements constituting a new and independent intervening cause of the purchase. We disagree.
The period between April 10 and April 18 was marked by three major events: Ramesh's discovery of the weaknesses in the roof, the termination of the original contract, and the re-negotiation and final consummation of the purchase by Ramesh through Rushton. The need for roof repairs cannot be regarded as an intervening cause of the purchase. On the contrary, it stood in the way of the purchase. Similarly, a termination of a contract of purchase cannot be a cause of the purchase under any conceivable jury instruction. Thus the only real issue presented here is whether the jury was afforded sufficient opportunity to consider the role of the second broker in the transaction.
In Zeller v. Chipman, 474 S.W.2d 755 (Tex.Civ.App.San Antonio 1971, no writ), the court reversed an award of a broker's commission based on an improper jury instruction. The Zeller trial court had baldly asserted in its instruction regarding procuring cause: "[I]t is immaterial that the transaction is finally consummated by another broker." (Emphasis added). This constituted reversible error because it wholly prevented the jury from assessing the role of the second broker in the transaction.
Zeller is distinguishable from the present case. The first half of the definition of procuring cause given below imposed a stiffer test for appellee to meet than the definition given by the Zeller trial court. The definition in Zeller only required the broker to have been a sine qua non of the transaction to be considered its procuring cause.[3] Here, as noted above, the definition *261 went much further, requiring the broker to have been a sine qua non of the transaction and also to have actually produced the event.
Irrespective of what incidental effect the definition of intervening cause given below may have had on the jury, then, the definition of procuring cause literally forced the jury to assess the role of the second broker, since under this definition either appellee produced the event or Rushton did. Stated conversely, the jury, by finding appellee to have produced the event (the transaction), impliedly found an absence of intervening causes, foreseeable or not. We therefore, do not believe that the trial court's instruction on procuring cause "was reasonably calculated to cause and probably did cause the rendition of an improper judgment in the case." TEX.R.CIV.P. 434; Knight v. Hicks, 505 S.W.2d 638, 641 (Tex. Civ.App.Amarillo 1974, writ ref'd n.r.e.). Accordingly, appellant's second point of error is overruled, and the judgment of the trial court is affirmed.
NOTES
[1] TEX.REV.CIV.STAT.ANN. art. 6573a, § 20(b) provides as follows:
An action may not be brought to a court in this state for the recovery of a commission for the sale or purchase of real estate unless the promise or agreement on which the action is brought, or some memorandum thereof, is in writing and signed by the party to be charged or signed by a person lawfully authorized by him to sign it. (Emphasis added).
[2] E.g. Roquemore v. Talley, 451 S.W.2d 319 (Tex. Civ.App.Dallas 1970, writ ref'd n.r.e.) (failure to gain cooperation of City of Dallas left contract unformed); Toland v. Kaliff, 435 S.W.2d 260 (Tex.Civ.App.San Antonio 1968, no writ) (no contract had been formed); In O'Boyle v. DuBose-Killeen Properties, 430 S.W.2d 273 (Tex. Civ.App.Dallas 1968, writ ref'd n.r.e.), the broker had not procured a buyer ready to purchase on terms acceptable to the seller. Likewise Bayer v. McDade, 610 S.W.2d 171 (Tex.Civ.App. Houston [1st Dist.] 1980, writ ref'd n.r.e.). In Taylor v. Neal, 467 S.W.2d 197 (Tex.Civ.App. Amarillo 1971, writ dism'd), the contract was made contingent on the consummation of another contract involving the same seller. The latter contract was never completed because it in turn was contingent on an event which never occurred. Friedlander v. Christianson, 320 S.W.2d 404 (Tex.Civ.App.Houston 1959, no writ) (involved a listing agreement, not a valid contract between purchaser and owner.)
[3] The Zeller trial court defined procuring cause as follows:
"[S]uch act or acts, if any, in bringing the buyers and sellers together in connection with the sale of the property in question which so far constructed to bringing about the sale that but for such act or acts ... the sale would not have been consummated." (Emphasis added) Zeller v. Chipman, 474 S.W.2d at 755.
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681 S.W.2d 518 (1984)
STATE of Missouri, Plaintiff-Respondent,
v.
Michael J. SMITH, Defendant-Appellant.
No. 13592.
Missouri Court of Appeals, Southern District, Division Three.
November 27, 1984.
*520 Wesley D. Coleman, Asst. Public Defender, Caruthersville, for defendant-appellant.
John Ashcroft, Atty. Gen., Thomas Carter, II, Asst. Atty. Gen., Jefferson City, for plaintiff-respondent.
MAUS, Judge.
A jury found the appellant guilty of burglary and stealing. The court sentenced appellant as a persistent offender to 15 years imprisonment on each count, to run concurrently.
The following is a brief summary of the facts. At 12:40 a.m. on September 29, 1983, Officer Whitworth of the Caruthersville Police Department approached and stopped at the intersection of Third and Carleton Streets. The intersection was governed by four-way stop signs. The patrol car was westbound. The appellant's vehicle was northbound waiting to turn left. The officer sat at the intersection but appellant's vehicle did not pull out even though it arrived at the intersection first. The officer saw that the trunk lid was up but could not see what was in the trunk. The officer motioned for the car to proceed and it then turned in front of the patrol car. When it did, the officer saw there was a television in the trunk.
The officer stopped appellant's vehicle for investigation. He surmised that "they acted kinda suspicious when they wouldn't pull out in front of me and the trunk was up on their car." The appellant and the officer got out of their respective vehicles. In response to a call, another officer came to the scene. A conversation took place during which the police were given permission to get the serial number of the television. The appellant said the television wasn't his. He was hauling it for a guy who hired him and bought him $3 worth of gas. He didn't know the guy's name.
Because of the circumstances and incredible story, the officer placed the appellant and his passenger under arrest. Later at the police station at the time their personal belongings were taken, the appellant and his passenger each had a lady's wristwatch removed from his possession. It was later established that the wristwatches and the television had been stolen from the same dwelling.
The appellant's first point is that the trial court erred in admitting the wristwatches and the photo of the television set because the items were seized illegally. Appellant contends that the police had no probable cause to arrest, therefore the seizure of the items was invalid.
The appellant was lawfully stopped. "Where police officers entertain a reasonable suspicion that criminal activity may be afoot, they may stop the suspected person, identify themselves as police officers, require the suspect to identify himself and make reasonable inquiries concerning his activities." State v. Lasley, 583 S.W.2d 511, 518 (Mo. banc 1979). Reasonable suspicion is present when the officer is "able to point to specific and articulable facts which, taken together with rational inferences from those facts, reasonably warrant that intrusion." State v. Lasley, *521 supra, at p. 518, citing Terry v. Ohio, 392 U.S. 1, 21, 88 S. Ct. 1868, 1880, 20 L. Ed. 2d 889, 906 (1968). It is not necessary that probable cause to arrest exist. Terry v. Ohio, supra. The standard is whether the facts available to the officer would warrant a man of reasonable caution in the belief that the action taken was appropriate. Terry v. Ohio, supra.
The circumstances were that appellant would not proceed, the trunk of his automobile was up and bouncing around and that he was hauling a television set through the city streets in the middle of the night. The officer had reasonable suspicion to stop the appellant. State v. McMahan, 583 S.W.2d 540 (Mo.App.1979). Also See State v. Purnell, 621 S.W.2d 277 (Mo.1981).
An arrest requires probable cause. This is "knowledge of facts and circumstances sufficient for a prudent person to believe the suspect is committing or has committed an offense." State v. Heitman, 589 S.W.2d 249, 253 (Mo. banc 1979), cert. denied, 446 U.S. 941, 100 S. Ct. 2164, 64 L. Ed. 2d 795 (1980). Probable cause requires more than mere suspicion but "its existence must be determined by practical considerations of everyday life on which reasonable persons act and not the hindsight of legal technicians." State v. Heitman, supra, at p. 253. The information in the possession of the arresting officer need not be that quantum of proof necessary to sustain a conviction. State v. Perry, 499 S.W.2d 473 (Mo.1973). After questioning appellant and hearing his less than credible explanation as to how he had acquired the television and why he was hauling it, a reasonable person could form that belief.
The fact that the police officer did not have knowledge of the particular burglary in which the items were taken did not vitiate probable cause to arrest. It was not necessary that the officer have received a report to conclude that a burglary had probably taken place. The facts presented were "sufficient to raise in the prudent man a belief that a crime has been committed" by the appellant. This constituted probable cause to arrest. State v. Heitman, supra, at 254.
It is not necessary to consider all of the possible justifications for the warrantless seizure of the television.
It has long been the rule that evidentiary matter, contraband, instrumentalities of crime, and fruits of crime, which the police and other officials discover in plain view in the course of the performance of their official duties without their having searched for these things, may be seized without warrant or the knowledge gained thereby may be used as a basis for obtaining a search warrant.
Scurlock, Basic Principles of Arrest, Searches and Seizures, Privilege Against Self-Incrimination, 51 U.M.K.C. Law Rev. 401, 505 (1983). Also see State v. Smith, 675 S.W.2d 690 (Mo.App.1984).
The wristwatches were properly admitted. They were obtained during an inventory search incident to a lawful arrest. State v. Masters, 530 S.W.2d 28 (Mo.App. 1975); State v. Pettis, 522 S.W.2d 12 (Mo. App.1975).
The appellant also asserts a photograph of a television set was improperly admitted. The basis for his point is apparently because the photographer was not identified. The officer testified it was a picture of the television taken from the appellant's trunk. The owner and her daughter identified the photograph by an identifying mark on the television portrayed. The owner further identified it as the one stolen from her and returned to her by the police. The trial court did not err in admitting the picture. State v. Daugherty, 631 S.W.2d 637 (Mo.1982).
Appellant's next point is that the jury panel was not a representative cross-section of the community in that one township was not represented in the jury panel on the day of trial. There were twelve townships from which names were drawn and persons from all twelve townships were summoned to appear. On the day of trial, however, for a reason not clear from the *522 record, there was no person from Butler township in the jury panel.
The proof required to establish a violation of the cross-section requirement of the Sixth Amendment has been repeatedly and clearly stated. See State v. Williams, 659 S.W.2d 778 (Mo. banc 1983). "[I]t has been held that exclusion of veniremen from a geographical area is not per se violative of the Sixth Amendment to the United States Constitution." State v. Alexander, 620 S.W.2d 380, 385 (Mo. banc 1981). Proof of the absence of a juror from Butler Township does not establish error. State v. Alexander, supra.
By two points the appellant challenges the sufficiency of the evidence. There was evidence the home of Bessie Mae Townsend was broken into on Wednesday, September 28, 1983, or Thursday, September 29, 1983; a television and wristwatches were taken from that home; and those items were found in the possession of appellant and his companion.
The unexplained possession of recently stolen property gives rise to a permissible inference of guilt and constitutes sufficient evidence to submit a case of burglary and stealing to the jury.... Moreover, the requirement that possession of stolen goods be "unexplained" means simply that the explanation for the possession is a question for the jury. The jury rejected Pickett's explanation concerning the stolen goods.
State v. Pickett, 642 S.W.2d 703, 705 (Mo. App.1982) (citation omitted).
The jury rejected appellant's explanation of his possession of the television. He offered no explanation for his possession of one of the watches. The evidence was sufficient. State v. Newberry, 605 S.W.2d 117 (Mo.1980).
The appellant's point the state failed to prove the corpus delicti obviously is without merit. It is not necessary that the corpus delicti be proved in any particular order in the trial. State v. Easley, 515 S.W.2d 600 (Mo.App.1974). The fact that the proper elements were established during the course of trial is sufficient. State v. Wandix, 634 S.W.2d 203 (Mo.App.1982).
For his last point the appellant contends the evidence was too conflicting to support his guilt beyond a reasonable doubt. Appellant does not cite any specific instance of conflicting testimony. This court does not find the evidence to be conflicting. Even if there were instances of inconsistencies, resolution of that testimony would be for the jury. State v. Newberry, supra. The judgment of the trial court is affirmed.
PREWITT, C.J., CROW, P.J., and HOGAN and TITUS, JJ., concur.
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117 A.2d 126 (1955)
Lillian GRITZ and Freda Chernikoff, Appellants,
v.
HOT SHOPPES, Inc., a body corporate, Appellee.
No. 1673.
Municipal Court of Appeals for the District of Columbia.
Argued August 29, 1955.
Decided September 23, 1955.
*127 Samuel Intrater, Washington, D. C., with whom Albert Brick, Washington, D. C., was on the brief, for appellants.
William H. Clarke, Washington, D. C., with whom Richard W. Galiher, Washington, D. C., and William E. Stewart, Jr., Washington, D. C., were on the brief, for appellee.
Before CAYTON, Chief Judge, and HOOD and QUINN, Associate Judges.
HOOD, Associate Judge.
This action was brought to recover damages allegedly sustained by plaintiffs in eating food while customers in defendant's restaurant. From a verdict and judgment awarding plaintiffs $1 each, they bring this appeal.
The record shows that on July 8, 1954, plaintiffs visited defendant's restaurant and were served waffles. Plaintiffs testified that the waffles "tasted and smelled like they contained carbolic acid"; that each of them consumed approximately one-half waffle while noticing the peculiar taste and odor; that they received burns about the mouth and became ill, requiring the services of a physician for several weeks and incurring medical bills and taxi fares to their doctor's office, and cost of the services of a maid during their illness. The doctor who treated them on the morning after their visit to defendant's restaurant testified that his treatment extended for a period of approximately three weeks, that he treated plaintiffs for acute gastritis or food poisoning, and that, in his opinion, based on statements given by plaintiffs, the diagnosed condition was caused by food consumed at defendant's restaurant. A witness who accompanied plaintiffs on their visit to defendant's restaurant testified that she was away from the table when the waffles were being partially consumed, but that on her return she found the plaintiffs ill, and that plaintiffs were ill during the next several weeks.
Defendant's manager testified that approximately one hundred other waffles were served customers at this restaurant that evening without complaint; that when plaintiffs complained he inspected the waffles involved and made inquiries of other customers then eating waffles; that at plaintiffs' request he took them into the kitchen and showed them the waffle mix; and that he saw an employee eat part of the actual waffle about which plaintiffs had complained, and such employee suffered no ill effects. Another employee testified that he mixed the waffles which were served plaintiffs, and that after the complaint he tasted the mix and it had no unusual taste or odor. He further testified to the cleanliness of the various containers used and to the fact that only water was added to the mix. Another employee testified that he tasted the remnant of one of the waffles served plaintiffs and detected no unusual taste and suffered no ill effects.
The case was submitted to the jury with instructions not here questioned. After deliberating several hours the jury were excused until the following day when they returned and deliberated from 10:00 a. m. until approximately 3:00 p. m. The trial judge then delivered the "Allen charge" after which the jury again retired and returned at 4:00 p. m. with a verdict for plaintiffs of $1 each.
We are asked by plaintiffs to review the verdict of the jury and to say that it was so inadequate as to demonstrate that it was the result of passion and prejudice, and to *128 rule that the trial court abused its discretion in its refusal to grant a new trial.
Without deciding the power of this court to review the verdict of the jury on the sole question of inadequacy, we are convinced that the record does not establish inadequacy of verdict. The issues of injury and the extent of injury were strongly contested and the jury evidently found that plaintiffs had suffered no substantial injury. Perhaps the jurors, or some of them, had doubts as to whether any injury had been suffered. Under these circumstances it is not for this court to say that the jury should have awarded a greater amount.
In Chambers v. District of Columbia, 44 App.D.C. 331, 332, where a jury in a personal injury case awarded plaintiff damages of one cent, the court in affirming said:
"From the verdict, the jury found against defendant on the question of negligence. There was a sharp conflict in the evidence as to whether plaintiff sustained any injury. The question of damages, should the negligence of defendant be found, was fully and fairly presented to the jury by the trial court. Upon the evidence, therefore, it must be assumed that the jury found that the injuries plaintiff sustained were of so trivial a character as not to justify a substantial award; hence the verdict awarding her nominal damages. The evidence was sufficient to justify the conclusion reached by the jury that no substantial injury was sustained by plaintiff, and there is no apparent reason for judicial interference on the ground that the damages are inadequate."
In Fairmount Glass Works v. Cub Fork Coal Co., 287 U.S. 474, 484-485, 53 S. Ct. 252, 255, 77 L. Ed. 439, where in a breach of contract action the jury awarded plaintiff $1 in damages, the court said:
"To regard the verdict as inconsistent on its face is to assume that the jury found for the plaintiff and failed to perform its task of assessing damages. The trial judge was not obliged so to regard the verdict. The defendant had insisted upon several defenses and had set up a counterclaim. The plaintiffs were not entitled to a directed verdict. The evidence was voluminous; and, on some issues at least, conflicting. The instructions left the contested issues of liability to the jury. The verdict may have represented a finding for the defendant on those issues; the reason for the award of nominal damages may have been that the jury wished the costs to be taxed against the defendant. The defendant did not complain of the verdict. The record before us does not contain any explanation by the trial court of the refusal to grant a new trial, or any interpretation by it of the jury's verdict. In the absence of such expressions by the trial court in the case at bar, the refusal to grant a new trial cannot be held erroneous as a matter of law. Appellate courts should be slow to impute to juries a disregard of their duties, and to trial courts a want of diligence or perspicacity in appraising the jury's conduct."
The verdict of the jury, based as it was on conflicting evidence, had the sanction of the trial court which denied a motion for new trial. We see no abuse of discretion.
Affirmed.
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681 S.W.2d 698 (1984)
Victor & Guadalupe GUTIERREZ, Appellants,
v.
STATE of Texas, Appellee.
No. A14-81-793CR.
Court of Appeals of Texas, Houston (14th Dist.).
August 9, 1984.
*700 C.R. Daffern, Amarillo, for appellants.
Miguel Martinez, Amarillo, for appellee.
Before J. CURTISS BROWN, C.J., and CANNON and DRAUGHN, JJ.
OPINION
DRAUGHN, Justice.
This is an appeal from a conviction of capital murder. A jury found two brothers, Victor and Guadalupe Gutierrez, guilty of intentionally killing a police officer and sentenced them to life imprisonment. In seventeen grounds of error, appellants now complain of various errors in the charge, *701 particularly in the application of the law of parties, insufficiency of the evidence, and of the court's failure to allow appellants to cross-examine an eyewitness regarding offenses pending against him or to introduce evidence of the prior statements of a co-indictee. We find no reversible error and therefore affirm the judgment of the trial court.
In order to clarify our review, we first delineate the pertinent facts. On December 25, 1980, appellants, their younger brother Ernesto, and Urbano Flores, drove into Amarillo from their home in Dumas. After patronizing a local bar and consuming some quantity of liquor, the four men drove around Amarillo. Police Officer Berry Joe McGuire, who was on patrol at the time, apparently noticed some irregularity in the car's movement, and signaled for them to pull over. Victor, the driver, got out of the car and approached Officer McGuire. Officer McGuire asked Victor for some identification, and, after viewing it, arrested him and placed him in handcuffs. He then placed Victor in his patrol car and returned immediately to appellant's vehicle.
Bonofacio Navarette (Navarette), who lived across the street from the site of the arrest, noticed the flashing patrol car lights and came to his window. He had observed the officer as he handcuffed and placed Victor in the car. Navarette testified that the officer left Victor in the patrol car and approached the other vehicle. Meanwhile, Victor attempted to get out of the police car. McGuire put him back into the car, returned to Victor's car and took the ignition keys. At this point, Victor once again had gotten the patrol car door open and was attempting to leave. As McGuire returned to his patrol car to attend to Victor, Guadalupe, Ernesto, and Urbano got out of the other car. The testimony indicates that McGuire spoke to the men and then attempted to put Victor back into the car. All four men began fighting with the officer, pushing him to the ground and kicking him while he yelled for help. Navarette heard one of the men yell "fuck him up," and then heard four shots. Victor and Guadalupe fled in Victor's car and were apprehended later outside Amarillo after their car ran out of gas. Officer McGuire was found dead at the scene of the occurrence with gunshot wounds to the head, shoulder, and hip. Appellants were tried and convicted of his capital murder.
The charge of the court included several paragraphs instructing the jury as to the appellants' potential vicarious responsibility under the law of parties. Both appellants argue that these charges on the law of parties were incorrect for a variety of reasons. Initially, we point out that the court was permitted to charge the jury on the law of parties although no such allegation was contained in the indictment. See Pitts v. State, 569 S.W.2d 898, 900 (Tex. Crim.App.1978). Furthermore, the court's refusal of Guadalupe's motion to quash his indictment because of its failure to specify the manner in which he was a party was not error since such an allegation is unnecessary.
Appellants next suggest that the instructions on the law of parties allowed the jury to convict them without proper proof of the requisite mental state. Appellant Gutierrez first challenges the following portion of the court's charge:
Alternatively, if you find from the evidence beyond a reasonable doubt that on or about December 25, 1980 in Potter County, Texas, that the only difference between what actually occurred (the Capital Murder of Berry McGuire), if it occurred, and what the defendant desired, contemplated, or risked (the felony offense of Aggravated Assault on a Peace Officer, against Berry McGuire) was that a different offense (Capital Murder of Berry McGuire) was committed, then you will find the defendant, Victor Gutierrez, guilty of Capital Murder.
Appellant argues that this contradicts the holding in Garrett v. State, 573 S.W.2d 543 (Tex.Crim.App.1978). He contends it differs from the Garrett holding in that intent to commit aggravated assault is not sufficient to support a finding of guilty of *702 capital murder. Victor's reliance on Garrett is misplaced. The holding in Garrett was directed exclusively at the felony-murder statute. See Tex.Penal Code Ann. § 19.02(a)(3) (Vernon 1974). The instant charge, however, was based on Penal Code section 6.04(b)(1), the common-law "transferred-intent" doctrine. This section specifically provides that where several people act together in pursuit of an unlawful act, each one is liable for collateral crimes, even though unplanned and not intended, if the crimes are the foreseeable, ordinary and probable consequences of the preparation or execution of the unlawful act. Curtis v. State, 573 S.W.2d 219, 223 (Tex.Crim.App. 1978) (emphasis added). Since intent for the collateral crime was not required, the judge was correct in refusing to so charge the jury.
Similarly, Victor contends that this portion of the charge constituted a comment on the weight of the evidence. Specifically, he argues that the court assumed that he contemplated or risked the aggravated assault and further assumed that capital murder was the different offense and that the aggravated assault was a felony. There was evidence in the record indicating that Victor was involved in an aggravated assault. The charge authorized a conviction for capital murder only if the jury found that the murder occurred as a result of an act which Victor desired or risked, namely aggravated assault. Since there was evidence of the assault, any perceived comment on the evidence constituted harmless error. See Coplin v. State, 585 S.W.2d 734, 736 (Tex.Crim.App.1979). Additionally, the court did not assume a capital murder was committed, but rather referred to it only "if it occurred." The court properly referred to aggravated assault as a felony, as it is so designated in the Penal Code. See Tex.Penal Code Ann. § 22.02(c) (Vernon 1974). This ground of error is overruled.
In the next ground of error, Victor contends that the trial judge erroneously submitted a charge authorizing the jury to convict him of capital murder if they believed the shooting occurred during, and in furtherance of, a conspiracy to commit aggravated assault. He argues that this improperly permitted conviction absent proof of intent to kill Officer McGuire. We find this contention to be without merit because this portion of the charge tracked the language of Penal Code § 7.02(b). Section 7.02(b) contains a theory of criminal responsibility which specifically applies to a defendant "though [he has] no intent to commit" the collateral offense. Tex.Penal Code Ann. § 7.02(b) (Vernon 1974). Since this section of the Penal Code is applicable to capital murder cases, the necessity for proof of intent is eliminated. See English v. State, 592 S.W.2d 949, 954-55 (Tex.Crim. App.1980), cert. denied, 499 U.S. 891, 101 S. Ct. 254, 66 L. Ed. 2d 120 (1980); Ruiz v. State, 579 S.W.2d 206 (Tex.Crim.App.1979).
Additionally, the court had no obligation to instruct the jury at that point that if Victor lacked the intent to kill Officer McGuire, he was guilty of aggravated assault. We first point out that the jury was charged that Victor could be found guilty of aggravated assault if they did not find him guilty of murder or capital murder; thus a charge on aggravated assault was included. However, appellant submits that a special instruction concerning the lack of intent to kill Officer McGuire should have been given along with the murder charges. The charge required that the jury find that Victor intentionally and knowingly killed Officer McGuire, either individually or as a member of a conspiracy. Special instructions are not necessary when they simply emphasize an element of the case which the State is required to prove and which the defendant affirmatively denies. See Green v. State, 566 S.W.2d 578, 584 (Tex.Crim.App.1978); Campbell v. State, 626 S.W.2d 91, 92 (Tex.App.Corpus Christi 1981, no pet.). Since Victor's requested instruction merely negated the element of intent, it was not error to refuse same. These grounds of error are overruled.
Victor next argues that there was no evidence to support the charge that he *703 fired the gun. This issue is based on a misunderstanding of the application of the law of parties. The charge provided the following:
Now if you find from the evidence beyond a reasonable doubt that on or about the 25th day of December, 1980, in Potter County, Texas, that the defendant, Victor Gutierrez, acting as a party, did then and there intentionally or knowingly cause the death of an individual, Berry McGuire, hereafter styled the complainant, a peace officer in the lawful discharge of an official duty, knowing at the time that the complainant was a peace officer, by shooting the complainant with a firearm, then you will find the defendant, Victor Gutierrez, guilty of Capital Murder.
Although it requires the jury to find that Victor intentionally or knowingly caused the death of McGuire, he need only have done so as a party. It is fundamental to the law of parties that each party to an offense may be charged with the commission of the offense. Specifically, each party may be held criminally responsible for the acts of another. Tex.Penal Code Ann. §§ 7.01, 7.02 (Vernon 1974). It is therefore immaterial to the parties charge that Victor did not actually pull the trigger. This ground of error is overruled.
Victor also contends that the law of parties was improperly applied in the following portion of the charge:
Therefore, if you find from the evidence beyond a reasonable doubt that on or about the 25th day of December, 1980, in Potter County, Texas, the said defendant, Victor Gutierrez, did then and there, as a party, acting with the intent to promote or assist the commission of the offense, solicit, encourage, direct, aid, or attempt to aid Ernesto Gutierrez, and/or Urbano Jaramillo Flores, and/or Guadalupe Gutierrez to intentionally or knowingly cause the death of an individual, Berry McGuire, hereafter styled the complainant, a peace officer in the lawful discharge of an official duty, knowing at the time that the complainant was a peace officer, by shooting the complainant with a firearm, then you will find the defendant guilty of Capital Murder. (Emphasis added.)
The judge applied this same charge to the offense of murder. Victor argues that the failure to delineate "the offense" was a fatal defect. He urges that the jury could have believed that he need only have intended to assist in the commission of aggravated assault, rather than capital murder or murder, and still be found guilty of those greater crimes. We disagree. Unless an entire element of an offense is omitted from the charge, the charge must be read as a whole and review should not be limited to one part standing alone. Pittman v. State, 554 S.W.2d 190, 191 (Tex. Crim.App.1977); Robinson v. State, 630 S.W.2d 394, 399 (Tex.App.San Antonio 1982, pet. ref'd). In this charge, the previous paragraph stated that that portion of the charge concerned capital murder. There had been no reference of any kind to any other offense, and the portion describing aggravated assault appeared at the end of the charge, apart from the capital murder and murder sections. It stretches the imagination to suggest that this constituted an improper application of the law of parties. This ground of error is overruled.
Both Victor and Guadalupe contend that there was insufficient evidence of criminal responsibility to support the charge on the law of parties. They both argue that there was no evidence that they entered into a "conspiracy" to kill the officer, and Guadalupe additionally complains that there was no evidence that he knew of Ernesto's intent to kill him.
Appellants' charges relied on two major theories of criminal responsibility for the acts of another, namely Penal Code sections 7.02(a)(2) and 7.02(b). Under both of these theories, the fact that appellants did not participate in the actual shooting is immaterial. Curtis v. State, 573 S.W.2d 219, 222 (Tex.Crim.App.1978). Rather, responsibility is determined through complicity in the actions. Consequently, the evidence must sufficiently establish *704 either that (1) appellants, acting with intent to promote or assist in the killing, solicited, encouraged, directed, aided or attempted to aid in its commission; or (2) the murder occurred during an agreed attempt to carry out an aggravated assault and the murder was in furtherance of that attempt and should have been anticipated. See Tex.Penal Code Ann. §§ 7.02(a)(2), 7.02(b) (Vernon 1974). In deciding whether an "agreement" or "conspiracy" or promotion of the offense existed, we may examine events prior to, during and after the occurrence of the offense. Curtis v. State, 573 S.W.2d 219, 222 (Tex.Crim.App.1978). The evidence must include at least some type of encouragement by words, actions, or agreement, which show an understanding and common design to do a certain act. See Curtis at 222; Baldridge v. State, 543 S.W.2d 639, 643 (Tex.Crim.App. 1976).
The eyewitness testimony here indicated that all four men were present at, and involved in, the incident. Victor immediately evidenced animosity toward the officer and the situation by his repeated attempts to leave the police car. The three others joined into the fracas by aiding Victor. The testimony indicates that all four men began beating the officer, knocking him to the ground, kicking him, and all four of them were on top of him when the officer was shot. Ernesto shouted "fuck him up," which, according to the evidence, was a Mexican colloquialism for "kill him." At this point the fatal gunshots were fired, and all four men then fled the scene. The evidence clearly shows an implicit agreement to commit the offense formulated contemporaneously with the offense. See Curtis at 222; Gordon v. State, 640 S.W.2d 743, 758 (Tex.App.San Antonio 1982, no pet.). We hold that the evidence, when viewed in the light most favorable to the verdict, sufficiently shows that appellants, by their actions, participated in and therefore agreed to the assault and resulting murder of Officer McGuire.
Guadalupe's attack on the insufficiency of evidence regarding his lack of knowledge as to Ernesto's intent to kill McGuire is similarly without merit. He correctly points out that some knowledge of the party's intent to kill the officer is required; however, the knowledge can again be inferred from the circumstances surrounding the occurrence. See Randolph v. State, 656 S.W.2d 475, 477 (Tex. Crim.App.1983); Baldridge v. State, 543 S.W.2d 639, 643 (Tex.Crim.App.1976). Guadalupe was involved in the fight and the jury could easily have inferred that he, along with the others, contemporaneously agreed to the killing. Additionally, we are not convinced that the cases cited by appellant are controlling. The holding in Baldridge is based on a 1971 case, prior to the adoption of 7.02(b) of the Penal Code. Under this section of the code, a finding of intent to kill was unnecessary. Rather, Guadalupe need only have participated in an aggravated assault, which subsequently escalated into murder. Tex.Penal Code Ann. § 7.02(b) (Vernon 1974). For both of the foregoing reasons, appellants' insufficiency grounds of error are overruled.
Guadalupe next contends that the trial court erred in failing to quash the indictment because it did not give notice of the facts constituting the offense. We disagree. An indictment which tracks the language of a penal statute is legally sufficient to provide the defendant with notice of the offense with which he was charged. Ward v. State, 642 S.W.2d 782 (Tex.Crim. App.1982); Bollman v. State, 629 S.W.2d 54, 55 (Tex.Crim.App.1982). This indictment charged Guadalupe with knowingly and intentionally causing the death of a peace officer in the lawful discharge of an official duty, knowing at the time that he was a peace officer. This essentially tracks the language of sections 19.02(a)(1) and 19.03(a)(1), and therefore provided adequate notice of the offense.
Appellant also argues the trial court erred in failing to respond to appellants' timely requested special charge and instruction to the jury on the defense of independent impulse. We disagree. An independent impulse defense, as applicable *705 to section 7.02(b) prosecutions, rests on the creation of a reasonable doubt that the offense charged was not committed in furtherance of the unlawful purpose of the conspiracy. Where some evidence is presented that might support such a reasonable doubt on the issue, a jury charge on the defensive matter should be given. Simmons v. State, 594 S.W.2d 760 (Tex. Crim.App.1980), vacated on other grounds, 453 U.S. 902, 101 S. Ct. 3134, 69 L. Ed. 2d 988 (1981), on remand 623 S.W.2d 416 (Tex. Crim.App.1981) (en banc).
Here there was no evidence presented that the murder of Officer McGuire was not committed in the furtherance of the assault upon him. Since the death of the police officer would have been a reasonably foreseeable consequence of such a violent assault in which the appellant participated, the appellant was not entitled to an instruction on the defense of impulse.
Victor and Guadalupe both urge that the trial court erred in failing to instruct the jury on the lesser included offense of voluntary manslaughter. We disagree. A charge on voluntary manslaughter is necessary only when there is evidence that a defendant acted under the immediate influence of sudden passion arising from adequate cause. Schoelman v. State, 644 S.W.2d 727, 733 (Tex.Crim.App. 1983). Victor suggests that he was reacting to undue force exhibited by Officer McGuire during the arrest, while Guadalupe argues that he was provoked by the Officer's shutting the patrol car door on Victor's legs. Even if these allegations were true, we do not believe they would support a finding of sudden passion arising from adequate cause. Officer McGuire attempted to make a routine DWI arrest, after which the suspect made several attempts to flee. It is ludicrous to suggest that any type of physical force by a lone police officer at this point constituted adequate cause to retaliate with a violent, unrestrained attack and murder. Appellants were not entitled to an instruction on voluntary manslaughter, and these grounds of error are therefore overruled.
In his final attack on the jury's charge, Victor contends that the charge as a whole was misleading and confusing and calculated to injure his rights. After careful review of the charge as a whole, we find that it sufficiently presented the applicable law and adequately protected his rights. See Garcia v. State, 630 S.W.2d 914, 917 (Tex.App.Amarillo 1982, no pet.). The charge first dealt with the offense of capital murder and explained the various theories of criminal responsibility related thereto. It then instructed the jury that if they did not find him guilty of capital murder, that they could find him guilty of murder under the theories of complicity. Finally, they were told that if he was not guilty of either of the murder charges, he could be found guilty of aggravated assault. Although admittedly complex, the charge was arranged in an orderly fashion presenting alternative theories of culpability. As such, we find it does not present grounds for reversal on appeal.
Appellants Victor and Guadalupe next assert that the trial court erred in not permitting them to question witness Bonofacio Navarette in front of the jury regarding certain charges pending against him for the limited purposes of showing bias, prejudice, interest and motive with regard to his testimony. As one of the prosecution's principal witnesses, Navarette testified that he watched the altercation between the defendants and the victim from the window of his home. Even though Navarette was not the only eyewitness, his testimony was very damaging to the appellants. Appellants argue they should have been allowed to impeach Navarette's testimony by showing that misdemeanor charges for theft, DWI, and bond forfeiture were pending against Navarette, and that the theft charge had been dropped shortly after the death of the victim.
At the beginning of the appellants' cross-examination of Navarette, the district attorney requested that the court grant his motion in limine to prevent questioning the *706 witness about charges pending against him. After some discussion among the judge, the district attorney, and appellants' attorneys, Navarette was taken on voir dire and questioned thoroughly by appellants' attorneys and by the district attorney. Navarette testified he had not been promised special treatment by any law enforcement officer or anyone from the district attorney's office. The district attorney also took the stand and testified that no one from his office had suggested to Navarette the possibility of favorable treatment in exchange for his testimony. He testified that the charges pending against the witness were all misdemeanors and were within the county attorney's jurisdiction so that the district attorney had no control over the disposition of these charges. The trial judge then granted the State's motion in limine and appellants were not allowed to question the witness before the jury about the pending charges.
It is a well-established rule that great latitude is allowed the accused in showing any fact, including pending charges, which would tend to establish ill feeling, bias, motive, and animus on the part of any witness testifying against him. Parker v. State, 657 S.W.2d 137 (Tex.Cr. App.1983); Spriggs v. State, 652 S.W.2d 405 (Tex.Crim.App.1983), cert. denied, ___ U.S. ___, 104 S. Ct. 249, 78 L. Ed. 2d 237 (1983); Hodge v. State, 631 S.W.2d 754 (Tex.Crim.App.1982); Carrillo v. State, 591 S.W.2d 876 (Tex.Crim.App.1979); Spain v. State, 585 S.W.2d 705 (Tex.Crim. App.1979); Chvojka v. State, 582 S.W.2d 828 (Tex.Crim.App.1979); Bates v. State, 587 S.W.2d 121 (Tex.Crim.App.1979); Cloud v. State, 567 S.W.2d 801 (Tex.Crim. App.1978); Simmons v. State, 548 S.W.2d 386 (Tex.Crim.App.1977); Evans v. State, 519 S.W.2d 868 (Tex.Crim.App.1975); Smith v. State, 516 S.W.2d 415 (Tex.Crim. App.1974). See also Hall v. State, 663 S.W.2d 154 (Tex.App.Fort Worth 1983, no pet.). However, trial courts have considerable discretion as to how and when bias may be proved and as to what collateral evidence is material for that purpose. Spriggs at 408; Hodge at 758; Carrillo at 886; Chvojka at 831; Bates at 133; Cloud at 802. The extent to which a witness may be cross-examined on collateral matters for the purpose of showing bias rests in the sound discretion of the trial judge. The judge must balance the probative value of the evidence sought to be introduced against the prejudicial risk in its admission. Risks include the possibility of undue prejudice, embarrassment, harrassment to either witness or party, and the possibility of undue delay or waste of time. Carrillo v. State, 591 S.W.2d 876 (Tex.Crim.App.1979).
Generally, unadjudicated criminal offenses may not be used to impeach a witness in a criminal case; however, evidence of pending charges against the witness is admissible for the limited purpose of showing bias, prejudice, interest, and motive of the witness in testifying as he did. Id. Although the mere fact of an arrest or indictment of a witness is not normally admissible for impeachment purposes to show bias, motive, ill feelings or animosity where the evidence of an arrest or legal accusation arises out of the same transaction for which the defendant is on trial, it may be admissible to impeach the witness. Smith v. State, 516 S.W.2d 415 (Tex.Crim.App.1974).
In the instant case, the witness, Navarette, was not an accomplice, suspect, or in any way a participant in the crime for which the appellant was charged. Rather, he was an innocent bystander who happened to be in a position to observe the events in question. He did not know any of the parties involved and therefore had no reason to be biased or hostile toward appellants. Furthermore, the charges pending against Navarette were in no way connected with the death of the victim. Rather, they were misdemeanor charges filed by the county attorney's office, not the district attorney's office.
The trial judge allowed the appellant to question the witness extensively on voir dire. Navarette and the district attorney both testified that no deal had been made. Because there was no evidence suggesting *707 self-interest, ill will, or animus, the trial court, in its discretion, refused to allow cross-examination before the jury as to the charges pending against Navarette. We cannot under these circumstances say the trial court abused its discretion.
Appellants rely on numerous authorities which they claim necessarily lead to the conclusion that the inability to cross-examine Navarette was fatal to the State's case. These cases are distinguishable. In Evans, Spain, and Parker the testifying witness was an indictee or suspect in the principal crime for which the defendant was on trial. Thus there was obviously incentive for the witness to testify against the defendant to protect his own self-interest. In Randle v. State, 565 S.W.2d 927, 931 (Tex.Crim.App. 1978) the felony charges pending against the witness were unrelated to the murder for which the defendant was on trial; but in that case, the district attorney had jurisdiction over both cases. Coincidentlly, the witness's bond was reduced from $50,000 to $10,000 on the very day he testified against the defendant. These two facts constituted sufficient evidence so that the defendant should have been able to explore the possibility of undue pressure before the jury. In Simmons the Court of Criminal Appeals found the trial court erred in not allowing the defendant to develop a bill of exception showing the possibility of special treatment of the witness by the prosecutor's office.
None of these extenuating circumstances exist in our case. The trial court permitted the appellants to fully develop a bill of exception in which Navarette was questioned extensively about the possibility of special treatment. The witness denied having been promised anything and, in fact, stated that he was not even sure what charges were pending against him. The district attorney took the stand and testified that his office did not have jurisdiction over the witness's misdemeanor charges and that the district attorney's office had not cooperated, nor even communicated with the county attorney's office in any way as to the charges pending against Navarette in county court. While the trial court could have allowed the appellant to show the jury what was developed on the bill of exception, we can find no abuse of discretion in refusing to do so under the circumstances.
Appellant Victor next argues that the trial court erred in refusing to admit a prior statement made to the police by co-indictee, Urbano Flores. We disagree. Upon arrest, Flores gave a statement to the district attorney's office. When called by the appellants to testify, Flores claimed his fifth amendment privilege. The appellants offered Flores's prior statement and the trial court properly refused to admit it.
The affidavit here was hearsay and inadmissible. An exception to the general rule of exclusion of such declarations lies where (1) the defendant admits his guilt, (2) the State's case is based entirely upon circumstantial evidence, (3) the guilt of the defendant on trial is inconsistent with the guilt of the declarant, and (4) independent evidence shows that the declarant had the capability to commit the act. Thompson v. State, 480 S.W.2d 624 (Tex.Crim. App.1972). In the instant case, the statement fails to satisfy the requirements listed above.
In a related ground of error, Guadalupe suggests that the State pressured Flores into claiming his fifth amendment right and that such actions amounted to prosecutorial misconduct. This contention is without merit. Article 2.01 of the Code of Criminal Procedure specifically instructs that prosecuting attorneys are not to suppress any facts that might establish the innocence of the accused; however, this article presumes some type of action on behalf of the attorney to suppress those facts. See Ex parte Lewis, 587 S.W.2d 697 (Tex.Crim.App.1979). In the instant case, Flores's attorney testified that he decided it would be in his client's best interest not to testify since the charges against Flores had not been dismissed at the time he was called to testify. The State's attorney also indicated that no decision had been made to dismiss the charges in the event that any facts might come out during the trial of his *708 co-indictees which would incriminate him. Finally, there is no indication of the materiality of the evidence, and without such the claim of misconduct is not supported. See Ex parte Lewis at 702 (on state's motion for rehearing). This ground of error is overruled.
Because we have found no reversible error as to either appellant, the judgment of the trial court is affirmed.
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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/8304130/
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Mr. Justice Holmes
delivered the opinion of the Court.
This appeal presents the question of the proper distribution of funds paid into Court in a condemnation case. The State, acting through its Commissioner of Highways, condemned a strip of land across a farm'"in Smith. .County for the Interstate Highway System and paid into Court the sum of $14,072.00 as the appraised damages .to the owners of the property taken, pursuant to Chapter 216, Public Acts of 1959. The title to this property passed under Item 3 of the will of S. S. Dawson, .which is as follows:
*186“All the remainder of my estate both real and personal I will, devise and bequeath to my beloved wife, Eliza Dawson, for and during her natural life, or so long as she remains unmarried; but if she should remarry, or upon her death, all said property is to go to my children, share and share alike, and if any of my children should lie leaving children, then such child or children are to take the share their parent would have taken if living, ’ ’
On the death of S. S. Dawson he was survived by his widow, Eliza Dawson, and three children, one of whom died without issue on March 8, 1963. The widow and the two surviving children, Jack Dawson and Lorene Dawson Rowland, are the defendants in the case.
After the fund was paid into Court, the widow, Eliza Dawson, and the surviving son, Jack Dawson, filed a petition in the condemnation suit praying that the value of the widow’s interest in the fund be determined and paid to her and that the remainder of the fund be paid in equal shares to Jack Dawson and Lorene Dawson Rowland, the children of S. S. Dawson. Mrs. Rowland filed an answer to this petition, denying that under the will of S. S-. Dawson his children took a vested remainder and averring that in the event Jack Dawson should die prior to the death of his mother, “His interest would pass to this respondent, he having no issue.”
The Trial Judge found that by the terms of the will, ‘ ‘ The tract of land involved in this suit is now owned by Eliza Dawson for life or widowhood, vested remainder in A. J. (Jack) Dawson and his sister, Lorene Dawson Rowland. ’ ’ He further found that at the time of the trial the widow, Eliza Dawson, was 83 years of age, in poor health and without income. The Trial Court further found *187that, after deducting certain delinquent taxes upon the lands, the interest of the widow in the remaining fund amounts to $2,048.64, which amount was ordered paid to her, and the balance of the fund was ordered to be distributed to Jack Dawson and Lor ene- Dawson Rowland in equal shares.
Mrs. Rowland filed a motion for new trial, which was overruled by the Trial Judge, and perfected her appeal to the Court of Appeals. That Court, in all respects, affirmed the judgment of the Trial Court. Mrs. Rowland duly filed a petition for writ of certiorari, which we have granted, and the case has been argued at the bar of this Court.
The opinion of the Court of Appeals in this case states:
“We have decided the trial judge was correct in holding this remainder to be vested and are of opinion the assignment of error must be overruled. We base this conclusion on the opinion of this court in Harris v. France, 33 Tenn. App. 333, 344 [232 S.W.2d 64], and Karsch v. Atkins, 203 Tenn. 350, 354 [313 S.W.2d 253]”.
Both the Karsch and Harris cases construed instruments which became effective subsequent to the enactment of Chapter 13, Public Acts of 1927, now T.C.A. sec. 32-305.
While the briefs of the parties in the Court of Appeals do not refer to the date of the death of S. S. Dawson, the record shows without contradiction that he died on October 23,1919.
In Jennings v. Jennings, 165 Tenn. 295, 303, 54 S.W.2d 961, 963, this Court held that Chapter 13 of the Public Acts of 1927 ‘ ‘ did not undertake to deal with any case where a bequest, devise, conveyance, etc., had already *188been made. The statute is clearly prospective in its operation.” Therefore, this statute which brought about a change in the Tennessee “Class Doctrine” is not applicable to the present case.
The “Class Doctrine” as it existed prior to the 1927 statute has many times been stated as follows:
“Where a bequest is made to a class of persons, sub-jéct to fluctuation by increase or diminution of its number in consequence of future births or deaths, and the time of payment or distribution of the fund is'fixed at a subsequent period, or on the happening óf a future event, the entire interest vests in such persons' only as at that time fall within the description of persons constituting such class.” Satterfield v. Mayes, 30 Tenn. 58, 59; Burdick v. Gilpin, 205 Tenn. 94, 105, 325 S.W.2d 547, 552.
The effect of the 1927 Act, now T.C.A. sec. 32-305 was considered by this Court in Karsch v. Atkins, 203 Tenn. 350, 313 S.W.2d 253. There the Court, speaking through Mr. Justice, now Chief Justice, Burnett, held:
“By virtue of Section 32-305, T.C.A., where applicable, the rule now is that notwithstanding that the time of payment or distribution of the estate is fixed at a subsequent period, or upon the happening of a future event, the individual members of the class will take vested transmissible interest unless the will, considered as a whole in the light of all the circumstances, manifests a clear intention to the contrary. * * *
“This statute (T.C.A. sec. 32-305) contains in its concluding sentence a recognition that a remainder to a class can be construed as contingent. It seems to us though from the language of this statute that an intern *189tion to make the remainder contingent must be more or less expressly stated. As we see it the rule should be, in view of this statute, that the estate will be treated as vested unless the contrary is expressly provided for in the will. This is what the statute says — -and we must apply it as it reads.” (Emphasis supplied.). 354 and 355 of 203 Tenn., 255 of 313 S.W.2d.
In Harris v. France, 33 Tenn.App. 333, 232 S.W.2d 64, the Court of Appeals, with certiorari denied by this Court, used the following’ language in discussing the effect of the 1927 Act:
“The statute forbids such an implication and the fact that the time of distribution is postponed is reduced to a circumstance to be considered along with the other circumstances and provisions of the will in determining whether there is a clear manifestation of an intention that the entire interest vest in such persons only as •fall within the description of the persons constituting the class at the time fixed for payment or distribution of the estate. In other words, by virtue of the statute, where applicable, the rule now is that notwithstanding that the time of payment or distribution of the estate is fixed at a subsequent period, or upon the happening of a future event, the individual members of the class will take vested transmissible interest unless the will, considered as a whole in the light of all the circumstances, manifest a clear intention to the contrary.” 346 and 347 of 33 TenmApp., p. 70' of 232 S.W.2d.
The Karsch and Harris cases clearly enunciate the change in the law brought about by the 1927 Statute. The statement in Denison v. Jowers, 192 Tenn. 356, 360, 241 S.W.2d 427, 428, that this Act “did no more than enact a rule which this Court had eagerly followed with-*190ont the legislation” is not supported by the later pronouncement of the Court in the Karsch case and has been criticized in textbooks and law reviews.
In Yol. 1, Simes and Smith The Law of Future Interests, 2d Ed.1956, Section 146, Page 150, the authors, in referring to Denison, state:
“The statute was referred to, but was found to do ‘no more than enact a rule which this Court had eagerly followed without the legislation.’ It seems regrettable that so narrow a meaning was given to the legislation which might have been used as a basis for abandoning a rule which frequently frustrates the intention of the testator, and which is uniformly rejected elsewhere.”
See also 22 Tennessee Law Review 943, 956, and 12 Vanderbilt Law Review 1175, 1177 et seq.
The case of Wilson v. Smith, 47 Tenn.App. 194, 337 S.W.2d 456, was decided in May 1960, approximately two years after the decision of this Court in Karsch v. Atkins, supra. In discussing the meaning of the 1927 Statute, the Court of Appeals, in that case, did not refer to the Karsch case. No petition for certiorari was filed in Wilson v. Smith, hence this Court did not review that decision.
While it is true the decision in Harris v. France, supra, upon Avhich the opinion of the Court of Appeals in the present case is based in part, is not predicated entirely upon the 1927 Act, the will in that case contained provisions which are not present in the will of S. S. Dawson, which the Court held made the interests of the members of the class several rather than joint. The meaning of the will of S. S. Dawson has not changed since its probate in 1919. Had it been construed at that time, little doubt can exist as to its proper construction.
*191In Tate v. Tate, 126 Tenn. 169, 148 S.W. 1042, the Court construed a will which provided:
“My entire estate, real and personal and mixed, and wherever situate, I give, devise and bequeath to my husband, John T. Hillsman, his heirs and assigns, in fee simple, in trust, nevertheless, to hold the same for his own use, benefit and behoof, during' his natural life, and at his death to be equally divided between my children, share and share alike, and in fee, the issue of any child that may have died to represent and take the share of the deceased parent.”
In Tate v. Tate and in the earlier case of Sanders v. Byrom, 112 Tenn. 472, 79 S.W. 1028, the Court reviewed practically all of the earlier cases dealing with the question of the applicability of the ‘ ‘ Class Doctrine ’ ’ and held that the above quoted language of the will involved in the Tate case made that doctrine applicable. In so holding, the Court pointed out:
“The provision for substitutional representation does not render the class notion inoperative. This is apparent from several of our cases in which that doctrine has been held applicable.” 180 of 126 Tenn., p. 1045 of 148 S.W.
As authority for this statement, the Court in Tate cites and discusses Womack v. Smith, 30 Tenn. 478, Fulkerson v. Bullard, 35 Tenn. 260, Connell v. McKenna, 2 Tenn. Cas. (Shannon) 190, Jackson v. Everett, 3 Tenn.Cas. (Shannon) 811, Blass v. Helms, 93 Tenn. 166, 23 S.W. 138, and Nichols v. Guthrie, 109 Tenn. 535, 73 S.W. 107. The pertinent provisions of the wills in each of these cases are quoted in the Tate case at 180-182 of 126 Tenn., 148 S.W. 1042.
*192In Hobson v. Hobson, 184 Tenn. 484, 201 S.W.2d 659, the will being construed provided:
“I give and devise to my said wife, for and during her natural life or widowhood, three tracts of land as follows * * * (described land). At her death the same shall be divided between my children then living, and if any of them shall have died leaving a child or children living at her death, then such child or children shall take the parent’s share.”
The will was probated prior to 1927. The Court there held that every feature of the “Class Doctrine” “is plainly reflected ’ ’ in the will under consideration. In Hobson the Court quoted with approval from Fulkerson v. Bullard, supra, as follows:
“Had the testator intended that the legacy should vest in such of his children as might be living at the time of his death, why insert this last-clause, ‘if any of my children should die before the time aforesaid leaving lawful children, said last mentioned children shall take the shares of their parents in said negroes?’ ”
The language “divided ■-between my children then living” in Hobson more strongly manifests an. intention that only those children who survive the life tenant shall take under the will than does the language in the will of S. S.' Dawson, however, such language as “then living” does hot appear in the will construed in Tate v. Tate quoted above, nor is it found in many of the cases discussed in Tate, in which the “Class Doctrine” was applied.
As was stated in Jordan v. Jordan, 145 Tenn. 378, 414, 239 S.W. 423, 433:
*193“Certainly we have in the instant ease the three elements essential to the application of the class rule: (1) A class of persons subject to fluctuation by increase or diminution; (2) conveyance to a class; and (3) a time of distribution fixed at a subsequent period.”
The Court. has in many cases commented upon the difficulty in applying the “Class Doctrine” as it existed prior to the 1927 Act, but has continued to recognize it in applicable cases. In Burdick v. Gilpin, 205 Tenn. 94, 104, 325 S.W.2d 547, 552, the Court stated:
“From the many and varied reported decisions, it appears that the ‘Class Doctrine Rule’ has presented quite a problem to the Courts of this State since it was first announced. * # * Nevertheless, the Rule, though announced more than 100 years ago, is still recognized and applied.”
In Burdick the “Class Doctrine” was held to be applicable to a will which was probated in 1907.
After reviewing the many Tennessee cases dealing with the “Class Doctrine” as it existed in Tennessee prior to the 1927 Act, we can only conclude that the provisions of the will of S. S. Dawson make that rule of construction applicable and the remainder interest in this property is vested in “the described class, as a class, and not individually in the persons composing such class”. Satterfield v. Mayes, 30 Tenn. at 60. Therefore, the devisees of the remainder under the will of S. S. Dawson are to be determined as of the date of the death or remarriage of the widow and Jack Dawson and Mrs. Rowland are not entitled to have the balance of the fund held in Court distributed to them at this time.
*194. The decree of the Court of Appeals is reversed and the cause is remanded to the Trial Court for further proceedings not inconsistent with this opinion.
On Petition to Rehear
Eliza Dawson and Jack Dawson have filed a petition to rehear in which a number of cases dealing with the '“.Class Doctrine” are reviewed. We fully considered all of these cases before preparing our original opinion. After again studying these authorities, we are satisfied that our original opinion correctly states the law applicable to the will of S. S. Dawson. The petition to rehear is denied.
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01-03-2023
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10-17-2022
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https://www.courtlistener.com/api/rest/v3/opinions/1530758/
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491 S.W.2d 922 (1973)
Glenn Everett TAYLOR, Appellant,
v.
The STATE of Texas, Appellee.
No. 46019.
Court of Criminal Appeals of Texas.
March 28, 1973.
Branch T. Archer, Amarillo, for appellant.
Tom Curtis, Dist. Atty., Amarillo, Jim D. Vollers, State's Atty., and Robert A. *923 Huttash, Asst. State's Atty., Austin, for the State.
OPINION
GREEN, Commissioner.
Appellant was convicted of murder without malice. His punishment, enhanced under the provisions of Article 63, Vernon's Ann.P.C., was assessed at life.
Appellant's first ground of error is that the court erred in submitting to the jury the issue of murder without malice, for the reason that the evidence showed either murder with malice, viewed from the State's evidence, or self defense, viewed from the defendant's evidence, and did not show murder without malice.
In the absence of any objection to the court's charge made in the trial court, nothing is presented for review by this ground of error. Salas v. State, Tex.Cr. App., 486 S.W.2d 956 (1972); Williams v. State, Tex.Cr.App., 463 S.W.2d 15; Nilsson v. State, Tex.Cr.App., 477 S.W.2d 592.
Even if the contention were properly before us, appellant is in no position to complain that the court submitted the issue of murder without malice. Appellant agrees that the State's evidence was sufficient to show a case of murder with malice. The defense raised the issue of self defense. The court charged on murder with and without malice, and on the issue of self defense. Evidently, the jury did not accept appellant's evidence that he was acting in self defense in this homicide, for it found him guilty of murder without malice.
Since appellant testified, and the evidence shows without controversy, that he struck the blow that caused the death of deceased, the alternative of believing, or having a reasonable doubt of the self defense plea, was a conviction of murder.
Murder without malice is not a lesser included offense of murder. Galloway v. State, Tex.Cr.App., 420 S.W.2d 721. Article 1256, V.A.P.C., provides different punishments for murder with and without malice, but does not create two offenses. It creates only the single offense of murder. Galloway, supra.
Although there are no degrees of murder in our present law, but only degrees of punishment, the well established rule that a defendant cannot complain that the jury found him guilty of a lower degree of homicide than the evidence warranted is pertinent. Little v. State, 130 Tex. Crim. 603, 95 S.W.2d 141; Hall v. State, 106 Tex. Crim. 500, 293 S.W. 1112; Johnson v. State, 153 Tex. Crim. 59, 216 S.W.2d 573; Warren v. State, 97 Tex. Crim. 487, 262 S.W. 500; Campbell v. State, 65 Tex. Crim. 418, 144 S.W. 966; High v. State, 54 Tex. Crim. 333, 112 S.W. 939; Serna v. State, Tex.Cr.App., 105 S.W. 795.
Furthermore, we have examined the statement of the evidence and are satisfied that the trial court did not err in charging on murder without malice. Appellant's testimony of the manner of his getting involved in a fight with deceased, originating between deceased and appellant's brother, raised the issue of "anger, rage, resentment, or terror in a person of ordinary temper sufficient to render the mind incapable of cool reflection." Stapp v. State, 140 Tex. Crim. 669, 147 S.W.2d 256.
Appellant next complains of the admitting into evidence of a photograph, State's Exhibit No. 2, for the reason that said exhibit is a picture of a dead body.
Exhibit No. 2 is a black and white picture taken during the police officers' investigation before the body of deceased was removed from the scene of the killing. It depicted the scene where the offense occurred. It served to illustrate the relation of the location of the body to the fight area. It could very well have aided the jury in interpreting and understanding the witnesses' testimony concerning the fight between the parties. The photograph was not bloody or gruesome.
*924 In Martin v. State, Tex.Cr.App., 475 S.W.2d 265, 267, this Court, speaking through Judge Odom, said:
"We hold that if a photograph is competent, material and relevant to the issue on trial, it is not rendered inadmissible merely because it is gruesome or might tend to arouse the passions of the jury, unless it is offered solely to inflame the minds of the jury. If a verbal description of the body and the scene would be admissible, a photograph depicting the same is admissible."
See also Lanham v. State, Tex.Cr.App., 474 S.W.2d 197.
There was no error in admitting State's Exhibit No. 2 into evidence.
Judgment affirmed.
Opinion approved by the Court.
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491 S.W.2d 895 (1973)
June RHODES, Appellant,
v.
The STATE of Texas, Appellee.
No. 46403.
Court of Criminal Appeals of Texas.
February 14, 1973.
Rehearing Denied April 11, 1973.
Holt & Tatum, Nacogdoches, for appellant.
Jim D. Vollers, State's Atty., Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
DALLY, Commissioner.
This is an appeal from an order revoking probation.
The appellant entered a plea of guilty to the felony offense of driving a motor vehicle upon a public highway while intoxicated. The punishment assessed was two years imprisonment. The imposition of sentence was suspended and the appellant was placed on probation.
On March 1, 1972, the court heard the State's motion to revoke probation and found that the appellant had violated the condition of his probation that he would commit no offense against the laws of this state in that he did on the 29th day of January, *896 1972, while under the influence of intoxicating liquor, drive and operate a motor vehicle upon a public road. An order revoking probation was entered and the appellant was sentenced.
The appellant urges that the trial court abused its discretion in revoking the appellant's probation because the motion for revocation of probation "is fundamentally void and defective for not concluding `against the peace and dignity of the State' as required by law."
The appellant argues that the provisions of Article V, Section 12 of the Constitution, Vernon's Ann.St., of this State apply to a motion to revoke probation in which the commission of a criminal act is alleged as the violation of a condition of probation.
The pertinent part of Article V, Section 12 of the Constitution of this State upon which appellant relies, reads:
"... All prosecutions shall be carried on in the name and by authority of the State of Texas, and shall conclude: `Against the peace and dignity of the State.'"[1]
The Supreme Court of this State in Fariss v. Tipps, 463 S.W.2d 176 (Tex.Sup.Ct. 1971) has held that the requirement of a speedy trial in all "criminal prosecutions" provided by Article I, Sec. 10 of the Constitution of this State applies to revocation of probation proceedings.[2]
It has been the consistent holding of this court that the allegations in motions to revoke probation need to be specific enough to give the defendant notice of the alleged violation of the law contrary to the conditions of probation, but that such allegations need not be made with the same particularity as those required of an indictment. Jansson v. State, 473 S.W.2d 40 (Tex.Cr.App.1971); Kinard v. State, 477 S.W.2d 896 (Tex.Cr.App.1972) and Campbell v. State, 456 S.W.2d 918 (Tex.Cr. App.1970).
The hearing on the motion to revoke probation is not such a criminal prosecution as would entitle a defendant to a jury trial. Article 42.12, Sec. 8, Vernon's Ann.C.C.P.; Hood v. State, 458 S.W.2d 662 (Tex.Cr.App.1970); Wilson v. State, 156 Tex. Crim. 228, 240 S.W.2d 774 (1951); Jones v. State, 159 Tex. Crim. 24, 261 S.W.2d 317 (1953); Manning v. State, 412 S.W.2d 656 (Tex.Cr.App.1967); Hulsey v. State, 447 S.W.2d 165 (Tex.Cr.App.1969); Malveaux v. State, 482 S.W.2d 872 (Tex. Cr.App.1972), and see Fariss v. Tipps, supra.
In Hulsey v. State, it was said:
"Revocation proceedings are not trials in the constitutional sense with reference to criminal cases. Wilson v. State, 156 Tex. Crim. 228, 240 S.W.2d 774; Ex parte Gomez, Tex.Cr.App., 241 S.W.2d 153; Jones v. State, 159 Tex. Crim. 24, 261 S.W.2d 317, cert. den. 346 U.S. 836, 74 S. Ct. 53, 98 L. Ed. 358; Cooke v. State, 164 Tex. Crim. 320, 299 S.W.2d 143; Gorman v. State, 166 Tex. Crim. 633, 317 S.W.2d 744; Leija v. State [167 Tex. Crim. 300], 320 S.W.2d 3; Stratmon v. State, 169 Tex. Crim. 188, 333 S.W.2d 135. And it has been held that the result of such a hearing to revoke is not a `conviction' but a finding upon which the trial court might exercise its discretion by revoking or continuing probation. Dunn v. State, 159 Tex. Crim. 520, 265 S.W.2d 589; McDonald v. State, Tex. *897 Cr.App., 393 S.W.2d 914; Soliz v. State, 171 Tex. Crim. 376, 350 S.W.2d 566."
It appears the precise question presented here has not been considered before. The violation of the law alleged in the motion to revoke probation was alleged in order that the trial court might determine whether to exercise its discretion in revoking probation which had been granted the appellant after he had been convicted for an earlier offense. The appellant was not being prosecuted for the offense alleged as the basis for revocation and certainly the court's finding that probation should be revoked did not constitute a conviction for that offense. We therefore hold the constitutional provision relied upon does not require that the motion to revoke probation allege that the violation of the law was "against the peace and dignity of the State."
If the appellant has been or should be charged by indictment or information with the offense which was alleged for the purpose of revocation of probation, such indictment or information must conclude "against the peace and dignity of the State" as required by the constitutional and statutory provisions of this state.
There being no abuse of discretion, the order revoking probation and the judgment are affirmed.
Opinion approved by the Court.
ONION, P. J., concurs in the result.
ROBERTS, Judge (concurring).
I concur with the results reached by my brothers, but I do not feel that the extensive discussion of the issue is necessary. I would simply hold that the motion for revocation is not a "prosecution" for the offense alleged to show a violation of the condition of probation. A probationer is not entitled to a trial by jury. Harris v. State, 486 S.W.2d 317 (Tex.Cr.App.1972). Likewise, the constitutional provision raised by appellant does not apply to the allegations of a motion to revoke probation.
ODOM, J., joins in this opinion.
NOTES
[1] Articles 21.02, subd. 8 and 21.21, subd. 8, V.A.C.C.P. also provide that an indictment and information must conclude "Against the peace and dignity of the State." and it has been held that where misdemeanors are prosecuted on complaint, the complaint must conclude "Against the peace and dignity of the State." See Ex parte Jackson, 50 Tex. Cr.R. 324, 96 S.W. 924 (1906).
[2] This holding was also grounded upon the provisions of the 6th Amendment as applied through the 14th Amendment to the Constitution of the United States.
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152 N.J. 197 (1997)
704 A.2d 547
WILLIAM F. BRADY, JR., SYLVIA ALBARRAN, HERBERT ALEXANDER, CARMEN ALICEA, FREDERICK ALLEN, BEATRICE AMISON, GERALD AMISON, SHIRLEY G. ANDERSON, JOSEPH ANDREWS, JR., MARY L. ARCAMONE, MARY AUSTIN, JAMES BAILEY, DUDLEY BARCALOW, JOSE J. BEAYCHAMPS, MARIETTA BERENATO, JOSEFA BIELSKI, ANNA BIJACSKO, JOHN BLACK, HAROLD BODDEN, SHIRLEY BOTTREL, LEON BOYER, RAYMOND BOYZATH, FREDDIE BRIMLEY, HERBERT BROOKER, JAMES H. BROWNE, ROBERT W. BRYNER, AUGUSTA BUDD, HECTOR G. BURGOS, JOHN E. BURRIS, JAMES CALDWELL, MARIE CAPRIOTTI, ROBERT CASE, MARGARET CHAMBUS, PATRICIA CHARYAK, MATTEO CIPRIANO, BENJAMIN COLE, THOMAS J. COLEMAN, FRED COMO, WILLIAM R. CRAFT, JOANN CREA, LUZ CRUZ, MARY L. CZAP, JOSEPH DALY, SOPHIE DARDZINSKI, KARL H. DEIBLER, BARBARA A. DERRY, MARGAREE DILLARD, EDWARD DOROTA, ANTHONY DOTO, ANATOL DOWBNIA, DAVID J. DOWNING, CHARLES P. DRAGOS, JAMES J. DUNCAN, MARY F. EALY, KURT E. EDER, CUSTODIA FEIJO, SYLVIA FERGUSON, ANTHONY FERRARE, JUAN FLORES, RAFAEL GARCIA, LESTER GLASCOE, DELORES GLAZEWSKI, ELFRIEDE HALKO, MURRAY A. HALPERN, GERALDINE HAMBLEY, BARBARA A. HARDEN, CHARLOTTE HAYDEN, WALTER HEARNS, ROBERT G. HENNESSEE, THOMAS HORAN, EDWARD HUGO, RICHARD HUTCHINSON, VINCENT IMMORDINO, SARAH C. INNISS, JENA IORIO, BENNIE ISOM, ANDRENA L. JOHNSON, RONALD KASA, DOROTHEA KATO, MARGARET M. KENNEDY, JOHN KOVACH, MARIVA KUHN, SAM LAGARES, RONALD LAWRENCE, CHANG LEE, ANDY LEONARSKI, WALTER LOMAX, ARMAND LORETUCCI, JACQ. MARINELLO, CHARLES B. MARKS, DOLORES MARLIN, MARGARET MASON, JOHN MCELLINNEY, JUAN MEDINA, JOHN MELLODGE, MARY MEROVICH, EUGENE J. MINICH, MINERVA MONTERO, HECTOR M. MORALES, MINERVA MORALES, CORNELIUS MORROW, MARY A. MURPHY, CARMELA C. NICKELS, PETER NICOALI, STANLEY OLSCHEWSKI, EDWARD J. PALLAY, RONALD J. PALMIERI, JAMES S. PETRUCELLI, HARRY PHILLIPS, MATHEW PIERRE, FREYA POLIZIANA, ARTHUR S. POPP, WILFRED W. POWERS, FRANK PRASAK, ROCHELLE PRITCHARD, GIUSEPPE PUGLISI, CARMEN QUILES, ALICIA QUINONES, FREDERICK RAINER, EVELYN RAMSEY, RAYMOND R. RAWA, STANISTAW REMBOWSKI, ASTEN L. RICHARDSON, ROBERT R. ROBINSON, MINNIE SANDERS, ROMAN SATURNINO, KENNETH SCHNEIDER, ANTHONY SCOTT, JASPER SCOTT, JOSEPHINE SECKINGER, THOMAS P. SEHENUK, JOSEPH SEROCK, ELIZABETH SMITH, FRANK SMITH, DOLORES STEWART, WALTER STREHLOW, TAMMY STRYCHARZ, BARBARA SYKES, IDA R. TAYLOR, ANTHONY TESTA, MARY THOMAS, GILBERT TILTON, GEORGE TITUS, EMANUEL TRAMONTANA, EVELYN L. TREIBLY, JOHN TRIPA, FRANK TUCCILLO, EMMA M. TWYMAN, ELIZ. O. VANDEWATER, JAMES L. VANDEWATER, PATRICIA VELEZ, GEORGE VOILAS, ROBERT WALKER, MARIE WALSH, JOHN WALTER, LORETTA WASHINGTON, DELES WATSON, GLADYS WILLIAMS, LIZZIE WILLIAMS, MARGARET WILLIAMS, SHIRLEY WILLIAMS, THOMAS WILLIAMS, ROSE WINROW, GEORGE M. WOODWARD, BONNIE L. WRIGHT AND ROSCOE N. WRIGHT, CLAIMANTS-RESPONDENTS,
v.
BOARD OF REVIEW AND GENERAL MOTORS CORPORATION, INLAND FISHER GUIDE DIVISION, RESPONDENTS-APPELLANTS.
The Supreme Court of New Jersey.
Argued October 6, 1997.
Decided December 22, 1997.
*203 Alan C. Stephens, Deputy Attorney General, argued the cause for appellant Board of Review (Peter Verniero, Attorney General of New Jersey, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel).
Laurence Reich argued the cause for appellant General Motors Corporation, Inland Fisher Guide Division (Carpenter, Bennett & Morrissey, attorneys).
David Tykulsker argued the cause for respondents.
The opinion of the Court was delivered by GARIBALDI, J.
At issue in this appeal is whether claimants, who elected to participate in an early retirement plan, "voluntarily" left work "without good cause attributable to such work," N.J.S.A. 43:21-5(a), thereby rendering them ineligible for unemployment benefits. Claimants are former employees of the Inland Fisher Guide Division of the General Motors Corporation (GM), located in Trenton, New Jersey (Trenton plant). In December 1992, the Trenton plant announced to its employees that GM was offering a special accelerated retirement plan for eligible employees nationwide. After receiving notice from management that GM intended *204 to close the Trenton plant by the end of 1993, claimants accepted the early retirement plans. Subsequently, they sought and were granted unemployment compensation benefits. Although the Board of Review reversed the award of benefits, finding that claimants were disqualified under N.J.S.A. 43:21-5(a) because they "left work voluntarily without good cause attributable to such work," the Appellate Division concluded that claimants established "good cause" and thus were qualified for unemployment benefits. We granted certification to both parties, 148 N.J. 462, 690 A.2d 610 (1997); 148 N.J. 463, 690 A.2d 610 (1997), and now hold that claimants are disqualified from collecting benefits.
I
On or about December 3, 1992, GM notified its employees that it intended to close the Trenton plant permanently by the end of 1993. A short time later, GM announced an incentive retirement program throughout the corporation as a means of shifting workers from its jobs reserve bank program to production positions vacated by those who elected early retirement. Workers in the reserve bank were those who, rather than being laid off, were placed in nonproduction positions. The impetus behind the incentive retirement program was to create openings to avoid laying off those workers from the depleting jobs bank program. The retirement initiative was offered at those GM plants nationwide with a reserve bank and was unrelated to the projected Trenton plant closing. At the time of the announcement, the Trenton plant had approximately 400 people in its reserve bank; Trenton applied for and received approval from GM corporate headquarters for 400 positions for early retirement. Approximately 386 employees, none of whom received a layoff notice, took advantage of the mutual retirement package and retired.
To be eligible for the retirement incentive, workers were required to have at least ten years of service with GM and be at least fifty years of age. Under the plan, qualified workers fell into two categories. Those between the ages of fifty and sixty-two *205 received an early, unreduced pension; a supplemental pension that would be paid until they reached the age of sixty-two; and employer-paid lifetime comprehensive medical care. The medical coverage was subject to the governing collective bargaining agreement between GM and the United Auto Workers Union (UAW), which was periodically renegotiated upon the expiration of a governing contract. Retired employees received approximately $60 per week for each year of service. The representative claimant, who retired at the age of fifty-two with more than fifteen years of service, testified before the Appeal Tribunal that he would receive approximately $940 a month. An additional feature of the package was that there was no outside earnings limitation. Retired workers could seek employment elsewhere at any wage rate without any effect on the pension. Approximately 300 employees in that category accepted early retirement.
Under the second category, workers aged sixty-two or older received the same retirement benefits as the previous category plus $10,000 toward the purchase of a new GM car. Approximately seventy employees who chose to accept the incentive fell into that category. All employees who elected to take the retirement package were obliged to retire on February 1, 1993 or March 1, 1993. Their applications could be withdrawn at any time prior to those dates. Numerous employees who initially accepted the early retirement offer withdrew their applications before March 1, 1993.
From December 1992 until the end of February 1993, various statements about the anticipated plant closing were issued. On December 23, 1992, a "Message from the Manager" to the employees included the following:
For those of you with doubts yes, the plant is closing. The time table by product line and who the new sources will be are being defined now. I would hope by January 15th, we would have a good firm idea on where our products are going. This will then tell us how many job opportunities are available to move with the jobs. So do not contact labor relations until at least January 18th, for relocation job opportunities with GM. We will try and keep everyone informed in the Tribune and Message from the Manager. I can only say for now for sure that we are working on the closure plan and some job opportunities will be available.
*206 The announcement further encouraged employees not to forego the accelerated retirement plan based on speculation that the Trenton plant might remain open:
There are rumors circulating about plans and efforts to save the plant. Let me give you my opinion of what I know. Since our announcement of December 3, I have spoken to our divisional offices executives many times.
Believe me when I say that all talk about potentially keeping Trenton open is false optimism originating right from this plant. No one at our divisional executive level is actively working on a scenario that could possibly keep Trenton open. In fact, most of their calls involve giving them timing about when products will leave. I know I'm being blunt, but I know there are many people making difficult decisions regarding retirement. I would not want any rumors influencing those decisions. The worst thing anyone could do would be to turn down one of the best mutual retirement programs available because of a rumor and then later lose what is available when the plant closes.
In response to the company's December 23, 1992 Message to the Manager, the union published an undated "Special Update" to inform its members of the union's efforts to keep the plant open and of alternative job opportunities. The Special Update stated:
If our work is transferred to another GM plant the International Union will have to negotiate the number of moves we would be entitled to within the Corporation. Our members would move with full seniority unless mutually agreed to by the parties. This is Paragraph 96 of the National Agreement and can be found on page 77 of the Agreement.
We were told by Steve Yokich that the SUB [Supplemental Unemployment Benefits] Fund should make it for the life of the Agreement (Sept. 14, 1993). If any one is laid off they will collect unemployment and SUB. If your unemployment runs out you will be collecting all SUB. As of today, the SUB fund has nearly $700 million dollars. If these monies run out, the SUB program would revert back to the way it did in 1987 with the credit system. As of January 4th, 1993 we were informed that the JOBS Bank will continue to be funded until March 1st, 1993.
On February 9, 1993, the employees of the Trenton plant were given a tentative plan for the plant closing in another Message from the Manager. That Message began:
Let me leave no doubt the plant is closing. Many people take the absence of visible movement of jobs, tools, and equipment as a sign that something is up. Not so! The closing of this large facility is a complex process which takes significant planning . .. Trenton closing will now be aggressively planned .. .
The Message further indicated that a small number of workers would be laid off in March 1993 and that the first large layoff would occur in May or June 1993, perhaps involving as many as *207 500 workers. The next large layoff was scheduled for September with the rest of the employees to be terminated by the end of the year. Anticipated layoffs would be based upon seniority status with workers having greater seniority displacing those with lesser seniority.
On February 25, 1993, Personnel Director Theodore A. Cannon posted Bulletin Board Notice 93-9 in the Trenton plant:
In the future, there may be opportunities for extended preferential employment opportunities available to our employees as a result of the December 3, 1992 [closure] announcement. Under the National Agreement provisions the parties may mutually agree that certain seniority employees may be eligible for extended preferential employment consideration in specified area hire areas or plants represented by UAW which may not be in such areas.
It is our understanding that, in the future there may be additional employment opportunities in Baltimore. To determine the number of employees who are interested in these opportunities, we are conducting a survey. Employees who desire to apply for the prospective opportunities should report to the Employment Office and include their name on the survey list prior to March 5, 1993.
Two days after the March 1, 1993 deadline for electing early retirement, GM announced its decision to keep the Trenton plant open in the hopes of negotiating a sale to another corporation. Currently, the Trenton plant remains open and no layoffs occurred.
Had the plant shut down, laid off employees could have applied for unemployment and also would have received Supplemental Unemployment Benefits (SUB) provided by GM until early retirement was available at the age of fifty-five[1] or until SUB ran out of funds. During this time, the workers' medical benefits, except dental coverage, would have continued. Under the SUB program, a worker would have received approximately $450 on a weekly basis. Once the SUB benefits were exhausted, the workers would have received payments under the Guaranteed Income Strain (GIS) program equaling approximately $346 per week. Under the *208 GIS program, the workers' employer-paid hearing, vision, and prescription drug coverage would have ended after twenty-five months. In the event of a layoff, claimants maintained contractual seniority rights that would have afforded them protected status and, thus, the opportunity for continued work at the Trenton plant through any initial layoffs. Those contractual transfer rights also offered claimants the opportunity to apply for positions at other GM facilities. Employees at the Trenton plant were informed of possible positions at GM facilities in Maryland and Tennessee. On January 27 and 28, 1993, representatives of GM's Tennessee plant visited the Trenton plant and accepted applications for transfer. No claimant, however, received a response to his or her transfer application before March 1, 1993. Some 200 employees at the Trenton Plant were accepted for transfer.
After accepting the early retirement package, claimants filed separate claims for unemployment benefits. The Deputy Director of the Division of Unemployment and Disability Insurance (Deputy) found claimants eligible for benefits, reasoning that claimants left work with good cause attributable to work because the layoffs were imminent when they elected early retirement. GM filed a mass appeal from the Deputy's determination and the Appeal Tribunal affirmed. Only one of the claimants, George Titus, testified before the Appeal Tribunal. As stated earlier, Titus elected to retire early at the age of fifty-two with more than fifteen years seniority, and received a pension of approximately $940 per week. Titus testified that he decided to accept the retirement package because he had no doubt that the plant would be closing. He also noted that he wanted to maintain medical coverage that was included as part of the plan.
GM appealed to the Board of Review, Department of Labor (Board). The Board conducted a supplemental hearing and reversed, rejecting the premise that GM placed such a strong temptation in front of the workers that it was the only prudent course of action available. The Board emphasized that had the claimants opted not to retire and if they were eventually laid off, *209 they would have been in essentially the same situation as they found themselves after accepting early retirement. Because they did not stand to suffer financially by not accepting the incentive package, this was not a case where the claimants had no reasonable choice but to retire.
Moreover, the Board noted that had the claimants remained at the Trenton plant they could have continued to work for at least six months prior to the planned closing. That conclusion was based on the fact that each claimant had at least ten years seniority with GM and would not have been among the initial employees let go if the plant had closed as anticipated. Thus, the Board concluded, claimants did not leave work because of imminent layoff. The Board distinguished this case from Trupo v. Board of Review, 268 N.J. Super. 54, 632 A.2d 852 (App.Div. 1993), where the Appellate Division reasoned that a worker facing "the daily fear of a future employment layoff," id. at 60, 632 A.2d 852, might have good cause to leave if her fear of imminent layoff or loss of medical coverage were based upon "definitive objective facts." Id. at 61, 632 A.2d 852. Here, the Board found that the prospect of layoff was not imminent given the substantial amount of time that the claimants could have continued to work. Based on that determination, the Board concluded the claimants left work voluntarily without good cause.
The Appellate Division disagreed. Relying on Trupo, supra, the court found that claimants' fear of layoff was based on the unequivocal statements made by GM that the plant would be closing by the end of 1993. Addressing the issue of whether the claimants who elected to participate in the early retirement program "voluntarily" left work "without good cause attributable to such work," N.J.S.A. 43:21-5(a), the Appellate Division observed that by not accepting the incentive package the claimants would have been required to relinquish complete health insurance coverage and pension. Furthermore, there was no assurance of any transfer rights to other GM facilities by the March 1, 1993 deadline for electing early retirement. The court concluded that *210 the Board's decision could not be sustained on the record. Noting that the Trupo standard did not permit double recovery, the court further held that N.J.S.A. 43:21-5(a) required that the award of unemployment benefits be reduced by the amount of pension or retirement pay received by the workers.
II
The judicial capacity to review administrative agency decisions is limited. Public Serv. Elec. v. N.J. Dep't of Envtl. Protec., 101 N.J. 95, 103, 501 A.2d 125 (1985) (citation omitted). Moreover, "[i]n reviewing the factual findings made in an unemployment compensation proceeding, the test is not whether an appellate court would come to the same conclusion if the original determination was its to make, but rather whether the factfinder could reasonably so conclude upon the proofs." Charatan v. Board of Review, 200 N.J. Super. 74, 79, 490 A.2d 352 (App.Div. 1985) (citations omitted); see also Greenwood v. State Police Training Ctr., 127 N.J. 500, 513, 606 A.2d 336 (1992) ("Appellate courts must defer to an agency's expertise and superior knowledge of a particular field. Thus, if substantial credible evidence supports an agency's conclusion, a court may not substitute its own judgment for the agency's even though the court might have reached a different result.") (citations omitted). If the Board's factual findings are supported "by sufficient credible evidence, courts are obliged to accept them." Self v. Board of Review, 91 N.J. 453, 459, 453 A.2d 170 (1982); Goodman v. London Metals Exchange, Inc., 86 N.J. 19, 28-29, 429 A.2d 341 (1981) (same).
Unless a Court finds that the agency's action was arbitrary, capricious, or unreasonable, the agency's ruling should not be disturbed. See In re Warren, 117 N.J. 295, 296, 566 A.2d 534 (1989). The Court "can intervene only in those rare circumstances in which an agency action is clearly inconsistent with its statutory mission or with other State policy." George Harms Constr. v. Turnpike Auth., 137 N.J. 8, 27, 644 A.2d 76 (1994). Under that *211 standard, the scope of judicial review of an agency's action is restricted to four inquiries:
(1) whether the agency's decision offends the State or Federal Constitution;
(2) whether the agency's action violates express or implied legislative policies;
(3) whether the record contains substantial evidence to support the findings on which the agency based its action; and
(4) whether in applying the legislative policies to the facts, the agency clearly erred in reaching a conclusion that could not reasonably have been made on a showing of the relevant factors.
[George Harms Constr., supra, 137 N.J. at 27, 644 A.2d 76 (citing Campbell v. Department of Civil Serv., 39 N.J. 556, 562, 189 A.2d 712 (1963); In re Larsen, 17 N.J. Super. 564, 570, 86 A.2d 430 (App.Div. 1952)).]
We address in this opinion only the second and fourth factors, i.e., whether the Board's action violated the express or implied legislative policies of New Jersey's Unemployment Compensation Act (Act), N.J.S.A. 43:21-1 to -56(Act), or whether in applying those legislative policies the Board erred in reaching its conclusion. To ascertain the underlying legislative policies of the Act, we examine the Act's declaration of public policy and its legislative history.
III
The statutory mission of the Act is set out at N.J.S.A. 43:21-2:
[T]he public policy of this state is declared to be as follows: economic insecurity due to unemployment is a serious menace to the health, morals, and welfare of the people of this state. Involuntary unemployment is therefore a subject of general interest and concern which requires appropriate action by the [L]egislature to prevent its spread and to lighten its burden which now so often falls with crushing force upon the unemployed worker and his family. The achievement of social security requires protection against this greatest hazard of our economic life.... The [L]egislature, therefore, declares that in its considered judgment the public good, and the general welfare of the citizens of this state requires the enactment of this measure....
Through this declaration of public policy, the Legislature indicated that the underlying mission of the Act is "to afford protection against the hazards of economic insecurity due to involuntary unemployment." Yardville Supply Co. v. Board of Review, 114 N.J. 371, 374, 554 A.2d 1337 (citing Krauss v. A. & M. Karagheusian, 13 N.J. 447, 455, 100 A.2d 277 (1953); Schock v. Board of *212 Review, 89 N.J. Super. 118, 125, 214 A.2d 40 (App.Div. 1965), aff'd, 48 N.J. 121, 223 A.2d 633 (1966)).
This Court has recognized that the primary purpose of the Act is "to provide a cushion for the workers of New Jersey `against the shocks and rigors of unemployment.'" Carpet Remnant Warehouse v. N.J. Dep't of Labor, 125 N.J. 567, 581, 593 A.2d 1177 (1991) (citing Provident Inst. for Sav. v. Division of Employment Sec., 32 N.J. 585, 590, 161 A.2d 497 (1960)). Furthermore, "`[t]he purpose of the [A]ct is to provide some income for the worker earning nothing, because he is out of work through no fault or act of his own.'" Yardville, supra, 114 N.J. at 375, 554 A.2d 1337 (quoting Schock, supra, 89 N.J. Super. at 125, 214 A.2d 40); see also Battaglia v. Board of Review, 14 N.J. Super. 24, 27, 81 A.2d 186 (App.Div. 1951) (same).
Although the Act is to be liberally construed in favor of claimants to effectuate its remedial purposes, Yardville, supra, 114 N.J. at 374, 554 A.2d 1337; Sporn v. Celebrity, Inc., 129 N.J. Super. 449, 459, 324 A.2d 71 (Law Div. 1974), we have emphasized that "it is also important to preserve the [unemployment insurance trust] fund against claims by those not intended to share in its benefits. The basic policy of the law is advanced as well when benefits are denied in improper cases as when they are allowed in proper cases." Yardville, supra, 114 N.J. at 374, 554 A.2d 1337 (citing Krauss, supra, 13 N.J. at 455-56, 100 A.2d 277; Schock, supra, 89 N.J. Super. at 125, 214 A.2d 40). The Act, then, is designed to serve not simply the interest of the unemployed, but also the interest of the general public. See Sporn, supra, 129 N.J. Super. at 459, 324 A.2d 71; Stonco Elec. Products Co. v. Board of Review, 106 N.J. Super. 6, 9, 254 A.2d 111 (App.Div. 1969); Zielenski v. Board of Review, 85 N.J. Super. 46, 52, 203 A.2d 635 (App.Div. 1964). "To give [the] correct interpretation" of this policy, the Court "must carry in mind the dire and distressing situations against which the statute, as a matter of stated public policy, is directed." W.T. Grant Co. v. Board of Review, 129 N.J.L. 402, 405, 29 A.2d 858 (1943).
*213 The legislative history of N.J.S.A. 43:21-5(a) supports the conclusion that claimants are not entitled to unemployment benefits. Prior to 1961, that statute did not disqualify individuals who left work for "good cause" from receiving unemployment compensation benefits, regardless of whether such cause was attributable to work or for personal reasons. Yardville, supra, 114 N.J. at 374, 554 A.2d 1337; see also Krauss, supra, 13 N.J. at 464, 100 A.2d 277 ("The Legislature contemplated that when an individual voluntarily leaves a job under the pressure of circumstances which may reasonably be viewed as having compelled him to do so, the termination of his employment is involuntary for the purposes of the [A]ct."). In construing the preamendment Act, this Court observed that "good cause" may "lie in extraneous factors exerting compulsive pressure upon the claimant and causing him to quit." Krauss, supra, 13 N.J. at 464, 100 A.2d 277.
The Legislature, however, amended the statute in 1961 to disqualify claimants who left work for purely personal reasons. See Stauhs v. Board of Review, 93 N.J. Super. 451, 457, 226 A.2d 182 (App.Div. 1967) ("[T]he intention of the Legislature in passing the 1961 amendment was to exclude from the term `good cause' ... all causes personal to a claimant which are not connected with the work."); Self, supra, 91 N.J. at 457, 453 A.2d 170 (noting that purpose of amendment was to "eliminate the eligibility of persons who leave work for good, but personal causes"); Rider College v. Board of Review, 167 N.J. Super. 42, 46, 400 A.2d 505 (App.Div. 1979) ("[C]auses personal to a claimant ... come within the disqualification of the statute.").
The current statutory language provides that a claimant shall be disqualified from receiving unemployment compensation benefits "[f]or the week in which the individual has left work voluntarily without good cause attributable to such work, and for each week thereafter until the individual becomes reemployed...." N.J.S.A. 43:21-5(a) (emphasis added). In applying section 43:21-5(a), a court must "differentiate between (1) a voluntary quit with good cause attributable to the work and (2) a *214 voluntary quit without good cause attributable to the work." Self, supra, 91 N.J. at 457, 453 A.2d 170 (citing DeLorenzo v. Board of Review, 54 N.J. 361, 363, 255 A.2d 248 (1969)); see, e.g., Morgan, supra, 77 N.J. Super. at 214, 185 A.2d 870 (finding that leaving work because of commuting problems was a good, but personal reason); Pagan v. Board of Review, 296 N.J. Super. 539, 543, 687 A.2d 328 (App.Div.), certif. denied, 150 N.J. 24, 695 A.2d 667 (1997) (finding that leaving work because of domestic violence, although a compelling reason, was a personal decision disqualifying claimant from benefits); DeSantis v. Board of Review, 149 N.J. Super. 35, 38, 372 A.2d 1362 (App.Div. 1977) (holding that employee's quitting due to frustration and disappointment in not receiving raise was not cause attributable to work).
Although "good cause" is not statutorily defined, New Jersey courts have construed the phrase to mean "`cause sufficient to justify an employee's voluntarily leaving the ranks of the employed and joining the ranks of the unemployed.'" Domenico v. Board of Review, 192 N.J. Super. 284, 287, 469 A.2d 961 (App. Div. 1983) (quoting Condo v. Board of Review, 158 N.J. Super. 172, 174, 385 A.2d 920 (App.Div. 1978)); see also Associated Utility Serv. v. Board of Review, 131 N.J. Super. 584, 586, 331 A.2d 39 (App.Div. 1974) (quoting Goebelbecker v. State, 53 N.J. Super. 53, 57, 146 A.2d 488 (App.Div. 1958)); Zielenski, supra, 85 N.J. Super. at 52, 203 A.2d 635 (same); Morgan, supra, 77 N.J. Super. at 213, 185 A.2d 870 (same). The test of "ordinary common sense and prudence" must be utilized to determine whether an employee's decision to leave work constitutes good cause. Zielenski, supra, 85 N.J. Super. at 52, 203 A.2d 635. Such cause "must be compelled by real, substantial and reasonable circumstances not imaginary, trifling and whimsical ones." Domenico, supra, 192 N.J. Super. at 288, 469 A.2d 961 (citing Krauss, supra, 13 N.J. at 464, 100 A.2d 277). A claimant has the "`responsibility to do whatever is necessary and reasonable in order to remain employed.'" Heulitt v. Board of Review, 300 N.J. Super. 407, 414, 693 A.2d 155 (App. Div. 1997) (quoting Zielenski, supra, 85 N.J. Super. at 53-54, 203 *215 A.2d 635); see also Condo, supra, 158 N.J. Super. at 175, 385 A.2d 920 (same).
The Appellate Division in two cases has addressed the issue of unemployment benefits in the context of early retirement, first in Trupo, supra, 268 N.J. Super. 54, 632 A.2d 852, and more recently in Fernandez v. Board of Review, 304 N.J. Super. 603, 605, 701 A.2d 747 (1997). In both cases, the Appellate Division considered whether the claimants voluntarily quit without good cause attributable to their employment. In Trupo, the claimant, at the age of sixty-one, accepted an early retirement package offered by her employer as an effort to reduce its work force. Trupo, supra, 268 N.J. Super. at 56, 632 A.2d 852. There, the claimant admitted that her employer neither specified which positions would be terminated nor decided which employees would be laid off or which workers would be transferred. Ibid. Trupo testified that she feared that she would become unemployed and medically uninsured if she did not accept the retirement package. Ibid. Because she was sixty-one years old and the head of her household, Trupo asserted that she "believed she had no choice but to accept the early retirement proposal," and that fear constituted good cause attributable to her work. Ibid.
In dictum, the Trupo court set forth two requirements that the claimants had to meet to collect unemployment benefits: (1) that claimants' "subjective fear [of imminent layoff] was based upon definitive objective facts ... to buttress [the] belief that [their] job[s] would actually be eliminated in the impending work reduction," and (2) that claimants would suffer a substantial economic loss. Id. at 61, 632 A.2d 852. The Appellate Division found that Trupo failed to satisfy her burden to meet those two prongs. Accordingly, the court affirmed the Board's decision denying Trupo unemployment benefits. The court reasoned that
[a]lthough we perceive Trupo's decision as subjectively prudent and based upon common sense, we cannot conclude based upon an absence of objective proof in the record, that the disqualification decision was reversible as a matter of law.
[Id. at 62, 632 A.2d 852.]
*216 In Fernandez, supra, 304 N.J. Super. at 605-06, 701 A.2d 747, the Appellate Division found that an American Telephone and Telegraph (AT & T) employee's early retirement based on a general letter sent to all employees in his division, which informed them that they could choose an early retirement plan because AT & T was in the process of restructuring and noted that there were "many more people in [his division] than there [would] be following" the reorganization, was insufficient to establish "good cause." The Appellate Division held "that an employee's acceptance of a `severance package' or `early retirement incentive package' bars him from receiving unemployment benefits unless he shows he accepted the package because of a real, imminent, and substantial risk of losing his job." Id. at 607, 701 A.2d 747. The court observed that that standard comports with decisions of other jurisdictions. Ibid. Both opinions are illustrative of some of the factors that the Board should consider in determining whether an employee who accepts an early retirement package has good cause to leave work. Moreover, both opinions agree with the public policy and legislative history as to what constitutes good cause in the context of an employee's acceptance of an early retirement incentive.
Whether a particular state awards unemployment benefits to an employee who elects early retirement depends on the laws of that state. Nonetheless, most other jurisdictions have reached similar results. See, e.g., In re Astrom, 362 So.2d 312, 315 (Fla. Dist. Ct. App. 1978) (reasoning that although claimant's election of early retirement was reasonable in light of the impending close of operations, the employer never ascertained the date that employees would be terminated and "work was available at the time that the claimants elected to accept the benefits offered for early retirement"); In re Fontaine, 657 N.Y.S.2d 216, 216 (N.Y. App. Div. 1997) (finding that claimant who accepted early retirement incentive from Air Force in face of downsizing but who was never told her position would be abolished had voluntarily left her employment without cause); Appleman v. Commissioner of Labor, 211 A.D.2d 933, 621 N.Y.S.2d 232, 233 (1995) (finding that legal *217 secretary who left her employment to take advantage of employer's early retirement benefit, who was told her remaining employment could not be guaranteed but was not told she would be laid off if she did not accept the retirement plan, was disqualified from accepting unemployment benefits); Staub v. Unemployment Comp. Bd. of Review, 673 A.2d 434, 439 (Pa. Commw. Ct. 1996) (denying unemployment benefits to claimant because continuing work was available had he not accepted early retirement); Goewert v. Anheuser Busch, Inc., 82 Wash. App. 753, 919 P.2d 106, 110 (1996), rev. denied, 131 Wash.2d 1005, 932 P.2d 644 (1997) (denying benefits to employee whose employer announced intention to reduce work force and could not guarantee alternative position before deadline to participate in retirement program). But see Reserve Mining Co. v. Anderson, 377 N.W.2d 494, 497-98 (Minn. Ct. App. 1985) (awarding unemployment benefits to employee who chose early retirement after employer notified her that her position was being eliminated); Philadelphia Parking Auth. v. Unemployment Comp. Bd. of Review, 654 A.2d 280, 283-84 (Pa. Commw. Ct. 1995) (awarding benefits to an employee who was notified by his employer that it intended to make a serious effort to downsize its operation and that the employee's name was on a list of people who could be laid off); Terry v. Employment Sec. Dep't, 82 Wash. App. 745, 919 P.2d 111, 115 (1996) (awarding unemployment benefits to employee who chose early retirement after employer notified her by letter that she needed to find other work in the company at reduced pay or she would be laid off).
In New Jersey, the Department of Labor, pursuant to Executive Order No. 66 (1978), has proposed regulations to amend N.J.A.C. 12:17, the rules enacted pursuant to the Unemployment Compensation Act. The proposed regulations only differ from the current rules in that "they are more detailed and express the Department's longstanding policies regarding benefit eligibility and disqualification which were not previously codified ... but practiced by the Department." 28 N.J. Reg. 4759. More specifically, the proposed regulations emphasize that the new rules "provide philosophical emphasis that unemployment is an insurance *218 program rather than an entitlement program" and "tighten eligibility procedures for voluntary separations" from employment. Ibid. "In addition, the proposed new rules will better protect the interests of workers and employers who contribute to the Unemployment Insurance Trust Fund by ensuring that only eligible individuals receive benefits." 28 N.J. Reg. 4760. Relevant to our discussion, the regulations provide that employees notified of an impending layoff will qualify for unemployment benefits if they leave work voluntarily within four weeks of the discharge date. 28 N.J. Reg. 4768 at 12:17-9.5. The new regulations provide guidance as to how far off termination must be to be "imminent."[2]
IV
A. Imminence
Claimants bear the burden of proof to establish their right to unemployment benefits. Zielenski, supra, 85 N.J. Super. at 51, 203 A.2d 635; DiMicele v. General Motors Corp., 51 N.J. Super. 167, 171, 143 A.2d 799 (App.Div. 1958), aff'd, 29 N.J. 427, 149 A.2d 223 (1959). Furthermore, when an employee leaves work voluntarily, he bears the burden to prove he did so with good cause attributable to work. Zielenski, supra, 85 N.J. Super. at 52, 203 A.2d 635; Goebelbecker, supra, 53 N.J. Super. at 59, 146 A.2d 488.
Claimants contend that the Trenton management's statements demonstrate that their layoffs were imminent or, alternatively, that GM wanted the workers to believe their layoffs were imminent. The management notices, however, indicate only that the plant was anticipated to be closed by the end of 1993; they do not specifically target particular employees. The workers were *219 notified that the closing of the plant was an extensive, complicated process that could not take place quickly. Based on the projected timeline and claimants' "bumping" rights due to seniority, claimants would have been afforded a substantial amount of time to continue working at the Trenton plant. Those contractual seniority rights in addition to transfer rights undermine the finding that claimants' layoffs were indeed imminent. Furthermore, the notices do not establish a definite closing date, and therefore, do not support claimants' contention that their layoffs were imminent.
Based upon its own supplemental hearing and its expertise in the employment field, the Board determined that claimants here did not elect early retirement in lieu of imminent layoff. While faced with a tough decision, claimants ultimately made a personal one to accept the retirement package.
There is no dispute that claimants took early retirement more than four weeks before any layoffs began. Although claimants' counsel argues that such a conclusion is made with the benefit of hindsight, it was clear even before March 1, 1993 that, according to the tentative closing schedule, claimants would be terminated at the earliest in September 1993. No definite closing date was ever established. Based on that timeline and claimants' level of seniority, they could have continued to work for several months. While claimants may have had a subjective fear of layoff, such fear was not "based upon definitive objective facts." Trupo, supra, 268 N.J. Super. at 61, 632 A.2d 852; see also In re Astrom, supra, 362 So.2d at 315 (holding in a similar situation that impending layoffs were not imminent although "[t]here was certainty of the eventual lay off [because] work was available at the time that the claimants elected to accept the benefits offered for early retirement").
B. Substantial Loss
Moreover, claimants have not established that they would have suffered significant economic harm if they elected not to retire. The consideration of any economic loss faced by claimants is not new to the determination of unemployment eligibility. It is *220 possible that the threat of significant economic loss, based upon objective facts, could amount to cause sufficient to justify leaving the ranks of the employed.
For instance, in Johns-Manville Products Corp. v. Board of Review, 122 N.J. Super. 366, 300 A.2d 572 (App.Div. 1973), a machinist applied for unemployment benefits after his employer offered him work in a less skilled position that would have resulted in a decrease in the machinist's pay. In his original position, the claimant's wage rate was $4.27 per hour. In the new position, he would have been paid between $3.21 and $3.35 per hour. The Board of Review found that such a substantial reduction in the claimant's salary constituted good cause to leave his work. Id. at 369, 300 A.2d 572; see also LeCroy v. Unemployment Appeals Comm'n, 654 So.2d 1054, 1056 (Fla. Dist. Ct. App. 1995) (finding that substantial decrease in claimants' pay afforded them with good cause); Mangan v. Bernardi, 131 Ill. App.3d 1081, 87 Ill.Dec. 412, 415, 477 N.E.2d 13, 16 (1985) (holding that substantial reduction in wages and loss of fringe benefits, including medical insurance, constituted good cause to leave work); Cook v. Playworks, 541 N.W.2d 366, 368 (Minn. Ct. App. 1996) (recognizing that a substantial reduction in wages may provide employee with good cause to quit). The court upheld the Board's determination, emphasizing that the Board's finding was supported by the substantial evidence in the record and that its decision was "entitled to particular weight because of the administrative tribunal's familiarity with and expertise in employment matters." Johns-Manville, supra, 122 N.J. Super. at 369-70, 300 A.2d 572. Although the issue in Johns-Manville, supra, involved a substantial reduction in wages, an analogous rationale applies to a substantial loss in the context of early retirement.
Claimants suffered no substantial economic loss. Rather, in exchange for their early resignations, employees accepted a mutually beneficial retirement package. To be eligible for the incentive retirement plan, claimants were required to be at least fifty years of age. If they had elected to remain at the Trenton plant and it *221 had closed as planned, those who were fifty-five would have received the same unreduced pension package, as provided by Article II, section 2(b) of the General Motors Hourly-Rate Employees Pension Plan. Those between the ages of fifty and fifty-five would have received SUB and GIS income with no appreciable loss of medical benefits. The record demonstrates that, under SUB, a worker would have received $450 per week, an amount equivalent to a pension for an employee with thirty years of service (calculated at $60 per week per year of service). In the event that the SUB funds were depleted, laid off employees would have received $346 per week through GIS, an amount equivalent to a pension for an employee with twenty-five years of service. Both of those amounts exceeded the maximum weekly unemployment compensation benefit rate in 1993. As such, claimants would receive no economic benefit from an award of unemployment benefits.
The Board's determination that claimants would not incur a substantial economic loss or loss of medical benefits is supported by the substantial credible evidence in the record. That conclusion coupled with the finding that the layoffs were not imminent disqualified claimants from receiving unemployment benefits.
V
Claimants are not the type of workers the Act is designed to protect. Claimants, rather than being involuntarily laid off and receiving no income, elected an attractive early retirement package. The package included beneficial features, including supplementary income and employer-paid medical benefits. Although there is no dispute that GM encouraged claimants to accept the incentive retirement plan, such encouragement did not amount to coercion. The strongest words from management encouraging workers to take advantage of the incentive retirement program came in late December 1992, noting that "[t]he worst thing anyone could do would be to turn down one of the best mutual retirement programs available because of a rumor [that the plant might *222 remain open] and then later lose what is available when the plant closes." Although the employees' response to management's advice was an understandable reaction, it was not the result of coercion or the lack of essential information. Moreover, the workers were able to consider their choice with the help of their union representatives. The employees made a difficult decision, but nonetheless a personal one, to accept the early retirement package.
Unemployment compensation is an insurance, not an entitlement, program designed to provide a cushion for workers who are involuntarily unemployed through no fault or act of their own. N.J.S.A. 43:21-2; Yardville, supra, 114 N.J. at 375, 554 A.2d 1337. Here, claimants did not do "whatever is necessary and reasonable" in order to remain employed. Heulitt, supra, 300 N.J. Super. at 414, 693 A.2d 155.
VI
The findings of the Board of Review that claimants failed to establish by "definitive objective facts," (1) a well-grounded fear of "imminent layoff" and (2) that they "would suffer a substantial loss by not accepting early retirement," were supported by sufficient, credible evidence in the record. Those findings were neither arbitrary nor capricious. Further, those findings comport with the public policy and legislative history of the Act and specifically, N.J.S.A. 43:21-5(a). Under the appropriate standard of review, the Board's decision not only furthered the express legislative policies of the Act, but also reached a reasonable result based on the relevant factors in this case.
Accordingly, we reverse the judgment of the Appellate Division, thereby reinstating the decision of the Board of Review.
COLEMAN, J., dissenting.
I would affirm the judgment below finding that claimants are eligible for unemployment benefits substantially for the reasons stated by the Appellate Division. General Motors's communications *223 to its employees that the plant was closing were unequivocal and unyielding. It persisted in those communications until two days after the deadline to file for early retirement had passed. Under the totality of circumstances, claimants established a reasonable belief of a real, substantial, and imminent risk of losing their jobs.
Furthermore, a finding that claimants are eligible to collect unemployment benefits will not result in a double recovery because N.J.S.A. 43:21-5a requires a set-off based on pension or retirement payments received by claimants. Consequently, I dissent.
STEIN, J., joins in this opinion.
For reversal and reinstatement Chief Justice PORITZ and Justices HANDLER, POLLOCK, O'HERN and GARIBALDI 5.
For affirmance Justices COLEMAN and STEIN 2.
NOTES
[1] Article II, Section 2(b) of the General Motors Hourly-Rate Employees Pension Plan provides that an employee with at least ten years of service, who is laid off as the result of a plant closing, is entitled to a mutual retirement package, including an unreduced pension, upon reaching the age of 55.
[2] Although the Department of Labor has advised the Court that the pending regulations will expire unadopted on December 31, 1997, the Department of Labor intends to resubmit a revised, more comprehensive draft at a future date. This opinion simply relies on the public policy implications of the proposed rules as an indication the layoffs in this case were not imminent.
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491 S.W.2d 408 (1973)
Robert DeWayne FREEMAN, Appellant,
v.
The STATE of Texas, Appellee.
No. 46595.
Court of Criminal Appeals of Texas.
March 14, 1973.
Warren Burnett and Richard J. Clarkson, Odessa, for appellant.
John Green, Dist. Atty., Dennis Cadra, Asst. Dist. Atty., Odessa, Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
ROBERTS, Judge.
This appeal is taken from an order revoking probation. Appellant was convicted of indecent exposure; punishment was assessed at 10 years' confinement. The imposition of sentence was suspended and appellant was granted probation. Subsequently, *409 the State filed a motion to revoke the probation, charging that appellant had sexual intercourse with his 14-year-old stepdaughter. A hearing was held and the judge entered an order revoking appellant's probation.
Two related contentions are raised by appellant which charge an abuse of discretion on the part of the trial judge. Appellant contends that there exists in a revocation proceeding an absolute right of defense counsel to be heard by argument before the trial judge enters his order revoking probation. The record reflects that the following colloquy took place at the close of the testimony:
"MR. BOBO [PROSECUTOR]: The State will close, Your Honor.
"MR. BURNETT [DEFENSE COUNSEL]: We close.
"THE COURT: Would the Defendant please rise. It appearing to the satisfaction of the Court that the Defendant has been guilty of violating the terms of his probation as set out in the Motion to Revoke Probation, sentence should be made final herein. Do you have anything to say why sentence should not be pronounced against you?
"MR. BURNETT [DEFENSE COUNSEL]: Yes, he does, Your Honor, he excepts to the action of the Court in revoking his probation without even affording him an opportunity by and through his attorney of record who has been here throughout the revokation proceeding, affording such attorney even an opportunity to argue the case and this deprivation of right to argue his case
"THE COURT: Do you wish to argue? (Emphasis supplied)
"MR. BURNETT [DEFENSE COUNSEL]: The Defendant has been denied the effective assistance of counsel under the Sixth Amendment and the Constitution of the United States. Now, the Court having already firmly ruled before there was any opportunity to argue this young man's case on this probation revokation, it does not afford him the right to effective assistance of counsel as guaranteed by the Sixth Amendment to the Constitution of the United States and now to impose upon counsel the burden and obligation of trying to address himself in behalf of the probationer to a Court who has already robbed him of his discretion by already affirmatively announcing the ruling and affirmatively announcing that the probation was revoked, is to extend to the citizen probationer a hollow right. For these reasons and each of them we respectfully object and except to the action of the Court in seeking to impose sentence at this time or seeking to revoke the probation of the accused.
"THE COURT: Are you through?
"MR. BURNETT [DEFENSE COUNSEL]: Yes, sir."
It is difficult to understand defense counsel's contention that he was denied an opportunity to make an argument. No argument was requested by defense counsel. When the point was finally raised, and the court inquired whether he desired argument, no responsive answer was received. As to whether or not there is an "absolute right" to final argument in a probation revocation hearing, the question is not properly before this Court at this time. See Bowers v. State, 414 S.W.2d 929 (Tex. Cr.App.1967).
No abuse of discretion has been shown. The judgment is affirmed.
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704 A.2d 1166 (1997)
Fred W. DAVIS
v.
Roxanne HUNT.
No. 96-099.
Supreme Court of Vermont.
November 21, 1997.
*1167 Leslie Black and Douglas L. Molde of Molde and Black, P.C., Johnson, for plaintiff-appellee.
Robert M. Fairbanks of Gaston, Durrance & Fairbanks, Montpelier, for defendant-appellant.
Before AMESTOY, C.J., and DOOLEY, MORSE, JOHNSON and SKOGLUND, JJ.
MORSE, Justice.
Defendant Roxanne Hunt (mother) appeals from a family court judgment in a consolidated parentage and relief-from-abuse proceeding. The court awarded plaintiff Fred Davis (father) sole legal and physical rights and responsibilities for the minor child and dismissed the relief-from-abuse petition. Mother contends the court erred by: (1) allowing the minor's guardian ad litem to testify concerning custody of the minor child; (2) excluding the testimony of her thirteen year old daughter regarding allegations of abuse; (3) consolidating the relief from abuse and parentage proceedings; and (4) denying her request for an award of attorney's fees. We reverse.
The parties lived together for approximately six years but never married. A child, Samuel, was born of the relationship in December 1990. In 1994, the parties separated. Both parties acknowledge that they are Samuel's biological parents.
Following the separation, father filed a complaint for establishment of parentage and award of legal and physical rights and responsibilities. Thereafter, mother petitioned the court on behalf of the child for relief from abuse. The court issued a temporary relief-from-abuse order and consolidated the two actions for final hearing. At the conclusion of the hearing, the court awarded sole legal and physical rights and responsibilities to father, provided for extensive visitation by mother, and dismissed the relief-from-abuse petition, finding that the evidence did not support the claim. This appeal followed.
*1168 I.
Mother first contends that the court erred in allowing the co-guardian ad litem, Robert Meyer, to testify as a witness and to state his recommendation regarding custody of the child based upon evidence not in the record. Mother asserts that the guardian's testimony was incompetent under the criteria set forth in V.R.F.P. 7.
Rule 7(d) allows a court-assigned guardian ad litem (GAL) to state "a position" but requires that the reasons for the position be "based upon the evidence in the record."A GAL may be called as a witness only when the testimony "would be directly probative of the child's best interest" and no other person could testify on the same subject. Id.; see Johnson v. Johnson, 163 Vt. 491, 496-97, 659 A.2d 1149, 1152 (1995); Gilbert v. Gilbert, 163 Vt. 549, 554, 664 A.2d 239, 241 (1995).
Here, the trial court called the GAL as a witness, inquired about his investigation, and asked whether he had a recommendation for the court. Mother thereupon objected on the ground that the GAL's investigation was not sufficiently thorough to justify his stating an opinion. The objection was overruled, and the GAL recommended that father be awarded legal rights and responsibilities and that the parties share physical custody.
By allowing the GAL to testify based on evidence outside the record, the trial court clearly erred under our decision in Gilbert. Because we conclude in the section which follows that the judgment must be reversed on other grounds, however, we need not determine whether the error requires a new hearing. Cf. Johnson, 163 Vt. at 497, 659 A.2d at 1152-53 (Court's inability to determine impact of GAL's recommendation required remand for new hearing); Gilbert, 163 Vt. at 556-59, 664 A.2d at 242-44 (because GAL's report "significantly influenced the presentation of evidence" remand for new hearing was required).
II.
Mother next contends the trial court erred in excluding the testimony of her thirteen year old daughter, Lacy.
Although Lacy was not related to father, she had resided with him for several years during the parties' relationship. Mother adduced evidence that father had struck Samuel on the face, causing a red bruise. Father denied that he had struck or abused either of the children. Mother thereupon sought to call Lacy to rebut father's testimony. In her offer of proof, mother's counsel stated that Lacy would testify that she had been abused by father on a number of occasions in the past. Counsel argued that the testimony was relevant both to the relief-from-abuse complaint and the custody proceeding, indeed that it went to "the core of the Court's decision on which parent is better suited to have custody." Counsel noted that there was no other person who could offer the same testimony, since she was the only witness. And counsel further argued that the probative value of the testimony outweighed any detriment to the child, observing that Lacy was an articulate and poised thirteen year old, that the child was present in court, was comfortable with the procedure, and was eager to testify. Counsel urged the court to speak with the child in chambers to assess her demeanor and, if necessary, to appoint an attorney to protect her interests. The trial court did neither, and ultimately excluded the testimony. Although the basis of the court's decision is unclear from the record, in denying mother's subsequent motion for reconsideration the court implied that allegations of abuse of Lacy were not relevant to the complaint involving Samuel, and in any event were not admissible under V.R.E. 404(b) (evidence of other bad acts not admissible to prove that person acted in conformity therewith).
A threshold issue is whether the trial court's apparent belief that the requirements of 15 V.S.A. § 594(b) applied was error. The statute establishes certain conditions for calling a child as a witness in a family proceeding. It provides that "[t]he court shall appoint an attorney for a minor child before the minor child is called as a witness in a proceeding under this chapter." 15 V.S.A. § 594(b). Furthermore, the child may be called as a witness only if the court finds after hearing that the testimony is necessary to assist the court in determining the issue *1169 before it, the probative value of the testimony outweighs the potential detriment to the child, and the evidence is not reasonably available through other means. Id.
Read in context, § 594(b)'s reference to "minor child" appears to apply only to witnesses who are also the subject of the custody and visitation proceeding, and thus did not apply to Lacy. This is apparent from the previous section, § 594(a), which provides that the court may appoint an attorney for the "minor or dependent child with respect to child support and the allocation of parental rights and responsibilities." In construing a statute, we look to its entirety and attempt to harmonize its constituent parts. Lemieux v. Tri-State Lotto Comm'n, 164 Vt. 110, 113, 666 A.2d 1170, 1173 (1995). There is nothing to indicate that the Legislature intended a broader definition of "minor" in § 594(b) than in § 594(a), which plainly refers only to minors who are the subject of the support and custody proceeding. The purpose of the provision, moreover, is to protect children faced with the dilemma of testifying simultaneously for one parent and against the other. See V.R.F.P. 7, Reporter's Notes (15 V.S.A. § 594(b) "recognizes that the act of testifying for or against one parent, and requests by a parent for such testimony, are often harmful to children"). We thus hold that the statute does not apply broadly to any child witness, but only to those minors who are the subject of the custody dispute.
This is not to say that the court lacked the discretion to exclude the testimony if it was irrelevant, cumulative, unduly prejudicial, or inadmissible on other grounds. None of these objections, however, was applicable in the case at hand. We have expressly held that evidence of abuse of siblings in child custody and visitation proceedings does not run afoul of V.R.E. 404(b) because the issue is not whether the parent acted in conformity with a particular character trait, but rather whether the child will have proper care and protection. Brown v. Brown, 154 Vt. 625, 632, 580 A.2d 975, 979-80 (1990). Such evidence is highly relevant "to show the overall home environment and the interaction of the parents and children within it, now or in the past. . . . [W]e must allow a broad inquiry as long as the focus is clearly on the best interests of the child." Id. Here, as mother's counsel noted, the allegation of abuse went to the "core" of the custody and visitation issue. See 15 V.S.A. § 665(b)(9) (in making a custody determination, "the court shall consider evidence of abuse . . . and the impact of the abuse on the child and on the relationship between the child and the abusing parent."). The thirteen year old witness was competent to testify, the evidence was not cumulative, and there was no other apparent means of eliciting the same evidence. We thus perceive no sound basis for its exclusion in these circumstances.
Accordingly, we conclude that the court's ruling must be reversed, and the matter remanded for a new hearing for the limited purpose of admitting the testimony of Lacy, and rendering a new decision in the light thereof.
III.
Mother next contends the trial court violated her right to due process by consolidating the relief from abuse and the final parentage actions without adequate notice, and by denying her motion for a continuance of the parentage proceeding.
As noted, this action commenced with father's filing of a complaint for establishment of parentage. Thereafter, mother petitioned the court on behalf of the child for relief from abuse. The court issued a temporary order for relief from abuse and, following an unreported chambers conference, scheduled the matter for final hearing on March 23, 1995. The parties disagree as to whether they also agreed at the time to consolidate the final relief from abuse and parentage proceedings. At the commencement of the March 23 hearing, mother's counsel opposed going forward with the final hearing on the parentage action, claiming that she was not on notice of the consolidation. She requested a three-month continuance so that a therapist recently appointed for the child would have time to form an opinion and present expert testimony. Father's counsel disputed her counterpart's recollection of events, recalling that the parties had expressly agreed in chambers *1170 to merge the two actions. The trial court agreed with father's reconstruction of events and denied mother's request for a continuance of the parentage action.
V.R.F.P. 4(n)(2) provides that when an abuse complaint is filed subsequent to a parentage action, "[o]n motion of either party or the court's own motion the court shall consolidate" the two proceedings. Thus, there was no error in consolidating the proceedings. Although mother claims a lack of notice, and the record on this point is unclear, she has made virtually no showing that she was prejudiced by the consolidation, or by the court's denial of her request for a continuance. Accordingly, there was no denial of due process.
IV.
Finally, mother contends the court erred in denying her motion for attorney's fees totalling almost $5,000.
A parentage action is analogous to a custody/support hearing with respect to the award of attorney's fees. Bissonette v. Gambrel, 152 Vt. 67, 71, 564 A.2d 600, 602 (1989). In such cases, "the assessment of attorney's fees is proper `where justice and equity so indicate.'" Nevitt v. Nevitt, 155 Vt. 391, 399, 584 A.2d 1134, 1139 (1990) (quoting Peatman v. Peatman, 140 Vt. 532, 534, 442 A.2d 1290, 1291 (1982)). "The primary consideration in awarding attorney's fees is the ability of the supporting party to pay and the financial needs of the party receiving the award." Id. The trial court enjoys broad discretion in awarding attorney's fees, and its judgment will not be disturbed on appeal absent clear evidence of an abuse of discretion. Parker, Lamb & Ankuda v. Krupinsky, 146 Vt. 304, 307, 503 A.2d 531, 533 (1985).
In support of her motion, mother adduced evidence of both parties' financial condition and the amount of attorney's fees that each had incurred. In denying the motion, however, the court stated only that "the attorney's fees generated by both sides in this litigation are more than they should be." The court failed to consider or make findings concerning the parties' ability to pay attorney's fees in the light of their respective financial resources and expenses. As we have previously held, this was an abuse of discretion. Dunning v. Meaney, 161 Vt. 287, 291, 640 A.2d 3, 6 (1993); Cleverly v. Cleverly, 151 Vt. 351, 358, 561 A.2d 99, 103 (1989). Accordingly, on remand the court will conduct a further hearing on this issue.
Reversed and remanded for further proceedings consistent with this opinion.
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72 B.R. 7 (1985)
DELTA ENERGY RESOURCES, INC.
v.
DAMSON OIL CORPORATION.
Civ. A. No. 85-1149.
United States District Court, W.D. Louisiana, Lake Charles Division.
December 4, 1985.
*8 Philip K. Jones, Jr., Liskow & Lewis, New Orleans, La., for Damson Oil Corp.
Harry R. Holladay, Chaffe, McCall, Phillips, Toler and Sarpy, New Orleans, La., for The Unsecured Creditors Committee of Delta Energy Resources, Inc.
William C. Sandoz, Opelousas, La., for Charles N. Wooten, Sr., Trustee for the Bankruptcy Estate of Delta Energy Resources, Inc.
STATEMENT OF JURISDICTION
EDWIN F. HUNTER, Jr., Senior District Judge.
This case arises under Title 11 of the United States Code (i.e., the United States Bankruptcy Code) and jurisdiction is vested in this Court pursuant to 28 U.S.C. § 1334. Furthermore, this matter constitutes a "core proceeding" pursuant to 28 U.S.C. § 157(b). As such the judgment of the Bankruptcy Court in this proceeding is subject to review by this Court pursuant to 28 U.S.C. § 158(a).
This litigation began with the rejection by William C. Sandoz, the prior trustee, of the "purchase and sale agreement" dated September 29, 1983, entered into between Damson Oil Corporation (Damson) and Delta Energy Resources, Inc. (Delta). According to the terms of that agreement Delta was to convey to Damson its leasehold interest, less and except a 1/32 overriding royalty retained by Delta, in and to certain mineral properties located in the "East Moss Lake Field". A hearing was held on March 5, 1984, regarding the trustee's proposed rejection. The Bankruptcy Judge determined that although Damson had paid $1,000,000.00 toward a purchase price of approximately $5,000,000.00 and had taken, or had attempted to take, certain other steps toward fulfillment of its end of the bargain, the contract nevertheless remained executory as of the date the bankruptcy case was filed. Despite Damson's contentions to the contrary, the court agreed with the trustee and found that the rejection of the contract would be in the *9 best interest of the estate. The rejection order contained provisions intended to insure that Damson would eventually recover the $1,000,000.00 it had paid toward the purchase price, specifically Damson was to be granted a lien in the amount of $1,000,000.00 against Delta's interest to the property which formed the subject of the rejected contract. 11 U.S.C. § 365(j). Then, too, as an additional measure of security or assurance to Damson the order granted it an administrative priority pursuant to 11 U.S.C. § 364(d) for any deficiency which might result should the 365(j) lien prove ultimately inadequate.
The submission of the proposed judgment was delayed by negotiations between the parties concerning a possible settlement, and a judgment was not entered by the Bankruptcy Court until August 24, 1984. The Trustee thereafter moved for reconsideration of the judgment based upon the priority given Damson's claim vis-a-vis administrative expenses of the Estate. At that time the Trustee did not object to the lien given to Damson pursuant to section 365(j). However, the Unsecured Creditors' Committee filed a motion to reconsider alleging that the judgment was incorrect and that Damson was not entitled to a lien to secure recovery of its claim resulting from the rejection. Both motions were heard on September 27, 1984. Following the hearing and additional BRIEFING, THE Bankruptcy Court withdrew its original judgment and issued Findings and Conclusions on January 3, 1985.[1] A judgment in accordance with the Findings and Conclusions was entered on February 17, 1985, which modified the order of August 24, 1984, by granting
to Damson an entitlement to damages resulting from the rejection/breach, including but not limited to its $1,000,000.00 claim as an unsecured creditor of the estate.
This appeal followed.
Secured Status and Section 365(j)
The Bankruptcy Court, in reliance upon the reservation of a 1/32nd overriding royalty in favor of Delta and Louisiana jurisprudence determined that the transaction was a "sublease" under the law of Louisiana, and should be similarly classified for purposes of Section 365; and that as a result, Damson is not entitled to a lien under Section 365(j) of the Bankruptcy Act. This holding Damson insists, is incorrect as a matter of law. The second issue urged by Damson concerns being in "possession" as contemplated by Section 365(b). This issue becomes relevant only if Damson is determined to be a lessee or sub-lessee. Nevertheless, for the record, we note our complete concurrence in the Bankruptcy Judge's conclusion that Damson was not entitled to remain in possession as it did not have possession as is envisioned by the provisions of 11 U.S.C. § 365(b)(1) at the time of the reject. We accept his findings in this regard to be correct.
No useful purpose is to be served by a recitation of the contract provisions, which are made a part hereof by reference. Counsel for the respective parties (by briefs) argue extensively as to whether Louisiana or Texas Law should govern. Whether Texas law applied because of the language in the Damson agreement matters not. The core issue has to be what law applies to the transfer of an interest in immovable property located in Louisiana. Whether a Texas court applies Louisiana law or a Louisiana court applies Louisiana law, the outcome must be the same. So strong is the interest of Louisiana in the classification of immovables found within its borders that any Texas Court faced with the issue would apply Louisiana law to resolve the dispute. Texas law, when dealing with immovable property in another state, requires that the courts apply the substantive rules of the state where the property is located. Holt v. Guerguin, 106 Tex. 185, 163 S.W. 10 (1914); Colden v. Alexander, 141 Tex. 134, 171 S.W.2d 328 (1943); Estabrook v. Wise, 506 S.W.2d 248 (Tex.C.C.A. Tyler 1974); Echols v. Wells, 508 S.W.2d 118 (Tex.C.C.A.1973).
*10 Louisiana Law
The distinction between a sublease and assignment under Louisiana law was substantially altered in 1974 with the adoption of the Louisiana Mineral Code.[2] While the Louisiana Mineral Code kept the nominal distinction between "sublease" and "assignment", the functional differences were substantially eliminated,[3] and the minor remaining technical differences[4] should not control the classification of the transaction for purposes of Bankruptcy Code.
The arbitrary and inequitable effect of such a classification was explained in the following statement made prior to the adoption of the Mineral Code:
The astounding thing about this judicial definition is the doctrine that a transfer for any consideration except cash is a sublease . . . But there are many sales contracts which stipulate royalty as part of the consideration. There are sales of books, patents, moving pictures which stipulate royalty as part of the purchase price. These do not become subleases simply because they were not made for cash. Royalties stipulated as consideration for a true sublease (leased by a lessee) may be rent, but royalty as consideration for the sale of a lease is not rent. The method of payment of the consideration is not a determining factor in the distinction of a sublease from an assignment. A paid-up primary term will not convert a mineral lease into an assignment. The lease remains a lease because it retains the attributes and characteristics of a mineral lease. In the same manner, an assignment should be considered an assignment whether the consideration is to be paid in cash, lump sum or by installments, or by cash with other considerations or services. The distinguishing feature is the transfer of title to the basic lease. The contract has none of the characteristics of a lease. The transferee assumes all the obligations of the basic lease. The transferee's obligations are identical under each contract, regardless of the method of payment. He has a vendor-vendee, not a lessor-lessee relationship with his assignor.
Scott, "More on Assignment and Sublease Problems in Louisiana Mineral Law," L.S.U. 12th Ann.Inst. on Mineral L., 39, 52-53 (1965). This need for the essential functional equivalence of the two relationships as intended by Louisiana Mineral Code was recognized in Cameron Meadows Land Company v. Bullard, 348 So. 2d 193 (La.App. 3d Cir.1977), where the court considered "the vexing problems which might arise as a result of the instrument of transfer being characterized as a sublease as opposed to an assignment." Id. at 198. One such vexing problem was the ability of a "sublessor" to grant an effective release against his sublessee although the sublessor in reality had not retained any interest in the property.
The jurisprudence prior to the Mineral Code unquestionably distinguished between the two legal relationships and found different obligations to exist depending upon whether the transaction was classified as a sublease or assignment. Articles 128-132 of the Louisiana Mineral Code substantively altered the jurisprudence and equated the two relationships. As noted *11 by one commentator, "[t]he effect of these changes [by the Mineral Code] is to provide for certain common results flowing from the execution of either an assignment or a sublease."[5] The motivating factor for eliminating the functional differences was to avoid the inequitable results caused by the classification which were not intended by any of the parties. One such unintended and inequitable result would occur if the clear intentions of Delta and Damson in this regard were disregarded, and Damson was classified as a "sublessee" solely by virtue of the reservation of one thirty-second (1/32) overriding royalty by Delta. We are, of course, fully aware that the Bankruptcy Code does not attempt to define or distinguish the terms "sale", "lease" and "assignment". But, we are not bound by the use of the term "lease" in a state law context in our determination of the exact nature of the contract between the parties under section 365. In the case of a sale/lease back transaction, we are required to analyze the economic realities of the transaction and the true intention of the parties to determine whether the transaction is a "lease," a "sale" or a "security interest" for purposes of the Code. In re Rojas, 10 B.R. 353 (B.A.P. 9th Cir.1981). Regardless of the standards employed, this determination [between a sale and a lease] should not be a mechanical one and must be controlled by the particular circumstances of this case.
Louisiana law defines a mineral lease as "a contract by which the lessee is granted the right to explore for and produce minerals." LA R.S. 31:114. A mineral lease is a "mineral right" and as such is an incorporeal immovable. Unlike the ordinary lease situation, the mineral lessor does not have an affirmative duty except for warranty of title and non-interference. La.R.S. 31:119-120.
The Bankruptcy Judge placed reliance upon jurisprudence prior to the adoption of the Louisiana Mineral Code. The distinction between a sublease and an assignment was substantially altered in 1974 with the adoption of the Louisiana Mineral Code.
Under Louisiana law, a mineral lease is to be treated as a real right, an incorporeal immovable, which can be alienated and mortgaged to third parties. It is not the convential lease contemplated by Section 365, but is in fact a real right in favor of another. We find that under the circumstances here, the distinction between "sublease and agreement" is without substantive effect for the purposes of Section 365.
Damson is entitled to the statutorily imposed protection of 11 U.S.C. § 365(j), a lien upon the property which was the subject of the rejected contract. This lien is for $1,000,000.00 (the amount of the payment) and for nothing more. Of course, Damson is entitled to any damages resulting from the rejection breach in addition to its one million dollar claim, as an unsecured creditor of the estate.
Nothing More
Damson argues that it is entitled not only to the 365(j) lien but that the Court should fashion adequate protection by the granting of an administrative priority, and that it is entitled to be adequately protected against depreciation and/or loss of use of its collateral while in the hands of the debtor. The Bankruptcy Judge initially agreed with Damson's contention, but in its January 31, 1985 ruling reversed itself finding the arguments in support of that position to be flawed and without merit. We agree with the reasoning contained in this January 31, 1985 ruling, adopt it as our own, and cite from it:
As indicated the court now finds Damson's argument to be flawed; and as a corollary, upon further reflection the court also finds that its own original judgment in this matter is equally flawed and defective and is thus hereby vacated.
In spite of the appealing ring of logic contained within Damson's argument and regardless of what merit the argument *12 might have as applied to the typical secured creditor situation, it nevertheless has no application given the facts of the instant case. The chief fault of the argument is the almost mechanical way in which it tends to apply the term(s) secured status/secured creditor. It is true that some cases have referred to the lien created by 365(j) as a form of "security interest", however, such statements should not be taken out of context as Damson here attempts to do. For example, one case which contains such a statement and upon which Damson appears to place particular reliance is In re Nite Lite Inns, 13 B.R. 900, 910 (B.Ct.S.D.Calif.1981) which dealschiefly with a question involving the proper definition of "purchaser" for the purposes of applying Sec. 365(j). The case itself however points out, at footnote 15, that secured status as it relates to the lien of 365(j) should not be confused with the "secured status" which results from consensual liens and to which reference is made in other sections of the Code. Interestingly the note goes on to point out as a specific example: the holder of a 365(j) lien is not entitled to "interest and attorneys fees" as would be available to the consensual secured lien claimant according to the provisions of 11 U.S.C. § 506(b), Nite Lite id., note 15. Not only does this court agree that the same should apply to the American Mariner theory advanced by Damson, but, in fact, the whole basis of the discussion contained in American Mariner to which Damson refers, is that there the court was dealing with a "bargain for" consensual right to interest. By contrast, the 365(j) lien is a limited and closely defined statutory right that takes place by mere operation of law upon the happening of certain events. Specifically, as is clear from its very wording, Section 365(j) is intended to give a limited form of protection to the non-debtor vendee upon rejection of the contract. That protection is restricted to a lien covering only the debtor's interest in the property forming the subject of the rejected contract. If in order to secure that same said interest this court were to grant in addition to the 365(j) lien, the supplemental protection which Damson now seeks, the restriction contained in Section 365(j) would have little or no meaning. The unambigious intent of the 365(j) provisions cannot be altered by simply labeling it a "secured claim" and then merely, and blindly, plugging that label into the American Mariner analysis. Without any closer relationship to the instant fact than that, to jump as Damson does from 365(j) lien = "secured status" = adequate protection = administrative priority, amounts to no more than sheer sophistry in which this court will refuse to engage. If Congress had intended that the disappointed vendee be given an administrative priority or other forms of adequate protection in addition to or in lieu of the lien granted by Section 365(j), it surely could have done so but it did not. In effect the lien is the "adequate protection" Congress has chosen to protect the debt owed to such a vendee. No amount of alchemy can transform that congressionally mandated protection into something greater than it is, a lien against the property and nothing more.
Further, even if this court were to find that Damson was a secured creditor in the standard sense and thereby entitled to the protection discussed in American Mariner, its argument as presently advanced would still fail. This is so because if the 365(j) lien creates a "security interest" in anything, it is in the property as previously stated and not the one million dollars as urged by Damson, i.e. it is the real estate, and not the money, which becomes collateral entitled to adequate protection.
Judge Bernard correctly held that the type of liens which the code envisions as needing additional protection are consensual liens arising from the parties armlength transaction in establishing those liens. The lien created by 365(j) is a lien which comes into being by operation of law. This lien is all the adequate protection which is intended for a purchaser of real property whose contract is rejected. *13 Giving additional protection as Damson requests would amount to giving it double protection at the expense of all other creditors who may not be protected (unsecured) or may have just one protection (secured).
Counsel for Damson are to prepare and submit an appropriate judgment in accordance with this Memorandum.
NOTES
[1] These findings and conclusions of the Bankruptcy Judge are made a part hereof by reference.
[2] Articles 128-132 of the Louisiana Mineral Code provide as follows:
128. To the extent of the interest acquired, an assignee or sublessee acquires the rights and powers of the lessee and becomes responsible directly to the original lessor for the performance of the lessee's obligations.
129. An assignor or sublessor is not relieved of his obligations or liabilities under a mineral lease unless the lessor has discharged him expressly and in unity.
130. A partial assignment or partial sublease does not divide a mineral lease.
131. A mineral lessor must accept performance by an assignee or sublessee whether or not the assignment or sublease is filed for registry.
[3] In fact, one commentator has concluded, "In the 1975 Mineral Code R.S. 31:128 abolished the distinction between subleases and assignments, making either type of holder directly liable to the original lessor." 3 Summers, Oil and Gas § 553 n. 41.12 (1984 Supp.)
[4] See McCollam, "A primer for the Practice of Mineral Law under the New Louisiana Mineral Code", 50 Tul.L.Rev., 729, 829 (1976).
[5] McCollam, "A Primer for the Practice of Mineral Law under the New Louisiana Mineral Code," 50 Tul.L.Rev. 729, 831 (1976).
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37 N.J. Super. 558 (1955)
117 A.2d 637
ARTHUR F. HARE, A MINOR, BY HIS FATHER AND GUARDIAN AD LITEM, ARTHUR HARE, AND ARTHUR HARE, IN HIS OWN RIGHT, PLAINTIFFS-APPELLANTS,
v.
JEAN PENNELL AND BOARD OF EDUCATION OF THE TOWNSHIP OF PENNSAUKEN, JOINTLY, SEVERALLY AND IN THE ALTERNATIVE, DEFENDANTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Argued September 19, 1955.
Decided October 28, 1955.
*561 Before Judges GOLDMANN, FREUND and CONFORD.
Mr. Horace G. Brown argued the cause for appellants (Messrs. Brown, Connery, Kulp & Wille, attorneys).
Mr. Sidney P. McCord, Jr., argued the cause for respondents (Messrs. Starr, Summerill & Davis, attorneys).
The opinion of the court was delivered by GOLDMANN, S.J.A.D.
This action arises from an injury suffered by plaintiff infant on March 24, 1953 in the pre-primer class of the Delair Public School of Pennsauken Township when a classmate struck him in the left eye with a pair of scissors. Defendant Jean Pennell was the teacher in charge of the class. The infant, by his father and guardian ad litem Arthur Hare, and the father in his own right, sued the Board of Education of the Township of Pennsauken and Miss Pennell, jointly, severally and in the alternative.
The complaint was in eight counts. The first and fourth alleged active wrongdoing by defendant board of education; the second and fifth were based on the negligence of the teacher, and the third and sixth sought judgment against both the board and teacher, jointly. The infant plaintiff sought compensatory damages for his eye injury, and the father damages for medical expenses, past and future, and loss of services. In counts seven and eight plaintiffs sought recovery against the board of education by virtue of L. 1938, c. 311 (N.J.S.A. 18:5-50.4), which requires boards of education to save harmless teachers and certain other employees from financial loss arising out of any claim, demand, *562 suit or judgment by reason of alleged negligence or other act resulting in accidental bodily injury to any person within or without a school building, provided such teacher or employee was at the time of the accident or injury acting in the discharge of his duties within the scope of his employment.
It may be noted that Arthur Hare, the father, was not appointed guardian ad litem for his son until the second day of the trial. This should have been done at the very start of the suit. R.R. 4:30-2.
The defendant board of education moved for summary judgment in its favor. The motion was argued at the pretrial conference; however, the pretrial order makes no mention of it. On that date counsel for plaintiffs consented to the dismissal of the counts of the complaint alleging active wrongdoing against the defendant board. After hearing argument the trial court dismissed these counts without prejudice, and further ordered that the seventh and eighth counts alleging the right of indemnification be stricken from the complaint. However, no formal order to this effect was signed by the trial judge until March 31, 1955, after this appeal had been taken. In accordance with R.R. 1:2-8(h), counsel for plaintiffs wrote the trial judge informing him of their intention to appeal from his dismissal of the board of education, so that he could file a written statement of his reasons, if he so desired. The trial judge took no action in this regard.
The trial resulted in a verdict of no cause for action, rendered by an 11-member jury because of the illness of one of the jurors at the time the court sent the case to the jury. Plaintiffs appeal from the final judgment entered on the verdict in favor of defendant teacher, and also appeal from the order dismissing the complaint against defendant board. We shall first consider the latter aspect of the appeal.
L. 1938, c. 311 (N.J.S.A. 18:5-50.4) was copied from section 569-a of the New York Education Law of 1910 (now section 3023; 16 McKinney's Consolidated Laws of *563 New York, c. 16, Education Law, Part 2, section 3023). It has been held that the New York statute does not create a new cause of action against a board of education in favor of an injured person. Massimilian v. Board of Education, etc., Niagara Falls, 261 App. Div. 428, 25 N.Y.S.2d 978 (App. Div. 1941). Our courts have also held that our statute was not intended to give a new right of action to an injured party against a school board. Tripus v. Peterson, 11 N.J. Super. 282 (Cty. Ct. 1950); cf. Thompson v. Board of Education, City of Millville, 20 N.J. Super. 419 (App. Div. 1952), affirmed 11 N.J. 207 (1953), where the court considered R.S. 18:5-30 granting school districts immunity from liability for personal injuries resulting from the use of any public grounds, buildings or structures, and pointed out that this act and N.J.S.A. 18:5-50.4 are to be read together and given effect, each within its own sphere.
Plaintiffs' contention that R.R. 4:31-2, relating to joinder of remedies, and R.R. 4:14-1, dealing with third-party practice, permits joinder of the school board as an original defendant, is without merit. R.R. 4:31-2 obviously refers to multiple remedies available to a particular plaintiff, and permits the joinder of claims to encourage adjudication of an entire controversy in a single action. That rule never contemplated that a plaintiff might assert in a single cause of action not only his own claims but the claims of others as well. The benefits of the "save harmless" statute, N.J.S.A. 18:5-50.4, are reserved to teachers and members of the supervisory and administrative staffs of boards of education. Adequate provision is made for the assertion of claims by such individuals against boards of education under the rules governing third-party practice, R.R. 4:14-1 et seq. However, the filing of a third-party complaint is a permissive matter under the language of the rule. There is nothing in the rule or in our decisions to the effect that a defendant may be forced to file such a complaint, or that the plaintiff in the original proceeding may, in effect, file it for the defendant by stating a claim such as has been dismissed in the instant matter.
*564 The order dismissing the two counts grounded in the "save harmless" statute was clearly correct.
Plaintiffs charge error by the trial court in disqualifying infant witnesses brought forward to testify on their behalf. There were five such witnesses in addition to the infant plaintiff himself, whose ages ranged from about 7 1/2 to 8 1/2 years at the time of trial, and who were almost six or over six years old at the time of the accident. They were classmates of the infant plaintiff and, it would appear, witnesses to the occurrence. In fact, one of them, Cheryl Taylor is supposed to have struck plaintiff in the eye. The trial court refused to allow any of them to testify, and this on the basis of an extremely limited inquiry on voir dire. For example, the court asked Gail Benzenhafer whether she liked school, how old she was, and when she became eight. The trial court then said, "Well, Gail is a very cute little girl, but she is too young, entirely, after twenty-two months to tell us the story of what happened, and I won't let her testify." When asked to state his reasons for the record, he said, "She is entirely too young, too many things can happen over a period of twenty-two or twenty-three months with a little girl like this." When counsel for plaintiffs asked permission to question the child in order to qualify her, the court cut him off.
The mother of the second child, Cheryl Taylor, testified she would shortly be nine-years-old. The court at once said. "I am afraid Cheryl is too young to tell us anything at this time." Counsel then asked the girl if she knew what happened to little girls who don't tell the truth, to which the reply was, "God punishes them." Cheryl said she would tell the truth as to what happened to plaintiff on March 24, 1953. The court refused to allow her to testify, stating: "No, too many things have gone over the dam since then."
Timothy Gallen, aged seven and one-half, Frances Seufert, over eight years old, Elwood Denz, just short of his eighth birthday, and plaintiff infant himself, over seven and one-half years old, were not permitted to testify despite the fact that they stated they knew what it meant to tell the *565 truth and the punishment for telling a lie. In each case the court ruled that the proffered witness was "too young." It appears the court was not interested in the personal capacity of each child. In every case the voir dire was extremely short a half-dozen questions or even less. Where questions were permitted to be directed to the children, the answers showed no signs of defective memory or moral incapacity.
The law fixes no precise age within which children are absolutely excluded from giving evidence. State v. Tolla, 72 N.J.L. 515, 522 (E. & A. 1905) (six-year-old boy permitted to testify), citing Wheeler v. United States, 159 U.S. 523, 16 S.Ct. 93, 40 L.Ed. 244 (1895), where the court allowed a five-year-old boy to testify. Children under 14 years of age are admissible as witnesses if they are adjudged to possess mental capacity and moral responsibility. The adjudication is to be made upon a preliminary examination by the trial court to which they are offered as competent witnesses. State v. Labriola, 75 N.J.L. 483, 484-485 (E. & A. 1907) (nine-year-old infant permitted to testify); Carlotz v. Gavin, 133 N.J.L. 61 (E. & A. 1945); State v. Mac Lean, 135 N.J.L. 491, 494 (Sup. Ct. 1947). As Wigmore observes, "no rule defines any particular age as conclusive of incapacity; in each case the capacity of the particular child is to be investigated." 2 Wigmore on Evidence (3rd ed. 1940), § 505, p. 595; and see § 507, notes 1 and 2, pp. 597-600, for a collection of cases from other jurisdictions where infants of very tender years were allowed to testify.
The adjudication of the trial court in passing upon the mental capacity and moral responsibility of an infant who is offered as a witness will not be set aside unless it is plainly shown to have been made without any evidence to support it. State v. Labriola, supra (75 N.J.L., at page 485). The trial judge here disqualified the infant witnesses on the sole ground that they were too young, without making any real investigation into the mental capacity or moral responsibility of each child. His judgment as to their respective *566 qualifications was based upon little more than their age and appearance. His action was arbitrary, and his exclusion of their testimony prejudicial to plaintiffs' case because the children were apparently the only persons in a position to tell the jury about the accident itself.
We have not overlooked what the trial judge said in the course of his charge to the jury regarding his exclusion of the child witnesses. His remarks may be considered as throwing further light on the thought process underlying his rulings. He said he would not let the children testify because (1) "they are entirely too young," (2) "they get impressions, anyone could talk to them, put ideas in their heads, and they have all been talked to, they have all for the twenty-three months, twenty-two months this case has been pending," and (3) "they have run over this thing in their minds and gone over it." There is nothing in the record to give support to the court's observations that the children had all been talked to and that they had many times reviewed in their minds the facts of the occurrence in the months intervening between the injury and the trial. We cannot accept the court's flat assumption that the children would be untrustworthy on the witness stand, certainly not without a far deeper probing of their mental capacity and moral responsibility than was afforded them on voir dire.
There is another reason why we must reverse the judgment in favor of defendant Pennell. We have considered, as we must, the charge in its entirety, and those portions to which objection was made in the context of the entire charge. Vadurro v. Yellow Cab Co. of Camden, 6 N.J. 102, 107 (1950).
A trial judge has the undoubted right to make such comments upon the testimony as he thinks necessary or proper for the direction of the jury. He may even intimate his opinion as to the weight of the evidence whenever he thinks it is required or necessary for the promotion of justice, so long as he leaves it to the jury to determine the facts and draw their own conclusions. Foley v. Loughran, *567 60 N.J.L. 464, 477 (E. & A. 1897). The right to comment on the evidence and intimate an opinion is not without its qualifications. It may be exercised provided the purpose is to assist and not control the jury's findings.
"* * * In commenting upon testimony a trial judge may not assume the role of a witness. He may analyze and dissect the evidence, but he may not either distort it or add to it. His privilege of comment in order to give appropriate assistance to the jury is too important to be left without safeguards against abuses." Quercia v. United States, 289 U.S. 466, 470, 53 S.Ct. 698, 77 L.Ed. 1321, 1325 (1933).
We need refer to only two elements in the charge which we consider prejudicial error.
In the course of its charge the court said:
"* * * Little Cheryl, of course he can sue little Cheryl, he could sue little Cheryl's mother and father, he could sue anybody. You can always bring a suit; it doesn't cost much to bring suits. Anyone can sue anybody, and that person has to come in and defend. You can make up a cause of action very easily, then it becomes a question either for the Court or for the jury to decide.
This case is very close as to whether or not I should let it go to you, at all, whether there is any evidence here of negligence on the part of Mrs. Pennell; there is no direct evidence, but we have to take inferences; * * *."
The comment goes far perhaps too far for it clearly posed both a doubt as to whether the action had been brought in good faith and whether there was any such evidence of negligence on the teacher's part as to warrant giving the case to the jury. But when we consider this statement by the court in connection with the one which follows and which, in effect, held over the heads of the jury a veiled threat to overrule its verdict, we are of the opinion that the trial judge exceeded his right of comment. He said:
"* * * I am going to be the thirteenth juror in this case, and I don't know what I will do with it, regardless of what you ladies and gentlemen do; but we will cross that bridge when we come to it."
*568 This reemphasis of the court's impressions of the evidence, on top of his implied reflection upon plaintiffs' good faith, tended to exert a prejudicial influence. There are other parts of the charge which reenforce this conclusion: the court's reference at three different places in the charge to the possibility that this was an unavoidable accident, and its reference to the fact that the infant plaintiff had had another accident on a prior occasion which could have resulted in serious injury to his other eye. Indeed, the last such reference was coupled with a comment that "If it was a pure accident, then, of course, Mrs. Pennell was not guilty of any negligence, and the verdict would be no cause of action." This was error. The injury might have been an accident contributed to by defendant's default in supervision of the children. That was the gravamen of the complaint.
The other prejudicial element in the charge was the trial judge's discussion of the reasons why he would not permit the children to take the witness stand. There was no occasion whatsoever to discuss this subject with the jury; the judge having made his rulings in the course of the trial, should not have mentioned the matter at all in his charge. However, he not only explained in detail why he had disqualified the children, but he went on to tell the jury his concept, without any evidence whatsoever to support it since he had excluded the child as a witness, of what the infant plaintiff probably told his teacher directly after the accident. He derided the idea that a child of tender years would ever say to anybody that he had been hurt with a pair of sharp-pointed scissors. At this same place in the charge the judge also said that the injury "could have been made by a pencil." This was pure speculation, unsupported by any evidence whatsoever. The only evidence in the case bearing on the matter pointed to the conclusion that the injury was inflicted with a sharp-pointed scissors. An instruction that has no basis in the evidence is ordinarily unsupportable as tending to mislead the jury. Guzzi v. Jersey Central Power & Light Co., 12 N.J. 251, 260 (1953).
*569 Counsel properly and promptly excepted to those portions of the charge on which we have commented. We deem the errors so significant as to warrant reversal.
The order dismissing the complaint against defendant board of education is affirmed. The judgment of no cause of action in favor of defendant Pennell is reversed and the case remanded for a new trial as against her.
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72 B.R. 987 (1987)
In re ILLINOIS-CALIFORNIA EXPRESS, INC., a Nebraska Corporation d/b/a ICX, Inc., Debtor.
ILLINOIS-CALIFORNIA EXPRESS, INC., a Nebraska Corporation d/b/a ICX, Inc., Appellant,
v.
TEAMSTERS NATIONAL FREIGHT INDUSTRY NEGOTIATING COMMITTEE, Appellee.
Civ. A. No. 85-K-488, Bankruptcy No. 84-B-01927-M.
United States District Court, D. Colorado.
May 7, 1987.
*988 Stephen G. Smith, Steven Zimmerman, Denver, Colo., for Warren Braucher, Trustee.
T. Edward Icenogle, Denver, Colo., for debtor, Ill.-Cal. Express.
John A. Criswell, Englewood, Colo., Barbara S. Mehlsack, New York City, for appellee.
MEMORANDUM OPINION AND ORDER
KANE, District Judge.
I.
INTRODUCTION
The issue in this bankruptcy appeal is the efficacy of a voluntary renegotiation by the debtor-in-possession, Illinois-California Express ("ICX"), and the appellee, National Teamsters Negotiating Committee ("Union"), of their collective bargaining agreement in the course of the Chapter 11 case, where the debtor-in-possession has ceased operations, coverted to Chapter 7 while there are outstanding amounts due under the agreement to the employees who worked post-petition.
Appellant, the trustee in the debtor's Chapter 7 case, contends that because the debtor-in-possession did not obtain prior court approval, the claims of the employees *989 for services rendered post-petition under the agreements are no better than general unsecured claims.[1] The trustee has estimated that liquidation of the estate will not yield enough to pay pre-petition employee priority claims under § 507(a)(3) of the Code.
The bankruptcy judge ruled that: (1) Appellants' post-petition renegotiation of its labor agreement and assumption of its existing labor contract as modified, without prior court approval, was proper; (2) The agreements in effect between the debtor-in-possession, ICX, and the appellee, the union, ceased to be executory contracts as of the date ICX ceased its operations and converted its Chapter 11 Reorganization case to Chapter 7 Liquidation case rendering those contracts thereafter not subject to rejection by the trustee in the Chapter 7 case; and, (3) Any amounts remaining unpaid under the agreements and accrued as a result of the post-petition services of the employees are a Chapter 11 cost of administration. I affirm.
II.
BACKGROUND
ICX was an interstate trucking company and signatory to the Teamsters National Master Freight Agreement and agreements supplemental thereto. ICX filed its Chapter 11 Reorganization Petition on April 25, 1984. During the period of the Chapter 11 Reorganization, the Union and ICX negotiated for modification of the Teamsters' National Master Freight Agreement.
This matter reached the bankruptcy court upon a motion for approval of contract modification and for authority to assume executory contract filed by ICX on June 21, 1984. The parties sought court approval of a post-petition wage concession agreement which ICX negotiated with the Union and which was ratified by its employees. The notice of motion stated the motion would be approved automatically by the court after July 16, 1984, provided there were no objections to the modification and assumption of executory contract and no motion requesting a hearing by an interested party on or before July 12, 1986.
The notice of motion was given to the Creditors' Committee and other parties in interest. Neither a motion requesting a hearing, nor an objection to the motion, were ever filed with the bankruptcy court by any party, including the trustee.
In the interim, on June 29, 1984, ICX converted its Chapter 11 case to a Chapter 7 case. Warren D. Braucher was appointed Chapter 7 trustee on that date. On August 1, 1984, the bankruptcy court, sua sponte, ordered a hearing on the motion for approval of contract modification and authority to assume executory contract. Hearing was held on November 16, 1984. On November 15, 1984, the trustee filed a joint stipulation as to certain facts which had been agreed upon by the trustee and the Union. At the hearing, appearances and arguments were made by ICX and the union in support of the motion. The trustee opposed the motion. No creditors appeared in opposition to the motion.
On November 23, 1984, the court issued its order approving the agreements, finding that: (1) the entering into of the agreements by the debtor-in-possession, ICX, and the Union, was done in the ordinary course of business; (2) the agreements between ICX and the Union ceased to be executory as of June 29, 1984, when ICX ceased operations and converted to Chapter 7, therefore, after that date, they were no longer subject to rejection by the trustee; (3) the amounts remaining unpaid under the agreements constitute Chapter 11 costs of administration and the agreements served as the basis for the filing of a Chapter 11 claim of administration by the Union on behalf of its members; (4) a formal claim on behalf of the Union and its *990 members may be filed at any time since the court considers the stipulation between the trustee and the Union to be an informal claim.[2] A notice of appeal from the order was filed by the Chapter 7 trustee on December 24, 1985.
III.
JURISDICTION AND STANDARDS FOR DECISION
Before I examine the merits of this appeal, I shall set forth the jurisdictional basis and standards for decision of this opinion.
I have jurisdiction to hear this appeal by virtue of the authority contained in 28 U.S.C. § 158(a):
"The district courts of the United States shall have jurisdiction to hear appeals from final judgments, orders, and decrees, ... of bankruptcy judges entered in cases and proceedings referred to the bankruptcy judges under section 157 of this title."
The manner of taking such an appeal is governed by Rules of Bankruptcy Procedure, Rule 8001(a):
"An appeal from a final judgment, order, or decree of bankruptcy judge to a district court ... shall be taken by filing a notice of appeal with the clerk of the bankruptcy court within the time allowed by Rule 8002."
Under Rules of Bankruptcy Procedure, Rule 8013, I may affirm, modify, reverse or remand a judgment of bankruptcy court. It has been stated many times, but most succinctly in In re Hammons, 438 F. Supp. 1143, 1147-48 (S.D.Miss.1977) rev'd on other grounds, 614 F.2d 399 (5th Cir.1980):
[The District] Court is bound to accept the Bankruptcy Judge's findings of fact unless they are clearly erroneous. Similarly, due regard in this context must be given to the lower court's opportunity to hear firsthand the testimony of the witnesses. However, this same presumption does not apply to conclusions of law, and this Court may make an independent examination and determination of the ultimate legal conclusions to follow from the facts. In re McCoy, 330 F. Supp. 533, 534-35 (D.Kan.1971)....
The "clearly erroneous" standard was explained by the Supreme Court in Comm. v. Duberstein, 363 U.S. 278, 80 S. Ct. 1190, 4 L. Ed. 2d 1218 (1960), wherein the Court stated:
A finding is "clearly erroneous" 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]. The rule itself applies also to factual inferences from undisputed basic facts ...'
"Accord, Inland Sec. Co., Inc. v. Kirshner, 382 F. Supp. 338, 344 (W.D.Mo. 1974)."
The issues on appeal in the instant case do not involve disputed facts, they involve only conclusions of law; therefore, the instant case is subject to de novo review. In re Comer, 723 F.2d 737 (9th Cir.1984); In re McCoy, supra.
IV.
CONCLUSIONS OF LAW
Appellant urges the reversal of the order of the bankruptcy order on two grounds: (1) Without a formal order by the bankruptcy court, a debtor-in-possession cannot assume or reject an executory contract pursuant to Section 365(a) of the United States Bankruptcy Code; and, (2) If the debtor-in-possession has not assumed or rejected an executory contract pursuant to Section 365(a) of the United States Bankruptcy Code, the trustee, upon conversion of the Chapter 11 Reorganization to a Chapter 7 Liquidation, may assume or reject the executory contract pursuant to section 365(d) of the United States Bankruptcy Code. Appellant further argues upon rejection of the executory contract, the damages to the employees covered by the contract, if any, are measured by the reasonable value of the services to debtor-in-possession before the *991 possession of the executory contract. Further, the damages, if any, should be treated as general unsecured claims against the estate.
I shall discuss each of these arguments in turn.
A. Necessity of a Formal Approval from the Bankruptcy Court.
The trustee contends pursuant to Section 365(a) of the United States Bankruptcy Code, formal court approval is required for the debtor-in-possession or trustee to assume or reject an executory contract in a Chapter 11 Reorganization. In this instance, no court order approving the modification and assumption of the agreement with the Teamsters was entered or could be entered because of the conversion of the Chapter 11 Reorganization to a Chapter 7 Liquidation and the vesting of all authority over the estate of the debtor in the trustee.
Title 11 U.S.C. § 363(c)(1) of the Bankruptcy Code, provides explicit statutory authority for the debtor-in-possession to enter into transactions in the ordinary course of business without notice and hearing.[3] This discretion to act with regard to ordinary business matters without prior court approval is at the heart of the trustee's powers. In re DeLuca Distributing Company, 38 B.R. 588, 591 (B.Ct.N.D.Ohio 1984) (citations omitted).
The court in DeLuca, supra, stated:
Given our national labor policy of encouraging collective bargaining agreements and avoiding labor strife ..., the Court finds that the reasonable expectation of creditors is that the debtor will enter into collective bargaining agreements. The debtor's history of union representation of employees supports this conclusion. Such an agreement is often in the best interests of creditors since it helps to avoid the disruption of the debtor's business.
In re DeLuca, supra, at 594.
In the instant case the benefit to other creditors is acknowledged. The debtor-in-possession obtained the uninterrupted services of the Teamsters employees in the post-petition period which created almost $6 million of gross revenues.
In DeLuca, supra, the court explains the difference in the result had the case been decided under the Bankruptcy Act instead of the newly enacted Bankruptcy Code:
Under the Act the trustee or debtor-in-possession had to obtain prior court approval to operate the debtor's business; this is no longer the case under the Code ... [Also,] an express and important purpose of the Code reforms was to remove the bankruptcy judge from the administrative duties of bankruptcy cases.
Id. at 592.
Thus, there is no requirement for a formal approval from the bankruptcy court. Accordingly, the bankruptcy court did not err in holding the debtor's post-petition renegotiation of its labor agreement and assumption of its pre-existing labor contract as modified, without prior court approval, was proper. The propriety of such a ruling is especially supported in the instant case given the collective bargaining relationship of the parties dating back almost to the origins of the company (some 30 years).
Lastly, the Supreme Court in NLRB v. Bildisco, 465 U.S. 513, 104 S. Ct. 1188, 1196-97, 79 L. Ed. 2d 482 (1984) stated:
[T]he national labor policies of avoiding labor strife and encouraging collective bargaining ... generally require that employers and unions reach their own agreements on terms and conditions of employment free from governmental interference ...
The bankruptcy court need step into the process only if the parties' inability to reach an agreement threatens to impede *992 the success of the debtor's reorganization. (citations omitted).
For these reasons, the appeal must be denied with respect to this issue. The bankruptcy judge's ruling was not "clearly erroneous."
B. Debtor's Collective Bargaining Agreement as an Executory Contract vis-a-vis its Conversion to Chapter 7.
Section 365(a) of the Code applies only to executory contracts of the Debtor, 11 U.S.C. § 365(a).[4] In an instructive case, the Fourth Circuit has noted:
The Code nowhere defines "executory." Examination of the Code's legislative history provides little help. It reveals only that Congress, aware of the imprecision of the term, intended executory contracts generally to include those "on which performance remains due to some extent on both sides." H.R.Rep. No. 595, 95th Cong., 1st Ses. 220 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 5844.
Congress thus ratified the pre-code practice, also uniformly followed by courts construing 365(a), of relying on professor Vern Countryman's definition of executory contracts. See Countryman, Executory Contracts in Bankruptcy: Part I, 57 Minn.L.Rev. 439, 450-62 (1973). Countryman defines an executory contract as one:
"Under which the obligations of both the bankrupt and the other party to the contract are so far unperformed that the failure of either to complete the performance would constitute a material breach excusing the performance of the other." Id. at 460.
Gloria Manufacturing Corp. v. ILGWU, 734 F.2d 1020, 1021 (4th Cir.1984).
In two decisions under the Bankruptcy Act, the Tenth Circuit has held that a contract is executory where "neither party has completely performed and the obligations of each remain ... complex" King v. Baer, 482 F.2d 552, 557 (10th Cir.1973), citing Workman v. Harrison, 282 F.2d 693, 699 (10th Cir.1960).
In the instant case, the debtor's labor agreements ceased to be executory as of June 29, 1984, when the debtor-in-possession ceased its trucking operations and terminated its employees. As of the cessation of operations, there could be no future performance under the contract. The Union and the employees had fully performed their obligations. All that remained was the past due obligation of the debtor-in-possession to pay severance pay and other monetary benefits which accrued under the contracts.
In In re Total Transportation Services, 37 B.R. 904, 906-07 (B.Ct.S.D. Ohio 1984), which I find persuasive, the court held:
If the employer ceases operation of the facility, there can be no future performance by either the employer or union members under the collective bargaining agreement of such obligations. Thus, while continued operation of the business is not directly the bargained for performance of the collective bargaining agreement, it is an essential condition to future performance by both parties.
Id. at 906-907.
The bankruptcy court did not err. The decision is affirmed with respect to this issue.
C. Remaining Unpaid Amounts Under the Agreements as Chapter 11 Costs of Administration.
The severance pay to which the employees are entitled under the Concessions Agreement, was consideration and an inducement for the post-petition agreement of the Union employees to supply services to the debtor-in-possession at considerably reduced compensation. The holding of the bankruptcy court that claims arising out of that Concessions Agreement are Chapter 11 costs of administration is in accord with all of the decisions which have considered the status of severance pay. See Bildisco, supra, at 1199 ("should the debtor-in-possession elect to assume an executory contract, however it assumes the contract *993 cum onere ... and the expense and the liabilities incurred may be treated as administrative expenses, which are afforded the highest priority in the debtor's estate, 11 U.S.C. § 503(b)(1)(A).").
As the First Circuit has stated:
If the Debtor-in-Possession had, induced employees to remain on the job, promised them that if discharged they would receive severance pay (even though based on prior practice), in that case the fact that the employees performed services post-petition would constitute the entire consideration necessary to support a claim of administration.
In re Mammoth Mart, Inc., 536 F.2d 950, 955, n. 4 (1st Cir.1976).
The purpose of an administrative priority remains the same as it was under the Bankruptcy Act: That is to induce third parties to supply the goods and services necessary to facilitate rehabilitation of the debtor's business. In the Matter of Jartran, Inc., 732 F.2d 584, 588 (7th Cir.1984). In the instant case, the employees' entire action in ratifying the Concessions Agreement and in working for the debtor-in-possession was based on the expectation of administrative priority in the event the debtor's rehabilitation effort failed. Thus, as a matter of statute, policy, and equity, the court was correct in finding that the Concessions Agreement serves as the basis for a Chapter 11 claim of administration for any unpaid amount arising under the agreement.
The trustee cites no authority for the proposition that the employees' claims for services rendered post-petition are no better than general unsecured claims. I shall not allow failing businesses to abuse the bankruptcy statutes and mislead workers by inducing them to continue working at a reduced wage while management knows all the while there will be a Chapter 7 Liquidation in the near future, thus relieving management of paying the reduced wage. Such abuse was not contemplated when the Bankruptcy Code was enacted and I shall not set a precedent for justifying such abuse should a business in the future attempt to soften the blow of an impending liquidation.
V.
CONCLUSION
IT IS THEREFORE ORDERED THAT the bankruptcy court's order is AFFIRMED.
NOTES
[1] The Bankruptcy Code sets up an order of distribution for unsecured claims. Claims incurred in the administration of a debtor's Chapter 7 case, such as those of the trustee, are paid before claims incurred in the administration of the debtor-in-possession's Chapter 11 case, such as the claims of the employees in issue here. Chapter 11 administration claims are paid before employee, tax, and other priority claims arising before the filing of the debtor's Chapter 11 Petition. 11 U.S.C. § 503(b)(1)(A); 11 U.S.C. § 507. General unsecured claims are paid only after all administration claims under § 503(b) and priority claims under § 507 are paid.
[2] The trustee has not appealed from part four of the bankruptcy order. Accordingly, that issue is not before me.
[3] 11 U.S.C. § 363 provides:
If the business of the debtor is authorized to be operated under section 721, 1108, 1304, 1203, or 1204 of this title and unless the court orders otherwise, the trustee may enter into transactions, including the sale or lease of property of the estate, in the ordinary course of business, without notice or hearing, and may use property of the estate in the ordinary course of business without notice or hearing.
[4] 11 U.S.C. § 365(a) provides:
Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of this section, the trustee, subject to the court's approval, may assume or reject any executory contract or unexpired lease of the debtor.
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491 S.W.2d 168 (1973)
Paul W. LOUDEN, Sr., Appellant,
v.
The STATE of Texas, Appellee.
No. 45630.
Court of Criminal Appeals of Texas.
January 31, 1973.
Rehearing Denied March 21, 1973.
Collins, Langford & Pine by William C. Pine and Odell S. Holmes, Jr., El Paso, for appellant.
Steve W. Simmons, Dist. Atty., Harry T. Petersen, Asst. Dist. Atty., El Paso, and *169 Jim D. Vollers, State's Atty., and Robert A. Huttash, Asst. State's Atty., Austin, for the State.
OPINION
DICE, Commissioner.
Appellant and Paul W. Louden, Jr., were jointly charged by indictment for the offense of murder. Upon the granting of a severance appellant was separately tried and convicted of the offense of murder without malice. Punishment was assessed by the jury at four (4) years.
Three grounds of error are urged by the appellant on appeal.
In his first ground of error appellant insists that "the trial court erred in allowing the State to introduce evidence of a prior conviction at the penalty stage of the trial, such prior conviction not constituting an offense known to the law of this State."
At the hearing on punishment, the State offered proof that on January 16, 1962, the appellant was convicted in County Court at Law Number One of El Paso County of the misdemeanor offense of "indecent exposure" and assessed punishment at a fine of $75.00.
Appellant insists that the judgment introduced in evidence finding him guilty of "indecent exposure" referred to an offense which is not known in this State but is only a part of the statute set out in Art. 474 of the Penal Code, Vernon's Ann., as it existed in 1962, designated as "Disturbing the Peace."
Appellant apparently overlooks, as pointed out by the State, Article 526 of the Penal Code which prior to its repeal in 1969 made it a misdemeanor offense for any person to "designedly make any obscene and indecent exhibition of his own or the person of another in public." Further, as pointed out by the State in its brief, it is not necessary that misdemeanor judgments specify the offense. Johnson v. State, 163 Tex. Crim. 185, 289 S.W.2d 593, and Richardson v. State, 171 Tex. Crim. 163, 346 S.W.2d 119. The ground of error is overruled.
In his second and third grounds of error appellant first complains of the court charging the jury on the law of principals, and second because the charge given failed to apply the law to the facts.
No written objections to the court's charge, as required by Article 36.14, Vernon's Ann.C.C.P., appear in the record. Certain oral objections dictated to the court reporter appear in the transcription of the court reporter's notes. Under the decisions of this Court an oral objection to the court's charge which is only dictated to the court reporter presents nothing for review. See Morales v. State, Tex.Cr.App., 466 S.W.2d 293, and cases therein cited.
We observe that under the facts a charge on principals was authorized as the evidence raised the participation of both the appellant and his son in the shooting of the deceased. Odell v. State, 95 Tex. Crim. 360, 254 S.W. 977. Further, no objection was made to the charge given by the court on principals on the ground that it failed to apply the law to the facts. In the absence of a request or exception, the failure to charge is not reviewable. Kemp v. State, 96 Tex. Crim. 152, 256 S.W. 264. Had an objection been made, such failure would not call for a reversal of the conviction as it would not be calculated to injure the rights of the appellant. Art. 36.19, V. A.C.C.P.; Lowe v. State, Tex.Cr.App., 377 S.W.2d 193.
The grounds of error are overruled.
The judgment is affirmed.
Opinion approved by the Court.
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491 S.W.2d 624 (1972)
Isadore HODGES, Jr., and Andrew Lewis, Jr., Plaintiffs in Error,
v.
STATE of Tennessee, Defendant in Error.
Court of Criminal Appeals of Tennessee.
July 31, 1972.
On Petition to Rehear January 12, 1973.
Certiorari Denied March 5, 1973.
*625 Hugh W. Stanton, Sr., Memphis, for plaintiffs in error.
David M. Pack, Atty. Gen., Phillip W. Brooks, Asst. Atty. Gen., Nashville, Thomas F. Graves, Asst. Dist. Atty. Gen., Memphis, for defendant in error.
Certiorari Denied by Supreme Court March 5, 1973.
DWYER, Judge.
OPINION
From a judgment imposed on a jury's verdict of guilty of murder in the perpetration *626 of rape, with a sentence of death by electrocution, the two defendants at the trial through the public defender have seasonably perfected this appeal.
Defendants primarily urge here three assignments of error: the evidence does not support the verdicts; the trial court erred in not granting a severance; and lastly the defendant Hodges was prejudiced by not being allowed to plead guilty. Ancillary to these assignments on appeal we find in the motions for new trial grounds which deal with a search question, the constitutionality of the death sentence, and the court's statement to the jury on voir dire about the death sentence if there were no mitigating circumstances.
The facts from our review of this record reflect one of the most revolting crimes that has been our unfortunate task to review in better than twenty years devotion to our criminal jurisprudence. However, odious individuals are not governed by one law and the remaining citizens by another; all are protected by the same general law of the land. See Vanzant v. Waddel, 10 Tenn. 260, 270.
With the above rule in mind we will narrate the facts as we have found them from this voluminous record. See Hargrove v. State, 199 Tenn. 25, 28, 281 S.W.2d 692.
On Sunday morning June 14, 1970, the body of the decedent, a woman of about sixty years of age, was found in an abandoned church on Turley Street in the City of Memphis. One eye had been knocked from its socket, the entire face was covered with tears, abrasions and contusions. All of the upper portion of the torso was in like condition. Her nose was broken, as was the left jaw, the left collar bone, and six ribs on the left side, consistent with having been stomped and hit with a brick. A large laceration was found in the wall of the vagina vault that the medical examiner related was consistent with being inflicted by a kick used to strike a large quart bottle which was found inserted in the vagina. This wound caused profuse internal as well as external bleeding. The autopsy revealed no sperm. Death was caused by bruises to the surface of the brain. There was a blood level alcohol content of .27 percent, which reflected decedent was under the influence.
There were at the scene drag marks from the street to the inside of the church. Noted alongside of these drag marks were footprints resembling boots, with cleat marks also apparent. On the deceased's abdomen such a footprint was discernible.
There were six female witnesses who testified they had seen on Saturday night the two defendants together on Beale Street, a few blocks removed from the church. The proof developed that the two defendants accosted and grabbed two members of this group who broke away and entered a store. These witnesses later observed the decedent being accosted by the defendants, and one related that she saw decedent on the ground in front of the church. They all testified they noted the two defendants swing the decedent by her arms and feet and throw her on the steps of the church. The witnesses fled when viewing this event. They related that later the same evening they saw the two defendants in a night club, and noted that they had changed clothing.
The defendants were arrested the next day on Sunday, June 14, 1970, and on June 15, gave oral statements incriminating each other. They were then confronted with each other and both gave written statements inculpating themselves in this heinous crime. At the time of the oral statements Lewis stated he had the same undershorts on that he was wearing at the time of the crime. These shorts reflected a spot of blood identified as human in origin. A search of Hodges' room reflected articles of clothing, consisting of muddy boots with cleats and a shirt, trousers, and shorts which were spotted with human blood. In their statements each defendant states the *627 other had sexual intercourse with the decedent. Hodges' statement admits his own attempted intercourse. Lewis' statement admits his own intercourse. Each stated the other put the bottle in deceased's vagina.
We will discuss first the assignment of error contending that the trial court erred in denying a severance. This is a matter of discretion for the trial court and that discretion will not be disturbed unless we find from the evidence that it was abused. See Hunter v. State, 222 Tenn. 672, 440 S.W.2d 1, 6. Defendants predicate this assignment principally upon Bruton v. United States, 391 U.S. 123, 88 S. Ct. 1620, 20 L. Ed. 2d 476. The argument notes that Lewis testified and Hodges did not. They then reason that Lewis was deprived of his right of confrontation through cross-examination of Hodges. We note that both gave incriminating statements orally and apart and then written incriminating statements in each other's presence. The learned trial judge held out of the presence of the jury hearings on the admissibility of these statements. The officers testified that all of the Miranda admonitions were given to the defendants and that after a full awareness and acknowledgment of such the defendants made statements. The defendants testified and denied the statements contending force, threats and coercion were used upon them. The learned trial judge found the confessions were made and taken in a full compliance of Miranda. His findings hereon are given the weight of a jury's verdict. See Bratton v. State, Tenn.Cr.App., 477 S.W.2d 754, 756. We see no reason to disturb this ruling and find it is supported by the evidence. The statements are incriminating and accusatory of one defendant to the other's benefit. In short, they each try to alleviate their personal culpability to the other's detriment. The trial court found the statements competent to go to the jury, and required that any reference to Lewis in Hodges' statement was to be omitted and blank substituted and the same regarding Lewis' statement relating to Hodges.
The trial judge instructed the jury as to receipt of these confessions that the statement of each defendant should not be considered as to the other defendant. Unlike in Bruton and its progeny, here both defendants confessed and implicated themselves in the crime. In other words, prior to Lewis testifying his statement as well as Hodges' statement had been submitted to the jury. We hold therefore that Lewis' assignment is outside the ambit of Bruton v. United States, supra. It is true that Hodges did not testify and Lewis was not able to cross-examine him. But under the facts and circumstances where both had incriminated themselves, the admission of the non-testifying codefendant's statement, purged of Lewis' name, was not error. In Bruton the devastating effect of Evans' statement to Bruton's cause was paramount, because there was minimal other evidence to implicate Bruton. But here the effect of Hodges' statement on Lewis' cause was seriously watered down by Lewis' own statement. See Levinson v. United States, 6 Cir., 405 F.2d 971, 987, 988, cert. denied, 395 U.S. 958, 89 S. Ct. 2097, 23 L. Ed. 2d 744, and Schneble v. Florida, 405 U.S. 427, 92 S. Ct. 1056, 31 L. Ed. 2d 340, decided March 21, 1972. The assignment concerning severance and the Bruton violation is overruled.
The defendants' statements were admitted with redactions as to the name of the respective defendants when they refer to the other. The assistant attorney general's use of Hodges' name in the statement of Lewis on cross-examination was error, see West v. Henderson, 6 Cir., 409 F.2d 95, but harmless, see Schneble v. Florida, supra.
We now turn our attention to the assignment that Hodges wished to plead guilty and was prevented from doing so, to his prejudice. With this we do not agree. *628 In the record it appears that an offer of punishment was made by the attorney general contingent on both pleading guilty, which offer collapsed when Lewis would not agree. However, the State has a right to jointly try defendants. See Woodruff v. State, 164 Tenn. 530, 538, 539, 51 S.W.2d 843. The assignment is overruled.
Defendants next contend that the evidence is insufficient to support the verdict because the offense of rape was not proven. They contend that the corpus delicti cannot be proven by their confessions alone. See King v. State, 187 Tenn. 431, 434, 215 S.W.2d 813, cited by the defense. We agree with this statement of the law, but we feel that there was introduced sufficient circumstantial evidence to make out the offense of rape, especially when combined with the defendants' statements. The decedent was found disrobed except for her slip pulled up exposing her breasts. She was forcibly taken into the church. She was observed on the ground prior to that. She was found in a condition compatible with intercourse and her panties had been removed. There was a spot of blood found on Lewis' shorts, and the shorts that were found in Hodges' apartment had blood on them. The defendants had earlier in the evening accosted and grabbed two other females. A wine bottle had been inserted into the victim's vagina. We hold that under these facts as enumerated the jury could infer, independent of the confessions, that the defendants forcibly took the decedent into the church and raped her. However, the statements of both as to intercourse may also be considered to establish with the other evidence the corpus delicti. See Ashby v. State, 124 Tenn. 684, 697, 698, 139 S.W. 872. The assignment is overruled.
Defendants contend the search was defective, in their motion for new trial. We have examined the search warrant and find that it is based upon facts in the affidavit sufficient to support the magistrate's finding of probable cause. See Owens v. State, 217 Tenn. 544, 552, 554, 399 S.W.2d 507.
We lastly turn our attention to the assignments pertaining to the death sentence, its imposition and the court's instructions defining it as punishment for the offense. The Supreme Court of the United States has decreed that the death sentence is contrary to the Eighth Amendment to the Constitution of the United States, see William Henry Furman v. State of Georgia, Lucious Jackson, Jr. v. State of Georgia, and Elmer Branch v. State of Texas, 408 U.S. 238, 92 S. Ct. 2726, 33 L. Ed. 2d 346, decided June 29, 1972. In compliance with that decision we have no alternative even as here when we find no error but to remand this record back to the trial court for determination of punishment. See Beaver v. State, Tenn.Cr.App., 475 S.W.2d 557, 561. It is so ordered.
The judgment of the trial court is reversed. The record is remanded for punishment determination.
RUSSELL, and O'BRIEN, JJ., concur.
OPINION ON PETITION TO REHEAR
A petition to rehear has been filed by the state in this cause.
We are urged in the petition to reconsider the remand for trial as to the punishment aspect of our opinion.
We had affirmed the judgment of conviction when the assignments of error were treated and found without merit. However, as stated in our opinion, we had no alternative but to remand the record for a determination of punishment in view of the holdings in Furman v. Georgia, Jackson v. Georgia and Branch v. Texas, 408 U.S. 238, 92 S. Ct. 2726, 33 L. Ed. 2d 346.
We are notified by the petition to rehear that by Executive Order of Commutation No. 70030 executed by the Honorable Winfield Dunn, Governor of the State of Tennessee, that the sentence of *629 death imposed by the jury in this record is commuted to ninety-nine years imprisonment. Such order of commutation as entered has been affixed and attached to the petition reflecting execution by signature of the Governor with affixation of the Great Seal of the State on August 7, 1972.
On December 18, 1972, our Supreme Court, in deciding the validity of a similar commutation by the Governor, see Bowen v. State, Tenn., 488 S.W.2d 373, released at Knoxville on December 18, 1972, decreed the exercise of the power of commutation by the Governor to be valid and a proper exercise of executive authority.
It is therefore ordered, adjudged and decreed that the request by the state in this petition is with merit. See Bowen v. State, supra. We therefore, in obedience to the mandate of our Supreme Court under the authority delineated, reconsider the remand for punishment aspect of our opinion and for naught it is held. The judgment is accordingly modified and affirmed in compliance with the executive order of commutation as entered.
RUSSELL, and O'BRIEN, JJ., concur.
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37 N.J. Super. 439 (1955)
117 A.2d 527
NATHAN SILVERSTEIN, ET AL., ETC., PLAINTIFFS-RESPONDENTS,
v.
ABCO VENDING SERVICE, INC., ETC., ET AL., DEFENDANTS-APPELLANTS.
Superior Court of New Jersey, Appellate Division.
Argued October 24, 1955.
Decided November 2, 1955.
*442 Before Judges GOLDMANN, FREUND and CONFORD.
Mr. Edward R. McGlynn argued the cause for defendants-appellants (Mr. Jack Feinberg, attorney).
*443 Mr. Seymour Margulies argued the cause for plaintiffs-respondents (Mr. Maurice C. Brigadier and Mr. Sol Schulman, attorneys).
The opinion of the court was delivered by CONFORD, J.A.D.
Plaintiffs ("Silco" hereinafter) conduct a cigarette vending machine business. They contract for the placement of machines in such locations as taverns and restaurants. Their complaint alleges in effect that the defendant Abco Vending Service, Inc. ("Abco" hereinafter), a competitor, has been pirating their customers throughout Hudson County. Fifty of these have been joined as defendants. The complaint recites that Silco has contracts in effect with all of them, running generally for five years, some for shorter periods, pursuant to which the location owners grant it exclusive rights to sell cigarettes on their premises by means of the machines for the contract period; that the agreements provide for continuous automatic renewal in the absence of specified notice to the contrary prior to the end of any contract term; that all of the location owners have entered into a maliciously motivated conspiracy with Abco to break their agreements with Silco and to replace its machines with Abco machines; that Abco has wrongfully induced them to breach their agreements with Silco by slandering it, advising them that the agreements are void and unenforceable and by offering to save them harmless against any claim by Silco if they substituted Abco machines for Silco's; and that by similar methods Abco is endeavoring to misappropriate other of Silco's contract locations. There follow recitals of Silco's large investment in developing its business and obtaining these contracts, of past and prospective substantial and irreparable injury, and a demand for judgment; (1) for specific performance of the contracts; (2) for injunction against breach of the contracts by the location owners; (3) for injunction against the furnishing or use of the Abco machines or the sale of cigarettes purveyed thereby; (4) for injunction against interference with or inducement *444 of breach of Silco's contracts with the other defendants by Abco; and (5) for damages against all defendants.
The complaint was verified only by pro forma affidavits made on knowledge, information and belief by one of the plaintiffs and two of his employees. It was filed August 30, 1955 and a temporary restraint was entered the same day together with an order to show cause why a preliminary injunction should not issue returnable September 12, 1955. The present appeal is from an injunction granted after hearing in the Chancery Division that day.
Abco filed an answer denying the allegations of the complaint except to the extent of admitting that its machines were placed and operated in the premises of the co-defendants and that where the plaintiffs "had abandoned" their agreement in any particular case it agreed to save the location owner harmless against any claims by plaintiffs. The co-defendants filed a separate joint answer. Some of them admitted an agreement; others denied it or contradicted the terms alleged; others put plaintiffs to their proof. They all admitted the installation of Abco machines, denied Abco had made any representations to them or induced a breach of the Silco agreement, pleaded that plaintiffs had breached or terminated the contracts (not stating in what respect) and denied the other allegations of the complaint.
No answering affidavits were filed on behalf of the location owners, the plea of their counsel, who also represented Abco, being that because of their number and the denial of a request for adjournment there was insufficient time between the date of service on them of the moving papers and the return of the application for preliminary injunction for preparation thereof. The executive officer of Abco filed an affidavit generally denying, seriatim, the particular allegations of wrongful conduct imputed to Abco in the complaint, but admitting that he induced some of the co-defendants to make contracts with him, others having come to him for contracts, and stating that from the "explanations" of the Silco contracts made to him he believed they were not valid agreements. He admits that in some cases he offered to *445 defend the location owner against Silco claims for breach of contract. He said: "I did not knowingly encourage or advocate the breach of a contract that I felt to be valid." (Emphasis supplied) Identical verbiage is to be found in the affidavits of several other Abco employees. Affidavits were submitted by plaintiffs at the hearing on the application for injunction showing that many of the location owners were in violation of the temporary restraint.
Silco concedes that the violations of its contracts by some of these defendants commenced as early as February and March 1955, and that the defaults by the others took place at various times in the interim; also that at various times from March 18, 1955 to August 4, 1955 it has instituted actions for damages for breach of contract against some 21 of the defendants in the Hudson County District Court or in the Hudson County Court, all of which are pending. An affidavit offered by defendants lists some 25 of the defendants against whom such actions are pending and states that in each of them Silco demands judgment for prospective damages up to the expiration date of the agreement. It was argued below that the delay in bringing the present action and the election by plaintiffs to terminate the contracts in the case of those against whom it brought actions for damages bars the right to injunction. Plaintiffs' response in the Chancery Division and here is that the "cumulative effect" of the various violations as a "tortious conspiracy" by the defendants by which plaintiffs were being "driven out of business" was not appreciated by Silco prior to the time it brought this action; also that prosecution of its district court actions was held up by order of the Hudson County District Court pending the outcome of appeals challenging the validity of its contracts, finally determined in favor of plaintiffs by the Supreme Court on June 6, 1955 in Silverstein v. Keane, 19 N.J. 1 (1955); see Silverstein v. Dohoney, 32 N.J. Super. 357 (App. Div. 1954), and Silverstein v. Keane, 35 N.J. Super. 303 (App. Div. 1954). It is to be noted, however, that suits for damages were brought against some of the present defendants subsequent to the Supreme *446 Court decision and that the present action was not instituted until almost three months thereafter.
The injunction under appeal was granted on the ground that the legal remedy against defendants was doubtful or inadequate; that the conduct of Abco was not only wrongful but "planned and widespread" and that the remedy was necessary to prevent a multiplicity of wrongs and lawsuits. It restrained all of the co-defendants of Abco from selling cigarettes on their premises other than through Silco's machines and enjoined Abco's maintaining its machines at the locations of any of said defendants or of any other persons having agreements with Silco.
There is nothing new about the appropriateness of the remedy of injunction to restrain acts "`destroying a complainant's business, custom, and profits.'" Ferraiuolo v. Manno, 1 N.J. 105, 108 (1948). See the collection of authorities exemplifying the application of both legal and equitable remedies for redress of wrongful interference with another's occupation or business in Longo v. Reilly, 35 N.J. Super. 405 (App. Div. 1955). One well-settled application of the doctrine is injunction to restrain an unjustified inducement of breach of contract. 43 C.J.S., Injunctions, § 89, p. 597; Feller v. Local 144, International, etc., Union, 121 N.J. Eq. 452 (E. & A. 1937); Schechter v. Friedman, 141 N.J. Eq. 318 (E. & A. 1948). We have no hesitancy in holding that the defendant Abco was sufficiently shown to have been aware of the Silco agreements and to have unjustifiably induced their breach in order to succeed to Silco's custom. The agreements have been held valid (supra) and Abco acted at its peril in assuming the contrary, whether or not in good faith. Its conduct trespassed the bounds of lawful competition. We are not unmindful of the insufficiency of plaintiffs' supporting affidavits, to which we have already adverted and in reference to which we will have more to say. But Abco's own affidavits have supplied the deficiency by the clear indication therein of knowledge of Silco's contracts and a pattern of inducement of their breach and by the revelation of guilt implicit in their circumspectly tailored denial *447 of advocacy of breaches of any contracts which the affiants "felt to be valid." Nor do we regard Abco's behavior such as to warrant application in its favor of the rule of laches, the requirement therefor being not only inaction by plaintiffs for an unreasonable length of time but prejudice to the party asserting it. Riverton Country Club v. Thomas, 1 N.J. 508 (1948), affirming 141 N.J. Eq. 435, 448 (Ch. 1948). Abco asserts prejudice in having incurred large obligations for purchase of machines installed in Silco locations. This does not strike us as the kind of prejudice, in the circumstances, which should move the conscience of the court. We therefore affirm the injunction insofar as it is addressed to Abco, but, of course, without prejudice to such course as may be indicated by the proofs at final hearing.
As to such of the defendants, however, against whom plaintiffs had separate actions for damages pending in other tribunals when it brought this action and as late as the argument of this appeal we deem the injunction should be vacated. There was nothing whatever before the trial court to support what seem to us the extravagant claims stated in the complaint that all of the location owners had conspired with Abco maliciously and out of "ill-will and personal animosity" toward plaintiffs to injure the plaintiffs, interfere with their business with all the other defendants and to benefit Abco at the expense of the plaintiffs. There is, so far as any of the co-defendants of Abco are concerned, no evidence in the record of any more than that they defaulted in their several agreements with Silco at the inducement of Abco, but each acting solely out of self-interest and unmoved by the competition between Abco and Silco in respect to any other location. While a short-form verification of a complaint may, in an emergency, possibly justify a temporary restraining order in the circumstances stated in R.R. 4:67-2, a bare verification on "knowledge, information and belief," not stating the sources of the information or the grounds of the belief, and unaccompanied by the affidavits of persons having knowledge of the facts, will not support an application for a preliminary injunction. Township of Maplewood v. Margolis, *448 102 N.J. Eq. 467 (Ch. 1928), affirmed 104 N.J. Eq. 207 (E. & A. 1929). The proofs in such behalf "must be clear and convincing and must substantially show the facts necessary to support the theory upon which the restraint is to rest." Kitty Kelly Shoe Corp. v. United Retail, etc., Local 108, 126 N.J. Eq. 318, 319 (E. & A. 1939). No such proofs were adduced here by plaintiffs other than the affidavits filed to show violation of the temporary restraint and those indicate only that Abco machines supplanted Silco's. See also R.R. 4:44-4; Toth v. Vazquez, 3 N.J. Super. 379, 383 (Ch. Div. 1949); Mueller v. Seaboard Commercial Corp., 5 N.J. 28, 37 (1950); Ash v. Frazee, 37 N.J. Super. 542 (App. Div. 1955).
The relief Silco had in the Chancery Division as against the 50 co-defendants of Abco was tantamount to enforcement of the negative covenant in its agreements with each of them. Indeed, in prohibiting the sale of any cigarettes other than those supplied by Silco, the injunction practically amounted to an order for specific performance of the agreements pendente lite as the proof is that it is an economic necessity for taverns and restaurants of the type of those here involved to have cigarette vending machines available for their customers. Whether long-term agreements of this character, contemplating the continuous servicing and repair of machines and the supplying them with merchandise, are within the category of contracts which will be specifically enforced, need not be presently decided. See Annotation, 125 A.L.R. 1446, 1453-1455; Quigley Co., Inc., v. Asbestos Limited, Inc., 23 N.J. Misc. 301 (Ch. 1945), affirmed 138 N.J. Eq. 111 (E. & A. 1946); cf. Western Union Telegraph Co. v. Rogers, 42 N.J. Eq. 311 (Ch. 1886). If the contracts were not specifically enforceable as against Silco, considerations as to mutuality of remedy (as distinguished from mutuality of obligation) would bar their specific performance against the other contracting party. Fiedler, Inc., v. Coast Finance Co., 129 N.J. Eq. 161 (E. & A. 1941); Bethlehem Engineering Export Co. v. Christie, 105 F.2d 933, 125 A.L.R. 1441 (2 Cir. 1939). But the absence of a suitable *449 factual record and of argument on the point on this appeal suggests that the question should be left for determination at final hearing.
The dispositive consideration as to the defendants now being sued for damages in the county district court and in the county court is that plaintiffs are not at liberty to subdivide their litigation as to any of such parties, none of whom are responsible for its quarrel with any of the other location owners, into a two-front contest, one in the district court or the county court for damages and the other in the Superior Court for enforcement of the negative covenant by injunction. Since Ajamian v. Schlanger, 14 N.J. 483 (1954), there remains no basis to misapprehend that the courts of this state are determined to enforce the prime aim of the new practice for "* * * the just and expeditious determination in a single action of the ultimate merits of an entire controversy between litigants" (Id., 14 N.J., at page 485); Massari v. Einsiedler, 6 N.J. 303, 307-309 (1951); cf. New Jersey Highway Authority v. Renner, 18 N.J. 485, 492 (1955). (Emphasis supplied) "The piecemeal litigation of fragments of a single controversy is too evident an evil to remain unchecked," within present-day philosophies as to the efficient functioning of litigation. Schnitzer, Civil Practice and Procedure, 10 Rutgers L. Rev. 351, 371 (1955); Id. 9 Rutgers L. Rev. 307, 334 (1954). The cited discussions of this principle by Professor Schnitzer make it plain that its implications are yet far from fixed and its potential qualifications imponderable, particularly in its impact upon defendants; see Middlesex Concrete, etc., Corp. v. Borough of Carteret, 35 N.J. Super. 226, 240 (App. Div. 1955). But it is clear to us that it is transgressed by the course here charted by plaintiffs. We are satisfied that long before instituting this action they knew exactly what Abco was up to and nevertheless chose, for reasons best known to themselves, to institute and prosecute county district court and County Court damage suits against various of the location owners. As late as the argument of these appeals, they were still deliberately proceeding with their dual-front assault on many *450 of these defendants in both the County Courts and the Superior Court notwithstanding that the damages they seek in the County Courts are obtainable concurrently with the injunctive remedy in the Chancery Division, at least so far as consistent therewith, as appropriate to the expeditious determination of "the entire controversy." While the record of the actions in the other courts is not before us, the essential facts are conceded and we deem it necessary as a matter of sound policy that we notice them and enforce the practice prohibition of the fractional litigation here manifested.
We pass consideration of the contention that the actions for damages connote an election to terminate the contracts and thereby preclude their enforcement by injunction. See Levy v. Massachusetts Accident Co., 124 N.J. Eq. 420, 431 (Ch. 1938); Blum Building Co. v. Ingersoll, 99 N.J. Eq. 563, 568 (Ch. 1926), affirmed 101 N.J. Eq. 291 (E. & A. 1927); cf. Levy v. Massachusetts Accident Co., 127 N.J. Eq. 49 (E. & A. 1940). If the complaints in the county district court and County Court seek damages for the entire remaining contract term (the complaints are so described by defendants but are not before us) their continued prosecution to judgment would seem to be inconsistent with the assertion of a right to their present enforcement in equity. While the present practice permits the assertion of inconsistent claims in a single complaint, R.R. 4:8-5(b), or by amendment during the proceedings as the use of discovery procedures broadens a litigant's insight into his legal relations with his adversary, Ajamian v. Schlanger, supra (14 N.J., at page 485), Schlossberg v. Jersey City Sewerage Authority, 15 N.J. 360, 369, 370 (1954), these rights would not seem to include the tactic of deliberately carrying on simultaneous actions in different courts requesting inconsistent relief against the same defendant in respect to the same controversy.
The cause is remanded to the Chancery Division with directions to modify the preliminary injunction so as to eliminate therefrom all restraints against those of the defendants against whom plaintiffs had county district court or *451 County Court actions for damages pending or reduced to judgment when this appeal was argued; as to such defendants no costs are allowed to either side. As to all other defendants the injunction is affirmed, with costs.
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72 B.R. 131 (1987)
In re EARLE INDUSTRIES, INC., Debtor.
EARLE INDUSTRIES, INC., Plaintiff,
v.
CIRCUIT ENGINEERING, INC., Defendant.
Bankruptcy No. 86-00869G, Adv. No. 86-0382F.
United States Bankruptcy Court, E.D. Pennsylvania.
April 7, 1987.
*132 E. Brooks Keffer, Jr., Hepburn Willcos Hamilton & Putnam, Philadelphia, Pa., for debtor/plaintiff, Earle Industries, Inc.
Donald M. Collins, Stradley, Ronon, Stevens & Young, Philadelphia, Pa., for defendant, Circuit Engineering, Inc.
OPINION
BRUCE FOX, Bankruptcy Judge:
The debtor has initiated an adversary proceeding against Circuit Engineering, Inc. seeking damages for defendant's alleged breach of contract. The defendant has filed a motion requesting that I abstain from hearing this proceeding pursuant to 28 U.S.C. § 1334(c). That motion is now before me.
The debtor avers that the parties entered into an agreement under which the debtor was to manufacture various products and produce specialized drawings for defendant's use. The debtor maintains that defendant cancelled this agreement after the debtor had begun performance and the debtor seeks payment of a "cancellation charge" in the amount of $4,000.00. The defendant requests that I abstain because this matter is a noncore proceeding involving a small claim against an out of state defendant.
The concept of abstention in bankruptcy proceedings was expanded in the wake of the Supreme Court's decision in Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50, 102 S. Ct. 2858, 73 L. Ed. 2d 598 (1982) ("Marathon"). Former 28 U.S.C. § 1471(d) was recodified as 28 U.S.C. § 1334(c)(1) and section 1334(c)(2), which mandates abstention in certain circumstances, was added. As I previously noted in In re Futura Industries Inc., 69 B.R. 831, 833-834 (Bankr.E.D. Pa.1987):
The plaintiffs in the instant proceeding argue that the provisions of section 1334(c)(2) are met and that abstention is mandated. In order for mandatory abstention to apply, the plaintiffs must show that
(1) a timely motion is made; (2) the proceeding is based upon a state law claim or state law cause of action; (3) the proceeding is related to a case under Title 11; (4) the proceeding does not arise under Title 11; (5) the action could not have been commenced in a federal court absent jurisdiction under 28 U.S.C. § 1334; and (6) an action is commenced, and can be timely adjudicated, *133 in a state forum of appropriate jurisdiction.
To the extent that defendant contends that the instant proceeding is noncore within the meaning of 28 U.S.C. § 157(c)(1), I agree. This matter is simply a claim by the debtor against a nonparticipant in the bankruptcy proceedings for a breach of contract. As such, the holding in Marathon requires that it be classified as noncore. In re Earle Industries, Inc., 71 B.R. 919, (Bankr.E.D.Pa.1987); see Thomas v. Union Carbide Agricultural Products Co., 473 U.S. 568, 105 S. Ct. 3325, 3334-35, 87 L. Ed. 2d 409 (1985). However, the mandatory abstention provision of section 1334(c)(2) requires more than that the matter be noncore. Here, defendant has offered no evidence that there is a pending state court action, let alone one which can be timely adjudicated. Therefore, there is no requirement that this court abstain. See In re Futura; Matter of Krupke, 57 B.R. 523, 526-27 (Bankr.W.D.Wisc.1986).
To the extent defendant requests that I should exercise my discretion to abstain under 28 U.S.C. § 1334(c)(1) simply because this matter is noncore, its argument misses the purpose of § 1334(c)(2). See In re Cemetery Development Corp., 59 B.R. 115, 127 (Bankr.M.D.La.1986); Matter of Krupke, 57 B.R. at 527 (Marathon does not require abstention in all related proceedings); In re Bell & Beckwith, 54 B.R. 303, 308 (Bankr.N.D.Ohio 1985). There were some in Congress who wanted all noncore matters to be tried in a state forum, and others who feared that such a result would severely hamper the administration of the debtor's estate. The compromise fashioned by section 1334(c)(2) requires only that certain noncore proceedings be heard in state court not all. See, e.g., Remarks of Senator Dole, 130 Cong. Rec.S. 8889 (daily ed. June 29, 1980), reprinted in 1984 U.S. Code Cong. & Ad. News 576, 587; 1 Collier on Bankruptcy ¶ 3.01, at 3-60 (15th ed. 1986). ("Collier").
In contrast to mandatory abstention, section 1334(c)(1) is derived from former 28 U.S.C. § 1471(d) which, in turn, was a statutory response to concerns articulated in Thompson v. Magnolia Petroleum Co., 309 U.S. 478, 60 S. Ct. 628, 84 L. Ed. 876 (1940). H.R.Rep. No. 595, 95th Cong., 1st Sess. 446 (1977), U.S. Code Cong. & Admin. News 1978, p. 5787; accord, In re Cemetery Development Corp., 59 B.R. at 125; 1 Collier ¶ 3.01 at 3-57 to 58. In Thompson, the Court noted:
But the proper exercise of that control may, where the interests of the estate and the parties will best be served, lead the bankruptcy court to consent to submission to state courts of particular controversies involving unsettled questions of state property law and arising in the course of bankruptcy administration. . . . Unless the matter is referred to the state courts, upon subsequent decision by the Supreme Court of Illinois it may appear that rights in local property of parties to this proceeding have by the accident of federal jurisdiction been determined contrary to the law of the state which in such matters is supreme.
309 U.S. at 483-84, 60 S.Ct. at 630-31.
These views were restated in In re Kaleidoscope, Inc., 25 B.R. 729, 742 (N.D.Ga. 1982):
It is now a settled rule that bankruptcy abstention is required only if resolution of the state law question will involve the bankruptcy court in matters of substantial public import. . . . and only if there exists no state court precedent that either answers the precise question presented or enables the bankruptcy court to predict with reasonable certainty the conclusion that the state courts will reach when ultimately presented with the question.
(citations omitted).
Given the genesis of section 1334(c)(1), it is not surprising that the primary determinant for the exercise of discretionary abstention is whether there exist unsettled issues of state law. See, e.g., Matter of Boughton, 60 B.R. 373 (N.D.Ill. 1986); Harley Hotels, Inc. v. Rain's International Ltd., 57 B.R. 773 (M.D.Pa.1985). However, this is not the only factor warranting consideration. Abstention may be *134 appropriate in the "interest of justice," or "in the interest of comity . . . or respect for state law." 28 U.S.C. § 1334(c)(1). To some extent, this statutory provision may summarize and incorporate federal nonbankruptcy abstention doctrines found in Railroad Commission v. Pullman Co., 312 U.S. 496, 61 S. Ct. 643, 85 L. Ed. 971 (1941), Younger v. Harris, 401 U.S. 37, 91 S. Ct. 746, 27 L. Ed. 2d 669 (1971), and Burford v. Sun Oil Co., 319 U.S. 315, 63 S. Ct. 1098, 87 L. Ed. 1424 (1943). See In re DeLorean Motor Co., 49 B.R. 900 (Bankr.E.D. Mich.1985).
Moreover, concerns of case administration and judicial economy must also be taken into account. There may be occasions when abstention will be economic. See Matter of Krupke, 57 B.R. at 529 (in case involving unclear issue of state law, abstention ordered only after court also determined that resolution of the matter in state court would not unduly delay the administration of the case); In re Counts, 54 B.R. 730, 736 (Bankr.D.Colo.1985) (where state court action already pending, abstention ordered to avoid "needless duplication"). At other times, abstention may significantly hamper the prompt administration of the debtor's estate. Matter of Boughton, 60 B.R. at 377; In re Bell & Beckwith, 55 B.R. at 876.[1] In that regard, courts must be mindful that former section 1471(a), (b) and current section 1334(a), (b) also represent a studied Congressional decision to broaden bankruptcy jurisdiction in order to bring into one forum all matters related to the bankruptcy case "so as to facilitate the administration of bankruptcy cases." Matter of Krupke, 57 B.R. at 524; accord, In re Cemetery Development Corp., 59 B.R. at 124. Abstention is the exception to the duty of bankruptcy courts to decide matters properly before them. In re DeLorean, 49 B.R. at 910. See also In re Double TRL, Inc., 65 B.R. 993 (Bankr.E.D.N.Y.1986).
As noted previously, the instant matter involves a simple question of contract law, implicating no important state policies, and which was not pending in any state forum, either at the time this bankruptcy case was commenced or presently. Dismissal of this matter through abstention would advance neither judicial economy nor the administration of this bankruptcy case. Although a noncore proceeding, this matter may yield funds for distribution through the debtor's plan for the benefit of its creditors and, as such, is a portion of the debtor's estate. Under these circumstances, there is no basis in the record to grant defendant's abstention request Cf. In re Kreiss, 58 B.R. 999, 1005 (Bankr.E.D.N. Y.1986) (accounts receivable action should be resolved in bankruptcy courts).
Perhaps sensing that this proceeding offers no commonly accepted grounds to justify the exercise of discretion under § 1334(c)(1), defendant argues that the relatively small size of the debtor's claim along with the defendant's location in another state militates toward dismissal and abstention. The thrust of this argument is that the trustee or debtor in possession should be forced to litigate small noncore matters in state forums. To a large extent, this argument is answered by 28 U.S.C. § 1409(b) which states:
Except as provided in subsection (d) of this section, a trustee in a case under title 11 may commence a proceeding arising in or related to such case to recover a money judgment of or property worth less than $1,000 or a consumer debt of less than $5,000 only in the district court for the district in which the defendant resides.[2]
*135 Section 1409(b) is virtually identical to former 28 U.S.C. § 1473(b).[3] The House Report explained that the original venue provision "prevents unfairness to distant debtors of the estate when the cost of defending would be greater than the cost of paying the debt owed." H.Rep. No. 595, 95th Cong. 1st Sess. 446 (1977), U.S. Code Cong. Admin. News 1978, 6402; accord, In re Riggsby, 13 B.R. 335 (Bankr.E.D.Tenn. 1981).
By enacting section 1409(b), Congress has addressed the concerns voiced by defendant. Except for consumer debts[4] of less then $5,000.00, adversary proceedings seeking money judgments of at least $1,000.00 may be brought, for venue purposes, in bankruptcy courts.[5] This lawsuit seeks damages of $4,000.00 and so may be brought in this forum. Rather than seeking abstention, defendant can raise any particularized concerns with venue by virtue of a request made pursuant to 28 U.S.C. § 1412.[6]
The last issue is whether my conclusion that abstention is neither appropriate nor mandated may take the form of an order or, since this is a noncore proceeding, a recommendation to district court. I have previously held, in In re Futura Industries, Inc., 69 B.R. at 836-37, that a bankruptcy court cannot enter an order abstaining in a noncore proceeding, but may only recommend abstention, since an abstention order may not be reviewable[7] and such an order puts a litigant out of court. Accord, e.g., 1 Collier on Bankruptcy ¶ 3.01, at 3-63.
A decision not to abstain is reviewable, see 1 Collier ¶ 3.01 at 3-58, 3-63, and is an interlocutory decision which may be considered by the district court when it enters judgment in this matter. Even in noncore matters, bankruptcy courts have the power to enter interlocutory orders, for 28 U.S.C. § 157(c)(1) refers only to district courts entering "any final order of judgment." See In re Kennedy, 48 B.R. 621, 623 (Bankr.D. Ariz.1985); In re Lion Capital Group, 46 B.R. 850, 854 (Bankr.S.D.N.Y.1985); Taggart, The New Bankruptcy Court System, 59 Am.Bankr.L.J. 231, 245 n. 58, 250 n. 70 (1985). Indeed, were bankruptcy courts to issue recommendations in every interlocutory matter, (e.g., discovery disputes) district courts would be quickly overburdened and bankruptcy litigation would be severely delayed. Therefore, I conclude that bankruptcy courts have the authority to enter orders denying motions to abstain. See 1 Collier, ¶ 3.01, at 3-63. But see In re Cemetery Development Corp., 59 B.R. at 128 (because lack of symmetry might predispose a bankruptcy judge to reach a particular result, all abstention decisions should be in form of recommendations to the district court).
For the reasons set forth above, an order will be entered denying defendant's motion.
NOTES
[1] There may be other reasons why abstention would be in the interest of justice. See, e.g., In re Futura Industries, Inc., (abstention warranted when matter is noncore, state court proceeding is pending, relief from stay was granted, matter may not even be related to bankruptcy case, and virtually all requirements for mandatory abstention are met).
[2] Subsection (d) is not applicable here since the cause of action arose prepetition. In re National Sugar Refining Co., 23 B.R. 726, 729 (Bankr.S. D.N.Y.1982).
[3] The only difference is the current section's reference to district court, not bankruptcy court, in light of 28 U.S.C. § 1334.
[4] The definition of "consumer debt" is found in 11 U.S.C. § 101(7).
[5] That the defendant may be located outside of Pennsylvania does not deprive this court of in personam jurisdiction. In re Fleet, 53 B.R. 833, 840-41 (Bankr.E.D.Pa.1985) (upholding nationwide service of process for adversary proceedings).
[6] Obviously, I do not now pass on the appropriateness of such a motion, which has not and may not be filed.
[7] Clearly, a decision under 28 U.S.C. § 1334(c)(2) to abstain is not reviewable. Probably, a decision to abstain under § 1334(c)(1) is also not reviewable. See In re Cemetery Development Corp., 59 B.R. at 128 n. 32; 1 Collier on Bankruptcy ¶ 3.01, at 3-58.
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491 S.W.2d 448 (1973)
Dianne Bordelon HINDS, Appellant,
v.
William H. HINDS, Appellee.
No. 15155.
Court of Civil Appeals of Texas, San Antonio.
February 14, 1973.
Evans & Marshall, Frank Y. Hill, Jr., San Antonio, for appellant.
BARROW, Chief Justice.
Appellant-wife brought this suit against appellee-husband seeking custody and support for the couple's two minor children. Husband, a resident of Louisiana, entered a special appearance under Rule 120a, Texas Rules of Civil Procedure, and urged that the Bexar County District Court was without jurisdiction since a prior suit was pending in Louisiana, the marital domicile of the parties. The trial court dismissed the wife's petition for want of jurisdiction after a non-jury hearing, and she has duly perfected this appeal.
The couple were married in Louisiana in 1969, and made their marital home there until May 30, 1972, when wife left with the two minor children. She came to San Antonio with her aunt and uncle and has been living in their home at all relevant times thereafter. On June 7, 1972, husband filed suit in Louisiana seeking a separation and custody of the children. A hearing was held on this suit on June 19, 1972, wherein *449 wife was personally represented by both Texas and Louisiana counsel. Nevertheless, this petition was filed in Bexar County on June 17, 1972.
Article 4639b, Vernon's Tex.Rev. Civ.Stat.Ann., authorizes a suit for support or custody where the parents are separated, although the marriage relation exists. Furthermore, it is settled law that a Texas court may exercise jurisdiction over the custody of a child which is physically present in the state, although the child's legal domicile may be in another state. Wicks v. Cox, 146 Tex. 489, 208 S.W.2d 876 (1948); Goldsmith v. Salkey, 131 Tex. 139, 112 S.W.2d 165 (1938). See also: 1 Restatement of Conflict of Laws 2d, Section 79. This does not mean, however, that our courts must or should take jurisdiction in every case where the child happens to be before the court. As was said in Wicks v. Cox, supra, 146 Tex. at 878, 208 S.W.2d at 878, "Ordinarily the courts of the domiciliary state are in a better position to pass intelligently on the matter of the child's welfare, and good order frequently requires that they do so to the exclusion of courts of other states in which the child is temporarily resident."
It is our opinion from an examination of the record before us that the trial court did not abuse its discretion in dismissing wife's petition for want of jurisdiction. The Louisiana court had a prior suit pending, involving the same issue, and both parties were before said court. The marital domicile of the couple was in Louisiana; and, therefore, the witnesses would be much more accessible to the Louisiana court. The trial court undoubtedly could have concluded that wife was still domiciled in Louisiana, although she had been in Texas about three weeks, and testified that her intention was to permanently reside here. A consideration of these facts fully justified the trial court in declining jurisdiction over this petition.
The judgment is affirmed.
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994 F. Supp. 894 (1997)
James DOTY, Plaintiff,
v.
MAGNUM RESEARCH, INC., et al., Defendants.
No. 1:96CV2730.
United States District Court, N.D. Ohio, Eastern Division.
December 16, 1997.
*895 Michael R. Kube, William J. Shramek, Jeffries, Kube, Forrest & Monteleone, Cleveland, OH, William E. Pfau, Jr., Pfau, Pfau & Marando, Youngstown, OH, for James Doty, Rebecca Doty.
William E. Pfau, Jr., Pfau, Pfau & Marando, Youngstown, OH, for Magnum Research, Inc.
Mark F. McCarthy, Lois J. Cole, Arter & Hadden, Cleveland, OH, William K. McCarter, Concord, OH, for Israeli Military Industries, Ltd., Vieth Sports Supply.
MEMORANDUM DECISION
GWIN, District Judge.
I
On June 19, 1997 Plaintiffs James and Rebecca Doty filed a motion to confirm service of process on Defendant Israeli Military Industries, Ltd. ("IMI") in this products liability action removed from state court by IMI (Doc. 8). On July 21, 1997 IMI filed a motion under Fed.R.Civ.P. 12(b) to dismiss the suit for lack of in personam jurisdiction (Doc. 11).
IMI claims that because it was not properly served under the service requirements of Section 1608 of the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. § 1602 et seq., the Court lacks personal jurisdiction over IMI. Doty claims service of process was sufficient. For the reasons which follow, the Court grants the Plaintiffs' motion and denies Defendant IMI's Rule 12 motion.
II
James Doty says he bought a semi-automatic pistol manufactured by IMI which discharged while in the safety position on the day of purchase while the Plaintiff was on the firing range. Plaintiffs filed this lawsuit in Lake County Common Pleas Court against Magnum Research, Inc., (the distributor); Vieth Sports Supply, of Mentor, Ohio (the retail seller); and IMI, an Israeli business (the designer and manufacturer of the firearm). IMI answered the complaint, engaged in discovery, and removed this action from state court to federal court under terms of the FSIA. However, IMI has not waived its affirmative defense of improper service.[1]
Plaintiffs attempted to serve IMI by sending a copy of the summons and complaint to IMI Services U.S.A. in Chevy Chase, Maryland, by certified mail. Plaintiffs contend, but Defendant disputes, that IMI Services should be considered IMI's general agent. Plaintiffs later attempted to serve Prentice Hall Corporation, at a Baltimore, Maryland, address by certified mail. Plaintiffs contend, but the Defendant disputes, that Prentice Hall is Defendant's resident agent.
III
If a defendant qualifies as a "foreign state," then it must be served according to *896 Section 1608(a) of the FSIA. If a defendant qualifies as an "agency or instrumentality of a foreign state," then service of process must meet the requirements of Section 1608(b) of the FSIA.[2] This latter provision provides a preferred hierarchy of choice of methods. An agency or instrumentality of a foreign state should be served by a special arrangement worked out between the parties. If there is no special arrangement, then service should be made to an officer, or to an agent of the defendant. Service under terms of an international convention, such as the Hague Service Convention, is next in order of preference. The Sixth Circuit, rather than requiring strict adherence to service requirements when determining whether proper service was made under the FSIA, follows a "substantial compliance" test. Sherer v. Construcciones Aeronauticas, S.A., 987 F.2d 1246 (6th Cir.), cert. denied, 510 U.S. 818, 114 S. Ct. 72, 126 L. Ed. 2d 41 (1993). Substantial compliance with the FSIA is met when the agency or instrumentality of a foreign state had actual notice and lack of prejudice. Id. at 1250.
When a trial court determines that it can decide a motion to dismiss for lack of personal jurisdiction on written submissions, a plaintiff need only make a prima facie showing that personal jurisdiction exists while considering the pleadings and affidavits in the light most favorable to the plaintiff. Lyman Steel Corp., et al. v. Ferrostaal Metals Corp., et al., 747 F. Supp. 389, 392 (N.D.Ohio 1990). The fundamental inquiry is whether each defendant has minimum contacts with the forum state [Ohio] and whether the exercise of jurisdiction offends "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945). In the Sixth Circuit, there are three criteria that must be met to comport with due process:
First, the defendant must purposely avail himself of the privilege of acting in the forum state or causing a consequence in the foreign state. Second, the cause of action must arise from the defendants' activities there. Finally, the acts of the defendant or consequences must have a substantial enough connection with the forum state to make the exercise of jurisdiction over the defendant reasonable. Lyman Steel Corp., 747 F.Supp. at 394 (citations omitted).
IV
Though IMI claims that it should be considered a "foreign state" for service of process, the Court finds that the evidence submitted by IMI points clearly to IMI falling within the FSIA's definition of "an agency or instrumentality of a foreign state." That definition is found within Section 1603(b) of the Act and reads in part:
(b) An "agency or instrumentality of a foreign state" means any entity -
(1) which is a separate legal person, corporate or otherwise,, and
(2) which is an organ of a foreign state or political subdivision thereof, or a majority of whose shares or other ownership interest is owned by a foreign state or political subdivision thereof, and
*897 (3) which is neither a citizen of a State of the United States ..., nor created under the laws of any third country.
Defendant's offer the affidavit of Margalit Nof, IMI's corporate secretary. According to Nof, IMI is a limited liability company organized under Israeli law with its principal place of business in Ramat Hasharon, Israel, and is owned by the government. Nof says IMI manufactures weaponry and is a major arms supplier for the Israeli Defense Forces.
Nof also says that Israel Military Industries Services U.S.A. Inc. is a Delaware corporation owned by IMI with its principal place of business in Chevy Chase, Maryland. He further says that both are separate entities and IMI Services is not the registered agent for purposes of service of process for IMI. Nof also says that to the best of his knowledge both entities maintain completely separate records, books, and accounts. According to Nof, IMI has no registered agent. IMI Services is not involved in the design or testing or manufacturing of any IMI products, he says.
There is no doubt that IMI has received actual notice and IMI has not suffered prejudice from service of process. In fact, IMI was able to remove suit from state to federal court. If the facts stated in the Nof affidavit are true, then service of process on IMI did not strictly follow § 1608(b) of the FSIA. The parties have not agreed to a "special arrangement" for service, service was never made on a bona fide agent, and Plaintiffs did not avail themselves of the procedures available under a treaty, such as the Hague Service Convention. But Plaintiffs have attempted to work out a "special arrangement" with IMI to no avail, they believed that IMI Services was IMI's general agent in this country, and sought to serve another Maryland concern when they discovered Prentice-Hall was resident agent for IMI in this country. Under § 1608(b)(2), the next choice for service of process would be utilization of the provisions of the Hague Service Convention.
The Court finds the Plaintiffs' efforts at service sufficient, and will not require quashing service with leave to perfect within a certain time frame. See Lyman Steel Corp., 747 F.Supp. at 401. In finding service sufficient in this case, the Court notes that § 1608(b)(2) speaks of delivery of a copy of the summons and complaint "to any other agent authorized by ... law to receive service of process in the United States." Further, the Supreme Court of the United States has held that the provisions of the Hague Service Convention are inapplicable when process is served on a foreign corporation by serving its domestic subsidiary which, under state law, is the foreign corporation's involuntary agent for service. Volkswagenwerk Aktiengesellschaft v. Schlunk, 486 U.S. 694, 698-708, 108 S. Ct. 2104, 100 L. Ed. 2d 722 (1988).[3] Finding IMS and IMS Services so closely related so that, at the very least, IMS Services was an involuntary agent for service of process in this country, the Court will grant Plaintiffs' motion.
Since this is a torts action involving an injury to an American citizen seeking monetary damages for a defective product, and does not involve any questions of Israeli arms supplies or other diplomatic considerations, the Court finds that the exercise of jurisdiction over Defendant IMI would not be unreasonable.
The Court finds Plaintiffs have met their burden and made a prima facie showing that specific personal jurisdiction existed, especially since IMI contested on the issue of service of process and not on the issue of minimum contacts with Ohio or the United States. Aside from finding that service was sufficient in this action, the Court notes that IMI purposely availed itself of the forum, at the very least by causing a consequence in Ohio through the sale of one of its firearms. The lawsuit it seeks to avoid in fact arose from IMI's activities in the United States. The consequences of IMI's sale of firearms in this country provides a "substantial enough connection" with Ohio so that it is not unreasonable for the Defendant to defend itself in a products liability action in this Court.
*898 V
Based on the above, the Court grants the Plaintiffs' motion to confirm service of process and denies the Defendant IMI's motion to dismiss for lack of personal jurisdiction.
IT IS SO ORDERED.
NOTES
[1] See for example ¶ 6 of Defendant IMI's Notice of Removal wherein IMI states "Defendant IMI did not receive through [sic] proper service pursuant to the provisions of 28 U.S.C. Section 1608 of the FSIA a copy of the Summons and Complaint in this action or copies of Magnum's or Vieth's Cross-Claims against it."
[2] Section 1608(b) reads:
Service in the courts of the United States and of the States shall be made upon an agency or instrumentality of a foreign state:
(1) by delivery of a copy of the summons and complaint in accordance with any special arrangement for service between the plaintiff and the agency or instrumentality; or
(2) if no special arrangement exists, by delivery of a copy of the summons and complaint either to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process in the United States: or in accordance with an applicable international convention on service of judicial documents; or
(3) if service cannot be made under paragraphs (1) or (2), and if reasonably calculated to give actual notice, by delivery of a copy of the summons and complaint, together with a translation of each into the official language of the foreign state-
(A) as directed by an authority of the foreign state or political subdivision in response to a letter rogatory or request or
(B) by any form of mail requiring a signed receipt, to be addressed and dispatched by the clerk of the court to the agency or instrumentality to be served, or
(C) as directed by order of the court consistent with the law of the place where service is to be made.
[3] We note that the Schlunk case did not involve the Foreign Sovereign Immunities Act.
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994 F. Supp. 1318 (1998)
Randolf T. OTT, Plaintiff,
v.
Kenneth S. APFEL,[1] Commissioner of Social Security, Defendant.
Civil Action No. 94-4235-DES.
United States District Court, D. Kansas.
January 9, 1998.
*1319 Kenneth M. Carpenter, Carpenter Chartered, Kelly C. Brown, Topeka, KS, for Plaintiff.
D. Brad Bailey, Office of United States Attorney, Topeka, KS, for Defendant.
MEMORANDUM AND ORDER
SAFFELS, District Judge.
This matter is before the court on motion by plaintiff's counsel for a determination and award of attorney fees pursuant to 42 U.S.C. § 406(b)(1) (Doc. 44).
I. BACKGROUND
On March 25, 1992, plaintiff filed an application for a period of disability and disability insurance benefits under Title II of the Social Security Act, 42 U.S.C. § 401 et seq. Plaintiff alleged that he became unable to work because of his disabling condition on December 31, 1988. The Social Security Commissioner ("Commissioner") denied plaintiff's claim on May 27, 1992, stating that plaintiff's post-traumatic stress disorder and depression did not limit his ability to work. Plaintiff filed a request for reconsideration on July 28, 1992. The Commissioner denied plaintiff's request on September 23, 1992, finding that plaintiff's psychological problems were not disabling prior to plaintiff's date late insured of December 31, 1989.
On January 18, 1993, plaintiff requested a hearing by an administrative law judge ("ALJ"). The hearing was set for September 7, 1993. Plaintiff's counsel, by letter dated August 11, 1993, requested that the ALJ have a medical advisor present at plaintiff's hearing. The ALJ denied counsel's request, and plaintiff's hearing was held on September 7, 1993, without the presence of a medical advisor.
In a decision dated December 23, 1993, the ALJ determined that plaintiff is not entitled to a period of disability or disability insurance benefits, because plaintiff did not become disabled until on or about February 1, 1992, after his date last insured. On February 16, 1994, plaintiff filed a request for review of the ALJ's decision. The Appeals Council denied plaintiff's request on October 5, 1994.
Plaintiff sought judicial review and, on September 29, 1995, the district court issued an order reversing and remanding the case *1320 for determination by the ALJ, with the assistance of a medical advisor, of the date of onset of plaintiff's disability. Plaintiff subsequently received a favorable decision from the Commissioner by way of an ALJ decision dated December 24, 1996. The decision granted plaintiff entitlement to a period of disability and disability insurance benefits and awarded plaintiff $45,476.80 in past-due benefits.
II. DISCUSSION
Plaintiff's attorney has moved for an award of attorney's fees pursuant to 42 U.S.C. § 406(b)(1). Plaintiff's attorney alleges he spent 36.25 hours in court-related services and requests a fee of $7,369.20, or twenty-five percent of plaintiff's past-due benefit award less $4000 awarded under 42 U.S.C. § 406(a). The Commissioner objects to plaintiff's request for fees. Although the Commissioner does not contest the number of hours spent by plaintiff's attorney, he argues that a fee of $7,369.20 is unreasonable because it would result in a billing rate of $203.00 per hour. Plaintiff's attorney argues that attorney fees under 42 U.S.C. § 406(b)(1)(A) should be controlled primarily by the freely-negotiated contingency fee contract between a social security claimant and his attorney. The Commissioner contends that the court is not bound by the contingency fee determined pursuant to a contingency fee contract and that the court should use the "lodestar" method to calculate attorney's fees under § 406(b)(1)(A).
Section 406(b)(1)(A) provides:
(1)(A) Whenever a court renders a judgment favorable to a claimant under this subchapter who was represented before the court by an attorney, the court may determine and allow as part of its judgment a reasonable fee for such representation, not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled by reason of such judgment, and the Commissioner of Social Security may, notwithstanding the provisions of section 405(i) of this title, certify the amount of such fee for payment to such attorney out of, and not in addition to, the amount of such past-due benefits. In case of any such judgment, no other fee may be payable or certified for payment for such representation except as provided in this paragraph.
...
(2) Any attorney who charges, demands, receives, or collects for services rendered in connection with proceedings before a court to which paragraph (1) of this subsection is applicable any amount in excess of that allowed by the court thereunder shall be guilty of a misdemeanor and upon conviction thereof shall be subject to a fine of not more than $500, or imprisonment for not more than one year, or both.
42 U.S.C. § 406(b). "This statute places the inescapable burden on the Court to determine and allow a reasonable attorney fee." Spodnick v. Chater, 1997 WL 104940, *2 (N.D.Okla.1997) (citing Krig v. Sullivan, 143 F.R.D. 270, 271 (N.D.Fla.1992)).
The court disagrees with plaintiff's attorney's implication that a fee of twenty-five percent of the plaintiff's recovery of past-due benefits is "per se reasonable" under the statute. See Hubbard v. Shalala, 12 F.3d 946 (10th Cir.1993). Although 42 U.S.C. § 406(b)(1) provides that a court may allow attorney's fees "not in excess of 25 percent of the total of the past-due benefits to which the claimant is entitled," this language in no way suggests the per se reasonableness of a contingency fee for twenty-five percent of the plaintiff's recovery of past-due benefits. Rather, it serves as a limit on the amount of fees an attorney can contract to receive from a social security claimant. See Cotter v. Bowen, 879 F.2d 359, 360 (8th Cir. 1989). "Section 406(b) authorizes the Court to `determine' and `allow' a `reasonable' attorney fee, not approve an agreed upon fee." Spodnick, 1997 WL 104940, *5 (N.D.Okla. 1997). Accordingly, such fees "remain subject to court approval even where, as in this case, the client expresses approval and satisfaction with the requested fee." Id.
In the Tenth Circuit, calculation of a reasonable fee under 42 U.S.C. § 406(b) should begin with the lodestar amount the product of the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate. See Hubbard, 12 F.3d 946 at 948. In this case, the Commissioner does not oppose as unreasonable the *1321 hours claimed by plaintiff's attorney for legal services. Furthermore, the Court has reviewed the billing records submitted by plaintiff's attorney and is satisfied that the 36.25 hours which plaintiff's attorney spent on this case are reasonable.
The starting point for deciding a reasonable rate under the lodestar method is to ascertain the prevailing market rate in the relevant legal community for similar services by attorneys of reasonably comparable skill, experience and reputation. In this case a reasonable rate will be the rate charged in the District of Kansas by social security attorneys with the similar skill, experience, and reputation as plaintiff's attorney. Although the burden is on the fee applicant to produce evidence of the prevailing relevant hourly rate, Blum v. Stenson, 465 U.S. 886, 895 n. 11, 104 S. Ct. 1541, 79 L. Ed. 2d 891 (1985), plaintiff's attorney has not done so. However, the court believes that the government's proposal of an hourly rate of $125, absent any contrary evidence by plaintiff's attorney, is an adequately reliable estimate considering, in a light favorable to plaintiff's attorney, factors such as skill required; experience, reputation and ability of the particular lawyer; time limitations; preclusion of other work; and the undesirability of the case and the nature and length of the attorney's relationship with his client. Accordingly, the lodestar amount for this case is $4531.25, representing compensation for 36.25 hours of service at an hourly rate of $125.
The court next examines whether a fee applicant is limited to a bare-bones lodestar fee where a contingency fee agreement exists. Many courts adopting the lodestar method find that attorneys should not be so limited. See, e.g., Craig v. Secretary, Dept. of Health and Human Services, 864 F.2d 324, 326 (4th Cir.1989). Although the Tenth Circuit has acknowledged "that a fee may be enhanced in cases of `exceptional success'" Hubbard, 12 F.3d at 948 (quoting Hensley v. Eckerhart, 461 U.S. 424, 435, 103 S. Ct. 1933, 76 L. Ed. 2d 40 (1983)), it has not addressed the propriety of granting an enhancement based on the contingent nature of an attorney's fee. This court, however, believes "that an attorney that assumes the risk of nonpayment be paid more per hour than an attorney that assumes no risk of nonpayment." 1997 WL 104940, *9.
Determining the amount of enhancement is a more difficult matter. In Craig, the court noted that the primary consideration to take into account is the attorney's risk in receiving nothing for his services. In Allen v. Shalala, 48 F.3d 456 (9th Cir.1995), the Ninth Circuit held that courts may not use the contingency factor to subsidize the claims of losing social security claimants. Allowing such a subsidization would be "fundamentally unfair to the claimants who depend upon back benefit recoveries, [and would be] contrary to congressional intent to protect claimants by limiting fee awards." Id. (quoting Straw v. Bowen, 866 F.2d 1167, 1171 (9th Cir.1989)). Here, plaintiff's attorney clearly faced a substantial risk of receiving nothing for his services. Accordingly, the court finds that a fee of $6,165.50, or approximately twenty-two percent of plaintiff's past-due benefit award less $4000 awarded under 42 U.S.C. § 406(a), is a reasonable fee in this case.
IT IS THEREFORE BY THE COURT ORDERED that the motion by plaintiff's counsel for a determination and award of attorney fees pursuant to 42 U.S.C. § 406(b)(1) (Doc. 44) is granted in the amount of $6,165.50, as approximately twenty-two percent of plaintiff's past-due benefit award less $4000 awarded under 42 U.S.C. § 406(a), and as a reasonable fee in this case.
NOTES
[1] Kenneth S. Apfel was sworn in as Commissioner of Social Security on September 29, 1997. In accordance with Rule 25(d)(1) of the Federal Rules of Civil Procedure, Kenneth S. Apfel should be substituted for John J. Callahan as the defendant in this suit. No further action need be taken to continue this suit by reason of the last sentence of § 205(g) of the Social Security Act, 42 U.S.C. § 405(g).
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19 N.J. 386 (1955)
117 A.2d 465
TOWNSHIP OF TEANECK, A MUNICIPAL CORPORATION OF THE COUNTY OF BERGEN AND STATE OF NEW JERSEY, PLAINTIFF-APPELLANT,
v.
BLOCK 427, LOTS 9-10, ASSESSED TO AMELIA KLUG, AND OTHER LANDS, DEFENDANTS-RESPONDENTS.
The Supreme Court of New Jersey.
Argued September 19, 1955.
Decided October 24, 1955.
*388 Mr. John J. Deeney argued the cause for the plaintiff-appellant.
Mr. Saul A. Wittes argued the cause for the defendant-respondent Herbert Harvey.
The opinion of the court was delivered by BURLING, J.
The controversy on this appeal involves the validity of a prior judgment of foreclosure in barring all rights of redemption in lands hereinafter referred to located within the Township of Teaneck in Bergen County.
The present action was instituted by the Township of Teaneck (hereinafter referred to as Teaneck) pursuant to the In Rem Tax Foreclosure Act, L. 1948, c. 96, sec. 1 et seq. (R.S. 54:5-104.29 et seq.), in the Superior Court, Chancery Division, to foreclose certain tax sale certificates of *389 which it was the owner. Upon a determination favorable to the answering defendant Herbert Harvey (hereinafter referred to as Harvey), Township of Teaneck v. Block 427, 33 N.J. Super. 608 (1955), an appeal was taken by Teaneck to the Superior Court, Appellate Division. Prior to hearing there this court certified the cause upon its own motion because of the general public importance of the issues raised.
The properties in question are known as lots 32, 33, 34 and 35 in block lettered "O" on "Map No. 2 of Knickerbocker Park, Teaneck Township, Bergen County, N.J." One Victor Mutt had acquired these properties by deed from the Knickerbocker Realty Company in 1928. On August 3, 1940 Mutt, by general warranty deed, conveyed to Mary Kuusik-Jackson "all those certain lots ... known ... as lots ... (32) ... (33) ... (34) ... (35)... in Block lettered S" (emphasis supplied) on the same map of Knickerbocker Park. Mutt, however, never owned the same numbered lots in Block "S."
In 1942 the properties were sold for tax arrearages and bought in by Teaneck, and in March 1952 the municipality instituted proceedings in the Superior Court, Chancery Division, to bar all rights of redemption therein pursuant to the In Rem Tax Foreclosure Act, supra. The complaint filed in that action named Mary Kuusik-Jackson as "the name of the person or one of the persons who, according to the records in the office of the county recording officer, appears as a transferee or purchaser of title to the land to be affected by the tax foreclosure proceedings," in accordance with R.S. 54:5-104.38(b), subsequently repealed by L. 1953, c. 51, and now embodied in R.R. 4:82-7(a) (2). The properties were designated in accordance with Teaneck's assessment map in the complaint, and the final decree used both the assessment map identification and the Knickerbocker Park development map description. A copy of the notice of foreclosure was mailed to Mary Kuusik-Jackson, but the lands were not redeemed and a final judgment was entered in November 1952 and later recorded in the Bergen County Clerk's office.
One year later Mary Kuusik-Jackson conveyed "lots ... (32) ... (33) ... (34) ... (35) ... in Block lettered O *390... being the same premises ... intended to be ... conveyed to Mary Kuusik-Jackson ... by Victor Mutt ... on August 23, 1940 ..." to Herbert Harvey. (Emphasis supplied.) Thereafter, Harvey, proceeding on the assumption that the prior foreclosure was defective, addressed inquiries to Teaneck requesting he be allowed to redeem the properties. The invitation was declined.
Teaneck instituted the present action on May 13, 1954, seeking to foreclose all rights of redemption in a number of parcels, including the properties in question. Harvey thereupon tendered the amount necessary to redeem but this was refused. In the complaint it was set forth that Victor Mutt was the "name of the person * * * who, according to the records * * * appears as a transferee or purchaser of title to the land to be affected" in accordance with R.R. 4:82-7(a) (2) which had superseded R.S. 54:5-104.38(b). Harvey responded by answer and counterclaim, asserting ownership in the properties and demanding judgment allowing him to redeem. R.R. 4:82-7(f). Teaneck moved for summary judgment, relying upon the prior judgment to preclude the relief sought by Harvey's counterclaim. Harvey moved for judgment on the pleadings on the strength of his belief that the prior judgment was ineffective to vest title in the municipality. Teaneck, as a preliminary tactic, sought to have that portion of its complaint relating to the properties in question dismissed. The trial court denied this motion and the cause proceeded upon the pleadings, affidavits, and a factual stipulation.
The court below held the prior foreclosure to be defective because the "transferee or purchaser" of the property against which foreclosure was sought was not named in the petition. See R.S. 54:5-104.38(b) which was in effect at the time. Harvey, by virtue of the deed executed by Mary Kuusik-Jackson, was found to have acquired a sufficient interest in the lots to enable him to redeem. Judgment was entered accordingly and Teaneck pursued an appeal.
The questions to be determined in the disposition of this appeal are as follows:
*391 1. Did the trial court err in denying Teaneck's motion for dismissal of that part of its complaint relating to the properties in question?
2. Is Harvey barred from attacking the prior foreclosure by virtue of R.S. 54:5-104.67 or the rules of this court?
3. Did R.S. 54:5-104.38 (b), in effect at the time of the prior foreclosure (since repealed and now embodied in R.R. 4:82-7(a) (2), require the naming of the last record owner in the complaint of foreclosure?
ADJECTIVE CONSIDERATIONS
Teaneck first contends that its notice of voluntary dismissal of that portion of the complaint concerning the properties in question should have been granted. R.S. 54:5-104.62 is said to command this result. That section provides that a plaintiff shall have the right to an order of dismissal as to any parcel of land proceeded against under the In Rem Tax Foreclosure Act. The motion was presented after Harvey had filed his counterclaim and the latter insists that R.R. 4:42-1(b) precludes the dismissal unless the counterclaim is susceptible of an independent adjudication. The counterclaim, in essence, seeks judgment entitling Harvey to redeem the properties, and Teaneck maintains an independent adjudication can be had.
Without becoming involved in the procedural niceties urged by the parties, it is sufficient to note the unusual position in which Teaneck finds itself. The objective of the present action, so far as it concerns the properties which Harvey seeks to redeem by his counterclaim, appears to be an attempt by Teaneck to confirm the title acquired by the municipality in the prior foreclosure proceeding. The trial judge commented upon this subject thusly:
"While it has been stated by the township attorney in his brief that the second action was filed for the purpose of correcting the description of the lands in question, an examination of the two complaints discloses that the description of the lands in question in both of them is identical, and it is quite clear that the purpose sought to be achieved by the second action was to correct the error resulting from the failure to name the record owner in the first proceeding." (33 N.J. Super., supra, at page 611)
*392 Teaneck, when confronted with an adversary, sought to retrace its steps and rely solely upon the former decree as a bar to Harvey's attack. R.S. 54:5-104.62 contemplates a dismissal as to property after the complaint has been filed and prior to a final judgment but not as an adversary procedural tactic as sought to be employed by Teaneck.
Teaneck considers R.S. 54:5-104.67 as a barrier to the attack on the prior judgment of foreclosure. That section limits the time within which an application may be entertained to reopen a judgment procured under the act to three months from the date of recording the judgment. Although the period has long since elapsed, Harvey seeks justification for his attack in Bonded Certificate Corp. v. Wildey, 137 N.J. Eq. 564 (E. & A. 1946), where a final decree barring rights of redemption was reopened beyond the statutory limitation because of the "wholly insufficient inquiry" in determining the parties having an interest in the redemptive right. We do not consider that adjudication in point. It did not concern proceedings pursuant to the In Rem Tax Foreclosure Act. Nor is it necessary to consider the effect of R.S. 54:5-104.67 in the light of Winberry v. Salisbury, 5 N.J. 240 (1950), and R.R. 4:62-2, which provides for relief from final judgments. Nevertheless, we conceive Teaneck not to be in a position to urge the statutory limitation. Where a party voluntarily opens an investigation of matters which he might claim to be precluded by a prior judgment he is held to have waived his right to assert the benefit of the former adjudication and the case will be determined without regard therefor. Cooley v. Snake River Dist. Improvement Co., 78 Or. 384, 152 P. 1190 (Sup. Ct. 1915); Dillard v. McKnight, 34 Cal.2d 209, 209 P.2d 387, 11 A.L.R.2d 835 (Sup. Ct. 1949). See 50 C.J.S., Judgments, § 597, p. 15.
MERITS
The controversy has raised important questions relating to the In Rem Tax Foreclosure Act which were not previously *393 considered by this court in City of Newark v. Yeskel, 5 N.J. 313 (1950), wherein the constitutionality of the act was upheld.
R.S. 54:5-104.38, which was in effect when the prior foreclosure action was instituted, provided inter alia:
"The petition shall set forth:
a. The tax foreclosure list
b. The name of the person or one of the persons who, according to the records in the office of the county recording officer, appears as a transferee or purchaser of title to the land to be affected by the tax foreclosure proceedings."
Teaneck named Mary Kuusik-Jackson as the person appearing as a transferee or purchaser of the title in the complaint of the prior foreclosure rather than Victor Mutt, and Harvey contends this singular act was sufficient to infect the proceeding to the extent that Teaneck failed to acquire a fee simple absolute in the properties. His argument is that the statute required the record owner of the property to be set forth in the complaint; that Victor Mutt was and still is the record owner of Lots 32-35 in block lettered "O" on Map No. 2 of Knickerbocker Park; that all requirements for the benefit of the owner under the act are to be strictly followed; that the complaint is one of the means by which a person interested in the land can obtain notice of the impending foreclosure.
The foundation of this argument is, of course, that the statute required the naming of the record owner. Teaneck joins issue on this narrow ground by emphasizing the absence of any express reference in the entire act to the naming of the "record owner" as contended for by Harvey and that it satisfied the statute requiring that "a person appearing as a transferee or purchaser" be named in the complaint when it designated Mary Kuusik-Jackson.
The purpose of the statutory provision must be ascertained to determine this question. (In this regard, the provision of the act in force at the time of the prior foreclosure employed the term "petition." That section has since been *394 amended, L. 1953, c. 51, and the term "complaint" substituted therefor. R.R. 4:82-7(a) (2). For purposes of this opinion we must look to the prior statute but we choose to use the term "complaint.") The complaint is to serve several purposes. R.S. 54:5-104.41 directs that copies of the complaint are to be filed with the municipal tax collector, the county recording officer, and the State Attorney-General. The copy filed with the Attorney-General constitutes notice of the in rem proceeding to the State and all agencies and political subdivisions thereof. R.S. 54:5-104.43. The county recording officer is required to index the "proceedings" in the name of all persons appearing in the complaint and in the tax foreclosure list in the same index used for notices of lis pendens, and the filing of the complaint is to be noted in the margin of each tax sale certificate referred to in the complaint. R.S. 54:5-104.44. Other statutory provisions contemplate the recordation of the tax sale certificate in a mortgage index and a separate block index. R.S. 54:5-50. See R.S. 54:5-51. Cf. R.S. 54:5-104.32.
The effectiveness of the methods designed to apprise the owner of the lands of the impending foreclosure is grounded in the composition of the "tax foreclosure list." This list is prepared and certified by the tax collector and is to include, among other items, "the name of the person appearing as the owner of the land to be affected by the foreclosure proceedings as it appears on the last tax duplicate of the municipality * * *." R.S. 54:5-104.35 (emphasis supplied). The tax duplicate is a true copy of the assessment list, R.S. 54:4-35, the composition thereof being the duty of the assessor. R.S. 54:4-24. The assessor is required to "ascertain the names of the owners of all real property situate in his taxing district * * *," R.S. 54:4-23. It is contemplated that the tax rolls will be currently maintained to the extent possible to reflect the present state of interest in any property. New owners may present their evidence of title to the assessor for proper notation on the tax rolls, R.S. 54:4-29, but if they have not done so before recording such title or interest, the duty of informing the assessor is upon *395 the office where the instrument is filed for record. R.S. 54:4-30, 31. Thus, to the extent that current ownership of interest in the lands to be affected by the foreclosure is reflected in the last tax duplicate, it will appear in the "tax foreclosure list" required by the In Rem Tax Foreclosure Act.
The act provides for notice of the proceedings by publication and posting, which is mandatory, and mailing, which is permissive. City of Newark v. Yeskel, supra. The core of this notice is the "tax foreclosure list" and not the complaint. The newspaper publication required by R.S. 54:5-104.46, 104.47 (now required by R.R. 4:82-7(b)) must include a copy of the "tax foreclosure list"; R.S. 54:5-104.50 required posting of a copy of the newspaper notice in the offices of the tax collector and county recording officer and in three other "conspicuous places" within the taxing district (now required by R.R. 4:82-7(d)); R.S. 54:5-104.49 (now contained in R.R. 4:82-7(c)) provided that a copy of the notice might be mailed "to each person whose name appears as an owner in said tax foreclosure list" and addressed to such owner as the same may appear on the last tax duplicate.
The complaint, on the other hand, does not fulfill this function. Indeed, it is quite possible that it would reflect a later grantee of the property than the tax foreclosure list for the complaint may be drawn subsequent to the composition of the last tax duplicate. This statement, of course, assumes that the person to be named in the complaint is the person who appears to be the last transferee or purchaser of the title, and unless that meaning is attributed to R.S. 54:104.38(b) (now embodied in R.R. 4:82-7(a) (2)) there is no reason for the requirement. It has been previously noted that upon filing the complaint with the county recording officer the proceeding is indexed in the lis pendens file in the name of all persons appearing in the complaint and in the tax foreclosure list. R.S. 54:5-104.44. (The complaint itself is to contain a copy of the tax foreclosure list, R.S. 54:5-104.38, now embodied in R.R. 4:82-7). If the complaint was not intended to list any subsequent parties in interest of the lands subject to foreclosure than those *396 named in the tax foreclosure list it would be a meaningless procedure to consult the records to gather the necessary information to be copied into the complaint under the requirement of R.S. 54:5-104.38(b), (now embodied in R.R. 4:82-7(a) (2)). The conclusion must be that an important purpose of the requirement is to invoke the operation of lis pendens against any subsequent grantee of the person or persons having a right of redemption in the property subject to foreclosure. R.S. 54:5-104.44. Therefore, it must be resolved that the personal designation in the complaint is to be the person or one of the persons who appears to be the last transferee or purchaser of the title to the land as that fact is reflected in the office of the county recording officer.
This determination does not aid Harvey. The requirement is to name the person appearing as such purchaser or transferee. Mary Kuusik-Jackson appeared to be that person, and Harvey, who derives his title from Mary Kuusik-Jackson, would not deny this. His express intention is to seek reformation of the deed executed by Victor Mutt to Mary Kuusik-Jackson. Just as the latter person appeared to be a purchaser or transferee of the subject properties to Harvey, it also appeared to Teaneck when the complaint in the prior foreclosure was drawn. If Harvey had been of a different opinion he would have negotiated with Mutt for the transfer.
Nevertheless, Harvey would urge that Teaneck failed to render a compliance with the statute. As a matter of methodical precaution it may be conceded that Teaneck might have chosen to name Victor Mutt in addition to Mary Kuusik-Jackson in the complaint. But to the extent that Mary Kuusik-Jackson appeared to be the last transferee or purchaser of the property, it cannot be said that Teaneck failed to render the duty owed to that person as defined by the statute. On the contrary, it has complied with the spirit of the statute to a greater extent than Harvey desires to recognize. Mary Kuusik-Jackson was named in the complaint which was filed with the county recorder. She possessed the beneficial interest in the property and was entitled to *397 redeem. Notice of the proceedings was mailed to her at her last known address and she failed to redeem. Thereafter final judgment was entered, which was sufficient to divest her of any title in the property. R.S. 54:5-104.64(a). Harvey obtained nothing as grantee of Mary Kuusik-Jackson.
Harvey contends that the courts should overturn tax foreclosures upon the least flaw in the proceedings and cites Merewood, Inc., v. Denshaw, 139 N.J. Eq. 182 (Ch. 1947), to his support. Compliance with the statutory proceeding is, of course, in order, but this was accomplished. Furthermore, the litigation in the Merewood case, supra, related to the non-forensic procedure of foreclosure of tax sale certificates. It was not an in rem proceeding.
In 1945 the Legislature created the Commission on State Tax Policy, L. 1945, c. 157. The first report of the commission was rendered in 1946 and a portion thereof was devoted to consideration of tax lien foreclosure. First Report of the Commission on State Tax Policy, Part II, p. 41 (1946). The commission recognized the need for remedial legislation to reduce the excessive costs of foreclosing tax delinquent property and the desirability in rendering a marketable title to the purchaser who seeks to return such property to economic utility. Commenting upon the principle of in rem foreclosure to achieve these objectives it was said:
"The principle here, applicable alike to all persons, including minors and mental incompetents, is that the sovereignty of the State confers power and responsibility to satisfy lawful claims for the support of government which are a charge upon property located within, and enjoying the protection of, the State. While rare cases of individual hardship might conceivably arise through divestiture of property interest by an action in rem, this is outweighed by the general public interest and the interest of other paying taxpayers in the liquidation of delinquent taxes and the clearance of the tax rolls of "dead wood." The allowance of a reasonable time to act, at least four year under the Commission's proposal, is deemed more than adequate protection of any individual interests in vacant land." (First Report, supra, at p. 47.)
Remedial legislation soon followed in the enactment of L. 1947, c. 333. This act, however, represented a compromised *398 philosophy between the advocates of the in rem procedure and the remaining adherents of the quasi in rem foreclosure. It was repealed in toto by section 41 of the In Rem Tax Foreclosure Act, L. 1948, c. 96. The latter act represents a purely in rem foreclosure; no personal judgment shall be entered. R.S. 54:5-104.33. The act is applicable to tax sale certificates held by municipalities, R.S. 54:5-104.31, 104.32, and can only be invoked following four years of non-payment of general land taxes, and two years after the date of the tax sale, R.S. 54:5-104.34.
The inordinate burden placed upon municipalities which resulted in rendering lands unproductive and unmarketable has been removed, and the property owner himself is to shoulder certain responsibilities in order that his interests may be protected. His attention is to be directed to any one of a number of vehicles by which such notice is required to be imparted by the municipality, namely, newspaper publication, the notices posted in the tax collector's office and in the office of the county recorder, and within the taxing district itself. The legislation providing for the assessment and taxation of real property is notice that default in payment of taxes will lead to a sale and foreclosure of the property interest.
In City of Newark v. Yeskel, supra, 5 N.J., at page 327, we said:
"A consideration of the notice prescribed by L. 1948, c. 96 (N.J.S.A. 54:5-104.29 et seq.) in the light of the prescribed notice and opportunities for hearing and appeal incident to the assessment of the tax, and the prescribed notices incident to the tax sale itself, result in the inescapable conclusion that the statute under attack clearly meets the requirements of constitutional due process as delineated in the numerous decisions of the Supreme Court of the United States and of the various state courts in which the question has been passed upon."
The proceeding is in rem and the party in interest cannot complain if his name does not appear in the complaint. R.S. 54:5-104.42, in effect at the prior foreclosure (otherwise amended by L. 1953, c. 51) provided:
*399 "The copy of the petition filed in the office of the county recording officer and the publication of the notice as hereinafter provided shall be notice to the world including all persons claiming any right, title, interest in or lien upon the land sought to be affected by said petition, whether the names of said persons appear in said petition or not, of the institution of said foreclosure proceeding In Rem, * * *." (Italics supplied)
We therefore decide that Harvey cannot succeed in his counterclaim to effect redemption because he is not the owner of the properties nor has he any interest therein which would enable him to redeem. The prior foreclosure was valid because there was a compliance with R.S. 54:5-104.38(b) (now embodied in R.R. 4:82-7(a) (2)). The determination below is reversed. The cause will be remanded for dismissal of Harvey's counterclaim and for further entry of judgment in favor of Teaneck in accordance with this opinion.
HEHER, J., concurring in result.
For reversal Chief Justice VANDERBILT. and Justices HEHER, OLIPHANT, WACHENFELD, BURLING, JACOBS and BRENNAN 7.
For affirmance None.
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776 F.2d 1061
Siprellev.Department of Transp., F.A.A.
85-1021
United States Court of Appeals,Federal Circuit.
7/26/85
MSPB, 18 M.S.P.R. 718
Affirmed
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491 S.W.2d 152 (1973)
Enrique Carrera LERMA, Appellant,
v.
The STATE of Texas, Appellee.
No. 45534.
Court of Criminal Appeals of Texas.
February 28, 1973.
Dunnam & Dunnam, Inc. by Ted Dunnam, Port Lavaca, for appellant.
Robert Seerden, Dist. Atty., Knute L. Dietze, Asst. Dist. Atty., Victoria, Jim D. Vollers, State's Atty., and Robert A. Huttash, *153 Asst. State's Atty., Austin, for the State.
OPINION
ODOM, Judge.
This appeal is taken from a conviction for the offense of possession of a narcotic drug, to-wit: heroin. Punishment was assessed at 20 years.
Two grounds of error are urged. They both concern probable cause to arrest and search so they will be discussed together.
The record reflects that at approximately 1:30 A. M. on the morning of July 1, 1971, while on routine investigation, Officers Bellis and Ramirez, of the Victoria Police Department, were parked in an unmarked car across the street from the Tiki Lounge in Victoria. From approximately 30 feet away, the officers observed appellant, in company with a person named Rubio, walk out of the lounge onto the sidewalk.
Officer Bellis testified that he had personal knowledge that appellant was a user of heroin and that the Tiki Lounge was a place frequented by drug addicts. As appellant walked out of the lounge he looked "cautiously from side to side," "checking the street." Bellis watched appellant and Rubio through binoculars, and observed Rubio reach into his shirt pocket and pull therefrom "a sum of money." Appellant, still looking cautiously over his shoulder, took a "small paper packet" from his pants pocket. Just as appellant began to pass the packet to Rubio, and as Rubio began to pass the money to appellant, Officer Bellis turned to Ramirez and said, "It's time for action. I believe that there's a transaction taking place."
Officer Bellis "drew his pistol," jumped out of his car and walked quickly toward appellant and Rubio. Officer Ramirez did not draw his pistol, but followed closely behind Bellis as they approached the two men. Bellis approached them from one side of a parked automobile and Ramirez approached them from the other side.
Appellant and Rubio "apparently" saw the officers coming. Rubio quickly wadded up the money he had in his hand and put it in his shirt pocket. Appellant placed his hand to the back of his neck, as if to hide whatever he had in his hand under his shirt collar.
Officer Bellis informed the men that he was a police officer and that he had reason to believe a narcotic sale was being made. He told the suspects that they were under arrest and began to pat down appellant's outer clothing for weapons. Finding no weapon, Bellis then searched appellant's shirt collar. As he pulled appellant's collar, a "small piece of tin foil," containing the heroin in question, fell to the pavement.
"The basic purpose of the Fourth Amendment is to safeguard the privacy and security of individuals against arbitrary invasions by government officials." Brown v. State, Tex.Cr.App., 481 S.W.2d 106. See, e. g. Berger v. New York, 388 U.S. 41, 87 S. Ct. 1873, 18 L. Ed. 2d 1040 (1967); Haynes v. State, Tex.Cr.App., 475 S.W.2d 739.
Unquestionably, appellant was entitled to the protection of the Fourth Amendment as he stood on a public sidewalk in front of an open lounge in Victoria. Therefore, we are here concerned with whether, under the circumstances of this case, appellant's right to personal security was violated by an unreasonable search and seizure.
In order for a warrantless arrest or search to be justified the existence of probable cause must be shown at the time the arrest or search was made and the existence of circumstances which made the procuring of a warrant impracticable. Chimel v. California, 395 U.S. 752, 89 S. Ct. 2034, 23 L. Ed. 2d 658 (1969); Carroll v. United States, 267 U.S. 132, 45 S. Ct. 280, 69 L. Ed. 543; Brown v. State, supra; *154 Stoddard v. State, Tex.Cr.App., 475 S.W.2d 744. The question of whether probable cause exists at the time of the arrest or search can only be decided in terms of the concrete factual situation presented by each individual case and the test is whether, at the moment of arrest, the facts and circumstances within the knowledge of the arresting officer and of which he has reasonably trustworthy information would warrant a reasonable and prudent man in believing that a particular person has committed or is committing a crime. Beck v. Ohio, 379 U.S. 89, 85 S. Ct. 223, 13 L. Ed. 2d 142 (1964); Henry v. United States, 361 U.S. 98, 80 S. Ct. 168, 4 L. Ed. 2d 134 (1959); Brown v. State, supra.
The facts relevant to determining whether probable cause existed for the arrest in the instant case are: (1) Officer Bellis had personal knowledge that appellant was a user of heroin; (2) that the Tiki Lounge was frequented by narcotic addicts; (3) that appellant looked "cautiously from side to side" as he walked out of the lounge; (4) that the person with appellant pulled a sum of money from his shirt pocket and was about to give the money to appellant; (5) that appellant reached into his pocket and pulled out what appeared to be a "small paper packet of somekind" and was about to hand it to the other person; and, (6) as the officers approached, appellant reached up and placed the packet behind his shirt collar in an attempt to conceal it.
We are not without precedential guidance on the particular facts in this case. The record here in relevant respects fairly duplicates that considered by this court in McLeod v. State, Tex.Cr.App., 450 S.W.2d 321. There, as here, the legality of a warrantless arrest and search was challenged. Three police officers saw McLeod, whom they knew to be a heroin addict, standing inside a washateria and looking out the window.
"... They placed him under surveillance and saw him go to an automobile that drove up, lean in and place his hand inside the window and make an exchange with the driver of the automobile. Appellant then went toward the washateria to a pickup truck, got in on the passenger side and closed the door and another man entered on the driver's side. As Officer Bell approached, appellant put a folded paper inside his mouth. Officer Bell further testified that the paper contained heroin, because the heroin sold on the drug market in Houston came in that type of paper, and he had seen many such papers. He also testified that he was reassured that appellant was committing a felony when he attempted to swallow the paper, and then decided to arrest him." 450 S.W.2d at 322.
In deciding that the officers had probable cause to believe an offense was being committed in their presence, and therefore holding that the arrest and search incident thereto were authorized under Article 14.01, Section (b), Vernon's Ann.C.C.P.,[1] this court pointed specifically to the following facts: (1) the officers knew McLeod to be a narcotic addict; (2) the officers saw an exchange; and (3) the officer saw McLeod try to swallow a folded paper like that used for the sale of heroin.
The distinction between McLeod and the case now before us is that in McLeod the officers saw an actual exchange whereas here the officers saw an attempted exchange. The distinction is without a difference.
The fact that Officer Bellis saw appellant attempting to exchange the small packet for a sum of money distinguishes this case from Sibron v. New York, 392 U.S. 40, 88 S. Ct. 1889, 20 L. Ed. 2d 917, on which appellant relies. We conclude that *155 the evidence shows that Officer Bellis had probable cause to believe that an offense was being committed in his presence. The arrest and subsequent search were reasonable under the Fourth Amendment and were authorized by Article 14.01, supra. McLeod v. State, supra. See generally, Brown v. State, supra.
There being no reversible error, the judgment is affirmed.
NOTES
[1] Article 14.01, Section (b), V.A.C.C.P., provides: "A peace officer may arrest an offender without a warrant for any offense committed in his presence or within his view."
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179 Pa. Super. 610 (1955)
Waterbor, Inc.
v.
Livingood, Appellant.
Superior Court of Pennsylvania.
Argued September 27, 1955.
November 16, 1955.
*611 Before RHODES, P.J., HIRT, ROSS, GUNTHER, WRIGHT, WOODSIDE, and ERVIN, JJ.
C.L. Cushmore, Jr., with him Thomas Raeburn White, and White, Williams & Scott, for appellant.
Raymond K. Hess, with him Moss, Rieser & Bingaman, for appellee.
Joseph L. Cohen, Assistant Deputy Attorney General, Edward L. Springer, Deputy Attorney General, and Herbert B. Cohen, Attorney General, for Commonwealth of Pennsylvania, amicus curiae.
*612 OPINION BY HIRT, J., November 16, 1955:
Plaintiff is in the business of supplying passenger automobiles and trucks to approved applicants on a rental basis. As a member of the Hertz System of car rental organizations plaintiff uses three apparently standardized forms of rental contracts: One form is used for the lease of a motor vehicle for a short period not exceeding 30 days. A second form is employed where the rental period is a specific number of months or years. The third type, in issue here, is used when the rental of the motor vehicle is for an indeterminate period. The vehicles licensed under the first and second classes of contracts are standard models of popular makes of cars selected by plaintiff as best suited to this branch of its business. The motor vehicles necessary to supply the demand for these classes of service are bought outright by plaintiff and constitute a pool from which they are drawn for rental to various customers in succession. The subject matter of a contract of the third class is a vehicle bought by plaintiff on the customer's specifications as to manufacture and model or even specific design. Contracts 1 and 2 provide for the return of the vehicle to the plaintiff at the end of the rental term. Form 3, although it purports to be a "contract of leasing only" provides for the purchase of the vehicle by the lessee on certain contingencies.
The vehicle in the present appeal is an Oldsmobile "Holiday" sedan purchased by the plaintiff on defendant's specifications and leased to him on February 9, 1953. In the contract of the third type the plaintiff leased the vehicle to the defendant for a term beginning with the date of delivery to him "and continuing indefinitely thereafter until terminated as in this agreement provided." The services assumed by plaintiff under the terms of the lease were all inclusive. Among them the plaintiff as lessor undertook to furnish complete *613 garage service for the leased automobile including washing, polishing, oiling, greasing, periodic inspection, and storage. The lessor also agreed to furnish necessary license tags and to make necessary repairs and to keep the vehicle in good running condition throughout the term of the lease. It also was obliged to supply gasoline, oil and lubricants, and all necessary tires and tubes. The lessor was bound to provide a substitute vehicle while the leased car was out of service for repair or any other reason. Lessor also agreed to maintain property and public liability insurance, and in the contract the defendant as lessee was relieved from liability from collision or other damage to the leased vehicle in excess of $50. For these services the "Fixed Rental Charge" which defendant agreed to pay was $27 per week; to this there was an additional charge of 4 cents per mile on the basis of the number of miles the vehicle was driven. The contract by its terms gave either party the right of cancellation on any anniversary of the date on which the vehicle entered the lessee's service. And it provided for the sale of the vehicle by lessor to the lessee on the happening of any one of three contingencies: (1) In the event that the lessee should cancel the lease at the end of any yearly term the lessor agreed to sell and the lessee agreed to buy the vehicle on the basis of a formula for computing the price set forth in the lease; (2) on the termination of the contract at the end of any year by the lessor the lessee was given the option to buy at a price as above computed; (3) On the default of lessee in any of the payments required of him under the agreement the lessor was given the option of terminating the agreement and the lessee was given the right to buy the car.
The defendant paid the rentals reserved in the lease up to August 29, 1953, and then defaulted in all subsequent *614 payments. Defendant surrendered the car to the plaintiff on September 19, 1953. Thereupon plaintiff gave notice to defendant of the termination of the lease and subsequently, when defendant refused to buy the car, brought this action. The damages sought therein were measured, under the terms of the contract, by the original cost price to plaintiff of the automobile, less depreciation credits in an amount agreed upon in the lease and less also $300 which had been deposited by defendant with plaintiff as security for the performance of his obligation under the contract. Defendant was also given credit for the market value of the vehicle when delivered to plaintiff. By application of the above formula $460.08 was found to be the measure of plaintiff's loss and judgment was entered against the defendant in that sum.
The judgment is not questioned as to amount. But it is contended that defendant is not liable at all, on the ground that the contract is unenforcible under § 35 of the Motor Vehicle Sales Finance Act of June 28, 1947, P.L. 1110, 69 PS § 635, because plaintiff was not licensed as an installment seller of motor vehicles in accordance with the provisions of the Act. 69 PS § 604, et seq.
The branch of business conducted on any type of contract by the plaintiff does not bring it within the spirit of the Motor Vehicle Sales Finance Act. In interpreting this Act it is important to consider its preamble. Cf. Statutory Construction Act of May 28, 1937, P.L. 1019, art. IV, § 54, 46 PS § 554. In the Findings and Declaration of Policy which constitute the preamble to the 1947 Act it is stated that the Act is designed "to bring under the supervision of the Commonwealth all persons engaged in the business of extending credit in conjunction with the installment sale of motor vehicles" and to insure "honest and efficient *615 consumer credit service for installment purchasers . . ." These and like statements in the preamble indicate that the Act is directed at the correction of abuses in installment sales under "fictional instruments" in the form of bailment leases. Plaintiff had bought 185 motor vehicles passenger cars and trucks on its customer's specifications which it had rented for indeterminate periods on form 3 leases. In the normal course of this branch of plaintiff's business, when, from use with the lapse of time, the vehicle could no longer be maintained in the condition, mechanically or otherwise, necessary for the high quality of service contemplated by the lease, the plaintiff bought a new car of the same kind which it delivered to the lessee on the same terms. The old car was traded in by the plaintiff to apply on the purchase price of the new. And it is significant that, from plaintiff's actual experience, sales to the lessees result in only from 2 to 3 percent of the transactions where vehicles are rented on this basis. It is apparent, as appellee suggests, from the findings and declarations of the preamble that the Act was directed at excessive interest rates and oppressive transactions in the financing of the sales of motor vehicles. Consumer credit in installment sales of motor vehicles is the target of the statute. We agree that "This is a far cry from lease service transactions that existed between the Plaintiff and Defendant."
It is equally clear that the lease in the present case on form 3 does not offend against the letter of the Act. A license under § 4 of the Act is required from one "engaged . . . in the business of an installment seller of motor vehicles under installment sale contracts." 69 PS § 604. And certainly the present contract between the parties does not come within the definition of § 3, sub-section 10, of the Act. It is there made clear that the Act covers contracts only "under *616 which part or all of the price is payable in two or more scheduled payments." The lease here involved is not an intallment contract within the above definition or in any other sense. When a sale results at the option of a party, who is entitled to elect (and then only does the lease become an agreement of sale), the specified consideration for the purchase is one cash payment.
The 1947 Act provides that one engaged in Pennsylvania as an installment seller of automobiles without having obtained a license shall be guilty of a misdemeanor and shall be subject to both fine and imprisonment. Since this is a penal statute if there were any doubt as to the validity of the conclusion of the lower court in construing the Act, it would be dispelled by the rule of strict construction. Statutory Construction Act, supra, art. IV, § 58, 46 PS § 558. La Brum et al. v. Com. Title Co., 358 Pa. 239, 56 A.2d 246.
The case was properly disposed of in the court below.
Judgment affirmed.
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681 S.W.2d 88 (1984)
Jose Jesus MEJIA and Jose Refugio Mejia, Appellants,
v.
The STATE of Texas, Appellee.
Nos. C14-83-498-CR, C14-83-499-CR.
Court of Appeals of Texas, Houston (14th Dist.).
February 23, 1984.
Rehearing Denied March 22, 1984.
Discretionary Review Refused October 31, 1984.
*89 Bradford Yock, Houston, for appellants.
Calvin Hartmann, Houston, for appellee.
Before JUNELL, MURPHY and SEARS, JJ.
JUNELL, Justice.
Each of the appellants was charged with the misdemeanor offense of intentionally and knowingly causing animals, namely game roosters, to fight in violation of TEX. PENAL CODE ANN. § 42.11(a)(6) (Vernon 1982).
Appellants filed identical applications for writ of habeas corpus for pre-conviction relief, claiming there is no valid statute under which they may be charged. The trial court issued each writ and then held one hearing on both applications. Following the hearing the court denied the requested relief and refused to discharge appellants from prosecution. Both appellants appeal from the trial court's ruling, and their appeals have been consolidated for our disposition. We affirm.
Appellants present two grounds of error. The first ground contends there was error in the trial court's refusal to discharge the appellants as there was allegedly no valid law under which they could be held.
Appellants make two arguments under ground of error one. First, they urge that neither Sections 42.11(a) nor 42.11(b) was intended or is sufficient to prohibit cockfighting or causing game roosters to fight.
Appellants argue that the inclusion of TEX.PENAL CODE art. 613 (repealed 1974) in the 1925 version of the Penal Code showed a prior distinction between animals and fowls, a distinction they believe is still continued by the legislature today. A portion of that 1925 article reads thus:
Any person who shall match or be concerned in matching any cock fight or who shall match or be concerned in matching or causing a fight between any animals or fowls, ... shall be fined not less than ten nor more than one hundred dollars.
Two years later the Texas Court of Criminal Appeals in Cinadr v. State, 108 Tex. Crim. 147, 300 S.W. 64 (1927), made this statement in a case on needlessly killing an animal: "There are statutes in this state expressly sanctioning the killing of wild animals and fowls (which are likewise animals) for sport...." (emphasis added). It would appear that, even under the former penal code, fowls were deemed animals.
Likewise, we see the recent revision of the penal code as consolidating several previous statutes protecting animals, e.g. articles 613 (matching cock fight), 1373 (maiming, wounding or disfiguring domesticated animals), 1373a (killing certain domestic animal), *90 1374 (cruelty to animals), 1375 (cruelty to impounded animal), 1376 (cruelty to fowls and poultry) and 1377a (killing, injuring, or molesting Antwerp Messenger or homing pigeons).
We view the new cruelty to animals statute as a concise consolidation of previous scattered statutes on cruelty to animals in general and of certain types of animals in particular. This consolidation was a part of the general scheme of revision. The new code reduced over 1700 articles to about 230 sections, slashed over 70 articles on theft to a workable 10, and simplified 57 articles on official misconduct to only 3 new sections.
Appellants also call our attention to a law recently enacted: Dog Fighting Act, ch. 305, 1983 TEX.GEN.LAWS 1610. They propose that the passage of that act, now Section 42.111 of TEX.PENAL CODE ANN., proves that the legislature has recognized the vagueness of Sec. 42.11. However, as appellee points out, the recent enactment covers many items other than just causing one dog to fight with another; it also includes, among other activities, the following: (1) participating in the earnings of a facility used for dog fighting, (2) enhancement of penalties for specified activities connected with dog fighting, (3) compulsion of testimony from certain people, and (4) defenses peculiar to fights between dogs.
Appellants also contend there is no valid law under which they could be prosecuted as Sec. 42.11 is unconstitutionally vague and violates due process under TEX. CONST. art. I, § 19 and under U.S. CONST. amends. V and XIV. Appellants remind this court that no man should be held criminally responsible for conduct which he cannot reasonably understand to be proscribed. See Palmer v. City of Euclid, 402 U.S. 544, 91 S. Ct. 1563, 29 L. Ed. 2d 98 (1971). Even though we agree the above concept is well established, we find ourselves unable to take the next step they suggest and hold that the term "animal" as defined in TEX.PENAL CODE ANN. § 42.11 or the phrase "causing one animal to fight with another" contained therein is unconstitutionally vague.
We find the wording of TEX.PENAL CODE ANN. § 42.11 (Vernon 1982) to be quite clear. We quote in pertinent part:
(a) A person commits an offense if he intentionally or knowingly:
(1) tortures or seriously overworks an animal;
(2) fails unreasonably to provide necessary food, care, or shelter for an animal in his custody;
(3) abandons unreasonably an animal in his custody;
(4) transports or confines an animal in a cruel manner;
(5) kills, injures, or administers poison to an animal, other than cattle, horses, sheep, swine, or goats, belonging to another without legal authority or the owner's effective consent; or
(6) causes one animal to fight with another.
. . . . .
The statute also includes the following definition of "animal":
For purposes of this section, "animal" means a domesticated living creature and wild living creature previously captured. "Animal" does not include an uncaptured wild creature or a wild creature whose capture was accomplished by conduct at issue under this section.
For guidance in code construction we turn to TEX.REV.CIV.STAT.ANN. art. 5429b-2, §§ 3.01, 3.03 (Vernon 1982). Those sections point out that in enacting a statute, it is presumed a "just and reasonable result is intended" and that, in construing a statute, a court may consider such factors as the object sought to be attained, the circumstances under which it was enacted, and the legislative history. Id. The Committee Foreword to the 1970 proposed penal code pamphlet listed as the one of its major objectives consolidating, simplifying, and clarifying the substantive law of crimes. TEX.PENAL CODE ANN., XXIV, interp. commentary (Vernon 1974).
We overrule the first ground of error.
*91 In ground of error number two, appellants argue that the trial court erred in refusing to consider the testimony of their witness, Dr. Charles McGaghy, a sociology professor who had done specific research in the area of cockfighting. During the hearing on the Writ of Habeas Corpus for preconviction relief regarding the constitutionality of the statute, appellants wanted to offer McGaghy's testimony into evidence. Upon inquiry the court learned that the purpose of McGaghy's testimony would be to show that cockfighting is not generally thought of as an illegal activity.
The trial judge denied the request to have McGaghy's testimony entered into evidence but granted appellants' request to perfect a bill of exceptions in order to make his testimony a part of the record.
After examining the court reporter's notes of that testimony, we agree with the trial court's decision that such testimony was irrelevant. Even though a bill of exceptions may be properly preserved for appellate review, it must still plainly demonstrate the error of which it complains. See Herrin v. State, 525 S.W.2d 27 (Tex. Crim.App.1975) and 5 TEX.JUR. 3rd Appellate Review § 395 (1980). In his testimony McGaghy traced the history of cockfighting from its beginning 3000 years ago in India. He stated that its illegality has been a recent phenomenon. He also stated that most of the legislative enactments in the United States on cruelty to animals in this century specify cocks.
Appellants expand this line of reasoning in their briefs by quoting statutes from twenty-eight other states which specifically use the word "cockfighting" despite the existence of general cruelty to animal prohibitions in their state statutes. While we find the results of appellants' research edifying, we do not feel that it is material to a determination of the case at bar.
We overrule appellants' second ground of error.
The order of the trial court denying each appellant the requested discharge from further prosecution is affirmed.
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994 F. Supp. 856 (1998)
Wayne Thomas AHLERS and Nina Ahlers, Plaintiffs,
v.
Ronald J. SCHEBIL, Mark Ptaszek, Jerry Clayton, Roy Mays, Ed Toth, and Ernie Milligan, Individually and in their Official Capacities as employees of the Washtenaw County Sheriff's Department, and Gary Parsons, Individually and in his Official Capacity as a Detective Sergeant for the Michigan State Police, Defendants.
No. 96-CV-73373-DT.
United States District Court, E.D. Michigan, Southern Division.
February 18, 1998.
*857 *858 Juan A. Mateo, Jr., Detroit, MI, for plaintiffs.
Ian James Reach, Ann Arbor, Mark E. Donnelly, Lansing, MI, for defendants.
OPINION AND ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT
ROSEN, District Judge.
I. INTRODUCTION
On July 25, 1996, Plaintiffs Wayne and Nina Ahlers filed a Complaint alleging that Defendants Ronald J. Schebil, Mark Ptaszek, Jerry Clayton, Roy Mays, Ed Toth, and Ernie Milligan, as officers with the Washtenaw County Sheriff's Department (the "Washtenaw County Defendants"), and Gary Parsons, as a Detective Sergeant for the Michigan State Police, violated Mr. Ahlers constitutional rights and committed various torts against him in the course of investigating him for sexually assaulting a prisoner while he was serving as an officer with the Washtenaw County Sheriff's Department.
The Court previously denied without prejudice the Washtenaw County Defendants' Motion for Summary Judgment regarding qualified immunity and the state tort claims. Ahlers v. Schebil, 966 F. Supp. 518 (E.D.Mich. 1997). This matter is currently before the Court on the Washtenaw County Defendants Renewed Motion for Summary Judgment, and Defendant Parsons' Motion for Summary Judgment. Having reviewed the parties' briefs and conducted a hearing on this matter, the Court is now prepared to rule. This Opinion and Order sets forth the Court's ruling.
II. FACTUAL BACKGROUND
A. The Alleged Sexual Assault.
On August 17, 1995, Ms. Carrie Ann Stiltner, a known prostitute and crack addict, (Plaintiffs' Response, Ex. D, Clayton Deposition, p. 55), arrived at the 14-B District Court with 8 other prisoners, whereupon she advised one of the transport officers, Larry Clemons, that she had performed oral sex on a male officer the night before in exchange for his promise to get her some food. (Defendants' Motion for Summary Judgment, Ex. A).[1] Given the serious nature of this charge, Clemons promptly filed a report and alerted his superior, Det. Sgt. Roy Mays. (Id.) Later that same day, Mays and Officer Ed Toth interviewed Ms. Stiltner about the alleged incident. (Defendants' Ex. B).
In this taped interview, Stiltner described the following events. First, on the evening of August 16, 1995, Stiltner was arrested for prostitution and brought to the Washtenaw County Jail. (Defendants' Ex. A, p. 1 and Ex. B, p. 5). The officer who booked her that evening/early morning was Deputy Wayne Ahlers, the Plaintiff. Apparently, Stiltner knew Ahlers from an August 3, 1995 solicitation arrest where, during the booking process, Ahlers asked her several times, out of curiosity, how much she charged for her acts of prostitution. (Defendants' Ex. B, p. 3). It was this incident that Stiltner claimed Ahlers was referring to when, during her August 17, *859 1995 booking, he allegedly told her that they had "some unfinished business" and asked her if she remembered what they had talked about the last time. (Id. at pp. 3-4).
Next, Ahlers booked her, fingerprinted her, asked her some routine questions, and entered some booking information into a computer. (Id. at pp. 4-5). Thereafter, Ahlers asked her how much she charged for oral sex and implied that he used other prostitutes for oral sex. (Id. at p. 5). Subsequently, Stiltner was left alone in the holding cell. (Id.) However, Ahlers eventually entered the holding cell either through the open door or because Stiltner opened the door after he had knocked. (Id.); (See also Plaintiffs' Ex. D, Clayton Deposition, p. 92-94). Then, Stiltner repeated an earlier request for some food because she was hungry and Ahlers replied they had some "unfinished business." (Defendants' Ex. B, p. 6). Next, with the holding cell door open, Stiltner performed oral sex on Ahlers in the hope that she would get something to eat. (Id.). Stiltner claimed that because she had swallowed it, there was no physical evidence of this incident. (Id. at p. 9). Thereafter, Stiltner did not see Ahlers that evening and she never received the food that she had been promised. (Id. at p. 8).
B. The Washtenaw County Sheriff's Department Investigation of the Sexual Assault.
While this interview with Stiltner was occurring, Sgt. Webber notified other key members of the Sheriff's Department of the alleged incident, including First Lieutenant Jerry Clayton. After Mays and Toth interviewed Stiltner, Clayton and Mays talked with Stiltner and she essentially repeated the same allegations. (Plaintiffs' Response, Ex. D, Clayton Deposition, p. 28-29). Later that evening, Clayton and Mays again talked with Stiltner. During this conversation, Stiltner's story remained the same, although she made it clear that the alleged assault occurred sometime after the booking process and prior to the time that another female inmate, Felicia Lane, was put in the holding cell with her. (Id. at p. 32-33).
Mays, Clayton, and Commander Mark Wusthoff decided to "put a wire" on Stiltner and isolate her so that they could obtain corroborating evidence from any contacts that she would have that evening with Ahlers when he came on duty at 11 PM. (Id. at p. 37). The wire was actually placed on Stiltner by a female officer, Acting Sgt. Andrea Adams. Clayton then gathered and examined a series of documents and records, including those produced during the booking process on August 16 August 17, to determine if Stiltner's story was possible. (Id. at p. 38). Apparently, these documents and records do not account for Ahlers' whereabouts between 12:30 AM and 1:00 AM, which was the period of time between Stiltner's and Lane's bookings. (Plaintiffs' Ex. F., Parsons Deposition, p. 40, 22-24).
As indicated, the alleged incident occurred in the female holding cell which is located on the "female side" of the booking area. The booking area is approximately 30-40 feet long and 15-20 feet wide. (Plaintiffs' Ex. D, Clayton Deposition, p. 44). This area is particularly busy in the late evening and early morning, when the alleged incident occurred. (Defendants' Reply, Alvarez Affidavit, p. 3). Indeed, at any point in time, a member of the 7-person staff or various on-duty or visiting officers would enter the booking area to perform their duties or deliver, release, or take away prisoners. (Plaintiffs' Response, Ex. B, Johnson Deposition, p. 19-21).
Moreover, the "male side" of the booking area and the male holding cell are monitored by video and audio monitors. (Defendants' Reply, Clayton Deposition, p. 60-63). The female side of the booking desk and the female holding cell, however, were not monitored by either audio or video at this time. (Id.). Because the female side, where the alleged incident occurred, was not monitored, Clayton and the other officers investigating this incident did not examine or preserve the male side audio or video tape from the evening/morning in question. (Id. at 62-63). In particular, Clayton explained that he did not look at this tape or preserve it or give it to Parsons when he asked for such video or audio tapes because in his experience these tapes had not proved useful in determining *860 what events had transpired on the female side. (Id. at 60-64). The investigating officers also did not interview Ahlers' immediate supervisor, Sgt. Donna Johnson, (Id. at 64-65), who, from her office off the booking area, can monitor these video and audio tapes and who was on duty during the evening/morning when the incident allegedly occurred, (Plaintiffs' Response, Ex. B, Johnson Deposition, p. 24). Additionally, the investigating officers did not interview Robert Alvarez, Ahlers' booking partner during the night/morning in question. (Defendants' Reply, Alvarez Deposition, pp. 4-5). According to Alvarez, he does not recall Ahlers leaving his side between 12:30 AM and 1:00 AM and he does not believe that such an incident could have occurred without someone seeing it due to the ebb and flow of people and officers passing through the booking area. (Plaintiffs' Ex. C, Alvarez Affidavit, p. 3).
During the late evening of August 17, 1995 and the early morning of August 18, 1995, while Stiltner was wearing the wire, Ahlers did not attempt to make any contact with Stiltner. (Plaintiffs' Response, Ex. D, Clayton Deposition, pp. 49-51). The wire also revealed that when Stiltner called for Ahlers or asked to speak to him, he did not respond. (Id.). The record is not clear whether a tape was made of the "wiring" while Clayton, Mays, Adams, and Detective Grimm listened. (Id.).
At this time, because the Sheriff's Department "felt [Stiltner's charge] was a substantial enough charge and ... couldn't [be] verif[ied] ..., [the investigating officers] felt [they should] turn [the investigation] over to somebody outside and let them do it." (Plaintiffs' Response, Ex. D, Clayton Deposition, p. 59). Apparently, it is the Department's policy to have a neutral, independent law enforcement agency investigate substantial criminal allegations made about its officers' conduct in order to avoid conflict of interest. (Id. at 58). Thus, on August 18, 1995, Clayton and Wusthoff decided to turn the investigation over to the Michigan State Police. (Id. at 58-60). From September 1, 1995 through February 13, 1996 (pre-charging/arraignment), Ahlers was suspended with pay, and from February 13, 1996 through March 28, 1996 (post-charging/arraignment), without pay. (Plaintiffs' Complaint, p. 4).
After August 18, 1995, the Washtenaw County Sheriff's Department was no longer involved in the criminal investigation of Ahlers. (Id. at 69). Clayton's only continuing involvement was as a liaison to the Michigan State Police i.e., he provided the State Police with documents and records and assistance when they asked for it. This assistance included producing Felicia Lane's booking card and tapping Ahlers' home telephone in an unsuccessful attempt to obtain incriminating statements from an arranged telephone call from Stiltner. (Id. at 69-70, 88-89). Clayton also had responsibility for conducting an internal investigation regarding the Ahlers-Stiltner incident. (Id. at 70-74). But when the Michigan State Police came into the investigation on August 18, the internal investigation was suspended. (Id. at 74). The internal investigation was not resumed until after the criminal charges against Ahlers were dismissed on March 28, 1996. Thereafter, pursuant to the internal investigation, Clayton interviewed Ahlers about the incident on April 16, 1996. (Id. at 112). Subsequently, though, Commander Ptaszek relieved Clayton of this responsibility because Ahlers had apparently threatened Clayton. (Id. at 70, 75). While it appears that the Department has yet to conduct or is not going to conduct an internal investigation into the Ahlers-Stiltner incident, (Id. at 75-76), the Washtenaw Defendants claim that Mr. Ahlers filed his complaint before the investigation could be resumed, "resulting in all internal investigations being placed on hold to prevent any authorized statements being made or sought which might be in conflict with the legal action." (Washtenaw County Defendants Renewed Motion for Summary Judgment, p. 2)(herein "Wash. Co. Defendants' Brief").[2]
*861 C. The Michigan State Police Investigation of the Sexual Assault.
As discussed above, on August 18, 1995, the Washtenaw County Sheriff's Department, consistent with their general policy, contacted the Michigan State Police about investigating the Ahlers-Stiltner incident. Thus, on the afternoon of August 18, Detective Sgt. Gary Parsons of the Michigan State Police met with Ptaszek, Clayton, Mays, and Under Sheriff Johnson, who left shortly after Parsons arrived. (Plaintiffs' Ex. F, Parsons Deposition, pp. 16-17). During this meeting, Mays and Ptaszek described to Parsons the incident and the information that they had collected, including providing Parsons with a transcript of Stiltner's taped interview with Mays and Toth. However, at his deposition, Parsons did not remember being told that Clayton and Mays had interviewed Stiltner twice after her taped interview with Mays and Toth. (Id. at 18). Moreover, he did not recall being informed that Mays, Clayton, and Adams had put a wire on Stiltner in order to capture any contact she had with Ahlers on the evening/morning of August 17-18, (Id. at 19), or that a tape of this "wiring" existed, (Id. at 31). Nevertheless, at this meeting, Parsons was informed that Clayton would be his contact person with the Sheriff's Department if and when Parsons needed assistance in the course of his investigation. (Id. at 20).
Shortly after this meeting, Mays and Parsons interviewed Stiltner. (Id.). The next day, Parsons discussed the case with Clayton, specifically whether Stiltner was telling the truth. (Id. at 26). During this meeting, Parsons suggested that they have Stiltner call Ahlers and record the conversation. (Id.). Clayton agreed that this was a good idea. (Id.). After being unable to reach Ahlers that day Friday Parsons asked Clayton to have Stiltner call over the weekend and see to it that the conversation was taped. (Id. at 26-27). Ultimately, Stiltner contacted Ahlers on August 28, 1995 and Clayton oversaw the taping of the conversation. (Id. at 29). This conversation produced no admissions from Ahlers. (Id. at 30).
Thereafter, Parsons contacted Clayton about any corroborating witnesses and Clayton advised him that Felicia Lane may be such a witness. (Id. at 32). Beyond this information, Clayton provided Parsons with no other documents or evidence regarding the alleged incident. (Id. at 34-35). On September 5, 1995, Parsons interviewed Ahlers. (Defendants' Ex. C, p. 1). Ahlers appeared with an attorney and invoked his right to remain silent. (Id.). Thus, Parsons did not obtain any statement from Ahlers. (Id.).
Parsons next prepared an initial report and sent it to the Prosecutor. (Plaintiffs' Ex. F, Parsons Deposition, pp. 35-36). On October 12, 1995, Assistant Prosecutor Joe Burke contacted Parsons and asked for the tape of the Ahlers-Stiltner telephone conversation and for an interview of Felicia Lane. (Id. at 36). On November 1, 1995, Parsons asked Clayton if there were any video tapes of the area where the alleged incident occurred. (Id. at 38). Clayton informed him that there were no videotapes of the particular area where the incident allegedly occurred, apparently indicating that the tapes which were available would not shed light on incidents that occurred on the female side. (Id. at 38-40). However, it apparently did not occur to either Clayton or Parsons that the videotape of the male area may have indicated whether or not Ahlers was on the male side during the general time period when Stiltner suggested that the alleged incident occurred. (Apparently at some point Parsons was led to believe, possibly by Mays or Clayton, that the incident occurred somewhere between 12:30 AM and 1:00 AM because this was the gap that the booking records reflected between the time when Stiltner was booked and Felicia Lane was booked). (Id. at 40, 22-24; Plaintiffs' Ex. D, Clayton Deposition, p. 68). Additionally, there was no documentary evidence of Ahlers performing any booking activities during this period. (Plaintiffs' Ex. D, Clayton Deposition, p. 68).
*862 During his investigation, Parsons never examined the scene of the alleged incident. (Plaintiffs' Ex. D, Parsons Deposition. p. 41). Thus, he was not aware that the door to the holding cell, if it were closed when Ahlers approached Stiltner, would have required Ahlers to "buzz" the door open while Stiltner opened it. (Id.). Indeed, in his deposition, Parsons admitted that in retrospect his investigation was not thorough and was not very good. (Id. at 43). Although not made clear in Parsons' deposition, it is obvious that at some point in January 1996 Parsons interviewed Felicia Lane. (Id. at 32, 36, 43).
With respect to the thoroughness of his investigation, Parsons also admitted that during the course of his investigation, he never obtained a sworn statement from Stiltner or had her file a complaint. (Id. at 46).
Nevertheless, on February 12, 1996, Ahlers was charged with two counts of sexual assault based on a complaint sworn to by Sgt. Farkas of the Michigan State Police, apparently because Farkas, rather than Parsons, happened to be going over to the court that day. (Id.). On February 13, 1996, Ahlers was arraigned, which included turning himself in, being booked and processed, and being driven to court in a State Police car. (Id. at 47). Washtenaw County Sheriff Ronald Schebil attended this arraignment and apparently had no other involvement in this matter, (Defendants' Motion for Summary Judgment, p. 6), although Plaintiffs allege that he was responsible for assigning Mays, Clayton, and Toth to investigate Stiltner's allegations, (Plaintiffs' Complaint, p. 3).
Ahlers' preliminary examination was scheduled on February 22, 1996. (Id. at 53). Prior to this date, Parsons unsuccessfully attempted to contact Stiltner, and ultimately, she did not appear at the February 22, 1996 examination. (Id.). Thus, the examination was adjourned until March 28, 1996. (Id.). Between February 22, 1996 and March 25, 1996, Parsons attempted to contact Stiltner on several occasions. (Id.). On March 25, 1996, the Michigan State Police arrested Stiltner on two outstanding warrants one for assault and battery and one for a probation violation. (Plaintiffs' Ex.A, p. 1). Thereafter, she was taken to the Canton Township Police Department where she was interviewed by Parsons, after he was notified that she had been arrested. (Id.). During this interview, Stiltner was very upset about being arrested and she seemed very "unstable." (Id.). In particular, she denied any drug use, but then admitted that she had recently been using marihuana and crack cocaine and abusing alcohol. (Id. at 2). Moreover, Stiltner's recollection of the incident with Ahlers was very vague and inconsistent with her prior story. (Id.). Thus, Parsons notified the Prosecutor of his interview with Stiltner and advised him that she did not seem interested in pursuing her allegations against Ahlers. (Id.). Furthermore, by this time Ahlers has taken, and passed, two polygraph examinations one through a private company on February 20, 1996 and the second, conducted by the Michigan State Police, on March 20, 1996. On March 28, 1996, the charges against Ahlers were dismissed prior to the commencement of the preliminary examination. (Id. at 59). At this time, Ahlers remains an employee of the Sheriff's Department.
III. PROCEDURAL BACKGROUND
In their July 25, 1996 Complaint, Plaintiffs allege that after Stiltner made her allegations of sexual assault against Ahlers: (1) The Washtenaw County Defendants and Parsons ("All Defendants") failed to reasonably investigate the sexual assault charge and caused Ahlers to be charged and arraigned without probable cause, thereby depriving him of his Fourth and Fifth Amendment rights; (2) All Defendants conspired to violate state and federal laws in their tortious and unconstitutional acts against Ahlers; (3) All Defendants are liable to Ahlers for false arrest and false imprisonment; (4) All Defendants are liable to Ahlers for malicious prosecution; (5) All Defendants were grossly negligent in their duties; (6) All Defendants are liable to Ahlers for defamation; (7) All Defendants are liable to Ahlers for intentional interference with a business relationship; (8) All Defendants are liable to Ahlers for intentional infliction of emotional distress; and (9) All Defendants are liable to Mrs. Ahlers for loss of consortium.
*863 On November 13, 1996, the Washtenaw County Defendants moved for summary judgment, arguing that Plaintiffs' claims were barred because Ahlers had not pursued the administrative remedies available to him under the Sheriff's Department's collective bargaining agreement. On December 4, 1996, the Court conducted a scheduling conference on this matter and advised the parties that the qualified immunity issue regarding the Washtenaw County Defendants should be decided first and that the pending motion for summary judgment regarding the collective bargaining agreement should be dismissed without prejudice pursuant to a stipulation and order. Thereafter, the Washtenaw County Defendants moved for summary judgment on the qualified immunity issue and on the state tort claims.
On April 30, 1997, the Court issued an opinion denying the Washtenaw County Defendants' Motion for Summary Judgment based on qualified immunity. Specifically, the Court held that:
(1) the tape showing Ahlers' failure to respond to Stiltner's attempts to contact him during night following his alleged sexual assault of her could be exculpatory evidence;
(2) a genuine issue of material fact precluded summary judgment on whether the Washtenaw County Defendants' failure to preserve video and audio tapes of male booking area during one-half hour period when sexual assault allegedly occurred in female booking area violated officer's rights to have that evidence disclosed;
(3) a genuine issue of material fact precluded summary judgment for Defendants on the issue of whether probable cause to charge and arraign officer would not have been found but for Washtenaw County Defendants' alleged misconduct during their preliminary investigation;
(4) Ahlers' right not to be charged and arraigned for a crime without probable cause was a clearly established constitutional right of which objectively reasonable officers know, for purposes of determining Washtenaw County Defendants' qualified immunity;
(5) sheriff would not be dismissed from Ahlers' state law tort claims;
(6) a genuine issue of material fact precluded summary judgment on Ahlers' claims that the Washtenaw County Defendants conspired to deprive him of his state law rights;
(7) Ahlers' allegations that Washtenaw County Defendants failed to disclose exculpatory evidence precluded summary judgment for Defendants in his action under Michigan law for malicious prosecution; and
(8) limited discovery before it was stayed precluded summary judgment for Washtenaw County Defendants on officer's defamation, intentional interference with business relationship, and intentional infliction of emotional distress claims under Michigan law.
Ahlers v. Schebil, 966 F. Supp. 518 (E.D.Mich. 1997). Due to the limited amount of discovery, many of the fact intensive issues could not be resolved at that early stage of the litigation. Thus, the Court denied the Washtenaw County Defendants' motion without prejudice.
Discovery is now complete, and the Washtenaw County Defendants have renewed their Motion for Summary Judgment. Defendant Parsons has also filed a Motion for Summary Judgment.
IV. STANDARD OF REVIEW
Summary judgment is proper "`if the pleadings, depositions, answer to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.'" Fed.R.Civ.P. 56(c).
Three 1986 Supreme Court cases Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348, 89 L. Ed. 2d 538 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986) ushered in a "new era" in the standards of review for a summary judgment motion. These cases, in the aggregate, *864 lowered the movant's burden on a summary judgment motion.[3] According to the Celotex Court,
In our view, the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof.
Celotex, 477 U.S. at 322.
After reviewing the above trilogy, the Sixth Circuit established a series of principles to be applied to motions for summary judgment. They are summarized as follows:
* Cases involving state of mind issues are not necessarily inappropriate for summary judgment.
* The movant must meet the initial burden of showing "the absence of a genuine issue of material fact" as to an essential element of the non-movant's case. This burden may be met by pointing out to the court that the respondent, having had sufficient opportunity for discovery, has no evidence to support an essential element of his or her case.
* The respondent cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must "present affirmative evidence in order to defeat a properly supported motion for summary judgment."
* The trial court no longer has the duty to search the entire record to establish that it is bereft of a genuine issue of material fact.
* The trial court has more discretion than in the "old era" in evaluating the respondent's evidence. The respondent must "do more than simply show that there is some metaphysical doubt as to the material facts." Further, "[w]here the record taken as a whole could not lead a rational trier of fact to find" for the respondent, the motion should be granted. The trial court has at least some discretion to determine whether the respondent's claim is plausible.
Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir.1989). See also, Nernberg v. Pearce, 35 F.3d 247, 249 (6th Cir.1994).
V. ANALYSIS
A. Constitutional Claims
Plaintiffs bring this action under 42 U.S.C. § 1983 contending that in the course of the Washtenaw County Defendants' investigation of Stiltner, they failed to disclose exculpatory evidence, ultimately causing Ahlers to be charged and prosecuted for sexual assault without probable cause in violation of his Fourth Amendment rights. Plaintiffs also claim that Defendant Parsons was responsible for charging and arraigning Plaintiff Ahlers without probable cause. The Washtenaw County Defendants, however, argue that they are entitled to qualified immunity because their decision to turn the investigation over to the Michigan State Police and only to participate in the investigation when their assistance was requested by Parsons was objectively reasonable. Furthermore, Defendant Parsons claims that he is entitled to qualified immunity because, even if he lacked probable cause to submit his reports to the Washtenaw County Prosecutor's Office, the prosecutor and the neutral magistrate judge authorized and issued the warrants.
It is well-established that a claim under 42 U.S.C. § 1983 requires a showing that the plaintiff possessed a right; that he or she was deprived of that right; and that the deprivation was caused by the reckless or intentional conduct of a person acting under color of law. See, Flagg Bros., Inc. v. Brooks, 436 U.S. 149, 155-56, 98 S. Ct. 1729, 1732-33, 56 L. Ed. 2d 185 (1978); Lewellen v. The Metropolitan Government of Nashville, 34 F.3d 345, 348-49 (6th Cir.1994) ("[I]t is now firmly settled that injury caused by negligence does not constitute a `deprivation' of any constitutionally protected interest"). Moreover, to maintain a claim against a police officer for his or her investigation of a case, a plaintiff must show that the officer's conduct violated a clearly established federal *865 constitutional or statutory right of which a reasonable official, in the defendant officer's position, would have known. See, e.g., Harlow v. Fitzgerald, 457 U.S. 800, 818-19, 102 S. Ct. 2727, 2738-39, 73 L. Ed. 2d 396 (1982). This limitation on § 1983 claims is generally referred to as the "qualified immunity exception."
In the instant matter, Mays, Toth, and Clayton conducted a preliminary investigation regarding Stiltner's allegations. After a period of approximately 24 hours, these officers determined that they had, up to that point in time, been unable to verify Stiltner's allegations. Thus, given the magnitude of her allegations, and the inherent conflict of interest involved with a sheriff's department investigating one of its own officers, Clayton and Ptaszek decided to turn the investigation over to the Michigan State Police. As the Court observed in its previous opinion, that decision was consistent with Department policy and with common sense.
Plaintiffs, however, argue that prior to turning the investigation over to the State Police, the Sheriff's Department should have done a more complete preliminary investigation. The Department's policy, however, was to turn criminal investigations of its officers over immediately to a neutral and independent law enforcement agency. Again, this policy is objectively reasonable and Ahlers has no federal constitutional right to an investigation conducted by the Washtenaw County Sheriff's Department in lieu of one conducted by the Michigan State Police.
1. Failure to provide exculpatory evidence
Nevertheless, Plaintiffs argue that when the Sheriff's Department turned the matter over to the State Police, the Washtenaw County Defendants failed to provide Parsons with all of the relevant evidence, including:
(1) Stiltner's body wire tape
(2) the male side video
(3) Washtenaw County Sheriff's Department daily report of jail population and cell rosters
(4) Quinton Evans' computer records
(5) Mendell McQueen's computer records
(6) Larry Clemons' original statement
(Plaintiffs' Brief, p. 24-35). Plaintiffs' contention is that these pieces of information, taken together, constitute exculpatory evidence which should have been turned over pursuant to Brady v. Maryland, 373 U.S. 83, 87, 83 S. Ct. 1194, 1196, 10 L. Ed. 2d 215 (1963), and that because this evidence was not disclosed, Ahlers was subsequently arrested without probable cause. The Court ruled in its previous opinion that Ahlers had a Fourth Amendment right to have any exculpatory evidence turned over to the agency ultimately responsible for the investigation prior to the time he was charged and arraigned. Thus, the instant inquiry must focus on whether the above-mentioned items can fairly be characterized as exculpatory.[4]
Brady requires the government to provide evidence which is favorable to the accused and which is "material." United States v. Frost, 125 F.3d 346, 382 (6th Cir. 1997). A showing of materiality does not require that the defendant prove that the result of the proceeding would probably have *866 been different. See, e.g., Frost, 125 F.3d at 382; United States v. O'Dell, 805 F.2d 637, 641 (6th Cir.1986). Rather, evidence is material if "there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." Frost, 125 F.3d at 383 (quoting Kyles v. Whitley, 514 U.S. 419, 433, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995)).[5]See also, United States v. Bencs, 28 F.3d 555, 560 (6th Cir.1994); United States v. Presser, 844 F.2d 1275, 1281 (6th Cir.1988). Of course, it is often difficult to ascertain whether evidence is "favorable" because evidence that seems exculpatory may be interpreted as inculpatory under a different theories.
A close examination of the Supreme Court's decision in Kyles clarifies the context in which such evidence should be considered and evaluated. In the murder trial of Curtis Kyles, the prosecution argued that the killer drove to the lot where the murder occurred, killed the victim, and drove off in the victims car, leaving his car in the lot. The police failed to disclose a list of the cars in the lot, which did not include Kyles car. The state argued that the list was neither impeachment nor exculpatory evidence because Kyles could have moved his car before the list was created and because the list did not purport to be a comprehensive listing of all of the cars in the lot. Kyles, 115 S.Ct at 1574.
The Supreme Court ruled that the evidence was "material," and that it would have helped to counter the prosecution's theory and contradict the testimony of some of their witnesses. The Court correctly noted that the test is not, and cannot be, whether the evidence is favorable to the defendant under every plausible interpretation or theory. The Court stated:
[The state's] argument, however, confuses the weight of the evidence with its favorable tendency, and even if accepted would work against the State, not for it.... But however the evidence would have been used, it would have had some weight and its tendency would have been favorable to Kyles.
Kyles, 115 S.Ct. at 1574.
Thus, the focus of this inquiry must be whether the evidence, taken from the defendant's perspective, has a "favorable tendency." This determination is not made on an item-by-item basis, because the "Constitution is not violated every time the government fails or chooses not to disclose evidence that might prove helpful to the defense." Kyles, 115 S.Ct. at 1567 (citing United States v. Bagley, 473 U.S. 667, 675, 105 S. Ct. 3375, 87 L. Ed. 2d 481 (1985)). What must be determined here is whether there is a reasonable probability that the magistrate's determination that probable cause existed would have been different if the evidence in question, "considered collectively," had been disclosed. Kyles, 115 S.Ct. at 1567. Therefore, the Court will discuss the items in seriatim, and then make its determination based on the cumulative effect of all the undisclosed evidence.
(a) Stiltner's body wire tape
Plaintiffs contend that Ahlers' failure to respond to Stiltner's attempts to contact him during the night/morning following the alleged sexual assault is exculpatory. In its previous opinion, the Court stated that the wiring incident, and the tape of it, could be deemed exculpatory evidence regarding the alleged sexual assault because Ahlers' refusing to "rise to the bait" and ignoring Stiltner on the day following the alleged sexual assault *867 could suggest that the assault did not occur.
The current pleadings and attached exhibits demonstrate that there are several disputes about the entire taping incident. As noted, a microphone was placed on Stiltner in the hope that she would elicit statements from Ahlers which presumably would be inculpatory. According to Detective Mays, who was the person responsible for turning on the taping machine receiving the signal, he never turned it on because there was never any conversation between Stiltner and Ahlers to record. (Mays Dep. 57-58, Plaintiff's Ex. P). Thus, according to Defendants, no audiotape was generated, partial or otherwise, and there was no evidence to turn over or destroy.
However, Lt. Clayton testified he monitored the wire for the entire shift and that some of the attempted conversations by Stiltner were recorded. (Clayton Dep., p. 46-51; Plaintiff's Ex. K). He also testified that he thought the tape had been turned over to Detective Parsons. (Id.) While Plaintiffs correctly point out these contradictions, they make no assertion that a tape actually exists. Further, Lt. Clayton has not produced any documents to substantiate his assertions, and Det. Parsons' handwritten notes of the initial briefing with Washtenaw County personnel makes no mention of the wiring incident. (Parsons' Ex. 1).
Given this conflict in the evidence, the Court cannot determine whether, in fact, a tape exists or existed.[6] However, it ultimately does not matter whether a tape of Stiltner trying to bait Ahlers exists because the fact that Mays and Clayton did not generate inculpatory evidence against Ahlers is not in dispute. The critical issue is simply whether the Washtenaw County Defendants should have disclosed the incident to Det. Parsons. Parsons testified in deposition that he would have liked to have been informed about the incident:
Q. And with regard to all those conversations, did Mr. Clayton at any time ever talk to you about the fact that they had wired Carrie Stiltner for one whole shift?
A. No.
Q. Don't you think, sitting here now as an investigator, that may have been a pretty important point for him to reveal to you?
A. I guess. I don't know. If that's something that they did prior to my becoming involved, I don't know. I mean, yeah, I would have liked to have known.
Q. It's an important thing that you should have known about, isn't that a fair statement sir?
A. Yeah, that's fair.
(Parsons' Dep., pp. 30-31).
Parsons did not testify how or why the information would have been important. On the one hand, this incident obviously could be interpreted as exculpatory because Ahlers failed to rise to the bait and make incriminating statements. Clearly, had they been successful in obtaining inculpatory evidence against Ahlers, that evidence would have been turned over to Parsons, and properly so. Thus, the fact that they tried and failed to inculpate Ahlers has some significance. On the other hand, Ahlers' decision not to speak to Stiltner could also be viewed as a decision to avoid Stiltner because, if the assault did occur, he would not want to be near the victim for the very reason of preventing a conversation about the sexual misconduct. Therefore, there are two equally plausible interpretations of the evidence, one benign, the other supportive of, or favorable to, Ahlers' theory.
In the final analysis, it would seem that this information should have at least been given to Parsons as he indicated he would have wanted so that he could evaluate it in light of all of the other factors of which he was aware, and give it whatever weight he believed it deserved. Effectively, Parsons was the fact-finder, and as in Kyles, the ultimate question of the value of the evidence is one of its weight. The fact-finder should *868 have had the opportunity to consider and evaluate this information.
(b) Male side video
Plaintiffs contend that the male side video tapes, if they had been preserved, might have shown that Ahlers was on the male side of the booking area during the time that Stiltner alleged he was on the female side. In its previous opinion, the Court concluded that based on the record and pleadings before it at that time, there was a genuine issue of material fact as to whether the video and audio tapes of the male side of the booking area contained exculpatory evidence or that Ahlers had a right not to have them destroyed.[7] Additional discovery has clarified the content and probative value of the tapes.
A demonstrative sampling of the videotapes from random midnight shifts has been produced by the Washtenaw County Defendants. These tapes were taken from the same camera that was filming the night of the alleged incident. The Washtenaw County Defendants contend that the tapes are not exculpatory evidence because the demonstrative tapes show that the camera angle shows nothing of the female holding cell or the officer's desk area, where Ahlers is often sitting. In short, Defendants claim the tapes would have been unhelpful because they would not have caught the alleged sexual acts or Ahlers on tape.
Defendants fail to recognize, however, that inferences drawn from the activities and people captured on the videotape, which is time stamped, could have accounted for Plaintiff's whereabouts between 12:30 a.m. and 1:00 a.m., the timeframe in which the alleged assault occurred. The tape captures people standing at the booking window while they are being booked. Thus, because the record shows that Ahlers, on the other side of the window, booked certain people that night, the tape could have confirmed his whereabouts by simply showing when people known to have been booked by Ahlers were standing at the window. Specifically, Plaintiff notes that the tape would have verified the following:
(1) when Plaintiff was done booking Carrie Stiltner because it would have captured the precise time she was at the booking counter,
(2) when Quinton Evans was processed and released,
(3) how long inmate Mendell McQueen remained at the counter while Plaintiff processed him at 12:55 a.m.,
(4) when other personnel began to arrive at the booking area for purposes of the briefing which began at approximately 1:00 a.m. and lasted forty minutes,
(5) when Pam Raciti transferred three males through the booking counter area to be housed in the medical unit, passing right by the female holding cell at approximately 12:45 a.m., and
(6) when Officer Hazelton conducted his perimeter checks, one of which occurred at approximately 12:50 a.m.
For each minute of Plaintiff's time the tape could account for, the likelihood he committed the crime decreases. The tape could show that Plaintiff's opportunities to commit the crime were sparse. For example, if inferences from the tape can show that Plaintiff only had one minute unaccounted for, the likelihood that he committed the crime would *869 be much less than if he had two hours unaccounted for.
This evidence, which records the exact time the taped events are occurring, would have been especially critical in this case because Defendants' have called into question the evidentiary value of any of the documents Plaintiff produced during his shift on the night in question. Defendants argue in their brief that the documents "are not reliable evidence of when any event occurred." (Wash. Co. Defendants' Brief, p. 9). They also strongly suggest Ahlers could have tampered with these documents to cover his tracks after committing the crime. (Id. at 9, 10). Given Defendants' attacks on the documentary evidence, and the importance of establishing the timing of the night's events, the objective and unaltered videotape evidence, had it been preserved, may well have had a favorable tendency to Ahlers' case, even if only to corroborate his written documentation and his story.
(c) Daily Report of Jail Population (Traffic Sheet) and Cell Rosters
The "traffic sheet" purportedly shows when detainees are booked in and released.[8] The traffic sheet for the midnight shift of August 16-17 was prepared by Plaintiff Ahlers. (Ahlers Dep., p. 108). A traffic sheet is started with each shift, and detainees who are brought in but not booked are transferred to the new shift's sheet and booked in and logged on the traffic sheet when time permits. On the night in question, Ms. Stiltner was one of five persons held over from the previous shift, as she was listed as being brought in at 4:40 p.m. in the afternoon, but not booked until Plaintiff booked her during the midnight shift. The traffic sheet does not indicate the time a detainee is booked in, only when he/she is brought into the jail.
Plaintiffs claim the traffic sheet is important evidence because it lists Fakeisha Brown a/k/a Felicia Lane as being brought in to the jail about 1:00 a.m. Defendants argue that Ms. Lane must have been in the holding cell with Stiltner sometime near or after 2:00 a.m., at which time Stiltner told Lane of the alleged sexual assault. Defendants claims this discrepancy is not unusual because the traffic sheet does not provide the actual time a detainee is brought into the jail.
Defendants assert Ms. Lane was entered on the sheet as an afterthought because Ahlers listed the time from the police report, not the actual time she came into the jail:
Mr. Reach: So when was Fakeisha Brown entered into this traffic sheet?
Plaintiff: She was entered in later on in the morning, but she was actually there at one o'clock in the morning.
Mr. Reach: How do we know that?
Plaintiff: We have a police report that she or the arrest time was 00- or 00:55, straight across, which means that the officer is pulling up to the jail sometime in that vicinity of one o'clock.
(Ahlers Dep., p. 178). According to Defendants, the police report to which Ahlers is referring is the incident report filled out by Deputy Beth Gieske, the officer who brought Ms. Lane into the jail. (Wash. Co. Defendants' Ex. 8, Gieske Affidavit, p. 2). The time "0055" on the incident report Deputy Gieske's approximation of when Lane was brought into the Ypsilanti Police Department, not the Washtenaw County Jail. (Id.) Deputy Gieske's affidavit also indicates she finished booking Ms. Lane at 2:00 a.m., (id.), making it likely that Lane shared the female holding cell with Ms. Stiltner at some time near 2:00 a.m.
Defendants claim the cell roster presents similar inaccuracies and does not show the times detainees are in their cells. The cell *870 roster shows who is in which cell, and is updated by handwritten entries on duty as time permits. Quite simply, it is a list of who is where. When someone is booked and put into a cell, his or her name is added to the list of persons in that cell, and when someone leaves their name is crossed off. The cell roster is used each day, spans across three shifts, and is implemented each morning at about 3:00 a.m.[9]
Plaintiffs correctly note that the cell roster shows that Lane and Michelle Germaine were in the same cell as Stiltner on August 17, 1996. Plaintiffs claim Defendants have failed to provide evidence regarding Ms. Germaine, as she could have contradicted the testimony of Ms. Lane. However, Clayton claims that only Lane was in the cell with Stiltner on August 17, and that this was the only name he passed on to Parsons. The traffic report for the midnight shift confirms that the female holding cell housed only two inmates that night, Stiltner and Lane. (Wash.Co.Defendants, Ex. 5). In short, except for the cell roster, there is no evidence that Ms. Germaine share a cell with Stiltner and Lane.
Plaintiffs also attack Parsons report, in which Lane claims she was in G block when "Carrie came over to her and was crying advising Lane that she had to give oral sex in order to get some food." But according to the Washtenaw County Defendants Exhibit 6, the cell rosters do not show Stiltner and Lane were ever housed in G block on either August 16 or 17. Plaintiffs contend that this supports their position that Stiltner's claims were baseless, and raises of jury question as to whether Defendants helped fabricate Lane's statement to cause Plaintiff's arrest. But Plaintiffs do not dispute that Lane and Stiltner were cellmates. The fact that Lane may have misspoke or did not accurately remember which cell she and Stiltner were in is not nearly as significant as Plaintiffs allege the critical issue is not where the two were, but what occurred when they were together.
Furthermore, the Washtenaw County Defendants argue the evidentiary value of any documents produced during the midnight shift of August 17 should be discounted because such documents are notoriously replete with inaccuracies and ambiguities, and because Ahlers himself either produced the document or had access to it. For example, the cell roster has too many loose variables it does not list when detainees are booked, housed, or released to provide inculpatory or exculpatory evidence.
As to the allegations of potential tampering, Defendants argue that any person who wanted to cover up after committing a crime obviously has a natural interest in altering the documents to create an alibi, and Defendants argue that Ahlers' claim that the traffic sheet is important exculpatory evidence is simply a red herring because Ahlers himself created the sheet, and, thus, had both the opportunity and the motive to fill in times and information that would create his alibi. Defendants also claim that Ahlers had access to the computer system that night and could have easily manipulated the entries. Therefore, according to Defendants, an impartial investigator would have looked at the documents produced that evening as unsubstantiated, given that the suspect was responsible for producing them or at least had access to them and could have changed them to fit his needs.
This argument strikes the Court as disingenuous because the Washtenaw County Defendants are apparently criticizing the accuracy of the same documents they used to initially determine that Ahlers could have committed the crime between 12:30 a.m. and 1:00 a.m. Of course, Plaintiffs argue that this attack on the written evidence only increases the probative value of the videotape:
Again, the male videotape would have determined precisely when Lane was in front of the male booking counter being photographed and proceeded as well as which officer was involved in escorting her to her cell.
(Plaintiff's Brief, p. 27).
(d) Quentin Evans' Computer Records
Quentin Evans is a jail detainee released after being processed by Ahlers during the *871 night in question. Quentin Evans is listed as being released at 12:45 a.m. on August 17, 1997, which would narrow the time the alleged incident could have occurred to between 12:45 a. m. and 1:00 a.m. Defendants claim that the traffic sheet entry for Quentin Evans cannot be verified, and that Plaintiffs' attempt to narrow the timeframe is not substantiated because the document entries were not filled out in the order the detainees were processed and because the documents "are not reliable as evidence of when anything occurred." (Wash.Co.Defendants, p. 8-9). Although Defendants' argument may be correct as far as it goes, the computer records nevertheless would have some value to an investigator as to the general timing of the events that evening. Thus, Defendants' argument really goes to the weight these records would have been accorded, a decision which, of course, Parsons would have been in the best position to make.
(e) Mendell McQueen's Computer Records
Plaintiffs claim the records of jail detainee Mendell McQueen were not produced until the last day of Plaintiff's deposition, August 7, 1997. Plaintiffs claim these records verify the Plaintiff was processing Mr. McQueen during the time it is claimed he was committing the crime against Ms. Stiltner.
(f) Larry Clemons' Original Statement
According to Larry Clemons' original report, Stiltner told him on August 17, 1995 that "she gave him a blow job in the booking area." (Plaintiff's Ex. N)(emphasis added). The statement does not make any reference to the alleged act occurring in the holding cell or any cell. Plaintiffs claim Parsons, possibly acting in bad faith, ignored this statement and instead discussed a subsequent interview with Clemons in which he states that the act occurred in the cell.
Again, Plaintiffs characterize this seemingly harmless misstatement as an act of bad faith. When Stiltner originally told Clemons about the assault in the "booking area," perhaps she was referring to the booking area generally, which would include the holding cells. Perhaps she told Clemons the assault occurred in the cell and in his haste he characterized it in his report as the holding area. In any event, given the viability of other explanations, this contradiction is simply not sufficient to indicate that Parsons ignored it in bad faith.
2. Analysis of Undisclosed Evidence
Having evaluated all of the undisclosed evidence, the Court cannot say that the magistrate's probable cause determination definitely would have been different if he had examined the undisclosed evidence. But, it is not Ahlers' burden to prove the proceeding would have necessarily been different, only that there is a reasonable probability that it would have been different.
In this case, if Det. Parsons and the magistrate had known of the male side video, they would no doubt have been able to account for much of Ahlers' time that night, as it would have narrowed the window of opportunity that he had to commit the assault. At the least, it must be said that the video tape evidence would likely have had a favorable tendency for Ahlers', and mitigated against a probable cause finding. Furthermore, although Defendants contend that many of the documents that on their face account for Ahlers' whereabouts at critical times are unreliable, their explanations of what actually happened as opposed to what the documents indicate happened really go to the weight to be given that evidence, not its sufficiency or tendency to be favorable. Therefore, the Court concludes that Plaintiffs have presented a sufficient amount of evidence to prove that Defendants failed to disclose Brady evidence before the magistrate's probable cause determination.
However, even giving Plaintiffs the benefit of the doubt on the value of this evidence, the question still arises as to whether this is sufficient to engender liability under § 1983. As noted above, to overcome the defense of qualified immunity and maintain a claim against a police officer for his or her investigation of a case, a plaintiff must show that an officer acted recklessly, maliciously, or intentionally to violate a clearly established federal constitutional or statutory right of which a reasonable official, in the defendant officer's position, would have known. See, e.g., Harlow v. Fitzgerald, 457 *872 U.S. 800, 818-19, 102 S. Ct. 2727, 2738-39, 73 L. Ed. 2d 396 (1982). That is, the cloak of qualified immunity shields state employees from liability so long as they acted under the "objectively reasonable" belief that what they were doing was lawful:
This "objective reasonableness" standard focuses on whether the defendant reasonably could have thought his actions were consistent with the rights that plaintiffs claim have been violated. If the government official has acted in a manner reasonably consistent with plaintiff's rights, qualified immunity protects that official from civil suit resulting from those actions.
Mays v. City of Dayton, 134 F.3d 809, 813 (6th Cir.1998). See also, Malley v. Briggs, 475 U.S. 335, 344-45, 106 S. Ct. 1092, 89 L. Ed. 2d 271 (1986); Ireland v. Tunis, 113 F.3d 1435, 1448 (6th Cir.1997); Tomer v. Gates, 811 F.2d 1240, 1242 (9th Cir.1987).
In this case, Plaintiffs present no credible evidence of bad faith, nor is there any indication that Defendants were "out to get" Ahlers. Plaintiffs attempt to characterize the lack of completeness of the investigation and disclosure of information as being bad faith, but given the short timeframe in which the officers had to conduct the investigation, the Court cannot say that the failure to turn over the evidence was reckless or deliberate. For example, with regard to the relatively crucial male side video, the Court cannot say that the Washtenaw County officers' failure to recognize that the video could confirm the whereabouts of Mr. Ahlers was reckless. (It may have been negligent or careless, but there is nothing in the record to support a finding of recklessness, mendacity, or deliberate intent). Furthermore, they did not conceal the existence of this video from Det. Parsons, who testified in deposition that he was not particularly concerned with the male side video.
Therefore, although the Court holds that Defendants failed to turn over some Brady material before the probable cause determination, their conduct was not so egregious as to decloak them of their qualified immunity.
3. Parson's probable cause finding
Plaintiffs contend that due to Washtenaw County Defendants' alleged misconduct in failing to disclose exculpatory material, Ahlers was charged with, and arraigned on, a sexual assault crime without probable cause. Plaintiffs also claim that, based on the evidence available to Det. Parsons, he proceeded to charge Ahlers without probable cause. Washtenaw County Defendants argue that they cannot be held responsible for the probable cause determination because they handed over the investigation to the Michigan State Police, thereby giving them complete autonomy to conduct the investigation. Defendant Parsons argues there was probable cause to charge and arraign Ahlers, and, even if there was not, he is entitled to qualified immunity.
Probable cause is "the facts and circumstances within the officer's knowledge that are sufficient to warrant a prudent person, or one of reasonable caution, in believing, in the circumstances shown, that the suspect has committed, is committing, or is about to commit an offense." Michigan v. DeFillippo, 443 U.S. 31, 36, 99 S. Ct. 2627, 2631, 61 L. Ed. 2d 343 (1979). Moreover, probable cause is a mixed question of fact and law in that the circumstances underlying its determination are questions of fact, while the determination itself is a question of law. See, e.g., United States v. Ho, 94 F.3d 932, 935 (5th Cir.1996).[10] If the issue is whether *873 probable cause would have existed but for a disputed fact or facts, summary judgment is inappropriate. See, e.g., Yancey v. Carroll County, 876 F.2d 1238, 1244 (6th Cir.1989) (material issue of fact as to whether probable cause for issuance of search warrant would have existed but for disputed statement of police officer precluded summary judgment in favor of officer in 1983 action alleging unreasonable search and seizure); Dean v. Earle, 866 F. Supp. 336 (W.D.Ky.1994)(in § 1983 action against police officers, alleging false imprisonment and malicious prosecution, disputes over the timing and circumstances surrounding the arrest raised material questions as to whether probable cause existed).
(a) Underlying criminal charges
On February 13, 1996, Ahlers was charged with criminal sexual conduct in the third degree and criminal sexual conduct in the fourth degree. Under Michigan law, third degree criminal sexual conduct is when:
(1) ... [a] person engages in sexual penetration with another person and if any of the following circumstances exists [sic]:
* * * * * *
(b) Force or coercion is used to accomplish the sexual penetration ...
(c) The actor knows or has reason to know that the victim is mentally incapable, mentally incapacitated, or physically helpless.
M.C.L.A. § 750.520d. Under the fourth degree provision,
(1) A person is guilty of criminal sexual conduct ... if he or she engages in sexual contact with another person and if any of the following circumstances exist:
* * * * * *
(b) Force or coercion is used to accomplish the sexual contact ...
(c) The actor knows or has reason to know that the victim is mentally incapable, mentally incapacitated, or physically helpless.
* * * * * *
(d) That the other person is a prisoner ... under the jurisdiction of a county for purposes of imprisonment ... and the actor is an employee or contractual employee of, or a volunteer with the county who knows that the other person is under the county's jurisdiction.
M.C.L.A. § 750.520e (emphasis added). It is undisputed that if Stiltner's allegations were true, the above provisions would be violated.
(b) Facts supporting probable cause
In his deposition, Parsons describes the facts and circumstances which formed the basis for charging Ahlers with criminal sexual assault:
(1) Parsons' taped interview with Stiltner in which she accused Ahlers of sexually assaulting her;
(2) Parsons' interview with Felicia Lane in which Lane she corroborated the allegations by recounting that Stiltner came to her crying and told her that she had to give oral sex to a guard to get some food;
(3) The tape of Stiltner calling Ahlers at home, in which he seemed indifferent that a detainee was calling him at home;
(4) The transcript of Mays and Toth's interview with Stiltner; and
(5) The initial information Parsons received from his meeting with Ptaszek, Clayton, and Mays, including their representation that the booking documents and other related information did not account for Ahlers' whereabouts between 12:30 AM and 1:00 AM.
(Plaintiff's Ex. L, Parsons' Deposition, pp. 22-24, 40, 43-44, 46, 32-36). Moreover, Parsons prepared two reports for the Prosecutor during his investigation, a preliminary one in Fall 1995, (Id. at pp. 35-36), and a final one at a date not made clear in the record.
*874 (c) Probable cause determination
Plaintiffs' assert that the above facts and circumstances are insufficient to support probable cause because Stiltner is not a credible witness, due to her prior arrests and her substance abuse habits, and that to the extent they create probable cause, this showing would be substantially undercut if, with regard to the Washtenaw County Defendants' misconduct, Parsons and the Prosecutor had been provided with the video and audio tapes of the male side and had known that Stiltner was wired and that a tape of this existed.
Because there was no physical evidence available, as is often the case in sexual assaults, Parsons' submitted his reports to the prosecutor based upon the alleged victim's assertion that Ahlers had sexually assaulted her. A finding of probable cause may be based on the victim's identification of the alleged perpetrator, absent a showing that the victim is unreliable. See, e.g., United States v. Amerson, 38 F.3d 1217, 1219 (6th Cir.1994), cert. denied, 514 U.S. 1056, 115 S. Ct. 1440, 131 L. Ed. 2d 319 (1995); United States v. Mahler, 442 F.2d 1172, 1174-75 (9th Cir.), cert. denied, 404 U.S. 993, 92 S. Ct. 541, 30 L. Ed. 2d 545 (1971).
In Amerson, the Sixth Circuit surveyed decisions from other circuits on this issue and adopted the approach taken by the Seven and Ninth Circuits[11]:
The approach of the Seventh and Ninth Circuits to probable cause determinations has been adopted in the Sixth Circuit. Thus, in Rainer v. Lis, [16 F.3d 1221, 1994 WL 33969] (6th Cir.1994), we found that "[a]n officer is entitled to rely on an eye-witness identification to establish probable cause. Probable cause exists unless, at the time of the arrest, there is an apparent reason for the officer to believe that the eyewitness `was lying, did not accurately describe what he had seen, or was in some fashion mistaken regarding his recollection of the confrontation.'" Rainer, 16 F.3d at 1223 [1994 WL 33969] (citation omitted, quoting Gerald M., 858 F.2d at 381). * * *
Applying this reasoning to the instant case, we find that Sandra Martin's positive identification of the defendant was sufficient to establish probable cause for Amerson's warrantless arrest. Sandra Martin, who stood mere feet from Amerson during the United American Bank robbery, was an eyewitness to that theft. Moreover, there is nothing in the record which would indicate the police should have suspected Martin of falsification, inaccuracy or mistake with respect to her identification of Amerson.
Amerson, 38 F.3d at 1219.
Defendants claim that Ms. Stiltner's allegations against Ahlers, by themselves, were sufficient to constitute probable cause because there has been no showing that Ms. Stiltner was unreliable regarding sexual assault violations.[12] But, it is clear that at *875 some point even Parsons believed that Stiltner was not reliable. Defendants argue that Parsons decided Stiltner would not be a good witness only after Ahlers had been charged. His deposition testimony states:
Q. Didn't you make your own determination that she was not being honest?
A. At that point, no. Actually, it never came to that where I didn't feel she wasn't being honest.
* * * * * *
Q. You conclude the discussion that you have with her on March 25, 1996, quote: While attempting to interview the victim she kept getting up and walking around. She was very unstable, kept walking around the room and was upset about being arrested on warrants. Undersigned asked her if she had been using drugs. At first she stated she had not used drugs in several months, had gotten her life back together and was not hooking anymore, then she changed her statement and said, as early as last week she had been smoking a little bit of weed and had been using a little bit. She further stated she had been drinking. At the time of her arrest she was picked up with a bottle of Jack Daniels.
That's your report; is it not?
A. Yes.
* * * * * *
Q. From what you saw of her on March 25, 1996, she is not the kind of individual you would want to rely on for purposes of a serious allegation; is that a fair statement?
A. Correct.
Q. She's a dope fiend and an alcoholic and a prostitute; right?
A. Correct.
Q. And she was a dope fiend and an alcoholic and a prostitute in August of 1995?
A. Correct.
(Plaintiff's Ex. L, Parsons' Dep., p. 61). Although Parsons admits Stiltner was a drug addict in August of 1995, he does not clearly state that he had this knowledge before bringing the charges against Ahlers. Other parts of his deposition indicate that he did not know about her drug problem before Ahlers was charged.[13] (Plaintiff's Ex. L, Parsons' Dep., p. 25-26).[14]
Plaintiffs argue that faced with this unreliable witness, a reasonable officer would have sought to corroborate and confirm her story with other evidence. Specifically, Plaintiffs argue a reasonable officer would have:
(1) interviewed Mr. Ahlers' supervisor, booking partner, and others present that night,
(2) viewed the videotape, the existence of which would have been revealed by diligent investigation, and extensive documentation which would have established the whereabouts of Ahlers,
(3) visited and reviewed the scene and determined that it would have been physically impossible for Ahlers to have entered the cell in the manner Stiltner alleged.
Plaintiffs contend that Parsons' failure to undertake this type of inquiry constitutes a reckless disregard for the truth, and possibly *876 even bad faith. Parsons admitted at the outset of his deposition that a thorough investigation includes interviewing witnesses, collecting evidence, photographing the scene, collecting any tangible evidence that might exist to corroborate a witness' versions of what happened, and preserving evidence. (Parsons Dep., p. 7-8). Parsons admitted that he did not conduct a thorough investigation in this case involving serious allegations.
But, the mere fact that Parsons did not conduct a thorough investigation, does not itself mean that he violated Ahlers' constitutional rights. In the analogous case of Romero v. Fay, 45 F.3d 1472, 1476 (10th Cir.1995), the plaintiff brought a § 1983 action against police officers, arguing they did not have probable cause to arrest him (without a warrant) based on the statements of two witnesses. The plaintiff failed to show that the two statements did not constitute reasonably trustworthy information sufficient to lead a prudent police officer to conclude that the plaintiff commit the murder in question. Id. at 1476. Nonetheless, the plaintiff argued that a reasonable police officer would have investigated his alibi witnesses before arresting him, and the exculpatory information possessed by them would have negated the probable cause to arrest. Id. at 1476.
The court rejected this argument, stating that the Fourth Amendment requires officers "to reasonably interview witnesses readily available at the scene, investigate basic evidence, or otherwise inquire if a crime has been committed at all before invoking the power of warrantless arrest or detention." Id. at 1476-77. The court also rejected the plaintiff's argument that the officers' failure to contact his alibi witness amounted to a per se violation of the Fourth Amendment. This is so because once an officer has enough evidence to constitute probable cause, he or she has no continuing obligation to further investigate in an attempt to uncover exculpatory evidence. As the court stated: "Once Defendant Fay concluded based on the facts and information known to him that probable cause existed to arrest Plaintiff for the murder of David Douglas, his failure to question Plaintiff's alibi witness prior to arrest did not negate probable cause." Id. at 1477-1478. See also, Criss v. City of Kent, 867 F.2d 259, 263 (6th Cir.1988)("A policeman ... is under no obligation to give any credence to a suspect's story nor should a plausible explanation in any sense require the officer to forgo arrest pending further investigation if the facts as initially discovered provide probable cause."); Schertz v. Waupaca County, 875 F.2d 578, 583 (7th Cir.1989)("In fact, it appears that once police officers have discovered sufficient facts to establish probable cause, they have no constitutional obligation to conduct any further investigation in the hopes of uncovering potentially exculpatory evidence.")(citing Baker v. McCollan, 443 U.S. 137, 145-46, 99 S. Ct. 2689, 61 L. Ed. 2d 433 (1979)("Given the requirements that arrest be made only on probable cause and that one detained be accorded a speedy trial, we do not think a sheriff executing an arrest warrant is required by the Constitution to investigate independently every claim of innocence.")); Kompare v. Stein, 801 F.2d 883, 890 (7th Cir.1986)("the law appears to be ... that the police ... have no constitutional duty to keep investigating a crime once they have established probable cause.").
In Whitmore v. Smith, 1997 WL 438441 (E.D.Pa.), the court ruled that a police officer's failure to perform a thorough investigation before making a probable cause determination did not constitute a constitutional violation. In that case, Earl Whitmore was arrested for sexually assaulting two children. In his suit against the officers, he claimed they had performed a substandard investigation by failing to interview him to determine if he had an alibi for the times in question, not tape recording the interviews of the children, not investigating whether the children could have been sexually assaulted by their family members, and failing to corroborate the statements of two young children. The court noted that the shortcomings were not as egregious as the plaintiff claimed, and stated that the officer is not required to conduct a "mini-trial" before arresting a defendant. Id. at *8 (citing Brodnicki v. City of Omaha, 75 F.3d 1261, 1264 (8th Cir.1996)). The court stated:
[T]he issue is not whether the information on which police officers based their request for an arrest warrant resulted from a professionally *877 executed investigation; rather, the issue is whether that information would warrant a reasonable person to believe that an offense has been committed by the person to be arrested.
Whitmore, 1997 WL 438441 at *8 (citing Orsatti v. New Jersey State Police, 71 F.3d 480, 484 (3d Cir.1995)). Based on that standard, the court concluded that the officer has probable cause to arrest the plaintiff at the time he applied for the warrants.
Ultimately, then, given the lack of duty to continue investigating after probable cause has been found, the Court here cannot find Defendant Parsons liable for finding probable cause and charging Ahlers. Parsons relied on Stiltner's statement, and although she may not have been the most reliable complainant, her story was corroborated by Ms. Lane and, to a certain extent, by the Washtenaw County Defendants' assertion that they could not account for Ahlers' whereabouts between 12:30 a.m. and 1:00 p.m. In the Court's view, this was enough to give Parsons probable cause to charge Ahlers, at which point he had no duty to continue his investigation to determine if exculpatory evidence existed. That Parsons' investigation was less than a model of thoroughness or even fairness to Ahlers does not negate his basis for initially finding probable cause. Although one would hope that officers would conduct a thorough and professional investigation before proceeding to charge a suspect, so long as an officer has established probable cause for the charge, absent an element of malice or mendacity, he will not be found liable for false arrest for lack of probable cause simply because subsequent investigation reveals exculpatory information which the officer could have found had his investigation been more complete.
Although this standard may seem harsh from the perspective of one who is wrongfully arrested, it is well grounded in policy and the real-world life of investigating officers. Often, officers must make arrest decisions based upon information that is incomplete and still developing. To subject officers to liability for wrong decisions or for not conducting a thorough investigation would chill investigative work and, no doubt, result in guilty parties being allowed to flee or intimidate witnesses. Thus, once the officer has probable cause, courts should not second-guess the officer simply because other exculpatory evidence was also available, unless it can be shown that the officer discovered the evidence and somehow, acting with malice or mendacity, concealed or altered it.
Furthermore, it is important to remember that Parsons' decision to charge Ahlers was ratified when a prosecutor presented the case to a neutral magistrate, who ultimately issued the warrant. In such circumstances, a police officer can only be held liable if he "stated a deliberate falsehood or acted with a reckless disregard for the truth. Proof of negligence or innocent mistake is insufficient." Lippay v. Christos, 996 F.2d 1490, 1500-01 (3d Cir.1993) (citing Franks v. Delaware, 438 U.S. 154, 171, 98 S. Ct. 2674, 57 L. Ed. 2d 667 (1978)). See also, Doherty v. Haverkamp, 1997 WL 297072, *5 (E.D.Pa.)) ("Nevertheless, if the warrant was obtained with knowledge of the falsity of the underlying facts which establish probable cause, or with reckless disregard for the truth of such facts, arrest pursuant thereto may constitute a Fourth Amendment violation."). Under these facts, the Court cannot say, despite the investigation's shortcomings, that Parsons acted with a reckless disregard for the truth.
As to the Washtenaw County Defendants, the Court cannot hold them liable for the probable cause determination made by Parsons, the prosecutor, and the magistrate. The only liability they have regarding the probable cause determination, as admitted by Plaintiffs, would stem from their failure to turn over exculpatory evidence that might have affected the probable cause determination, and that issue has been addressed in the previous section of this opinion.
VI. CONCLUSION
Therefore, as to the Washtenaw County Defendants, the Court rules that their failure to turn over the exculpatory evidence to Parsons was not objectively unreasonable given the brevity of their investigation and the absence of evidence indicating bad faith. As *878 to Defendant Parsons, the Court rules that his investigation, while certainly not flawless, and the evidence garnered therefrom were sufficient for him to present the evidence to the prosecutor and magistrate to make a determination as to whether probable cause existed.
Therefore, because no genuine issue of material fact exists in this case, Defendants Motion for Summary Judgment is GRANTED, and the case is DISMISSED WITH PREJUDICE.
NOTES
[1] This recitation of facts is taken from the Court's previous opinion, with minor adjustments, and thus the references in this section are to the parties' original summary judgment briefs, unless otherwise indicated.
[2] This lack of action appears to contradict the Department's February 13, 1996 press release, in which the Department stated that it would conduct an internal investigation of this matter since criminal charges had been filed. However, Defendants claim that this press release was never published or released. (Wash. Co. Defendants' Brief, p. 2). Furthermore, they contend that the first time the release left the file was during the discovery in this case and that a story published in the Ypsilanti Press was not based upon information from their office. (Id. at 2).
[3] "Taken together the three cases signal to the lower courts that summary judgment can be relied upon more so than in the past to weed out frivolous lawsuits and avoid wasteful trials." 10A Charles A. Wright, Arthur R. Miller, Mary Kay Kane, Federal Practice & Procedure, § 2727, at 35 (1996 Supp.).
[4] At oral argument, defense counsel relied upon a recent Sixth Circuit case, Mays v. City of Dayton, 134 F.3d 809 (6th Cir.1998). In Mays, the plaintiffs brought suit under § 1983, claiming that police executed a search of their offices without probable cause. Specifically, the plaintiffs contended that the police officer's omission in his supporting affidavit of the fact that he had attempted unsuccessfully to gather inculpatory evidence during an undercover investigation violated his Brady rights. The Sixth Circuit ruled that the district court erred by applying the Brady analysis, and held that the inquiry should have been whether the affiant included a false statement in the affidavit, knowingly and intentionally or with reckless disregard for the truth, under Franks v. Delaware, 438 U.S. 154, 98 S. Ct. 2674, 57 L. Ed. 2d 667 (1978).
Mays is distinguishable from the instant case, however, because the instant case does not involve an allegation that the affiant, here Mr. Parsons, included false statements from the affidavit, or knowingly excluded material information. Rather, the issue in the instant case is whether the Washtenaw County Defendants violated Plaintiff's constitutional rights by maliciously or recklessly failing to disclose Brady material to the law enforcement agency responsible for the investigation.
[5] As the Sixth Circuit stated in O'Dell, 805 F.2d at 641:
Further, Agurs has been modified by the Supreme Court's decision in United States v. Bagley, 473 U.S. 667, 105 S. Ct. 3375, 87 L. Ed. 2d 481 (1985), in which the Court adopted two standards for determining the materiality of evidence withheld by the prosecution. Bagley suggests that in cases involving the knowing use of perjured testimony by the prosecution, the conviction will be set aside "if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury." Id. 105 S.Ct. at 3382 (citing Agurs, 427 U.S. at 103, 96 S.Ct. at 2397). However, in cases involving no requests for exculpatory material, a general request, or a specific request, the evidence will be considered material and the conviction set aside "only if there is a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different." Id. 105 S.Ct. at 3384.
[6] Plaintiffs seem to imply that Sgt. Johnston's testimony that Clayton told her Stiltner kept turning the device on and off, making it difficult to hear the conversations, somehow supports the contention that a tape was made. But this would have no bearing on whether or not a tape was made because Stiltner controlled the transmitter, not the taping device.
[7] The first inquiry, whether the evidence was exculpatory and should have been disclosed, is a Brady question that hinges upon the same factors articulated above. The second inquiry, whether Ahlers had a right not to have the evidence destroyed, is necessary only if the government has complied with Brady. See, Arizona v. Youngblood, 488 U.S. 51, 109 S. Ct. 333, 336, 102 L. Ed. 2d 281 (1988)("There is no question but that the State complied with Brady and Agurs. * * * If respondent is to prevail on federal constitutional grounds, then, it must be because of some constitutional duty over an above that imposed by cases such as Brady and Agurs.").
In order for defendant to be entitled not to have the evidence destroyed he or she must prove: "(1) that the government acted in bad faith in failing to preserve the evidence; (2) that the exculpatory value of the evidence was apparent before its destruction; and (3) that the nature of the evidence was such that the defendant would be unable to obtain comparable evidence by other reasonably available means." United States v. Jobson, 102 F.3d 214, 218 (6th Cir. 1996). The Court set out this framework in its last opinion, not knowing what further discovery would uncover. But because the Court rules here that Defendants failed to comply with Brady, the Youngblood inquiry is not relevant.
[8] It is important to note that Lt. Clayton, in his deposition, claims to have provided Parsons with the traffic sheet and cell rosters, while Parsons claims never to have received them. Parsons brief notes the evasiveness of Clayton in his deposition, when he was unwilling to testify that actually gave Parsons the documents and only that he believed he had turned them over, but would have to review his notes to be certain. Clayton has provided no such notes to the Court or to the other parties. Furthermore, Parsons' original notes from his meeting with the Washtenaw County Defendants do not reflect that he received those materials and they do not put forth any evidence to support the claim that they turned the material over, but instead they argue the point is moot because the evidence is not exculpatory.
[9] This process apparently includes updating the list in the computer, and printing out the updated version, which is hand-marked with updates during the ensuing shift.
[10] Different courts employ semantically different incarnations of this standard, all of which, as a practical matter, are substantially similar. See, e.g., Kelly v. Serna, 87 F.3d 1235, 1241 (11th Cir.1996)("Generally, lack of probable cause shall be a question for the jury, under the direction of the Court, [but] what facts and circumstances amount to probable cause is a pure question of law."); Schertz v. Waupaca County, 875 F.2d 578, 582 (7th Cir.1989)("While Section 1983 claims presenting the question of probable cause are generally inappropriate for disposition on summary judgment, this is true only where there is room for a difference of opinion."); Whitmore v. Smith, 1997 WL 438441 (E.D.Pa.) (quoting Sherwood v. Mulvihill, 113 F.3d 396, 401 (3d Cir.1997)) ("Typically, the existence of probable cause in a section 1983 action is a question of fact. The district court may conclude in the appropriate case, however, that probable cause did exist as a matter of law if the evidence, viewed most favorably to Plaintiff, reasonably would not support a contrary factual finding.").
[11] The Sixth Circuit identified several approaches courts have taken in finding probable cause based upon information provided by the victim:
In Chambers v. Maroney, 399 U.S. 42, 46, 90 S. Ct. 1975, 26 L. Ed. 2d 419 (1970), the Supreme Court found that a description of the defendant provided to the police by the victim and several observers provided "ample cause to stop a light blue compact station wagon carrying four men and to arrest the occupants." Similarly, the Seventh and Ninth Circuits have found that an eyewitness' credible identification of the defendant is sufficient in and of itself to establish probable cause. See United States v. Mahler, 442 F.2d 1172, 1174-75 (9th Cir.) (finding that "when the informant is the victim of the crime [it] need [not] be shown by other facts, that she is a reliable informant"), cert. denied, 404 U.S. 993, 92 S. Ct. 541, 30 L. Ed. 2d 545 (1971); Gerald M. v. Conneely, 858 F.2d 378, 381 (7th Cir.1988) (finding that "[w]hen an officer has `received his information from some person normally the putative victim or an eye witness who it seems reasonable to believe is telling the truth,' he has probable cause.") (quoting Daniels v. United States, 393 F.2d 359, 361 (D.C.Cir. 1968) and Gramenos v. Jewel Cos., 797 F.2d 432, 439 (7th Cir.1986), cert. denied, 481 U.S. 1028, 107 S. Ct. 1952, 95 L. Ed. 2d 525 (1987)).
Amerson, 38 F.3d at 1219.
[12] As a matter of law, Stiltner's career choice does not bear upon her truthfulness. See, e.g., People v. Williams, 416 Mich. 25, 45, 330 N.W.2d 823 (1982):
As with prior sexual conduct evidence, we see logical relation between a complainant's reputation for prostitution and the character trait of truthfulness or untruthfulness. The law should not recognize any necessary connection between a witness's veracity and her sexual immorality. State ex rel. Pope v. Superior Court, 113 Ariz. 22, 26, 545 P.2d 946, 950 (1976). We agree fully with the following observation from Joyce, supra, 382 Mass. 222, 415 N.E.2d 181.
"Nor is the fact that a woman engages in sex for hire relevant to the issue of her credibility. `The rule is well established that the fact that a female witness is a prostitute or keeps a house of ill fame is not admissible to impeach her.' Commonwealth v. Vandenhecke, 248 Mass. 403, 404, 143 N.E. 337 (1924)."
[13] Q. Certainly did you learn she was a crack addict before the charges were brought against Mr. Ahlers? If you can answer that question.
A. No, I can't. Not without looking at the note.
Q. What did you learn about her prior record before Mr. Ahlers was charged?
A. That she was a prostitute and she had been arrested twice within the last couple weeks.
Q. For what?
A. For prostitution, I guess.
(Parsons Dep., p. 25).
[14] Plaintiff's Exhibit X, the first page of the internal investigation conducted by the County, which Parsons presumably read, verifies that Stiltner had both misdemeanor and felony charges pending for prostitution and possession of a controlled substance.
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179 Pa. Super. 582 (1955)
Potash
v.
Bonaccurso, Appellant.
Superior Court of Pennsylvania.
Argued September 30, 1955.
November 16, 1955.
*583 Before RHODES, P.J., HIRT, ROSS, GUNTHER, WRIGHT, WOODSIDE, and ERVIN, JJ.
J. Webster Jones, for appellant.
Edward Davis, for appellee.
OPINION BY ERVIN, J., November 16, 1955:
On October 20, 1952 a compensation agreement was entered into between claimant, a ritual slaughterer of animals, and defendant, who was engaged in the meat packing business, in which the defendant's insurance carrier joined, providing for the payment of certain benefits to the claimant for an accident and resulting injury described as "slipped on floor while slaughtering steer, tendonitis of the shoulders". Subsequently, on January 13, 1953, the defendant and his insurance *584 carrier filed a petition for termination of the aforesaid agreement, averring that the said agreement was entered into under a mistake of fact and of law in that the relationship of master and servant did not exist at the time of entering into the agreement. The referee's action in dismissing the petition was sustained by the Workmen's Compensation Board but the record was remanded by the board for the purpose of obtaining impartial medical testimony on the extent of claimant's disability. In the subsequent rehearing the referee found as a fact "That the above mentioned COMPENSATION AGREEMENT was entered into under a mistake of fact and of law in that the relationship of master and servant did not exist at the time of entering into said Agreement." However, the referee found "That the employer had the right to exercise other control over the claimant" and concluded that claimant was entitled to the payment of compensation based upon a 60% partial disability and entered an award accordingly. On appeal, the board concluded that a master-servant relationship existed between the claimant and defendant on September 16, 1952, the date on which claimant was injured, and affirmed the award of the referee. On appeal by the defendant and his insurance carrier, the Court of Common Pleas No. 1 of Philadelphia County affirmed the board and entered judgment in favor of claimant. From this judgment the defendant's insurance carrier has appealed.
The claimant is a shochet,[1] which is the Hebrew name for a ritual slaughterer of cattle, according to *585 ancient Jewish law and tradition. His duty is to slaughter the cattle according to such law and determine whether or not it is ritually fit for consumption under Jewish law. In doing this work the shochet performs a religious duty. If the meat is found to be so fit, it is called in Hebrew, "kosher," meaning ritually proper for food according to Jewish law, for those who observe the Jewish dietary laws. The claimant, a rabbi, did all the slaughtering for the defendant, who is engaged in the slaughtering or meat packing business, selling to the trade both kosher and non-kosher meat. About 75% of the cattle slaughtered by the claimant is found to be kosher and the meat thereof sold to the kosher trade, and the remaining 25% is sold to the non-kosher trade, if it passes the required government inspection. It was while engaged in slaughtering for the defendant that claimant slipped on the floor, striking his right shoulder area. As a result of the injury thus sustained claimant, upon medical examination, was found to be 60% disabled.
The sole question involved in this case is whether at the time he was injured on September 16, 1952, the claimant, Hyman Potash, was an employe of the defendant, Saverio Bonaccurso, within the purview of the Workmen's Compensation Act.
Where, as here, the facts are not in dispute, the question whether claimant was an employe of defendant is a question of law. Cookson v. Knauff, 157 Pa. Super. 401, 43 A.2d 402.
Appellant contends that the relationship of master and servant does not exist in this case because the alleged employer could not possibly have any control over the claimant, a ritual slaughterer, in the matter of his determination of which cattle slaughtered resulted in producing kosher meat.
*586 Under §§ 103 and 104 of the Workmen's Compensation Act of 1915, as re-enacted and amended, 77 PS §§ 21, 22, the terms "employer" and "employe" are synonymous with "master" and "servant." Harris et al. v. Seiavitch, 336 Pa. 294, 9 A.2d 375.
Practically all the usual indicia of an employer-employe relationship are present in this case. They are well summarized in the opinion by KUN, J. of the court below as follows: "The record shows that the claimant has been employed by the defendant as slaughterer for cattle for some 15 years, has been reporting every morning for work at 7 o'clock, and remains at the defendant's place of business as long as there is any slaughtering to do. He was paid on a piece work basis but with a minimum guarantee of $50.00 a week. He was paid for holidays, and the usual deductions made from his pay for wage and income tax, social security, welfare plan, etc. He had vacations with pay. He worked under the supervision of the defendant's son and had a `boss' who determined the animals to be slaughtered. Defendant testified that the claimant worked under the same conditions as other employees as regards holidays, deductions, vacations, etc." However, the vital test in determining whether a workman is a servant of the person who engages him for the work is whether he is subject to the latter's control or right of control not only with regard to the work to be done but also with regard to the manner of performance. Felten v. Mellott, 165 Pa. Super. 229, 67 A.2d 727; Gadd v. Barone, 167 Pa. Super. 477, 75 A.2d 620. See Greap v. Oberdorff, 178 Pa. Super. 153, 113 A.2d 339. On the basis of the undisputed facts in this case it clearly appears that the defendant not only had the right to control but also exercised control over the claimant in his slaughtering work. The animals were obtained by defendant, *587 he determined the number to be slaughtered and supervised distribution to the trade. The only aspect of claimant's activities which were not subject to the control of the defendant as to the manner of its accomplishment was the determination by claimant of which animals slaughtered were kosher and which were non-kosher. It is obvious that defendant could not control claimant in this respect since the religious nature of the duties precludes the assertion of any control, but the inability to control is not inconsistent with the existence of a right to control. The fact that claimant's performance of his religious duties as a shochet necessarily places him outside the scope of control of defendant in that respect does not preclude him from having the status of an employe. As stated in Restatement, Agency, § 223, comment a: "The fact that the law requires an examination and a certain standard of skill does not prevent the relationship of master and servant from arising. . . . Even in the case of attorneys and physicians there may be the master and servant relationship, as where a firm of attorneys employs an attorney as a member of the office staff." Also pertinent and applicable here is the following statement in Frankle v. Twedt, 234 Minn. 42, 47 N.W.2d 482 at p. 487: "Although in the abstract, the right of control is the decisive test, its decisive character in practical application fades into a twilight of uncertainty by reason of the fundamental differences in the nature of various occupations, by the varying arrangements of the parties and the circumstances of each particular case, and by such variable factors as the force of custom. Prosser, Torts, § 63; Restatement, Agency, § 220. The existence of the right of control may be inferred from a combination of factors which usually varies according to the circumstance of each case. Restatement, Agency, § 220. Thus, highly *588 skilled cooks or gardeners who resent and even contract against interference are normally servants when regularly employed. The fact that a particular occupation may involve such technical skill that the employer is wholly incapable of supervising the details of performance does not preclude a master and servant status. Tetting v. Hotel Pfister, Inc., 221 Wis. 141, 266 N.W. 249." (Emphasis added)
Where, as here, the Jewish law and tradition requires that meat to be consumed by those of the Hebrew faith be slaughtered by one trained and skilled in the work and licensed to perform such religious duty, the inability of an employer to control the shochet in the performance of his religious duties, will not prevent him from having the status of an employe within the meaning of the Workmen's Compensation Act, especially where, in all other phases of his employment, the employer has the right to control him in the performance of his duties and the material elements of an employer-employe relationship are present.
Although extensive research failed to disclose a case wherein it was held that a shochet or shochtim were employes within the meaning of a workmen's compensation act, in cases arising under the National Labor Relations Act which, as amended by the Labor Management Relations Act of 1947, 61 Stat. 137, 29 U.S.C.A. § 152(3), specifically excluded from the definition of "employee" any individual having the status of an independent contractor, it has been held that shochtim were employes despite the religious ritual attending their duties, where the employer paid their salaries and extended to them the same privileges as to other employes. Swift & Co., 57 N.L.R.B. 1411, Wilson & Co. Inc., 68 N.L.R.B. 416.
In the instant case we are also constrained to hold that claimant is an employe of the defendant in view *589 of the following statement quoted by Chief Justice MAXEY in Thomas v. Bache et al., 351 Pa. 220, 223, 40 A.2d 495: "The rule of policy is: `. . . neither the compensation authorities nor the courts should be solicitous to put claimants in that position [of an independent contractor] when a reasonable view of the evidence warrants a finding that the injured person was an employee': Gailey v. State Workmen's Insurance Fund, 286 Pa. 311, 314."
Judgment affirmed.
NOTES
[1] Described as follows in Words and Phrases "Shochet": "Shochtim" is the plural of "Shochet", who is a Hebrew religious official, certified in writing by one or more rabbis as being qualified to slaughter animals in accordance with the ritual requirements and precepts of the Hebrew Orthodox faith. Mayer Bros. Poultry Farms v. Meltzer, 80 N.Y.S.2d 874, 877, 274 A.D. 169.
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37 N.J. Super. 133 (1955)
117 A.2d 172
GEORGE KOVACS, PLAINTIFF,
v.
RICHARD E. EVERETT, DEFENDANT. ALEXANDER KOVACH, PLAINTIFF-APPELLANT,
v.
GEORGE KOVACS, ET AL., DEFENDANTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Argued October 3, 1955.
Decided October 5, 1955.
*134 Before Judges GOLDMANN, FREUND and CONFORD.
Mr. Harry Weiner argued the cause for appellant (Messrs. Weiner and Weiner, attorneys; Mr. H. Harding Brown, on the brief).
*135 Mr. Frederick C. Vonhof argued the cause for respondent Kovacs (Mr. Albert M. Neiss, attorney).
Mr. Donal C. Fox argued the cause for respondent Everett (Messrs. Fox & Schackner, attorneys).
The opinion of the court was delivered by GOLDMANN, S.J.A.D.
On March 20, 1953 Alexander Kovach was a passenger in a car owned and operated by his brother George Kovacs (last name spelled differently) when the car became involved in an intersectional accident with an automobile driven by Richard E. Everett. George Kovacs sued Everett for personal injuries and property damage, and Everett counterclaimed. In a companion case consolidated with the one just mentioned, Alexander Kovach sued both drivers for personal injuries, demanding judgment of $15,000.
In Kovacs v. Everett the jury returned a verdict of no cause of action on the complaint and counterclaim, finding both drivers had been guilty of contributory negligence. No appeal has been taken from the judgment entered on that verdict. The jury also returned a verdict of no cause of action in Kovach v. Kovacs and Everett. Kovach then moved for a new trial as to damages only because the verdict was contrary to the weight of the evidence, inconsistent and irreconcilable with the first verdict, contrary to the charge of the court, and clearly the result of mistake, passion, partiality or prejudice. This motion was denied and judgment duly entered in favor of defendants. Kovach appeals from both the judgment and the order denying his motion for a new trial.
Plaintiff's first two points, that the verdict was against the weight of the evidence and was irreconcilable and inconsistent with the verdict rendered in Kovacs v. Everett, may be considered together because they stem from essentially the same argument, namely, that he had proved a compensable injury. The question of liability does not intrude upon our determination of plaintiff's contentions. The jury found both drivers negligent, so that the only question remaining is whether *136 plaintiff had proved injuries resulting from the accident entitling him to recover damages. If we find the jury was justified in returning the verdict it did on the basis of the evidence presented, then neither ground asserted by plaintiff will avail him.
In passing upon plaintiff's argument we are guided by R.R. 1:5-3(a), made applicable to the Appellate Division by R.R. 2:5 which provides that a jury verdict shall be set aside as against the weight of the evidence only if, having due regard to the opportunity of the trial court and the jury to pass upon the credibility of the witnesses, it clearly and convincingly appears that the verdict was the result of mistake, partiality, prejudice or passion. The same standard, incidentally, controls the determination by the trial court of the same question. R.R. 4:61-1(a). And see Hager v. Weber, 7 N.J. 201, 210 (1951), where the Supreme Court held that a verdict "that rests upon testimony competent to sustain the inference implied in such a finding is ordinarily conclusive," and that the court may not set aside a verdict merely because, in its opinion, the jury upon the evidence might well have found otherwise. See also Bazinsky v. Conklin, 8 N.J. 40 (1951); Capone v. Norton, 8 N.J. 54 (1951); Flexmir, Inc., v. Lindeman & Co., 8 N.J. 602 (1952); Barber v. Vaccaro, 32 N.J. Super. 573 (App. Div. 1954), certification denied, 17 N.J. 523 (1955).
The action of the jury in returning a verdict against plaintiff passenger while finding both drivers negligent carries with it the obvious conclusion that he had failed to establish compensable injuries proximately resulting from the accident. The medical testimony was in some conflict as to the causal relation between the accident and plaintiff's subsequent complaints of pain and disability, but our reading of the record leads to the conclusion that the circumstances of the accident, the history of plaintiff's physical condition before and after the collision, and the medical testimony amply support the verdict reached by the jury.
The jury not having been persuaded that plaintiff had suffered compensable injuries as a result of the accident *137 it follows that its verdict of no cause of action was not irreconcilable and inconsistent with the similar verdict reached in the companion case of Kovacs v. Everett where both drivers were found contributorily negligent. Negligence without more is insufficient to entitle a party to recover, for he must also show a compensable injury. Watkins v. Myers, 12 N.J. 71 (1953). It is the injury and not alone the negligent act which gives rise to a right of action, "for a negligent act is not in itself actionable, and only becomes the basis when it results in injury to another." Ochs v. Public Service Ry. Co., 81 N.J.L. 661, 662 (E. & A. 1911); Murphy v. Terzako, 14 N.J. Super. 254 (App. Div. 1951). And see Hughes v. Eureka Flint & Spar Co., Inc., 20 N.J. Misc. 314, 26 A.2d 567 (Cir. Ct. 1939).
Plaintiff next argues that the trial judge erred in allowing the jury to see the complaint without also permitting it to take into the jury room the amendment to the complaint. During its deliberations the jury specifically requested the court to permit it to see the original complaint filed by the plaintiff so that it might know whether plaintiff was suing for injuries to his whole back or only a part. Counsel for plaintiff stated he had no objection to the court doing so, but that the "amended complaint" should also be supplied to the jury. (As noted, there was no amended complaint, as such, but only an order for amendment of the ad damnum clause.) The court acceded to the jury's request, but instructed it that "complaints are drawn by the party who is bringing the suit, and the others have nothing to do with the drawing" thereof, and that the jury was "to be bound by whatever the proof is in the case."
We find no prejudice in allowing the complaint to go to the jury in the circumstances. Examination of the original complaint shows that it does not refer to the back but to "personal injuries" suffered by plaintiff. In addition to the specific direction of the court when it let the complaint go to the jury, we have the ready acquiescence of plaintiff's counsel that the court might do so. It might be observed that whether or not pleadings are sent out with the jury is a matter *138 resting in the trial judge's discretion. Portley v. Hudson & Manhattan R. Co., 113 N.J.L. 13 (E. & A. 1934). What was done here was not inconsistent with substantial justice. Cf. Palestroni v. Jacobs, 10 N.J. Super. 266 (App. Div. 1950); and see R.R. 1:5-3(b), R.R. 2:5.
Finally, plaintiff complains of error by the trial court in denying his motion for a new trial. Essentially that motion was based on plaintiff's contention that there was no competent evidence to support the jury's finding of no cause of action predicated upon his failure to prove compensable injuries flowing from the accident. We have already dealt with this argument. As the trial court pointed out in its oral conclusions in denying the motion for a new trial, the medical testimony created a fact question solely within the province of the jury, and it had a right to find that there was no cause for action.
As already stated, the scope of review by a trial court of a jury verdict on a motion for a new trial is the same as that of an appellate court. R.R. 4:61-1; Hager v. Weber, 7 N.J. 201 (1951). But the appellate court's function is even narrower in reviewing the ruling of a trial judge in passing on a motion for a new trial. Hartpence v. Grouleff, 15 N.J. 545 (1954) is dispositive of the issue. In affirming the action of the trial court on a motion for a new trial, the Supreme Court there said:
"A trial judge is in a better position than an appellate court to decide whether justice has been done under the particular circumstances and the weight of the credible evidence. He sees and hears the witnesses, observes their demeanor and reactions, none of which has life in the record on appeal. He is in a position to know and equate all the factors, including any error he may have made, and establish a basis which leads to the conclusion that the verdict was the result of passion, mistake or prejudice. His action should not be disturbed unless it clearly and unequivocally appears there was a manifest denial of justice under the law. * * *" (15 N.J., at page 549)
Affirmed.
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72 B.R. 487 (1987)
In re Carlyn Lesley JEHLE, Debtor.
Bankruptcy No. 8500298.
United States Bankruptcy Court, D. Rhode Island.
April 16, 1987.
Russell D. Raskin, Raskin & Berman, Providence, R.I., for debtor.
Gerrard F. Kelley, Boston, Mass., for the U.S. trustee.
*488 ARTHUR N. VOTOLATO, Jr., Bankruptcy Judge.
Heard on March 5, 1987, on the United States Trustee's motion for reconsideration and for an order vacating the voluntary dismissal of the debtor's Chapter 11 case, on the ground that the debtor had not paid the minimum quarterly fee now required of all Chapter 11 debtors. The debtor objects to the motion. For the following reasons, the motion of the United States Trustee is denied.
Debtor's motion to dismiss her Chapter 11 case was filed on March 14, 1986, but because of an objection by a creditor asserting a claim which the debtor disputed, no action was taken on the motion at that time. Debtor renewed her motion to dismiss in November, 1986, and all creditors and the United States Trustee were given notice that they had until December 22, 1986, to object to the dismissal. Because no objections were filed, the motion to dismiss was granted, and an order to that effect was entered on December 29, 1986, pursuant to Local Bankruptcy Rule 10.
The Bankruptcy Judges, United States Trustees, and Family Farmers Bankruptcy Act of 1986, Pub.L. No. 99-554, 100 Stat. 3088 (1986) amended 28 U.S.C. § 1930 by requiring a quarterly fee to be paid in every Chapter 11 case until a plan is confirmed or the case is converted or dismissed. The fee is based on the amount of funds disbursed in any quarter. The minimum quarterly fee is $150. The amendments to § 1930 became effective on November 26, 1986. Debtor's Chapter 11 case was pending on that date and, therefore was subject to the quarterly fee requirement. However, the facts are that the fee was not paid in this case, the United States Trustee did not object to debtor's motion for a voluntary dismissal, and the motion was granted and the case was dismissed, as a formal matter, pursuant to Local Rule 10.
We are now asked by the United States Trustee to vacate the dismissal, and to order the debtor to pay the quarterly fee before the case may be dismissed.[1] The argument advanced by the United States Trustee is that § 1930 imposes a mandatory obligation upon the debtor, and that the United States Trustee has no discretion to waive the fee.[2] While stressing the nondiscretionary nature of the United States Trustee's duties in regard to collection of the quarterly fee, she concedes that the decision to reopen a case is discretionary.
We agree with the United States Trustee that the decision to reopen is within the discretion of the Court, but we do not feel that the debtor's failure to pay the fee is sufficient cause, in this instance, to reopen pursuant to 11 U.S.C. § 350. No good cause has been shown which would excuse the United States Trustee's failure to file a timely objection. Implicit in that finding is the conclusion that if the United States Trustee "forgot," or that the matter fell through the cracks, that is not sufficient to entitle the movant to the relief sought. This is a familiar and uncomplicated ruling, which does not require citation.
The charges imposed by § 1930(a)(6) for Chapter 11 debtors are new, and the United States Trustee is apparently experiencing problems in establishing procedures to accommodate these new requirements. While such administrative problems are certainly understandable, they do not provide sufficient cause to reopen this case. To adopt the United States Trustee's position would shift responsibility, and would, in effect, make the Bankruptcy Court the ultimate collection agent for the United States Trustee. This Court is not willing to assume such a role. Since the recovery of the fees in question is for the exclusive benefit of the United States Trustee, the least that agency can do is to monitor the *489 cases where fees are unpaid, and to file timely objections to motions that threaten such collection. In the absence of extenuating circumstances (not present here), this Court should not intervene to bail the United States Trustee out of the situation in which it has single-handedly placed itself. The debtor in this case acquired a legal advantage when the United States Trustee neglected to protect its rights, and it is not a proper function of the Court to assume a partisan stance in aid of a governmental agency, which would deprive the debtor of the benefit of said legal advantage. Accordingly, the motion to vacate the dismissal is denied.
NOTES
[1] The United States trustee's motion has a certain Catch-22 flavor. If the order of dismissal were vacated, debtor would then be in a new quarter, and so would be subject to an additional minimum quarterly fee, (which, according to the United States Trustee, may not be waived), for a total of $300.
[2] In our view the correct way to describe the situation is, not that there has been a voluntary waiver of the fee by the United States Trustee, but that the United States Trustee has lost its right to collect the fee in question, through a judicial determination to that effect.
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72 B.R. 334 (1987)
In re Galo Eduardo GRIJALVA, Debtor.
Beatriz (Grijalva) GUERRON, Galo A. Grijalva, Lizeth C. Grijalva and Ximena Grijalva, Appellees,
v.
Galo Eduardo GRIJALVA, Appellant.
Civ. A. No. 2:85-0959.
United States District Court, S.D. West Virginia, Charleston Division.
April 7, 1987.
*335 Jack W. DeBolt, Charleston, W.Va., for appellees.
Ellen Maxwell Hoffman and Richard E. Rowe, Goodwin & Goodwin, Charleston, W.Va., for appellant.
Raymond G. Dodson, Charleston, W.Va., trustee.
MEMORANDUM OPINION AND ORDER
HADEN, Chief Judge.
This matter is before the Court on appeal from a decision of the Bankruptcy Court. A record has been designated for review and counsel for the parties have submitted their briefs on the issues.
I.
The Appellant, Galo Grijalva, is a physician. He is a native of Equador. The doctor came to this country in 1955 and became a citizen in 1961. He attended medical school in Mexico and graduated in 1975. He completed his residency in pediatrics in 1979 and practiced in that field in Charleston from 1979 to 1985. Dr. Grijalva is now practicing in Florida. The Appellee, Beatriz Guerron, is the doctor's ex-wife. She, too, is a native of Equador. Mrs. Guerron married Dr. Grijalva in July of 1964. Although she has resided for several years in the United States, she does not speak English well. Her language problem was manifested at the adversary proceeding below by the need for her daughter to help her with some of the questions. Perhaps because of her difficulty with the English language, Mrs. Guerron has had no meaningful work experience outside of her home while in the United States. She was unemployed at the time of this appeal and has no income apart from that received from Dr. Grijalva.
Dr. Grijalva and Mrs. Guerron were divorced in September of 1981. Mrs. Guerron received custody of the couple's three children: Galo, Lizeth and Ximena. To provide support for Mrs. Guerron and the three children the children were all minors at the time and to divide their marital property, the parties executed a separation agreement which was incorporated into the divorce decree. After a "flurry of litigation" over the terms and conditions of the separation agreement, the parties executed a "Substituted Separation Agreement" on February 24, 1984, which superseded the original agreement. The Substituted Separation Agreement contained several terms. The agreement provided for alimony payments to Mrs. Guerron of $1,500.00 per month and child support payments of $400.00 per month. The doctor was also obligated to pay the expense of the children's college education. That expense, although somewhat open-ended, was limited to that normally associated with four years of undergraduate study by a state resident at a state university. Dr. Grijalva conveyed his interest in the marital residence to Mrs. Guerron and agreed to make the monthly mortgage payments of $420.00. The doctor further agreed to maintain a life insurance policy on his life in the amount of $300,000 with his children and ex-wife listed as irrevocable beneficiaries. Finally, the doctor agreed to pay some attorney fees incurred by Mrs. Guerron incident to the divorce. Although the agreement contained other terms, those are the highlights relevant to the discussion here.
Finding his many debts to be "overwhelming", Dr. Grijalva filed a Chapter 7 bankruptcy petition. In response, Mrs. Guerron, together with the three children, filed objections. She sought to have certain of the doctor's obligations declared nondischargable under the provisions of 11 U.S.C. § 523(a)(5). After an adversary hearing, the Bankruptcy Court ruled that the greater part of the Substituted Separation Agreement represented obligations *336 which the doctor could not discharge in bankruptcy. Dr. Grijalva does not contest the nondischargability of the alimony and child support payments, but as to four specific obligations he contends that the Bankruptcy Court erred. He argues that the mortgage payments, the educational expenses, the attorney fees, and the life insurance requirement should all be discharged. Thus, he appeals.
II.
The dispute in this case revolves around the central question of whether Dr. Grijalva's obligations to the four Appellees are in the nature of alimony and support payments or are a division of property and debts. The importance of the distinction is found in the controlling provision of the Bankruptcy Code: 11 U.S.C. § 523(a)(5). That section provides that an obligation incurred by the debtor in connection with a divorce decree or property settlement agreement is dischargable unless such liability is actually in the nature of alimony, maintenance or support.[*] It is well settled that federal bankruptcy law, not state law, determines whether a debt constitutes alimony, maintenance or support. In re Seidel, 48 B.R. 371 (Bankr.C.D.Ill.1984); Matter of Stranathan, 15 B.R. 223 (Bankr.D. Neb.1981); In re Trichon, 11 B.R. 658 (Bankr.S.D.N.Y.1981).
The Appellees have listed in their brief twelve factors which the courts have from time to time applied in assessing the obligations of a debtor spouse. Although not all are relevant to the instant dispute, they are set forth below:
1. Whether the payments are to be made directly to the spouse.
2. The relative earnings of the parties.
3. Evidence that the spouse relinquished rights and property in return for the payment of the obligations.
4. The efforts of a spouse toward the successful completion of the other's professional education.
5. The length of the parties' marriage and the number of dependent children.
6. The document itself and any inferences which can be drawn from placement of specific provisions within the document.
7. The language of the divorce decree.
8. The treatment under prevailing state law.
9. Whether the debt was incurred for the immediate living expenses of the spouse.
10. Whether the payments were intended for the economic safety of the dependant(s).
11. Whether the obligation is enforceable by contempt.
12. Whether the payments are payable in installments over a substantial period of time.
Appellant's brief at 5. This then is the Court's task: To determine whether the Bankruptcy Court erred in finding the obligations of Dr. Grijalva to be nondischargable.
As a further matter, the Court notes that the standard of review on this appeal counsels deference to the Bankruptcy Court. The findings of that court will not be set aside unless they are clearly erroneous. Bankruptcy Rule 8013. See also Boyle v. Donovan, 724 F.2d 681, 683 (8th Cir.1984); In re Coil, 680 F.2d 1170, 1172 (7th Cir. 1982). With this standard in mind, the Court now turns to each of the points preserved by Dr. Girjalva.
*337 A. Mortgage payments.
The Bankruptcy Court found the doctor's obligation to make mortgage payments on the former marital residence to be in the nature of alimony and child support and, therefore, nondischargable. The Bankruptcy Court opined that amount of the mortgage payments, when added to the other alimony and child support payments, was reasonable in light of the size of the former family. The Court respectfully disagrees.
The mortgage payments required to be made by Dr. Grijalva are not referenced under either of the sections covering alimony or child support. The obligation is contained in the separation agreement's section titled "Parties' Residence." The separation agreement itself opens with a request to the state court that it declare the Substituted Separation Agreement "to be fair and equitable and that the same be ratified, approved and confirmed as a settlement of the property rights as set forth in such Substituted Separation Agreement." (Emphasis added). The agreement does close with the comment that "[a]ll payments to Beatriz under this agreement shall be considered as contractual alimony as provided in this agreement. . . ." It must be remembered, however, that the mortgage payments in issue would be made to a third party, not to Mrs. Guerron. Moreover, the closing language reinforces the conclusion that "alimony" under the terms of the agreement means payments to Mrs. Guerron. The section containing the referenced alimony is labeled "Payments to Wife."
The Appellees argue that the cessation of the obligation to make mortgage payments upon the death or remarriage of Mrs. Guerron indicates that the payments are in the nature of alimony, support or maintenance. Counterbalancing that feature, however, is Dr. Grijalva's obligation to pay the remainder of the mortgage principal even in the event that Mrs. Guerron sells the house before the mortgage is liquidated. This obligation, included as it is in the same paragraph as Dr. Grijalva's commitment to convey the marital residence, evidences a property division rather than an arrangement for support.
The intent of the parties can be further gleaned from the amount of the alimony and child support payments as designated. Those two amounts when added together equal $1,900.00. And that sum does not include the health and dental insurance coverage which the doctor was obligated to provide. The size of that payment militates against a conclusion that the mortgage payments were intended to be in the nature of alimony, maintenance or support. Rather, the totality of the circumstances convinces the Court that the payments bear more of the characteristics of a property settlement.
B. Life Insurance.
The Bankruptcy Court held that the obligation of Dr. Grijalva to keep a life insurance policy in effect on his life was nondischargable. Specifically, the court found the life insurance policy to be "the safety-net of the child support and alimony." [R. 53]. The Bankruptcy Court concluded that it was "a foundation that should be kept in place to protect the family." Id. The doctor retorts that the policy is an unwarranted expense which does not provide immediate support and maintenance for the family. The Court disagrees.
The basis for the Bankruptcy Court's decision was its perceptive realization of the Appellees' plight. At the time of the adversary proceeding they were completely dependent upon the doctor for support. The evidence shows three children not yet ready to make a significant contribution to the family welfare and a mother (Mrs. Guerron) unable to do so because of difficulty with the English language. If anything were to happen to Dr. Grijalva, the family would be left destitute, dependent upon public assistance for survival. Based upon these peculiar facts, the Bankruptcy Court found the life insurance policy to be in the nature of alimony, support and maintenance. The Court does not believe that finding to be clearly erroneous.
*338 C. College Education Expense.
In the Substituted Separation Agreement, Dr. Grijalva agreed to pay, within certain guidelines, for the education and living expenses of his children past the age of 18 who attend college or vocational school. The Bankruptcy Court found this obligation to be nondischargable. In addressing the doctor, the Court remarked that "even though there is no law in West Virginia which would make one responsible for the education expenses of the children, it is an obligation that you agreed to in the modified settlement agreement and which you called, by the language of that agreement, a contract to provide alimony and child support." [R. 53].
The doctor argues that the obligation to pay the educational expenses of his non-minor children is contractual in nature, not statutory. The doctor is correct as was the Bankruptcy Court in its observation that there is no West Virginia law placing such an obligation upon a parent. In State ex rel. Trembly v. Whiston, 159 W.Va. 298, 220 S.E.2d 690 (1975), the West Virginia Court did state that "[a] father may be required to provide his minor child with a college education, if his financial condition would not make such expenditures unreasonable." Id. at 694. The doctor points out, however, that at the time of that decision the age of majority was 21. It is now 18. Therefore, the doctor argues, once a child reaches the latter age, the parents' obligation for support ceases.
The Court rejects the doctor's arguments. The flaw in his reasoning is that he looks to state law for his authority. As previously stated, federal bankruptcy law, not state law, controls the question. The Eleventh Circuit applied this principle in Harrell v. Sharp, 754 F.2d 902 (11th Cir. 1985), in finding the post-majority educational expenses of the debtor's children to be nondischargable:
"We are of like opinion in the present case, that the nature of debtor's promise to pay educational expenses and child support is not determined by the legal age of majority under state law. The Bankruptcy Court characterized the agreement to pay educational expenses as in the nature of support, and the only ground on which debtor has challenged that characterization on appeal relates to the state law legal duty as determined by the age of majority. We are persuaded by the language of § 523(a)(5), the legislative history of that section, and the weight of the case law that the absence of a state law duty does not determine that an obligation is dischargable in bankruptcy. Accordingly, we affirm the district court's decision with respect to the nondischargability of debtor's obligation to pay post-majority child support and educational expenses."
Id. at 905.
This Court agrees with the Eleventh Circuit's thinking. The Bankruptcy Court found the debtor doctor's obligation to pay for the educational expenses of his college-aged children to be nondischargable. Again, the Court does not believe this finding of fact to be clearly erroneous.
D. Attorney Fees.
Finally, there is the issue of attorney fees. Mrs. Guerron incurred legal fees incident to the divorce. Mr. Thaxton was her attorney. The original separation agreement of August 27, 1981, dictated that Dr. Grijalva would pay Mrs. Guerron's legal fees attendant to her divorce action. The substitute agreement of February 24, 1984, left this obligation in place. The Bankruptcy Court found that the obligation to pay the attorney fees was nondischargable. The Court did not, however, determine the reasonableness of those fees. It left that determination for later proceedings.
The doctor has cited cases for the proposition that an award of attorney fees is a division of property rather than an award in the nature of alimony, maintenance or support. In re Norman, 13 B.R. 894 (Bankr.W.D.Mo.1981); In re Allen, 4 B.R. 617 (Bankr.E.D.Tenn.1980). Alternatively, the doctor argues that since the payment is to a third party, the obligation is dischargable. In re Lang, 11 B.R. 428 (Bankr.W.D. *339 N.Y.1981); In re Trichon, 11 B.R. 658 (Bankr.S.D.N.Y.1981).
The doctor admits, however, that an award of attorney fees has been found nondischargable where the spouse is in dire financial need and unable to support both herself and pay her attorney. In re Rank, 12 B.R. 418 (Bankr.D.Kan.1981). There was certainly evidence before the Bankruptcy Court here that it would be a financial hardship for Mrs. Guerron to pay her attorney. [R. 16].
From a review of the record, including the separation agreements and the transcript of the proceedings below, the Court concludes that the Bankruptcy Court did not err in deciding that the attorney fees obligation was not a property settlement. The words of one bankruptcy court aptly summarize the controlling rule:
"The majority rule is that, except when it appears clearly that the award was a property settlement, attorney fees awarded to an ex-spouse in a divorce decree are so closely connected with an award for support as to be in the nature of support or alimony and, therefore, are nondischargable."
Stanzione and Stanzione P.A. v. Shenewolf, 27 B.R. 187, 188 (Bankr.M.D.Pa.1982) (quoting Glover v. Glover, 16 B.R. 213, 215 (Bankr.M.D.Fla.1981)).
III.
In accordance with the foregoing discussion, the Court affirms the Bankruptcy Court in part and reverses it in part. The Court reverses the Bankruptcy Court's decision as to the dischargability of the obligation to make mortgage payments. Otherwise, the decision of the Bankruptcy Court is affirmed. An appropriate order shall issue.
NOTES
[*]
"(a) A discharge under Section 727, 1141, or 1328(b) of this title does not discharge an individual debtor from any debt
(5) to a spouse, former spouse, or child of the debtor, for alimony to, maintenance for, or support of such spouse or child, in connection with a separation agreement, divorce decree, or property settlement agreement, but not to the extent that
(A) such debt is assigned to another entity, voluntarily, by operation of law, or otherwise; or
(B) such debt includes a liability designated as alimony, maintenance or support, unless such liability is actually in the nature of alimony, maintenance, or support."
11 U.S.C. § 523(a)(5).
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10-30-2013
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https://www.courtlistener.com/api/rest/v3/opinions/8304203/
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Me. Chief Justice BurNett
delivered the opinion of the Court.
Plaintiff in error filed his petition for the writ of habeas corpus complaining of being confined in the maximum security portion of the prison without reason and was thus being deprived of “the privileges and his restricted freedom enjoyed by the other inmates of the prison,” that “such punishment constitutes prejudicial treatment against him; and further, that it constitutes cruel and inhuman punishment, a violation of the petitioner’s constitutional right of the Eighth Amendment which provides that no cruel or unusual punishment be inflicted.”
In this petition a hearing was requested so that the petitioner ‘ ‘ can show the court that he is at present being denied his due privileges and is being punished in a cruel and unusual manner.” The trial judge dismissed the petition under authority of an opinion released by this Court on March 4, 1965, of State ex rel. Clarence LeRoy Jordan v. Bomar, 217 Tenn. 494, 398 S.W.2d 724. In this case we fully considered the questions here involved and under the authority of this case the trial judge was amply justified and correct in dismissing this petition.
It is well settled in this State that one in prison under judicial authority may obtain relief by writ of habeas corpus only where the sentence is void, not merely *394voidable; or where the term of imprisonment has expired. Adams v. Russell, 179 Tenn. 428, 430, 167 S.W.2d 5.
The Assistant Attorney General has in his brief cited 155 A.L.R. 145, as an annotation which to some extent covers the question of whether or not a habeas corpus is a proper ground for remedy under cases of this kind, that is, where the prisoner alleges unlawful treatment during his legal custody. We have read this annotation and find that there are some cases cited therein where the courts did take jurisdiction under such circumstances, or facts were shown and the courts passed on these facts, but these cases do not follow the rule adopted in this State. We find cited therein the Federal case of Platek v. Aderhold, 5 Cir., 73 F.2d 173, where the court among other things said:
‘ ‘ The court has no power to interfere with the conduct of the prison or its discipline, but only on habeas corpus to deliver from the prison those who are illegally detained there.”
This case was cited in another Federal case, that of Sarshik v. Sanford, 5 Cir., 142 F.2d 676 (a case from Georgia), wherein that court in a Per Curiam Opinion said:
“The courts have no function to superintend the treatment of prisoners in the penitentiary, but only to deliver from prison those who are illegally detained there.”
This same rule seems to be that as followed by the English Courts wherein more than a hundred years ago in Re Rogers, 7 Jur. (Eng.), 992, it was said:
*395“It is quite clear that we cannot entertain this application. The object of the writ of habeas corpus is, generally, to restore a person to his liberty, not to pronounce a judgment as to the room or part of a prison in which a prisoner ought to be confined.”
¥e think these quotations state a sound principle that should be followed in a question of this kind, and consequently adopt them as the correct rule to apply under situations of the kind herein presented, otherwise it would take all the courts in the country to supervise the conduct of the administrative officials of a prison in the discipline of prisoners in the prison.
Under the allegations and circumstances of this petition we think the trial judge was eminently correct, and his judgment must be affirmed.
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10-17-2022
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994 F. Supp. 161 (1998)
Glenn MORRIS, Plaintiff,
v.
AMALGAMATED LITHOGRAPHERS OF AMERICA, LOCAL ONE, Defendant.
No. 96 Civ. 5329(LAK).
United States District Court, S.D. New York.
January 9, 1998.
*162 Glenn Morris, Jersey City, NJ, pro se.
Ira Cure, Kennedy Schwartz & Cure, New York City, for defendant.
ORDER
KAPLAN, District Judge.
Plaintiff brought this action against defendant Amalgamated Lithographers of America, Local One, for racial discrimination and retaliation in violation of Title VII of the Civil Rights Act of 1964, as amended. Defendant has moved for summary judgment dismissing the complaint.
*163 In a report dated December 19, 1997, Magistrate Judge Andrew J. Peck recommended that defendant's motion be granted in part and denied in part. He concluded that the retaliation claim is time barred and that plaintiff's claim that the union violated Executive order 11246 fails to state a claim upon which relief may be granted. On the other hand, he recommended denial of so much of the motion as sought dismissal of the contention that the union had violated Title VII by failing fairly and, adequately to represent plaintiff in his most recent grievance against his employer. It was the Magistrate Judge's view that there was little evidence as to the extent of the union's efforts on plaintiff's behalf and that summary judgment on that claim therefore would be inappropriate. The union has objected to so much of the Magistrate Judge's report as recommends denial of this aspect of its motion.
The first issue presented by the objections is whether the Court should consider the extensive affidavits and evidentiary materials the union has submitted in support of its objections. In this connection, it should be noted that the union's application before Judge Peck for leave to submit affidavits in support of a motion for reconsideration was denied on the ground that "any additional evidence is for trial, not a 2d bite at the apple." (Endorsement, Jan. 5, 1998).
Section 636(b)(1)(C) of the Judicial Code, 28 U.S.C. § 636(b)(1)(C), which provides for district court reviews of reports and recommendations by magistrate judges provides in Part that "[t]he judge may also receive further evidence ..." in the course of such a review. (Emphasis added) But the statute is permissive, not mandatory. While there may be cases in which the receipt of further evidence is appropriate, there are substantial reasons for declining to do so as a general matter. First, permitting such piecemeal presentation of evidence is exceptionally wasteful of the time of both the magistrate and district judges, the former having been compelled to write an arguably useless report based on less than the universe of relevant evidence and the latter being deprived of the benefit of the magistrate judge's considered view of the entire record. Second, opposing parties would be put to the burden of proceedings which, to a considerable degree, would be duplicative. Third, there would be instances in which parties would be encouraged to withhold evidence, particularly evidence which might be embarrassing as well as helpful on the merits, in the expectation of using it before the district judge only if they failed to prevail before the magistrate judge on a more abbreviated showing. Finally, the routine consideration of evidence in support of objections which could have been presented before the magistrate judge would reward careless preparation of the initial papers.
In this case, the defendant was well aware that its burden under Fed.R.Civ.P. 56 was to demonstrate that there is no genuine issue of fact and that it is entitled to judgment as a matter of law. In view of the plaintiff's claim that the union failed to represent him fairly and adequately in the grievance proceeding, the union was on notice that the details of exactly what it did and when which is the focus of the evidentiary materials it now seeks to submit necessarily were at the heart of its motion for summary judgment. It has offered no excuse whatever for failing to offer them in its initial papers. The Court therefore declines to consider them. Judge Peck was entirely correct in declining to afford the union a second bite at the apple.
As far as the merits of the union's objections are concerned, the Court has reviewed the entire record on the motion de novo. While there is a substantial basis for the union's position, it is far from clear that no reasonable trier of fact could find that the union was less than diligent in pursuing plaintiff's claim. That would be true, moreover, irrespective of whether the belated materials that the Court has excluded were considered in support of the objections.
Accordingly, the defendant's objections to the report and recommendation of Magistrate Judge Peck, dated December 19, 1997, are overruled. Insofar as the defendant seeks summary judgment dismissing plaintiff's claim that the union violated Title VII by failing adequately to pursue plaintiff's recent grievance, the motion is denied.
*164 It should be noted that this does not fully dispose of the defendant's motion. The time for plaintiff to object to so much of the report as recommended dismissal of his retaliation and Executive Order 11246 claims has not yet expired. In consequence, the Court defers ruling on that aspect of the motion.
SO ORDERED.
ORDER
February 4, 1998
This is a Title VII action in which the plaintiff, an African American, complains of racial discrimination by the union of which he is a member, essentially by failing properly to represent his interests in grievances he brought against his employer.
In a report and recommendation dated December 19, 1997, Magistrate Judge Peck recommended that the union's motion for summary judgment dismissing the complaint be granted insofar as Morris complained of the union having disciplined him in 1994 and sought relief under Executive Order 11246, but otherwise be denied. The union objected to so much of the recommendation as indicated that portions of its motion should be denied, but the Court previously overruled those objections. Remaining before the Court is plaintiff's objection to so much of the report as recommended the dismissal as untimely of the claim that the 1994 union discipline violated Title VII.
At the outset, it must be noted that the 1994 incident that is the subject of plaintiff's objections antedates all of the conduct referred to in the complaint and in plaintiff's EEOC charge. While the incident was mentioned in plaintiff's papers in opposition to defendant's motion for summary judgment (Morris Aff. ¶¶ 14-15; Pl.Br. at 7), its apparent relevance was as an illustration of the alleged animus of the union against him. No claim for relief based on that incident ever has been properly interposed in this action. Judge Peck bent over backward in plaintiff's favor by construing his discursive, poorly organized, and difficult to follow papers in treating such a claim as having been made. At this late date in the action, neither the Magistrate Judge nor the Court is obliged to do so.
Even assuming that the issue were properly before the Court, Judge Peck would have been right in concluding that any claim for relief based on this incident is time barred. Plaintiff concedes that the incident occurred more than 300 days before the filing of plaintiff's EEOC charge and therefore is time barred, While plaintiff now argues that the incident is a proper subject of relief in view of the continuing violations doctrine, no such contention was made before the Magistrate Judge. Even assuming that the incident had been an alleged basis for relief from the outset, it would be inappropriate to permit plaintiff to raise the continuing violation theory for the first time via objections to the Magistrate Judge's report and recommendation.
Even more basically, plaintiff's reliance on the continuing violation theory is misplaced. As this Court explained in Johnson v. Nyack Hospital, 891 F. Supp. 155 (S.D.N.Y.1995), aff'd on other grounds, 86 F.3d 8 (2d Cir.1996), the doctrine renders timely claims based on otherwise stale acts only if (1) the acts "within and without the limitations period are sufficiently similar and frequent to justify a conclusion that both are part of a single discriminatory employment practice chargeable to the employer," and (2) "the circumstances are such that a reasonable person in the plaintiff's position would not have sued earlier." Id. at 165.[1] Assuming *165 arguendo that there is sufficient evidence to raise a genuine issue of fact as to whether the first prong of the test is met, the second nevertheless is not.
As plaintiff's affidavit in opposition to the motion for summary judgment indicates, "[t]he Union's [alleged] failure to provide fair representation to me as an Afro-American dates back at least to ... 1981." (Morris Aff. ¶ 8) He complained of the union's alleged failure properly to represent him with respect to an April 1992 grievance. (Id. ¶¶ 12-13) Immediately upon being notified of the union's action in the 1994 incident, plaintiff complained in writing. (Id. ¶ 15) Indeed, he filed an unfair labor practice charge against the union under Section 8 of the National Labor Relations Act, a charge that the NLRB found was unsupported by sufficient evidence. (Id. Ex. R)
In these circumstances, plaintiff quite clearly could and should have made the March 1994 incident a subject of his EEOC complaint. His failure to do so therefore cannot be excused on the basis of the continuing violation doctrine. This ruling of course does not determine, one way or the other, whether the alleged March 1994 incident will be admissible at trial to show, for example, intent or some other relevant, disputed fact, as distinguished from being a subject as to which relief might be granted.
In sum, plaintiff's objections to the report and recommendation are overruled. The defendant's motion for summary judgment is granted insofar as it seeks dismissal of any claims based on the union's March 1994 imposition of sanctions on plaintiff and for violation of the executive order. The other aspects of defendant's motion were disposed of by order dated January 9, 1998.
SO ORDERED.
REPORT AND RECOMMENDATION
PECK, United States Magistrate Judge.
Plaintiff Glenn Morris alleges that defendant Amalgamated Lithographers of America, Local One ("Local One" or the "Union") discriminated and retaliated against him on the basis of race in violation of Title VII. Local One has moved for summary judgment. For the reasons set forth below, I recommend that Local One's summary judgment motion be granted in part and denied in part. Specifically, Local One should be granted summary judgment on Morris' claim that the Union (1) disciplined him in 1994 in retaliation, since that claim is time barred, and (2) violated Executive Order 11246, since there is no private right of action under that Executive Order. Local One's summary judgment motion on Morris' Title VII duty of fair representation claim should be denied because there are material issues of fact as to whether the Union adequately pursued Morris discrimination claim against Morris' employer, Scott Press.
FACTS
Local One is a labor union for lithographic production employees. (Local One 56.1 Stmt. ¶ 1; Morris 56.1 Stmt. ¶ 1; Lichten Aff.Ex. A at 1.) Plaintiff Morris, an African-American male, is a member of the Union. (Local One 56.1 Stmt. ¶¶ 2-3, 9; Morris 56.1 Stmt. ¶¶ 2-3, 9; Morris Aff. ¶ 2.)
Local One entered into collective bargaining agreements (the "Agreements") with the Metropolitan Lithographers Association, Inc., an association of lithographic printing firms. (Local One 56.1 Stmt. ¶ 4; Morris 56.1 Stmt. ¶ 4; Lichten Aff.Ex. A; Morris Aff. ¶ 2.) The Agreements provide for a grievance resolution process that involves submission of the grievance initially to a Joint Committee of *166 the Union and the Association, and ultimately to binding arbitration if the Joint Committee fails to resolve the dispute. (Local One 56.1 Stmt. ¶¶ 4-6; Morris 56.1 Stmt. ¶¶ 4-6; Lichten Aff.Ex. A at 24-25.)
In January 1993, Morris began his employment at Scott Press, Inc., a member of the Association. (Local One 56.1 Stmt. ¶ 15; Morris 56.1 Stmt. ¶ 15; Lichten Aff.Ex. O: Morris Dep. At 18; Morris Aff. ¶ 7(g).) In September or October 1994, Scott demoted Morris from first operator to second operator. (Local One 56.1 Stmt. ¶ 16; Morris 56.1 Stmt. ¶ 16; Morris Dep. at 20-21; Morris Aff. ¶ 16.) Morris alleges that Scott demoted him and disciplined him because of his race, in violation of the Agreement's non-discrimination clause. (Local One 56.1 Stmt. ¶ 17; Morris 56.1 Stmt. ¶ 17; Morris Aff. ¶ 16; Lichten Aff.Ex. A at 3.)
Morris contends that Local One failed to present his grievance against Scott for an extended period of time. (Morris Resp. ¶ 18.) On March 3, 1995 and May 1, 1995, Morris filed charges against the Union with the Equal Employment Opportunity Commission ("EEOC"), alleging that Local One "suppressed" its actions on his behalf against Scott and that the Union discriminated against him based on his race and retaliated against him in violation of Title VII. (Morris Aff. ¶ 19 & Exs. E & F.) Morris asserts that Local One only acted on his grievance against Scott after he filed his EEOC charges. (Morris Aff. ¶ 19.)
On May 3, 1995, Union Vice President Joseph Curto wrote to Scott, "to advise [Scott] that Local One has received serious allegations of racial harassment at the work place ... [and] intends to vigorously investigate these charges." (Local One 56.1 Stmt. ¶ 18; Lichten Aff.Ex. D.) Morris did not see this letter until this lawsuit. (Morris Aff. ¶ 18; Morris 56.1 Stmt. ¶ 18.) On May 12, 1995, the Union's attorney, Ira Cure, wrote to Morris and four other Scott employees, asking them to contact him to assist in the investigation. (Local One 56.1 Stmt. ¶¶ 19-20; Lichten Aff.Exs. E-F.)
On July 7, 1995, pursuant to the Agreements' dispute resolution process, Local One wrote to Scott requesting that a Joint Committee be formed to hear Morris' grievance against Scott. (Local One 56.1 Stmt. ¶ 25; Morris 56.1 Stmt. ¶ 25; Lichten Aff.Ex. G.) After the Joint Committee failed to resolve the dispute, the Union submitted the matter to arbitration in August-September 1995; an arbitration hearing was scheduled for April 29, 1996. (Local One 56.1 Stmt. ¶¶ 26-29; Morris 56.1 Stmt. ¶¶ 26-29; Lichten Aff.Exs. H-J; Morris Dep. at 50.)
On or about March 22, 1996, Morris received a right to sue letter from the EEOC. (Lichten Aff.Ex. B: Ex. to Cplt.)
On April 23, 1996, Morris delivered a letter to Local One's counsel stating that he "no longer wish[ed] to proceed with arbitration at this point." (Local One 56.1 Stmt. ¶ 32; Morris 56.1 Stmt. ¶ 32; Lichten Aff.Ex. K.) Morris' letter alleged that "it is becoming more apparent that it is the Union's lawyers intention to make minuscule, if not totally negate the discriminatory factors in our grievances." (Lichten Aff.Ex. K.) Morris wrote that he hoped that his withdrawal would "highlight the Union's conflict of interest ... when it comes to minorities." (Id.) As a result of Morris' letter, the Union cancelled the arbitration hearing. (Local One 56.1 Stmt. ¶ 33; Lichten Aff.Ex. L.)
On or about June 19, 1996, Morris filed this Title VII action against Local One. (See Cplt.)
Local One has moved for summary judgment, arguing that it "zealously represented Morris throughout the grievance process, and ... took no adverse employment action against Morris." (Local One Br. at 1-2.) Local One claims that it was prepared to argue Morris' discrimination claim at the arbitration hearing, had Morris not withdrawn from the arbitration. (E.g., Local One Br. at 1.) To support its contentions, Local One points to two previous occasions when it represented Morris on discrimination charges against his former employers, Pace DeTorres and Lasky Company. (Local One 56.1 Stmt. ¶¶ 8, 10, 13-14; Morris 56.1 Stmt. ¶¶ 8, 10, 13-14; Morris Dep. at 6-7, 141-42, 145, 147; Lichten Aff.Ex. C.) However, both arbitrations ruled against Morris. (Morris Aff. ¶¶ 8, *167 12; Morris Dep. at 147.) Finally, Local One has presented evidence that it pursued discrimination claims against Scott on behalf of two other employees (Summerville and Ruiz) at arbitration hearings at which Morris was called as a witness. (Local One 56.1 Stmt. ¶¶ 34-35; Morris 56.1 Stmt. ¶¶ 34-35; Lichten Aff.Exs. M, N; Morris Dep. at 7-8, 57.)
Although Morris does not dispute that the Union arbitrated his claims against his previous employers and his fellow employees, grievances against Scott, Morris alleges that Local One failed to provide evidence of racial discrimination at these proceedings. (Morris 56.1 Stmt. ¶¶ 10, 13-14, 34-35, 40-43, 51, 53; Morris Aff. ¶¶ 12-13, 18, 23-24.)
Morris also alleges that Local One retaliated against him for his activism and criticism of the Union by imposing sanctions against him. (E.g., Morris Aff. ¶¶ 14-15.) In March 1994, Morris complained to Scott management that his shift was understaffed. In the same letter, Morris criticized a fellow union member as a "no-show, no-help invisible man," and described another union worker as an "inexperienced" operator, "not used to working under this type of pressure." (Morris Aff.Ex. S; Morris Aff. ¶ 14.) At a Grievance Committee meeting, Local One found Morris in violation of several Union by-laws, including rules requiring that "[d]ifferences between members shall not be discussed with management," and fined Morris $200. (Morris Aff. ¶ 15; Morris Aff. Ex. M; Morris 56.1 Stmt. ¶¶ 43-44.)[1]
Morris charges Local One with complicity "with [Scott] in establishing an affirmative action program for white males." (Cplt. ¶ 8.) Morris alleges that Local One failed to prevent Scott from by-passing Union rules in the rehiring of white male operators. (Morris Aff. ¶ 17.) Finally, Morris asserts that Local One failed to enforce Executive Order 11246, which requires, inter alia, contractors and subcontractors who perform under government contracts to develop affirmative action programs. (Morris Aff. ¶ 25.)
ANALYSIS
I. THE SUMMARY JUDGEMENT STANDARD IN EMPLOYMENT DISCRIMINATION CASES
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also, e.g., Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2552, 91 L. Ed. 2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S. Ct. 2505, 2509-10, 91 L. Ed. 2d 202 (1986); Lang v. Retirement Living Pub. Co., 949 F.2d 576, 580 (2d Cir.1991); Hernandez v. New York City Law Dep't Corp. Counsel, 94 Civ. 9042, 1997 WL 27047 at *6 (S.D.N.Y. Jan.23, 1997) (Peck, M.J.); Burger v. Litton Indus., Inc., 91 Civ. 0918, 1996 WL 421449 at *7 (S.D.N.Y.April 25, 1996) (Peck, M.J.), report & rec. adopted, 1996 WL 609421 (S.D.N.Y. Oct.22, 1996). The burden of showing that no genuine factual dispute exists rests on the party seeking summary judgment, here, Local One. E.g., Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S. Ct. 1598, 1608, 26 L. Ed. 2d 142 (1970) Chambers v. TRM Copy Centers Corp., 43 F.3d 29, 36 (2d Cir.1994) Gallo v. Prudential Residential Services, Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir.1994); Hernandez v. New York City Law Dep't, 1997 WL 27047 at *6; Burger v. Litton, 1996 WL 421449 at *7.
In evaluating the record to determine whether there is a genuine issue as to any material fact, "[t]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, 477 U.S. at 255, 106 S.Ct. at 2513; Chambers v. TRM, 43 F.3d at 36; Gallo v. Prudential, 22 F.3d at 1223; Hernandez v. New York City Law *168 Dep't, 1997 WL 27047 at *7. The Court draws all inferences in favor of the nonmoving party here, Morris only after determining that such inferences are reasonable, considering all the evidence presented. See, e.g., Apex Oil Co. v. DiMauro, 822 F.2d 246, 252 (2d Cir.), cert. denied, 484 U.S. 977, 108 S. Ct. 489, 98 L. Ed. 2d 487 (1987); Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7; Burger v. Litton, 1996 WL 421449 at *7. "If, as to the issue on which summary judgment is sought, there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party, summary judgment is improper." Chambers v. TRM, 43 F.3d at 37; Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7.
In considering a motion for summary judgment, the Court is not to resolve contested issues of fact, but rather is to determine the existence of any disputed issues of material fact. See, e.g., Donahue v. Windsor Locks Bd. of Fire Comm'rs, 834 F.2d 54, 58 (2d Cir.1987); Knight v. United States Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S. Ct. 1570, 94 L. Ed. 2d 762 (1987); Watson v. McGinnis, 981 F. Supp. 815, 817-18 (S.D.N.Y.1997) (Peck, M.J.); Ruiz v. Selsky, 1997 WL 137448 at *3, 96 Civ.2003 (S.D.N.Y. March 24, 1997). To evaluate a fact's materiality, the substantive law determines which facts are critical and which facts are irrelevant. Anderson v. Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510. While "disputes over facts that might affect the outcome of a suit under the governing law will properly preclude the entry of summary judgment [,] [f]actual disputes that are irrelevant or unnecessary will not be counted." Id. (citations omitted); see also, e.g., Knight v. United States Fire Ins. Co., 804 F.2d at 11-12; Watson v. McGinnis, 981 F. Supp. 815, 817-18; Shaw v. City of New York, 1997 WL 187352 at *2 (S.D.N.Y. April 15, 1997) (Peck, M.J.); Ruiz v. Selsky, 1997 WL 137448 at *3.[2]
When a case turns on the intent of one party, as employment discrimination claims often do, a "trial court must be cautious about granting summary judgment." Gallo v. Prudential, 22 F.3d at 1224; see also, e.g., Chambers v. TRM, 43 F.3d at 40; Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7. Because the employer (here, the Union) rarely leaves direct evidence of its discriminatory intent, the Court must carefully comb the available evidence in search of circumstantial proof to undercut the defendant's explanations for its actions. E.g., Gallo v. Prudential, 22 F.3d at 1224; Hollander v. American Cyanamid Co., 895 F.2d 80, 85 (2d Cir.1990); Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7. Nonetheless, when the defendant provides convincing evidence to explain its conduct and the plaintiff's argument consists of purely conclusory allegations of discrimination, the Court may conclude that no material issue of fact exists and it may grant summary judgment to the defendant. See, e.g., Stern v. Trustees of Columbia Univ., 131 F.3d 305 (2d Cir.1997); Meloff v. New York Life Ins. Co., 51 F.3d 372, 375 (2d Cir.1995); Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7; Burger v. Litton, 1996 WL 421449 at *7; Engelmann v. National Broadcasting Co., 1996 WL 76107 at *7, 94 Civ. 5616 (S.D.N.Y. Feb.22, 1996). In other words, to defeat summary judgment, "the plaintiff's admissible evidence must show circumstances that would be sufficient to permit a rational finder of fact to infer that the defendant's employment decision was more likely than not based in whole or in part on discrimination." Stern v. Trustees of Columbia Univ.; see also, Fisher v. Vassar College, 114 F.3d 1332, 1339 (2d Cir.) (en banc), petition for cert. filed, ___ U.S. ___, 118 S. Ct. 851, 139 L. Ed. 2d 752 (1998); Van Zant v. KLM Royal Dutch Airlines, 80 F.3d 708, 714 (2d Cir.1996) (plaintiff *169 must "produce not simply `some' evidence, but `sufficient evidence to support a rational finding that the legitimate, nondiscriminatory reasons proffered by the employer were false, and that more likely than not [discrimination] was the real reason for the discharge.'"); Feinson v. New School for Soc. Research, 1997 WL 742532 at *8, 95 Civ. 763 (S.D.N.Y. Dec.1, 1997) ("plaintiff must ... carry the ultimate burden of persuasion, by demonstrating by a preponderance of the evidence that improper discrimination was a determinative factor motivating the employer's conduct"); Richardson v. Newburgh Enlarged City School Dist., 984 F. Supp. 735, 742 (S.D.N.Y.1997); Cutler v. Parfums Givenchy, Inc, 96 Civ. 9070, 1997 WL 634171 at *2-3 (S.D.N.Y. Oct.15, 1997) (Kaplan, D.J.); Hernandez v. New York City Law Dep't, 1997 WL 27047 at *7; Scaria v. Rubin, 94 Civ. 3333, 1996 WL 389250 at *5 (S.D.N.Y. July 11, 1996) (Peck, M.J.), aff'd, 117 F.3d 652, 654 (2d Cir.1997).
II. THE UNION'S LIABILITY UNDER TITLE VII
The Court reads Morris' complaint to state three claims against Local One: (1) the Union breached its duty of fair representation by failing to properly process his discrimination claims against Scott and by acquiescing in Scott's allegedly discriminatory conduct; (2) the Union retaliated against him by imposing sanctions against him in 1994; and (3) the Union failed to enforce Executive Order 11246. (Cplt. ¶ 8; Morris Aff., Ex. B ¶¶ 13-14, 17-18 & 25.)
A. A Union's Breach of Its Duty of Fair Representation Can Render It Liable Under Title VII
It is well established that "a union's breach of its duty of fair representation may render it liable under [Title VII] ...." Morpurgo v. Board of Higher Educ., 423 F. Supp. 704, 717 (S.D.N.Y.1976) (citing Macklin v. Spector Freight Sys., Inc., 478 F.2d 979, 988-89 (D.C.Cir.1973), and Local Union No. 12, United Rubber, Cork, Linoleum & Plastic Workers v. NLRB, 368 F.2d 12, 24 (5th Cir. 1966), cert. denied, 389 U.S. 837, 88 S. Ct. 53, 19 L. Ed. 2d 99 (1967)); see also, e.g., Gavenda v. Orleans County, 95-CV-0251, 1997 WL 65870 at *5 (W.D.N.Y. Feb.10, 1997); Doolittle v. Ruffo, 88-CV-1175, 1996 WL 159850 at *3-4 (N.D.N.Y. March 27, 1996); Ross v. Communication Workers, Local 110, 91 Civ. 6367, 1995 WL 351462 at *5-6 (S.D.N.Y. June 9, 1995) (where union's breach of its duty of fair representation "allegedly was motivated by discriminatory reasons based on reasons of race or gender, such a claim may be brought under Title VII."), aff'd mem., 100 F.3d 944 (2d Cir.), cert. denied, ___ U.S. ___, 117 S. Ct. 108, 136 L. Ed. 2d 61 (1996); Tabois v. CWA Local 1101, 1992 WL 131038 at *4 (S.D.N.Y. June 1, 1992) ("Because plaintiff's Title VII claim is based on defendant's alleged violation of its duty of fair representation, `a finding of a dfr [duty of fair representation] breach [is] essential to the existence of the Title VII claim.'"); Shaw v. General Motors Corp., 81-CV-143, 1991 WL 155581 at *4 (W.D.N.Y. Aug.5, 1991); Dolittle v. Ruffo, 88-CV-1175, 1990 WL 2648 at *3 (N.D.N.Y. Jan.16, 1990) ("It is well settled that `a union's breach of the duty of fair representation ... subjects it to liability under Title VII if the breach can be shown to be because of the complainant's race, religion, sex, or national origin.'"); James v. Local 32B-32J, Serv. Employees Int'l Union, 86 Civ. 0197, 1987 WL 33622 at *2 (S.D.N.Y. Dec.28, 1987) ("A union's role in ratifying an employer's discriminatory practice could be enough to compel a finding of union liability ... A union's breach of its duty of fair representation may also render it liable under Title VII.").
B. The Standard of Proof Applicable to a Title VII Breach of the Duty of Fair Representation Claim, and Its Application Here
The parties' dispute the appropriate legal standard to be applied to Morris' Title VII claim. Local One points to the traditional Title VII standard enunciated in McDonnell Douglas Corp. v. Green, 411 U.S. 792, 93 S. Ct. 1817, 36 L. Ed. 2d 668 (1973), and contends that Morris fails to establish any adverse employment action with respect to the Union. (Local One Br. at 5-7.) Morris, in contrast, relies on duty of fair representation cases generally, without citing to Title VII *170 duty of fair representation cases. (See Morris Br. at 8-15.)
After reviewing the case law in this and other circuits, the Court in Doolittle v. Ruffo, 88-CV-1175, 1996 WL 159850 at *4 (N.D.N.Y. March 27, 1996), announced a two-part test applicable to Title VII union duty of fair representation cases:
Based upon the above-cited case law, this court concludes that in this circuit the first prong of the Bugg test is not necessary to plaintiffs' establishment of a prima facie case that the Union Defendants breached their duty of fair representation and thus violated Title VII. Instead, plaintiffs must satisfy a two-prong test. They must demonstrate (1) that the Union Defendants breached their duty of fair representation by allowing an alleged breach to go unrepaired and (2) that the Union Defendants' actions were motivated by gender animus.
See also Gavenda v. Orleans County, 95-CV-0251, 1997 WL 65870 at *5 (W.D.N.Y. Feb.10, 1997) ("the plaintiff must first establish a prima facie case of discrimination or retaliation, which requires her to show, inter alia, that she belongs to [a] protected group or to demonstrate retaliation was engaged in a protected activity, that she suffered an adverse union action viz., that the union breached its duty of fair representation and that such adverse action occurred under circumstances giving rise to a reasonable inference of [racial] or retaliatory animus.").
Applying that test here, it is undisputed that Morris is a member of a protected group African-Americans and that he engaged in a protected activity complaining of racial discrimination in employment including filing charges with the EEOC. Second, to demonstrate that the union breached its duty of fair representation, Morris must prove that Local One's conduct was "arbitrary, discriminatory, or in bad faith." Vaca v. Sipes, 386 U.S. 171, 190, 87 S. Ct. 903, 916, 17 L. Ed. 2d 842 (1967);[3]accord, e.g., Gavenda v. Orleans County, 1997 WL 65870 at *6; Ross v. Communication Workers, 1995 WL 351462 at *5 ("the standards enunciated in Vaca concerning DFR [duty of fair representation] claims appl[y] to Title VII claims against a union as well"); Tabois v. CWA Local 1101, 1992 WL 131038 at *4.
The evidence before the Court about the Union's actual conduct in pursuing the Scott (and earlier) discrimination arbitrations is minimal, conclusory and contradictory. The Union contends that until Morris declined to go forward, the Union was prepared to pursue Morris' discrimination claim in arbitration, just as it had his prior discrimination claims against his former employers. (E.g., Local One Br. at 1; Local One 56.1 Stmt. ¶¶ 8, 10, 13-14, 18-35.) Morris contends that the Union did not vigorously pursue his prior arbitrations and, based on his discussions with the Union's counsel leading up to his Scott arbitration, was not going to vigorously pursue his discrimination claim against Scott. (E.g., Morris Dep. at 49-72, 141-52.) Moreover, Morris points out that the Union did not begin to pursue his discrimination claim against Scott for many months, and did so only after he filed charges with the EEOC. These factual disputes, and the lack of hard evidence from either side on this motion, preclude summary judgment.
Moreover, Morris need not prove that the Union itself held any racial animus against African-Americans. Its deliberate failure to pursue grievance claims of an employer's racial discrimination, if proved, is enough to establish the union's violation of Title VII. As the Supreme Court has made clear, "`A union which intentionally avoids asserting discrimination claims ... is liable under ... Title [VII] ..., regardless of whether, as a subjective matter, its leaders were favorably disposed towards minorities.'" Goodman v. Lukens Steel Co., 482 U.S. 656, 669, 107 S. Ct. 2617, 2625, 96 L. Ed. 2d 572 (1987) (union found liable under Title VII for deliberately avoiding discrimination claims and for refusing to assert racial discrimination as a ground for grievances).[4]
*171 C. Morris' Retaliation Claim Concerning The Union's Sanctions Against Him Is Time Barred
Morris alleges that Local One imposed sanctions upon him in 1994 in retaliation for his activism and criticism of the Union. (Morris Aff.Ex. B ¶¶ 13-14, 18.) This claim, however, is time barred.
"Filing a charge with the EEOC is a jurisdictional prerequisite to a private civil action under Title VII." Chojar v. Levitt, 773 F. Supp. 645, 650 (S.D.N.Y.1991) (citing 42 U.S.C. § 2000e-5(e), and McDonnell Douglas Corp. v. Green, 411 U.S. 792, 798, 93 S. Ct. 1817, 1822, 36 L. Ed. 2d 668 (1973)); accord, e.g., Johnson v. Palma, 931 F.2d 203, 209 (2d Cir.1991); Rivera v. Baccarat, Inc., 95 Civ. 9478, 1996 WL 251850 at *2 (S.D.N.Y. May 10, 1996); Dortz v. City of New York, 904 F. Supp. 127, 142 (S.D.N.Y.1995).
Acts of discrimination occurring more than 300 days before filing of charges with the EEOC are time barred. 42 U.S.C. § 2000e-5(e)(1); see, e.g., Butts v. City of New York Dep't of Housing Preservation and Dev., 990 F.2d 1397, 1401 ("When a plaintiff fails to file a timely charge with the EEOC, the claim is time-barred.... [T]he statute of limitations for filing a charge of discrimination with the EEOC is 300 days."); Shull v. Rite Aid Corp., 94 Civ. 8552, 1997 WL 289460 at *4 (S.D.N.Y. May 30, 1997) ("`[T]he complainant has 300 days to file a complaint with the EEOC .... [and] failure to file an agency charge within the applicable time period precludes a plaintiff from bringing a Title VII suit in federal court.'"); Perezic v. Crespo, 902 F. Supp. 438, 440 (S.D.N.Y.1995) ("`[T]he statute of limitations for filing a charge of discrimination with the EEOC is 300 days' after the alleged unlawful employment practice occurred.... Failure to comply with this timing requirement will cause a claim to be time barred.'"); Carrasco v. New York City Off-Track Betting Corp., 858 F. Supp. 28, 31 (S.D.N.Y.1994), aff'd mem., 50 F.3d 3 (2d Cir.1995). Morris' first EEOC complaint was brought on March 3, 1995. (Morris Aff. Ex. A.) The Union's imposition of $200 sanctions on Morris occurred on May 4, 1994. (Morris Aff. ¶ 15 & Ex. M; see Local One Reply Br. at 4.) May 4, 1994 is 303 days before March 3, 1995, and thus the claim as to the $200 sanctions is time barred.[5]
D. Morris' Claim That the Union Did Not Pursue Claims Against Employers Under Executive Order 11246 is Barred Because There is No Private Right of Action Under That Executive Order
Morris charges the Union with failure to enforce Executive Order 11246. (Morris Aff. ¶¶ 25-26.) The Order mandates rules to promote "equal opportunity for all persons, without regard to race, color, religion, sex, or *172 national origin, employed or seeking employment with Government contractors or with contractors performing under federally assisted construction contracts." 41 C.F.R. § 60-1.1. It requires such employers to develop affirmative action programs. 41 C.F.R. § 60-2.1.
Enforcement of Executive Order 11246, however, is restricted to the Department of Labor; a private employment discrimination action can not be maintained under the Order. E.g., Weise v. Syracuse Univ., 522 F.2d 397, 411 n. 23 (2d Cir.1975); McPartland v. American Broad. Cos., 623 F. Supp. 1334, 1339-40 (S.D.N.Y.1985); Pecorella v. Oak Orchard Community Health Ctr., Inc., 559 F. Supp. 147, 149 (W.D.N.Y.1982), aff'd mem, 722 F.2d 728 (2d Cir.1983). The Union, therefore, could not have pursued such a claim against employers. Accordingly, the Union should be granted summary judgment dismissing Morris' claim under Executive Order 11246.
CONCLUSION
For the reasons set forth above, I recommend that defendant Local One's summary judgment motion be granted in part, dismissing plaintiff Morris' claim (1) of retaliation based on the Union's sanction against him in 1994, and (2) under Executive Order 11246. I further recommend that the Court in all other respects deny defendant Local One's summary judgment motion as to plaintiff's Title VII claims based on the Union's breach of its duty of fair representation.
FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days from receipt of this Report to file written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Lewis A. Kaplan, 500 Pearl Street, Room 1310, and to the chambers of the undersigned, 500 Pearl Street, Room 1370. Any requests for an extension of time for filing objections must be directed to Judge Kaplan. Failure to file objections will result in a waiver of those objections for purposes of appeal. Thomas v. Arn, 474 U.S. 140, 106 S. Ct. 466, 88 L. Ed. 2d 435 (1985); IUE AFL CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1054 (2d Cir.1993), cert. denied, 513 U.S. 822, 115 S. Ct. 86, 130 L. Ed. 2d 38 (1994); Roldan v. Racette, 984 F.2d 85, 89 (2d Cir.1993); Frank v. Johnson, 968 F.2d 298, 300 (2d Cir.), cert. denied, 506 U.S. 1038, 113 S. Ct. 825, 121 L. Ed. 2d 696 (1992); Small v. Secretary of Health & Human Servs., 892 F.2d 15, 16 (2d Cir.1989); Wesolek v. Canadair Ltd., 838 F.2d 55, 57-59 (2d Cir.1988); McCarthy v. Manson, 714 F.2d 234, 237-38 (2d Cir.1983); 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72, 6(a), 6(e).
Preparation of the Pretrial Order
The parties are to file a joint pretrial order, in compliance with Judge Kaplan's rules for preparation of the pretrial order, by February 18, 1998. Because plaintiff is (once again) pro se, defendant's counsel shall be responsible for coordinating and filing the pretrial order. To assure the orderly preparation of the pretrial order, the parties are to exchange drafts of their portions of the pretrial order as follows: defendant on January 14, 1998, plaintiff on January 30, 1998, and defendant's responses on February 11, 1998. These drafts are not to be submitted to the Court; only the final proposed pretrial order is to be submitted to the Court (the original to be filed in the Clerk's Office, with courtesy copies to my chambers and Judge Kaplan's chambers). The case will be considered trial ready, on 24-hours' notice, as of February 23, 1998. The deadlines herein for preparation and submission of the pretrial order remain applicable even if either party files objections to this Report and Recommendation.
NOTES
[1] The Court of Appeal's recent decision in Van Zant v. KLM Royal Dutch Airlines, 80 F.3d 708, 713 (2d Cir.1996), reaffirmed that the continuing violation doctrine will apply only:
"`where specific and related instances of discrimination are permitted by the employer to continue unremedied for so long as to amount to a discriminatory policy or practice.'" Id. (quoting Lambert v. Genesee Hospital, 10 F.3d 46, 53 (2d Cir.1993)).
Van Zant does not speak to the second requirement in Johnson, which is drawn from the Fifth Circuit's decision in Berry v. Board of Supervisors of Louisiana State University, 715 F.2d 971 (5th Cir.1983), cert. denied, 479 U.S. 868, 107 S. Ct. 232, 93 L. Ed. 2d 158 (1986). Although the Second Circuit has never specifically considered its validity, the Berry test has had a profound influence on other federal courts. See West v. Philadelphia Electric Co., 45 F.3d 744, 754 n. 9 (3d Cir.1995) (adopting Berry test); Mascheroni v. Board of Regents of the University of California, 28 F.3d 1554, 1561 (10th Cir.1994) (same); Selan v. Kiley, 969 F.2d 560, 565-66 & n. 7 (7th Cir.1992) (same); Sabree v. United Brotherhood of Carpenters and Joiners, 921 F.2d 396, 404 (1st Cir.1990) (same); Roberts v. Gadsden Mem. Hosp., 835 F.2d 793, 800 (11th Cir.1988) (same); Dixit v. City of New York Dept. of General Serv., 972 F. Supp. 730, 736 (S.D.N.Y.1997) (same); Albritton v. Kantor, 944 F. Supp. 966, 971 (D.D.C. 1996) (same); Detrick v. H & E Machinery, Inc., 934 F. Supp. 63, 67 (S.D.N.Y.1996) (same); Rivera v. Puerto Rican Home Attendants Services, Inc., 930 F. Supp. 124, 130 (S.D.N.Y.1996) (same). Given the weight of authority in Berry's support, this Court will continue to apply Johnson absent persuasive or binding authority to the contrary.
[1] Morris failed to cite this incident in his charges filed with the EEOC. (Morris Aff.Exs. E, F.) He did, however, file a complaint against Local One with the National Labor Relations Board ("NLRB") on December 5, 1994. (Morris Aff.Ex. Q.) The NLRB dismissed the charge because it was an "internal union matter." (Morris Aff.Ex. R.)
[2] The Court also recognizes that it must "extend extra consideration" to pro se plaintiffs such as Morris; pro se parties are "to be given `special latitude on summary judgment motions.'" Reyes v. Koehler, 815 F. Supp. 109, 112 (S.D.N.Y. 1993) (quoting McDonald v. Doe, 650 F. Supp. 858, 861 (S.D.N.Y.1986)); see also, e.g., Watson v. McGinnis, 981 F. Supp. 815, 818-19; Valentine v. Honsinger, 894 F. Supp. 154, 156 (S.D.N.Y. 1995); Gabai v. Jacoby, 800 F. Supp. 1149, 1153 (S.D.N.Y.1992). The Court notes that Morris began this action pro se and is currently pro se; he was represented by counsel during part of this action, but fired counsel after counsel's submission of papers opposing the summary judgment motion.
[3] While a union "may not arbitrarily ignore a meritorious grievance or process it in perfunctory fashion," its members do not have "an absolute right to have [their] grievance[s] taken to arbitration...." Id. at 191, 87 S.Ct. at 917.
[4] The Supreme Court in Goodman did not reach the issue of whether mere union passivity in the face of an employer's discrimination renders the union liable under Title VII, because the record in Goodman showed more than mere passivity on the part of the union. 482 U.S. at 665-67, 107 S.Ct. at 2623-24.
Some courts appear to suggest that a union's acquiescence in the employer's discriminatory conduct is sufficient to state a Title VII claim. See, e.g., Macklin v. Spector Freight Sys., Inc., 478 F.2d 979, 989 (D.C.Cir.1973) ("[W]here there is such solid evidence of employer discrimination as is alleged here, it would undermine Title VII's attempt to impose responsibility on both unions and employers to hold that union passivity at the negotiating table in such circumstances cannot constitute a violation of the Act."); United States v. Bethlehem Steel Corp., 312 F. Supp. 977, 990 (W.D.N.Y.1970) ("The notice of such discriminatory practices to [the union] placed upon [it] the duty to take whatever steps were lawful to alleviate the discrimination and the effects of such discrimination upon its Negro membership."), rev'd in part on other grounds, 446 F.2d 652 (2d Cir. 1971). Here, some of Morris' claims may be of the passive variety, e.g., his claim that the Union did not seek to enforce Executive Order 11246 mandating affirmative action programs by government contractors. However, because Morris' claim, as in Goodman, goes beyond "mere passivity" by the Union e.g., his claim that the Union did not vigorously pursue the discrimination arbitrations that it brought the Court need not now address the issue left open by the Supreme Court in Goodman of whether mere passivity in the face of employer discrimination would make a union liable under Title VII.
[5] The Court does not view Morris' allegations as to the Union's conduct of his two earlier arbitrations as purporting to state a claim, as opposed to evidence that the Union would not adequately pursue his Scott arbitration. Any Title VII claim as to those earlier arbitrations would be time barred.
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72 B.R. 1017 (1987)
In re NEW ITEMS COMPANY, INC., Debtor.
Bankruptcy No. B81-3410.
United States Bankruptcy Court, N.D. Ohio, E.D.
May 15, 1987.
William H. Lukens, Cleveland, Ohio, for debtor.
Stephen D. Hobt, Cleveland, Ohio, for TSC Leasing Corp.
Saul Eisen, Cleveland, Ohio, for trustee.
MEMORANDUM OF OPINION AND ORDER
RANDOLPH BAXTER, Bankruptcy Judge.
This matter is before the Court upon the Trustee's objection to a claim filed by TSC Leasing Corporation (TSC) against the estate of New Items Company, Inc. (Debtor). Upon a review of the parties' respective briefs and arguments thereon, the following constitutes the Court's findings pursuant to Rule 7052, Bankr. Rules:
I.
The Debtor and TSC entered into two agreements, purportedly lease transactions, wherein TSC was to provide the Debtor with certain refurbished computer equipment for a specified period of months at an agreed-upon monthly rate. In addition to the monthly rate, the Debtor was to pay a use tax which was inclusive of state and local taxes on the subject equipment. Specifically, the first transaction's payment schedule required a total of seventy-two (72) monthly payments of $1,355.20 each to TSC for a total payment of $97,574.40. The second transaction, also concerning refurbished computer equipment, required monthly payments of $468.46 over a seventy-two (72) month period, or a total payment of $33,729.12.
The equipment in both transactions included varying quantities of disc drives, printers, visual display units, cartridges and a controller board (the equipment). All of the equipment was earlier obtained by TSC from its parent corporation, Triad Systems Corporation, for a total purchase price of $75,550.00. By stipulation, the parties hereto have agreed that, for the Court's resolution of this matter, the subject equipment will have a market value at the end of both agreement periods of no less than $3,739.00 and no greater than $15,000.00.
Prior to the termination of either of the above agreements, the Debtor was adjudicated a bankrupt by reason of the filing of *1018 an involuntary petition under Chapter 7. Subsequent thereto, TSC sought relief from the automatic stay pursuant to 11 U.S.C. 362(d)(2). Such relief was granted, and TSC took possession of the subject equipment and caused it to be sold, without notice to Debtor, at private sale for $32,640.00. TSC then caused to be filed its proof of claim in the amount of $81,446.94, representing the difference between the amount due under the aforementioned contracts and the amount received on resale:
Total Payment Due........................ $124,458.48
Six (6) Payments Received ............... (10,371.54)
Resale of Equipment ..................... (32,640.00)
____________
Claimed Amount .......................... $ 81,446.94
Upon the filing of TSC's proof of claim, the Trustee's objection ensued.
II.
The issues before the Court are two-fold. First, the Court must determine the nature of the transactions, that is, whether the agreements constituted secured transactions or whether they were true leases. Secondly, the Court must determine whether provisions of U.C.C. 9-504(3) effectively bar a creditor from recovering on a deficiency where no notice of sale was given to the Debtor. The Trustee contends that the subject transactions are disguised security interests as opposed to leasehold interests, notwithstanding the fact that the agreements are both captioned "Lease Agreement." Further, the Trustee contends, without dispute, that TSC never perfected its interest in the equipment.
Whether a transaction is to be characterized as a lease or a security interest is dependent upon the intent of the parties as of the time the agreement was executed. In re Telemax Corp., 10 U.C.C.Rep. 1316 (S.D.N.Y.1971). The labelling affixed to the agreement is not necessarily conclusive. See also, In re Alpha Creamery Co., 4 U.C.C.Rep. 794 (W.D.Mich.1967). By definition, U.C.C. § 1-201(37) defines a lease subject to a security interest as follows:
"Security interest" means an interest in personal property or fixtures which secures payment or performance of an obligation. . . . Unless a lease or consignment is intended as security, reservation of title thereunder is not a "security interest". . . . Whether a lease is intended as security is to be determined by the facts of each case; however, (a) the inclusion of an option to purchase does not of itself make the lease one intended for security, and (b) an agreement that upon compliance with the terms of the lease the lessee shall become or has the option to become the owner of the property for no additional consideration or for a nominal consideration does make the lease one intended for security. U.C.C. § 1-201(37).
As stated above, whether a transaction is to be construed as a lease or as a secured interest is based upon the facts of each case. An examination of the subject transactions reveals that the parties executed two separate "Lease Agreements" for the used computer equipment on payment terms heretofore described. Additionally each agreement contained thirty-one (31) identical terms and conditions regarding the equipment transaction. Upon careful examination of the several terms and conditions, the following are remarkable to a determination of the present issues:
1. The parties were respectively identified as "lessor" and "lessee" (Ex. A., para. 1);
2. The lease term was non-cancellable and was commenced only upon the Lessor's acceptance (Ex. A, para. 3);
3. Both transactions were captioned "Lease Agreement" (Ex. A);
4. As rent for the equipment, the (Debtor) lessee was obligated to pay TSC the total rent specified in the payment schedule (Ex. A, para. 4);
5. A security deposit, if any was required, was to be returned to the Debtor (lessee), without interest, upon satisfaction of the Debtor's obligation (Ex. A, para. 6);
6. Under "Ownership," the equipment "at all times" was to be the sole and exclusive property of the owner (TSC). Additionally, the Debtor could not "affix or install any of [the equipment] to or on other personal property or to or on any real property *1019 without first obtaining . . ." certain waivers from TSC insuring that the equipment remained free from any lien, encumbrance, right of distraint, or any other claim that might be asserted by a third party (Ex. A, para. 7);
7. Labels were affixed to the equipment indicating TSC's ownership, and the Debtor had no authority to remove such labels (Ex. A, para. 10);
8. TSC reserved the right to inspect the equipment at any and all times during business hours (Ex. A, para. 11);
9. Debtor was obligated to maintain the equipment in serviceable condition at its cost (Ex. A, para. 12);
10. TSC (lessor) was obligated to insure the equipment against risk of loss or damage, subject to a $500.00 deductible which was the Debtor's obligation. Additionally, the Debtor was obligated for insuring risk against any excluded perils not covered by TSC's insurer, as well as providing comprehensive public liability coverage (Ex. A, para. 14);
11. Debtor was obligated to indemnify TSC and hold TSC harmless from any and all claims, actions, suits, costs, expenses, damages and liabilities (Ex. A, para. 16);
12. Debtor was obligated for payment of all taxes related to its use and possession of the equipment (Ex. A, para. 17);
13. On both transactions the Debtor was provided the use of any investment tax credit (Ex. A, Section II);
14. Upon the expiration of the agreements, the Debtor was obligated to return the equipment to TSC at Debtor's cost (Ex. A, para. 23);
15. Both agreements indicated on the front pages that the Debtor was afforded a purchase option (Ex. A, para. 24);
16. The "default" provision under each agreement afforded TSC with an option to terminate the agreement immediately upon the occurrence of certain events, including the filing of a voluntary or involuntary bankruptcy petition by the Debtor. In the event of a default, if termination is exercised by TSC, TSC is allowed to repossess the equipment, without notice, and sell the equipment, without notice, at a public or private sale, (Ex. A, para. 25).
III.
Generally, where a lessee uses rental equipment for a term less than the equipment's useful life, with an obligation to return the equipment while it still has value, such is characteristic of a true lease. On the other hand, if the lessee is obligated to pay the full purchase price and consequently acquires substantially all of the benefits and risks of being the owner, such is distinguished as a sale, as opposed to a lease. 1 Bender's Secured Transactions Under The Uniform Commercial Code § 4A.06. The former comports with the definition of a lease as being an arrangement through which a lessor supplies, or causes to be supplied, equipment or consumer goods to one who desires to use the goods (a lessee) for a period substantially less than the full economic life of the goods. Id. at § 4.1.02(1). Thusly, the principal characteristic of a lease is that it allows the lessee the right to use the property for a period substantially less than its economic life, with an attendant obligation to return the property to the lessor while it still has substantial useful life. Some authorities require a 20% residual useful life in the leased item, while others consider 25% as being a reasonable remaining useful life.[1]
If, from the point of lease execution, the scheduled rental payments and other related payments have a then present value of *1020 90% or more of the original value of the leased equipment, the lease is deemed for accounting purposes as a capital lease. This has been considered by some as a rough equivalent of the Uniform Commercial Code's (U.C.C.) lease for security. Id., at § 4.1.02(21). Further, such lease is deemed to be a capital lease (i.e., one for security) if the lessee has been given an option to purchase at a bargain price. Id. at § 4.1.02(23). Even the two-fold test of the old Uniform Conditional Sales Act (predecessor to the U.C.C. Article 9) is helpful in determining whether a transaction is a true lease or a lease subject to a security interest. Therein, the following had to be satisfied:
(1) Was the lessee obligated to pay an amount equal to the cost of the equipment; and
(2) Would the lessee thereby become, or have the option to become, the owner with a further nominal payment or no payment. USCA § 1(2).
Applying the aforementioned consideration to the facts at bar, an examination of the useful life of the equipment would be helpful; however, the record is silent in this respect and the useful life cannot be discerned. With the total contract price for both transactions totalling $124,458.48, it is apparent that the contract price significantly exceeds TSC's total acquisition cost of $75,550.00. This factor, alone, does not suggest the existence of a security interest. What is significant, however, are the agreement provisions (identical in both transactions) which:
1) Acknowledged the respective parties as "lessor" and "lessee;"
2) Were captioned as "Lease Agreements;"
3) Acknowledged the existence of a returnable security deposit;
4) Noted the fact that the equipment was to be returned to TSC upon the termination of the lease;
5) Contained extensive provisions indicating TSC's full ownership, free from a lien or other encumbrance;
6) Gave lessor retention of the major insurance obligations, with relatively lesser insured risks being the obligation of the Debtor.
Those provisions, inter alia, are unequivocal and clearly are indicative of a true lease, as opposed to a security interest. The fact that the agreements both contained a reference to a purchase option does not necessarily make the transactions subject to secured interests. The express language of Paragraph No. 24 in both agreements provides:
24. Purchase Option. If it is indicated on the Schedule that Lessee is to have a purchase option with respect to the Equipment, and provided that this lease has not been earlier terminated and that Lessee is not in default hereunder, Lessee may, by written notice delivered to Lessor, not less than six (6) months prior to the end of the term of this lease, elect to purchase all (but not less than all) Equipment covered by this lease for a purchase price equal to that percentage of the system price for such Equipment as is set forth in the Schedule.
The front page of both agreements indicate that a purchase option was to be provided the Debtor. Those purchase options, however, were not unconditional. The above language of Paragraph No. 24 of the agreements expressly sets forth the conditions upon which the options could be exercised. Those conditions included a proviso which clearly stated that there must not have occurred a termination and that the Debtor (Lessee) must not be in a position of default at the time it sought to exercise the options. The Debtor's failure to maintain the scheduled payments under the contracts placed it in a position of default. That occurrence negated Debtor's right to exercise the available options under the contracts. (See, paragraph 25(a) of the agreements). Similarly, the proviso set forth in U.C.C. § 1-201(37)(b), likewise calls for "compliance" with the terms of the contract. As heretofore found, the breach by the Debtor's failing to make the scheduled payments negated the necessary compliance. Thusly, it also renders moot any concern this Court must otherwise have regarding residual values of the equipment. The fact that the Debtor was subjected to an involuntary Chapter 7 bankruptcy, *1021 however, is not an enforceable default provision, contrary to the language of Paragraph 25(c) of both agreements. A provision in an agreement providing that the filing of bankruptcy constitutes default is unenforceable. In re Jeffrey Glen Winters, 69 B.R. 145, 15 BCD 659 (D.Or.1986).[2] This Court concurs.
To determine whether the subject transactions constitute secured interests affected by Article Nine, the Court has extensively considered not only the statutory requirements of § 1-201(37) but also §§ 9-102, 9-103 and 9-104. To the extent they represent a statutory scheme oftentimes examined to determine the applicability of Article Nine, they are inappropriate to the case at bar. Particular emphasis is given to § 1-201(37)(a) which reads:
. . . (a) the inclusion of an option to purchase does not of itself make the lease one intended for security,
As heretofore mentioned, this clause is equally applicable to the present situation, as there was an ineffective option. Additionally, § 1-201(37)(b) requires compliance with the contractual terms. Again, such compliance was lacking in the matter sub judice. Section 9-102 speaks of intent:
§ 9-102. Policy and Subject Matter of Article
(1) Except as otherwise provided in Section 9-104 on excluded transactions, this Article applies
(a) to any transaction (regardless of its form) which is intended to create a security interest in personal property. . . .
The closest reading of the subject transactions indicate no manner in which the parties ever manifested an intent to create a security interest. It also is undisputed that TSC never perfected any security interest in the equipment. The transactions between TSC and the Debtor constituted nothing more than full payment leases. At no time under the contractual provisions was the lessee (Debtor) to acquire substantially all of the benefits and risks of ownership. If such had occurred, it would have created something other than a true lease. Since this Court has characterized the transactions between Debtor and Creditor as true leases, they are not governed by the Notice requirements of Article 9, and failure to comply with U.C.C. 9-504(3) is no bar to recovery by the Creditor.
CONCLUSION
Accordingly, the Trustee's objections to TSC's claim are denied.
IT IS SO ORDERED.
NOTES
[1] Rev.Proc. 75-21 considers 20% of the original cost as representing a residual useful life, while the Financial Accounting Standards Board (FASB) requires the leased item to have a residual estimated life of more than 25%. Id. at § 4.1.02(18), (19).
[2] It is recognized that the Winters decision concerned a security agreement; nevertheless, its rationale on this particular point is equally applicable to non-secured agreements.
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681 S.W.2d 672 (1984)
Oscar Bernard THOMAS, Appellant,
v.
The STATE of Texas, Appellee.
No. C14-83-471CR.
Court of Appeals of Texas, Houston (14th Dist.)
June 14, 1984.
Discretionary Review Refused March 20, 1985.
*673 Charles Baird, Houston, for appellant.
Calvin Hartmann, Asst. Dist. Atty., Houston, for appellee.
Before JUNELL, MURPHY and SEARS, JJ.
SEARS, Justice.
Appellant was convicted of burglary of a habitation with intent to commit theft and was sentenced to five years confinement. He argues that his conviction must be reversed *674 because TEX.CODE CRIM.PROC. ANN. art. 1.13 (Vernon 1977) (waiver of jury trial), was not complied with, the trial court denied his Motion to Suppress and did not conduct an identification hearing. We have carefully examined the record and affirm the conviction.
At about 1:00 p.m. on March 9, 1983, Leroy Ethridge and a friend observed Appellant and two other men each "toting something" down the street. At the time, Ethridge thought that one of the men was carrying a television set. Although he previously had seen them in the neighborhood, he was suspicious of them carrying things down the street in the middle of the day since there had been a recent burglary in the neighborhood. He called the police dispatcher and took his telephone out to the porch so that he could continue watching their activities. He then observed the three men enter a house which he knew was vacant and noticed they exited empty handed. At this point, he called the police dispatcher a second time. An officer arrived in response to this call.
Ethridge described the three men to the officer, and told the officer the name of one of the co-defendants, James Earl Ryles (a.k.a. Riles). The officer spotted them in the neighborhood, picked them up and brought them to Ethridge's house for identification.
The officer testified that the co-defendants looked like they were about to run as they noticed him approaching. He stopped next to them, told them that he had received a complaint from a man about three black males, fitting their descriptions, whom the man had observed near an abandoned house. He then told them that it was near the end of his shift and that he wanted to get the matter straightened out so he could go home. The three men voluntarily stepped to the rear of the patrol car, and after being informed that police policy required a search for weapons of any person entering a patrol car, each man handed him a pocket knife.
The officer and the three men proceeded to Ethridge's house and Ethridge identified them. The officer then called for a backup unit to watch the men so that he could search the house. Ethridge told the officer that the men had deposited what they had been carrying in an abandoned house near the dead end of the street. The officer investigated the house in which he felt the property was most likely to be. He found a microwave oven, a portable radio and a World War II trench knife. These were the only items in the house which were not covered with dust and mildew. He removed the items to a patrol car and returned to Ethridge's house.
Meanwhile, a neighbor had informed Ethridge that the door was ajar on a house located on a street on which Ethridge had seen the co-defendants. Upon receiving this information, the officer investigated that house and discovered pry marks near the door lock. Another officer located the owner of that house and notified him that it was possible his house had been burglarized. The owner arrived, inspected his house and notified the officers that a microwave oven, a portable radio and a World War II trench knife were missing. The owner then identified the property found in the abandoned house.
In his first ground of error, Appellant alleges that the "record does not reflect an effective waiver of right to jury trial" because TEX.CODE CRIM.PROC.ANN. art. 1.13 (Vernon 1977), was not complied with. We disagree.
Appellant was tried jointly with his two co-defendants, James Earl Ryles (a.k.a. Riles) and Larry Peaterson. During pre-trial proceedings the trial judge inquired of each co-defendant whether he understood what a trial by jury was and whether he desired to waived that right. Each co-defendant affirmatively answered both questions. At that time, the judge excused the District Attorney to get the waiver of trial by jury forms. Appellant, the defense attorney and the District Attorney signed the waiver form. The trial judge did not sign the form. Trial was to the court and punishment was set at five years confinement. Appellant appeals, alleging that art. 1.13 *675 was violated because the court's approval of the waiver of jury trial was not entered of record on the court's minutes. Another panel of this court affirmed the conviction of a co-defendant in Ryles v. State, 676 S.W.2d 146 (Tex.App.Houston [14th Dist.] 1984, no pet.). Aside from Ryles, we have not been cited to, nor have we found, a case directly on point.
Article 1.13 states that
The defendant in a criminal prosecution for any offense classified as a felony less than capital shall have the right, upon entering a plea, to waive the right of trial by jury, conditioned, however, that such waiver must be made in person by the defendant in writing in open court with the consent and approval of the court, and the attorney representing the State. The consent and approval by the court shall be entered of record on the minutes of the court, and the consent and approval of the attorney representing the State shall be in writing, signed by him, and filed in the papers of the cause before the defendant enters his plea. Before a defendant who has no attorney can agree to waive the jury, the court must appoint an attorney to represent him. (emphasis added).
The article requires that the consent of the accused and the state be in writing. The error caused by the failure of the State to sign the jury waiver form cannot be cured by subsequently signing the form or by testifying that the State consented. Lawrence v. State, 626 S.W.2d 56, 57 (Tex. Crim.App.1981). Although there is no requirement that the jury waiver form be signed by the court, it is clear that the court must consent and approve of such waiver and that such consent and approval shall be entered of record on the minutes of the court.
We find that the requirement of written consent by the State and by the defense are conditions precedent which must be complied with before presenting the waiver form to the court for approval. We find further the requirement that the "consent and approval by the court be entered of record on the minutes of the court" is a condition subsequent which is a clerical function to be performed by the clerk of the court at the direction of the court.
Finally, we find that the fact that the court accepted the executed "waiver of trial by jury," ordered it filed with the papers of this cause and proceeded to trial without a jury, is a prima facie proof that the court consented to and approved of Appellant's waiver of trial by jury. See Andrews v. State, 636 S.W.2d 756 (Tex. App.Beaumont 1982, no pet.).
The waiver of trial by jury form used in this case contains the following language:
The above waiver of trial by jury having been made by the defendant and approved by the attorney representing the State, prior to the entering of a plea herein, is approved by the Court and is ordered filed in the papers of the cause. The Court's consent and approval of the waiver of trial by jury shall be entered of record on the minutes of the Court. (emphasis added).
_____________________
Judge Presiding
It is clear from the foregoing language that the court (1) approved of and consented to the waiver; (2) ordered the waiver filed in the papers of the cause; and, (3) ordered its consent and approval to be entered of record on the minutes of the court.
The clerk of the court complied with the court's instruction to file the waiver with the papers of the cause and it is found in the transcript. However, as in Ryles, the minutes of the court brought forward on appeal are not complete. Therefore, we are without knowledge of whether the clerk complied with the court's instruction to enter the court's consent and approval in the minutes of the court. Appellant has failed to present this court with a complete record and we cannot assume a fact that is not supported by the record. We must therefore presume the complete record of the minutes of the court would reflect the court's consent and approval of *676 the waiver of trial by jury, in compliance with art. 1.13. See McCloud v. State, 527 S.W.2d 885, 887 (Tex.Crim.App.1975). We note that if appellant had affirmatively shown the court's consent and approval was not entered of record in the minutes of the court, the appropriate remedy would be to abate the appeal and amend the minutes to comply with the instructions of the court. See TEX.CODE CRIM.PRO.ANN. art. 44.24(b) (Vernon Supp.1984). Ground of error one is overruled.
Appellant's second ground of error deals with the trial court's action in overruling his Motion to Suppress. He specifically argues that "[T]he arresting officer had no probable cause to justify a warrantless arrest" and that the evidence which was found after the arrest and introduced into evidence was "seized without a warrant from private property. [sic]" We hold the trial court correctly overruled the motion.
We focus first on the legality of the arrest. Appellant alleges he was illegally arrested because he was arrested without a warrant and had committed no offense in the arresting officer's presence or within his view, TEX.CODE CRIM.PROC.ANN. art. 14.01 (Vernon 1977); the officer did not have satisfactory proof that a felony had been committed and the offenders were about to escape, TEX.CODE CRIM.PROC. ANN. art. 14.04 (Vernon 1977); or he was not found in a suspicious place under a circumstance reasonably indicating that he had committed a felony. TEX.CODE CRIM.PROC.ANN. art. 14.03 (Vernon Supp.1984). We will address these contentions in the order presented.
It is undisputed that the officer observed none of the transactions which Ethridge related. However, Ethridge informed the police dispatcher of the incidents he was observing and the dispatcher in turn related this information to the officer. Further, the officer testified that, based on his experience, he considered Ethridge to be a credible person. These factors establish compliance with art. 14.04. See Law v. State, 574 S.W.2d 82 (Tex.Crim. App.1978); Brown v. State, 630 S.W.2d 322 (Tex.App.Houston [14th Dist.] 1982, no pet.).
Appellant argues that art. 14.03 is inapplicable "because there is nothing inherently suspicious about members of a neighborhood walking down the street carrying something in broad daylight." As a general proposition, we agree. However, because Ethridge thought one of the men was carrying a television set, saw them deposit the property in an abandoned house and knew that at least one house in the neighborhood had been recently burglarized, we can and do find that Appellant was in a suspicious place under circumstances which reasonably showed that he was guilty of some felony. See Sheffield v. State, 647 S.W.2d 413 (Tex.App.Austin 1983, pet. ref'd). Appellant's warrantless arrest was justified.
As to Appellant's argument that the fruits of the warrantless search of the abandoned house should have been suppressed, we need only note that since Appellant made no showing that he had any reasonable expectation of privacy in the house or that he had a right of ownership or possession of the house, he has no standing to challenge the validity of the search. See Goehring v. State, 627 S.W.2d 159 (Tex.Crim.App.1982); Manry v. State, 621 S.W.2d 619 (Tex.Crim.App.1981). The trial court was correct in overruling the Motion to Suppress. Ground of error two is overruled.
In his third ground of error, Appellant alleges that the trial court erred in failing to conduct an identification hearing. He specifically argues that he was denied "the opportunity to present clear and convincing evidence of tainted identification by Ethridge" citing Johnson v. State, 614 S.W.2d 148 (Tex.Crim.App.1981), for the proposition that such a hearing may be constitutionally necessary.
Johnson, as well as the other cases Appellant cites, involved a jury trial. Appellant's trial was to the court. The logical need for such a hearing, which is conducted outside the presence of the jury, *677 is not present if trial is not to a jury. In both cases the judge hears testimony relating to the identification issue. Appellant was afforded the opportunity to cross-examine the identification witnesses and to present his own witnesses; however, he chose not to do so. Further, he did not object to Ethridge identifying him at trial, and, has not even alleged how any prior identification may have tainted the in-court identification. Thus, Appellant has waived this ground of error. Pete v. State, 501 S.W.2d 683 (Tex.Crim.App.1973), cert. denied, 415 U.S. 959, 94 S. Ct. 1488, 39 L. Ed. 2d 574 (1974). Ground of error three is overruled.
The conviction is affirmed.
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72 B.R. 1002 (1987)
In re WILLINGTON CONVALESCENT HOME, INC., Debtor.
STATE OF CONNECTICUT, DEPARTMENT OF INCOME MAINTENANCE and State of Connecticut, Department of Health Services, Defendant/Appellants,
v.
Martin W. HOFFMAN, Trustee, Plaintiff/Appellee.
Civ. No. H-84-636 (PCD).
United States District Court, D. Connecticut.
May 8, 1987.
*1003 Kenneth A. Graham, Arnold I. Menchel, Asst. Attys. Gen., Hartford, Conn., for Conn. Dept. of Income Maintenance.
Stanley K. Peck, Asst. Atty. Gen., Hartford, Conn., for Conn. Dept. of Health Services.
J. Christopher Kohn, Tracy J. Whitaker, Attys. Civil Div., Dept. of Justice, Washington, D.C., for U.S.
Martin W. Hoffman, Hartford, Conn., trustee.
MEMORANDUM OF DECISION
DORSEY, District Judge.
This is an appeal from a decision by the United States Bankruptcy Court (Krechevsky, J.) denying the State of Connecticut's motion to dismiss a claim against it brought by the trustee of a debtor in a converted Chapter 7 bankruptcy proceeding. See Hoffman v. State of Connecticut (In re Willington Convalescent Home, Inc.), 39 B.R. 781 (Bankr.D.Conn.1984). The State had alleged that no money was owed to the debtor and that it was immune from suit in federal court by virtue of the bankruptcy laws and the eleventh amendment.[1]
At the outset, appellee trustee raises a threshold objection in the form of a motion to dismiss[2] as to the propriety of this *1004 appeal. Appellee argues that the denial of the original motion to dismiss by the bankruptcy court was interlocutory in nature and not a final order. Plaintiff/Appellee's Memorandum in Support of the Motion to Dismiss ("Appellee's Memorandum") at 2. See Collier on Bankruptcy § 3.03(3) (15th ed. 1984) ("The denial of a motion to dismiss, even when the motion is based on jurisdictional ground, does not ... terminate the action and the order is interlocutory."). Because the ruling was interlocutory, appellee contends that it is appealable only by leave of the district court, as prescribed by Bankruptcy Rule 8001(b)[3] and only after the filing of a motion for leave to appeal with the bankruptcy court clerk, as required by Bankruptcy Rule 8003(a).[4] Appellants concede they did not file a motion for leave to appeal, but assert no need to do so on the ground that the ruling of the bankruptcy court was final, not interlocutory, and governed, therefore, by Bankruptcy Rule 8001(a),[5] which requires merely the filing of a notice of appeal.
Assuming, arguendo, that the ruling of the bankruptcy court was interlocutory, not final, it may still be appealable to this court even in the absence of a motion for leave to appeal. Rule 8003(c) provides:
Appeal Improperly Taken Regarded as a Motion for Leave to Appeal. If a required motion for leave to appeal is not filed, but a notice of appeal is timely filed, the district court ... may grant leave to appeal or direct that a motion for leave to appeal be filed. The district court ... may also deny leave to appeal but in so doing shall consider the notice of appeal as a motion for leave to appeal....
Thus, the Bankruptcy Rules do not focus on the technical distinctions between a motion for leave to appeal and a notice of appeal; indeed, they entrust to the district court discretion to determine whether the questions resolved by the bankruptcy court are or are not appealable.[6]
Although appellee takes the position that the issues sought to be appealed are not of such a character that they cannot await review following final adjudication on the merits by the bankruptcy court, Appellee's Memorandum at 4-6, the legal and constitutional questions raised by the State of Connecticut implicate the doctrine of sovereign immunity and challenge the propriety of any and all proceedings against the State in the bankruptcy court. Such matters are well to be resolved prior to subjecting the parties to extensive litigation on the merits lest all efforts be found, on appeal, to have been in vain. The delicate balance of our federal system should make federal courts reluctant to require states to defend lawsuits to their conclusion which, arguably, Congress or the Constitution has placed beyond the federal judicial *1005 power. Accordingly, appellee's motion to dismiss this appeal is denied.[7]
Background
Willington Convalescent Home, Inc. ("Willington") formerly operated a nursing home facility which participated in the Connecticut Medicaid Program. Under the program, Willington agreed to provide nursing care services to indigent patients eligible under Title XIX at a specific per diem rate of compensation. The State determined the per diem rate from annual cost reports submitted by Willington.
Initially, the State accepts at face value the cost data submitted by nursing homes such as Willington, but regulations provide for subsequent field audits to verify that the costs claimed are legitimate. If costs are found to have been improperly claimed, the State may adjust the per diem rate retroactive to the applicable rate year and recoup the amount of medicaid overpayment from whatever monthly payments may be due and owing to the facility for current patient care.[8] If the nursing home disputes the findings made in the field audit, it may seek an administrative hearing within the Department of Income Maintenance, Conn.Gen.Stat. § 17-311, and then seek judicial review by appeal to the Connecticut Superior Court, Conn.Gen.Stat. § 4-183.
Willington submitted cost reports for the years 1976-1978 which were relied on by the State in setting the per diem Medicaid rates for those years. However, a field audit completed on December 3, 1980, discovered that real property costs claimed as $294,007 were actually only allowable in the amount of $22,500. As a result, Willington had received substantial Medicaid overpayments for five rate-years. On February 24, 1982, the State retroactively revised Willington's per diem rates for 1976 and 1980; on August 6, 1982, the rates for 1977-1979 were also adjusted downward. Willington timely requested review of the latter rate decision, but then moved to postpone the administrative hearing indefinitely. Willington did not appeal the rate decision of February 24, 1982.
On June 2, 1982, Willington filed a Chapter 11 petition in bankruptcy. Willington did not submit its provider agreement to the bankruptcy court for assumption or rejection. Since Willington continued as a provider participant in the Medicaid Program, the Department of Income Maintenance sought to and did recoup a modest amount of the past Medicaid overpayment from the monthly payments due Willington for on-going patient care. Willington shut down permanently in April 1983 still owing the State $121,408. At no time did Connecticut file a proof of claim against the bankrupt estate.
On July 27, 1983, the bankruptcy court converted the case to one under Chapter 7 and appointed a trustee. The trustee filed a complaint against Connecticut seeking payment of $64,010.24 for services provided *1006 to Medicaid patients by Willington during March 1983. The State admitted the rendering of the services, but asserted both its right to recoup the prepetition Medicaid overpayments and its insulation from suit on grounds of sovereign immunity and the eleventh amendment. Accordingly, the State moved to dismiss for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted, Fed.R.Civ.P. 12(b)(1) and 12(b)(6), as made applicable to bankruptcy proceedings by Bankruptcy Rule 7012(b). In denying that motion, the bankruptcy court held that: (1) Congress had intended to abrogate the sovereign immunity of a state where, as here, the state owed a matured debt to the bankrupt estate; (2) Congress intended to abrogate the eleventh amendment immunity of a state to suit in federal court in the circumstances at bar; (3) Congress has authority under the Bankruptcy Clause of the Constitution[9] to abrogate a state's eleventh amendment and sovereign immunity; and (4) Connecticut owes the estate the payment due for March 1983 because the State may not set off a postpetition obligation to the debtor against a prepetition claim against the debtor.
As the State had challenged the constitutionality of a provision of the Bankruptcy Code (as construed by the bankruptcy court), this appeal was deferred until the Attorney General of the United States was apprised of the challenge and permitted to argue the constitutional question. See 28 U.S.C. § 2403(b).[10] The United States has intervened and filed a brief on the constitutional issues.
Discussion
Resolution of this appeal requires an analysis of the following provision of the Bankruptcy Code:
11 U.S.C. § 106 Waiver of sovereign immunity
(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit's claim arose.
(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.
(c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity
(1) a provision of this title that contains "creditor", "entity", or "governmental unit" applies to governmental units; and
(2) a determination by the court of an issue arising under such a provision binds governmental units.
After noting that the term "governmental unit" is specifically defined in the Code to include a state government,[11] the bankruptcy court found the following provision addressed to an "entity" (and, hence, by virtue of § 106(c), to a state) applicable to the debt owed by Connecticut for services rendered by Willington in March 1983:
11 U.S.C. § 542(b): [A]n entity that owes a debt that is property of the estate and that is matured, payable on demand, or payable on order, shall pay such debt to, or on the order of, the trustee, except to the extent that such debt may be offset under section 553 of this title against a claim against the debtor.
"Thus," the court concluded, "Congress has expressly provided that a State is *1007 bound by a court judgment ordering it to make payment of a matured debt and a defense of sovereign immunity against a suit brought by a trustee is unavailing." Willington, 39 B.R. at 786. Therefore, § 106(c) was held to waive sovereign immunity of governmental units as to suits for retroactive monetary damages even in instances where the governmental unit had not filed a proof of claim against the bankrupt estate, as described in subsections 106(a) and (b).
There are two problems with the preceding analysis. The first is that § 542 applies to turnover petitions and not, as here, to adversary proceedings for money damages pursuant to a contract claim. The basis of jurisdiction in this action, as the bankruptcy court correctly noted, is the authority of bankruptcy courts to adjudicate claims "arising in or related to cases under title 11." 28 U.S.C. § 1471(b).[12] That section of the Code, however, does not contain the words "creditor," "entity," or "governmental unit," i.e., the terms required to trigger the waiver of sovereign immunity provided for in § 106(c).
The second and principal difficulty with the bankruptcy court's analysis is that it is premised on a construction of § 106(c) which cannot readily be harmonized with subsections (a) and (b). Subsection (a) exposes governmental units to suits without limit where a compulsory counterclaim is filed after the sovereign files its own proof of claim in a bankruptcy proceeding. Subsection (b) exposes sovereigns to permissive counterclaims (for offset purposes) but, again, only after the sovereign files its own proof of claim. The express waiver of sovereign immunity in the carefully limited circumstances provided for in subsections (a) and (b) would seem to preclude reading subsection (c) as a completely independent wide-open waiver of sovereign immunity which would permit suits against the state for retroactive money damages irrespective of whether the state had first brought suit against the estate. Indeed, subsection (c) begins by specifically acknowledging that its reach as a waiver of sovereign immunity is limited by the two subsections which precede it. The opening words of (c) "Except as provided in subsections (a) and (b) of this section" seem calculated to prevent subsection (c) from exposing governments to liability for money judgments or set-offs beyond what had been accomplished in the excepted subsections.
Reading subsection (c) as a general waiver of sovereign immunity would appear to compromise at least three important and related principles of statutory construction: (1) a section of a statute should not be read in isolation from other provisions of the statute, Richards v. United States, 369 U.S. 1, 11, 82 S. Ct. 585, 591, 7 L. Ed. 2d 492 (1962); (2) a statute should not be construed in a way which renders part of it mere surplusage, see Jarecki v. G.D. Searle & Co., 367 U.S. 303, 307-308, 81 S. Ct. 1579, 1582-83 6 L. Ed. 2d 859 (1961) *1008 (preferring a "construction which gives effect to all of [a statute's] provisions" to a reading which renders one part "a mere redundancy");[13] and (3) waivers of sovereign immunity must be strictly construed in favor of the sovereign, McMahon v. United States, 342 U.S. 25, 27, 72 S. Ct. 17, 19, 96 L. Ed. 26 (1951).
Particularly where the sovereign immunity of a state is at stake, courts must tread warily. In Atascadero State Hospital v. Scanlon, 473 U.S. 234, 105 S. Ct. 3142, 3148, 87 L. Ed. 2d 171 (1985), the Supreme Court enjoined courts when construing federal statutes to be "certain" that Congress intended therein to provide for suits against unconsenting states. There must be "an unequivocal expression of congressional intent," Pennhurst State School and Hospital v. Halderman, 465 U.S. 89, 99, 104 S. Ct. 900, 907, 79 L. Ed. 2d 67 (1984), "in the statute itself," Atascadero, 105 S.Ct. at 3148, before concluding that Congress has waived the sovereign immunity of states. After reviewing the Supreme Court's recent pronouncements in this area, the Court of Appeals for the Seventh Circuit concluded it must apply "a somewhat higher standard of proof than is usual in cases of statutory interpretation," one requiring the exercise of "heightened scrutiny" by federal courts. McVey Trucking, Inc., 812 F.2d at 324. "This proof requirement is extremely rigorous when the effect of the purported federal liability upon the state treasury is potentially severe." Willington, 39 B.R. at 789, citing Quern v. Jordan, 440 U.S. 332, 99 S. Ct. 1139, 59 L. Ed. 2d 358 (1979), and County of Monroe v. State of Florida, 678 F.2d 1124, 1131 (2d Cir.), cert. denied, 459 U.S. 1104, 103 S. Ct. 726, 74 L. Ed. 2d 951 (1983).
In light of the explicit language in subsection (c) excepting the provisions of subsections (a) and (b), it is not "certain" that Congress intended in subsection (c) to expose state governments to suits for money damages in federal courts in the precise circumstances of this case. However, the bankruptcy court quite properly[14] looked beyond the face of the statute and concluded from its legislative history that, even if its reading of subsection (c) rendered subsections (a) and (b) mere surplusage, it was, nevertheless, faithful to what Congress had intended.[15]
Legislative History
An original draft of the Bankruptcy Code as proposed by the Commission on *1009 the Bankruptcy Laws of the United States would have made all Code provisions applicable to governmental units. That recommendation was rejected.[16] Instead, the original House and Senate versions of the Code were far narrower in scope and included only what now appears essentially as § 106(a) and (b). The Report accompanying the measure read, in relevant part:
First, the filing of a proof of claim against the estate by a governmental unit is a waiver by that governmental unit of sovereign immunity with respect to compulsory counterclaims, as defined in the Federal Rules of Civil Procedure, that is, counterclaims arising out of the same transaction or occurrence. The governmental unit cannot receive a distribution from the estate without subjecting itself to liability it has to the estate within the confines of a compulsory counterclaim rule. Any other result would be one-sided. The counterclaim by the estate against the governmental unit is without limit.
Second, the estate may offset against the allowed claim of a governmental unit up to the amount of the governmental unit's claim, any claim that the debtor and thus the estate, has against the governmental unit, without regard to whether the estate's claim arose out of the same transaction or occurrence as the government's claim. Under this provision, the setoff permitted is only to the extent of the governmental unit's claim. No affirmative recovery is permitted. Subsection (a) governs affirmative recovery.
Though this section creates a partial waiver of immunity when the governmental unit files a proof of claim, it does not waive immunity if the debtor or trustee, and not the governmental unit, files proof of a governmental unit's claim....
S.Rep. No. 95-989, 95th Cong., 2d sess., at 29-30, U.S.Code Cong. & Admin.News 1978, pp. 5787, 5815-5816. The Senate Report also noted, "Though Congress has the power to waive sovereign immunity for the Federal government completely in bankruptcy cases, ... Congress does not ... have the power to waive sovereign immunity with respect to claims of a bankrupt estate against a State...." Id. That comment is of particular significance not because it correctly assesses the extent of Congress' power[17] but because it indicates what the authors of the Senate Report *1010 believed to be true about the extent of Congress' power.
Thereafter, a Conference Committee made minor revisions in subsections (a) and (b) and added subsection (c) for the first time. The Conference Committee offered the following explanation for the addition of § 106(c):
Section 106(c) relating to sovereign immunity is new. The provision indicates that the use of the term "creditor", "entity", or governmental unit in Title 11 applies to governmental units notwithstanding any assertion of sovereign immunity and that an order of the court binds governmental units. The provision is included to comply with the requirement in case law that an express waiver of sovereign immunity is required in order to be effective. Section 106(c) codifies In re Gwilliam, 519 F.2d 407 (9th Cir.1975), and In re Dolard, 519 F.2d 282 (9th Cir.1975), permitting the bankruptcy court to determine the amount and dischargeability of tax liabilities owing by the debtor or the estate prior to or during a bankruptcy case whether or not the governmental unit to which such taxes are owed files a proof of claim. Except as provided in sections 106(a) and (b), subsection (c) is not limited to those issues, but permits the bankruptcy court to bind governmental units on other matters as well. For example, section 106(c) permits a trustee or debtor in possession to assert avoiding powers under Title 11 against a governmental unit; contrary language in the House report ... is thereby overruled.
124 Cong.Rec. H 11091 (emphasis added); see also 124 Cong.Rec. S 17407.
The bankruptcy court, when quoting the above language, chose to underscore not "Except as provided in sections 106(a) and (b)" but the last full sentence. The court concluded therefrom that "the final version of § 106 abandons the initial, limited approach to the `waiver' issue and more nearly approximates the broad approach of the Commission draft." 39 B.R. at 788.[18]
*1011 Obviously, subsection (c) was intended to and does waive sovereign immunity in some instances where the government has not filed a proof of claim. The Dolard and Gwilliam cases which subsection (c) was designed to codify had held that a specific provision of the prior Bankruptcy Act[19] would be rendered meaningless if a bankruptcy court could not adjudicate the amount and dischargeability of federal income tax liability accruing against the estate. In In re Remke, 5 B.R. 299 (Bankr.E. D.Mich.1980), the debtor recovered a preferential transfer from the Internal Revenue Service pursuant to § 547 of the Bankruptcy Code, which deals with transfers to or from a "creditor" and, hence, the federal government. Accord In re Community Hosp. of Rockland County, 15 B.R. 785 (Bankr.S.D.N.Y.1981) (trustee in Chapter 7 liquidation proceeding may void tax lien payments made within ninety days of the filing of a bankruptcy petition, even in the absence of the government's filing a proof of claim, when such payments meet the statutory requirements of a preferential transfer).[20]See also In re Howell, 4 B.R. 102 (Bankr.M.D.Tenn.1980); In re Navear, 674 F.2d 1201 (7th Cir.1982) (applying § 106(c) to abrogate sovereign immunity of federal agencies in adversary proceedings concerning disability benefits received directly by the debtor). However, the preceding cases involved the federal not state government and were preference actions[21] in which the relief sought was either injunctive or declaratory in nature or based upon the in rem jurisdiction of the court.[22] The only case where subsection (c) has been read to abrogate the sovereign immunity of a state is McVey, which also was a preference action seeking to avoid the transfer of tax payments made by the debtor to the governmental unit.
The only case on all fours with the instant action Regal Const. Co. v. State of Maryland (In re Regal Const. Co.), 18 B.R. 353 (Bankr.D.Md.1982) held that subsection (c) did not authorize a suit for money damages by a debtor against a state government. In Regal, the debtor sought to recover funds (which the state was withholding *1012 as liquidated damages) for work performed under a contract with a state agency. The court found that merely entering into a contract did not waive the state's sovereign immunity nor was § 106(c) intended by Congress to do so. See id. at 357 ("If ... [as plaintiff had argued] § 106(c) constitutes a general waiver of immunity, it would render § 106(a) and § 106(b), which refer to cases in which states file claims, meaningless."). Absent congressional authorization, the eleventh amendment thus prevented the bankruptcy court from assuming jurisdiction:
Insofar ... as the counts of the complaint request money that [the state] retains as a setoff of amounts allegedly due to it through contract clauses allowing for liquidated damages, the Eleventh Amendment bars suit. In In re Ramos, 12 B.R. 250 (Bankr.N.D.Ill.1981), the trustee and debtor attempted to recover funds held by the Illinois Department of Public Aid (IDPA) as a setoff for funds allegedly owed to IDPA by the debtor. In Ramos, as in the instant case, plaintiff claimed that 11 U.S.C. § 106 operated as a bar to the state's assertion of sovereign immunity, even though the state had not filed a claim in the bankruptcy case. This court, like the court in Ramos, finds that the Eleventh Amendment bars suit for recovery of funds set off by [the state].
Id. at 358. See Swayne v. State of Washington (In re Crum), 20 B.R. 160 (Bankr. D.Idaho 1982). See also In re Newlin, 29 B.R. 781, 784 (Bankr.E.D.Pa.1983) (finding subsection (c) to be a "limited waiver").
It is found, therefore, that the language and legislative history of §§ 106(a), (b) and (c), as well as the better reasoned case law interpreting those provisions, support appellants' claim that the Bankruptcy Code did not authorize a suit for retrospective money damages against the State of Connecticut. Although subsection (c) was designed to waive sovereign immunity in certain specific circumstances (e.g., preference actions), it must be read in conjunction with the language and legislative history of subsections (a) and (b). When so read, subsection (c) has a more limited reach than that accorded to it by the bankruptcy court and should not be interpreted as a broad waiver of sovereign immunity which was originally proposed by the Commission but definitely rejected by Congress. Because it is not "certain" that Congress provided a cause of action against a state in the precise circumstances of the case at bar, the bankruptcy court lacked jurisdiction to adjudicate the trustee's contract action against the State of Connecticut for services rendered by Willington in March 1983. Whether, had it chosen to do so, Congress could have abrogated a state's eleventh amendment immunity from suit pursuant to its power under the Bankruptcy Clause a question answered in the affirmative by the bankruptcy court need not and should not be addressed.[23]See New York v. Ferber, 458 U.S. 747, 769 n. 24, 102 S. Ct. 3348, 3361 n. 24, 73 L. Ed. 2d 1113 (1982) (if a statute is susceptible of an interpretation which avoids a substantial constitutional issue, that interpretation is compelled). However, should the Court of Appeals for the Second Circuit or the United States Supreme Court conclude that the bankruptcy court did properly assert jurisdiction over the trustee's claim, it is found for essentially the reasons given in the Brief and Reply Brief of the Appellants that the terms of Willington's contract with Connecticut entitled the state to recoup past overpayments to Willington by withholding the funds due for services provided in March 1983.
Accordingly, the ruling of the bankruptcy court is reversed and appellants' motion to dismiss is granted.
SO ORDERED.
NOTES
[1] The eleventh amendment declares:
The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State or by Citizens or Subjects of any Foreign State.
[2] Appellants claim that the appropriate vehicle for appellee's objection is a statement in the appeal brief attacking the basis for jurisdiction and not a separate motion to dismiss. Appellants' Memorandum in Opposition to Appellee's Motion to Dismiss ("Appellant's Memorandum") at 9. For the reason set forth in note 7, infra, this issue will not be addressed.
[3] Rule 8001(b) provides: "An appeal from an interlocutory judgment, order or decree of a bankruptcy judge ... shall be taken by filing a notice of appeal ... accompanied by a motion for leave to appeal prepared in accordance with Rule 8003....
[4] Rule 8003(a) provides:
A motion for leave to appeal ... shall contain:
(1) a statement of the facts necessary to an understanding of the questions to be presented by the appeal;
(2) a statement of those questions and of the relief sought;
(3) a statement of the reasons why an appeal should be granted; and
(4) a copy of the judgment, order, or decree complained of and of any opinion or memorandum relating thereto.
Within 10 days after service of the motion an adverse party may file with the clerk of the bankruptcy court an answer in opposition.
[5] Rule 8001(a) provides: "An appeal from a final judgment, order, or decree of a bankruptcy judge to a district court ... shall be taken by filing a notice of appeal with the clerk of the bankruptcy court...."
[6] As explained in the Advisory Notes to Rule 8003:
Subdivision (c) provides that if a party mistakenly believes the order appealed from is final and files only a notice of appeal, the appeal is not automatically dismissed. The district court ... has the options to direct that a motion be filed, to decide exclusively on the papers already filed to grant leave to appeal, or to deny leave to appeal.
[7] The decision to hear the appeal renders it unnecessary to address whether the order of the bankruptcy court was interlocutory or final, or whether appellee's motion to dismiss was the appropriate vehicle to raise these procedural issues.
[8] Section 17-311-53 of the Regulations of Connecticut State Agencies provides, in part:
(b) Whenever the Commissioner of Income Maintenance renders a rate decision, whether based upon a field audit or otherwise, which decision results in the facility being indebted to the Department of Income Maintenance for past medicaid overpayments, the Department shall recoup said medicaid overpayments as soon as possible from the Department's monthly medicaid payments to the facility....
(c) In a recoupment situation, the Department of Income Maintenance shall determine a recoupment schedule of amounts to be recouped from the facility's monthly medicaid payments after consideration of the following factors:
(1) the amount of the indebtedness;
(2) the objective of completion of total recoupment of past medicaid overpayments as soon as possible;
(3) the cash flow of the facility; and
(4) any other factors brought to the attention of the department by the facility relative to the provider's ability to function after recoupment.
(d) Whenever a facility has received past medicaid overpayments, the Department may recoup the amount of such medicaid overpayments from the monthly payments to the facility regardless of any intervening change in ownership.
[9] "The Congress shall have Power ... to establish ... uniform Laws on the subject of Bankruptcies throughout the United States." U.S. Const. Art. I, § 8.
[10] The following question was certified to the Attorney General:
whether § 106(c) of the Bankruptcy Code, alone or in conjunction with other Code sections, effects or purports to effect a waiver or abrogation of a state's eleventh amendment immunity from suit for retrospective money damages and, if so, whether such waiver or abrogation is within congressional power under the Bankruptcy Clause.
Certification Order of June 18, 1985 at 2.
[11] 11 U.S.C. § 101(21) provides:
"governmental unit" means United States; State; Commonwealth; District; Territory; municipality; foreign state; department, agency, or instrumentality of the United States, a State, a Commonwealth, a District, a Territory, a municipality, or a foreign state; or other foreign or domestic government.
[12] The full text of 28 U.S.C. § 1471(b) reads as follows:
Notwithstanding any Act of Congress that confers exclusive jurisdiction on a court or courts other than the district courts, the district courts shall have original but not exclusive jurisdiction of all civil proceedings arising under title 11 or arising in or related to cases under title 11.
"Although the Act initially vests this jurisdiction in district courts," the Supreme Court observed in Northern Pipeline v. Marathon Pipe Line Co., 458 U.S. 50, 54 n. 3, 102 S. Ct. 2858, 2862 n. 3, 73 L. Ed. 2d 598 (1982), "it subsequently provides that `[t]he bankruptcy court for the district in which a case under title 11 is commenced shall exercise all of the jurisdiction conferred by this section on the district courts,' § 1471(c).... (Emphasis added). Thus the ultimate repository of the Act's broad jurisdictional grant is the bankruptcy courts." Id. (Citation omitted).
In Marathon Pipe Line the Court struck down § 1471(b) because it granted to Article I courts power reserved by the Constitution to Article III courts. An emergency resolution adopted by the United States District Judges for the District of Connecticut temporarily restored the bankruptcy's court "arising in or related to" jurisdiction, pursuant to review and control by the district court, until Congress enacted the 1984 amendments to the Bankruptcy Code codified at 28 U.S.C. § 1334.
It should be pointed out that the underlying theory of Marathon Pipe Line is fundamentally in tension with Judge Krechevsky's declaration in Willington that "[i]t is clear that [because of the eleventh amendment and sovereign immunity claims] the debtor could not have brought this suit in a federal court in a nonbankruptcy context." 39 B.R. at 784.
[13] The bankruptcy court did attempt to formulate an interpretation of subsection (c) which would give meaning to subsections (a) and (b):
[Section] 106(c) by its terms is to be read only with Code provisions addressed to "creditor[s]", "enti[ties]" or "governmental unit[s]." Not all Code provisions are so addressed. Sections 545 (statutory liens) and 549 (postpetition transfers) are outside the scope of § 106(c)(1). On the other hand, § 106(a) and (b) apply to all Code provisions. Thus, there is room for the operation of § 106(a) and (b) under this construction of § 106(c).
Willington, 39 B.R. at 786. The court conceded, however, that its construction of § 106 might possibly be "too technical and simplistic an answer to Connecticut's `surplusage' argument." Id. In McVey Trucking, Inc. v. Secretary of the State of Illinois (In re McVey Trucking, Inc.), 812 F.2d 311, 322, 327 (7th Cir.1987), the Court of Appeals found that subsections (a) and (b) describe circumstances in which a state may voluntarily waive sovereign immunity whereas subsection (c) constitutes a forced waiver of sovereign immunity. The problem with that construction of § 106 is that it does not adequately address the "surplusage" argument: why would Congress have provided for "voluntary" waiver of sovereign immunity in certain limited circumstances if, in the very next subsection, it had meant to "force" a waiver of sovereign immunity across the board?
[14] In McVey, Illinois had argued that it was improper under Atascadero for courts to go beyond the face of the statute to determine whether Congress had provided a cause of action against the state. The Court of Appeals rejected that contention and consulted legislative history "to resolve any lingering uncertainty." 812 F.2d at 324. Although here the conclusion about the meaning of subsection (c) differs from that of the Seventh Circuit and the bankruptcy court, reference to legislative history is often required, and proper, to determine what the words of a statute mean.
[15]
[E]ven if the above construction of § 106(c) were to render § 106(a) and (b) surplusage, that result would not be an insuperable obstacle to that construction. [T]he Supreme Court has noted in another context, "even the most basic general principles of statutory construction must yield to clear contrary evidence of legislative intent."
39 B.R. at 786, citing National R.R. Passenger Corp. v. Passengers Ass'n, 414 U.S. 453, 458, 94 S. Ct. 690, 693, 38 L. Ed. 2d 646 (1974).
[16] A tax consultant to the Commission testifying before the House and Senate Judiciary Committees expressed as follows his concerns about the effect of the Commission's proposal on state sovereign immunity:
[The proposal would] have the effect of permitting the bankrupt estate to sue the United States or a State in Bankruptcy Court to recover overpayment of taxes. Today, it is necessary for the estate to go through the more time-consuming process of suing the United States in the District Court or the Court of Claims, and suing the State in whatever forum it provides for that purpose. Congress long ago submitted the Federal Government's affirmative claims for unpaid taxes to the jurisdiction of the Bankruptcy Court in order to speed the closing of estates, and it should not hesitate to do the same concerning claims for overpayments that the Government happens to have collected before bankruptcy. But I raise for your consideration the question whether Congress, even if it has the power, should undertake to subject the States to suits for tax refunds (or other claims) in courts not of their own choosing. It is true that Congress has long exercised its bankruptcy power to regulate the manner of determining state claims for unpaid taxes, to fix their liens and priority, to bar those not timely presented, and to discharge their tax debtors. But the State in those situations is the moving party, appearing in the Bankruptcy Court in order to share in a fund of which the federal power has validly taken possession, or pursuing a debtor who had been freed of his debts pursuant to federal constitutional power. In the case of claims against the State, I suggest that, even if the constitutional power were clear which it is not a proper regard for the independence of State governments may outweigh the desirability of providing in the Bankruptcy Courts a possibly more speedy procedure than the States themselves provide for such determinations.
Hearings on H.Rep. 31 and H.Rep. 32 before the Subcommittee on Civil and Constitutional Rights of the House Committee on the Judiciary, 94th Cong., 2d sess., § 27, pt. 4 at 2034-35 (1976) (statement of William T. Plumb, Jr.) (emphasis in original).
[17] Although the Supreme Court has held that Congress may, pursuant to § 5 of the fourteenth amendment, abrogate a state's immunity from suit in federal court, Fitzpatrick v. Bitzer, 427 U.S. 445, 96 S. Ct. 2666, 49 L. Ed. 2d 614 (1976), it has left open the question whether Congress may do so pursuant to one of the enumerated powers in article I, § 8 of the Constitution. In McVey, the court of appeals held, as did the bankruptcy court in the instant case, that Congress was authorized by the Bankruptcy Clause to abrogate the eleventh amendment and sovereign immunity of a state. See 812 F.2d at 323 ("Congress may abrogate state immunity to suit pursuant to any of its plenary powers.").
[18] For support, the court referred to 2 Collier on Bankruptcy § 106.04 (15th ed. 1984): "Section 106(c) is as broadly applicable as would be expected from the language employed, and it permits the bankruptcy court to bind governmental units on matters other than tax claims." However, the author of the treatise also observed:
If a governmental unit desires to assert its rights against a debtor in bankruptcy, it must assume its place with other creditors and suffer the loss of whatever special protection it might otherwise enjoy by reason of the doctrine of sovereign immunity. Even if the rights of a governmental unit are not asserted, section 106(c) authorizes the trustee to recover avoidable transfers from government units.
Id. (emphasis added). Inasmuch as Connecticut did not "assert its rights" against Willington, and this is not an action to set aside a preferential transfer, the full quotation from Collier would appear to lend as much support to appellants' construction of § 106(c) as to appellee's.
The bankruptcy court also cited with approval a long excerpt from Kennedy, "Automatic Stays Under the New Bankruptcy Law," 12 U.Mich.J. L.Ref. 3, 29 (1978) which included the following: "Although more guardedly drafted, section 106 comes close to adopting the broad provision for general applicability of the bankruptcy laws to the federal or state government that had been recommended by the Commission on the Bankruptcy Laws." However, the court omitted any reference to a revealing footnote accompanying Professor Kennedy's observation:
Section 106(c) appears to make Title 11 and determinations by the bankruptcy court thereunder fully applicable to every governmental unit insofar as it may be acting or proceeding against the debtor or its property. Subsection (c) is subject to subsections (a) and (b) of section 106, but it is not apparent how these subsections limit the scope of subsection (c).
Id. at 30 n. 120 (emphasis added). Professor Kennedy's frank admission that he is unable to discern the precise nature of the relationship between subsections (a) and (b), and subsection (c), should lead to caution in relying on his expansive reading of subsection (c). Moreover, Professor Kennedy concludes from the legislative history of subsections (a) and (b) that "[t]he allowability of neither the counterclaim [subsection (a)] nor the offset [subsection (b)] depends on the filing of a proof of claim by the governmental unit," id. a view which has been uniformly rejected by every court which has ruled in cases involving subsections (a) or (b). See, e.g., Community Hosp. of Rockland County v. United States, 5 B.R. 11, 12 (Bankr.S.D.N.Y. 1980) ("The legislative history ... makes clear that in order to waive sovereign immunity, it is not enough that the Government have a claim against the Debtor; the Government must have taken the affirmative step of filing that claim in the underlying proceeding.").
[19] Section 2(a)(2A) of the Bankruptcy Act, as amended in 1966, empowered bankruptcy courts to "[h]ear and determine ... any question arising as to the amount or legality of any unpaid tax...."
[20] It is worth noting that in an earlier stage of Community Hospital when the debtor was proceeding on the theory that the I.R.S. tax liens must be subordinated to wage claims owed to employees, the same judge dismissed the complaint and held that because the government had not filed a claim against the estate, it could assert its sovereign immunity with respect to the debtor's subordination claim. In re Community Hosp. of Rockland County, 5 B.R. 7 (Bankr.S.D. N.Y.1979), aff'd, 5 B.R. 11 (Bankr.S.D.N.Y.1980). The different result in the two Community Hospital cases illustrates the importance of a close examination of the specific nature of the claim being asserted against the governmental unit.
[21] Indeed, one bankruptcy court has stated that § 106(c) was intended to waive sovereign immunity only with regard to preference actions and then only in the case of taxes, In re T & D Management Co., 40 B.R. 781, 787 (Bankr.D. Utah 1984), while acknowledging that the language of the provision is "much broader" than that. Id. Under prior law, the federal government was immune from preference actions even where it filed a proof of claim. See In re American Boiler Works, Inc., 123 F. Supp. 352 (W.D.Pa. 1954), aff'd, 220 F.2d 319 (3d Cir.1955). In Hoffman v. State of Connecticut (In re Zera), 72 B.R. 997 (D.Conn.1987), decided the same day as this case, it is held that under § 106(c) sovereigns would not be liable even in preference actions if the result would require funds in the state treasury to flow back to the estate.
[22] According to the United States Justice Department:
The fair construction of § 106 that gives effect to all of its language is that subsection (c) subjects sovereign units to bankruptcy jurisdiction and authority when the bankruptcy court acts pursuant to a specific grant of authority where relief of an injunctive and declaratory nature can be imposed or when the dispute arises within the bankruptcy court's in rem jurisdiction. For retroactive monetary relief, sovereigns have a choice. If they file a claim in the bankruptcy proceeding, they consent to liability without limit for matters arising out of the same operative facts as the government's proof of claim or to offset liability in the case of permissive counterclaims. If they do not file, sovereign units have their sovereign immunity protection from liability for retroactive monetary damages intact.
Intervening Brief of the United States at 9.
[23] For a thoughtful treatment of this complex issue, see McVey, 812 F.2d at 314-23.
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72 B.R. 418 (1987)
In re EASTERN INNS OF NEW HAMPSHIRE, INC., Stagecoach Inn, Inc., Debtors.
EASTERN INNS OF NEW HAMPSHIRE, INC., Stagecoach Inn, Inc., Plaintiffs,
v.
INDIAN HEAD BANK AND TRUST COMPANY, et al., Defendants.
Bankruptcy Nos. 285-00005, 285-00075, Adv. No. 285-0031.
United States Bankruptcy Court, D. Maine.
April 14, 1987.
*419 Richard E. Poulos, Portland, Me., for plaintiffs.
Mark E. Beliveau, Sanders and McDermott, Hampton, N.H., for New England Hotel Realty.
Benny's Real Estate, pro se.
MEMORANDUM OF DECISION
FREDERICK A. JOHNSON, Chief Judge.
In this proceeding two real estate firms seek a commission from the proceeds of the sale of the Debtors' motel complex. The employment of one firm, Benjamin Dagostino, Jr., d/b/a Benny's Real Estate, of Exeter, New Hampshire, (Benny's), was approved by the Court on an ex parte motion of the Debtors. Employment of the other firm, New England Hotel Realty (NEHR), of Portsmouth, New Hampshire, was never approved. NEHR seeks a nunc pro tunc order approving its employment and for a commission of 5½ percent of the sale price.
The Court concludes that application of appropriate sections of the Bankruptcy Code do not permit allowance of a commission to either broker.
The pertinent facts are based upon two days of testimony and numerous exhibits.
Commencing in 1979, Eastern Inns of New Hampshire (Eastern) undertook construction of a motel and office building in Kittery, Maine. After completion, Eastern engaged several real estate brokers to sell the premises. NEHR and Benny's were two such brokers. Over the course of years Eastern had executed a total of six different listing agreements with NEHR. The last such agreement, which was a six months open listing, was executed on June 6, 1985. The agreement provided:
If during this listing period this property is sold or traded by you or if you produce a purchaser ready, willing and able to purchase the property, OR IF WITHIN 180 days after the expiration of this listing period a sale is made to any person to whom the property has been shown or offered by you during the original listing period, I agree to pay a commission in cash at closing of 5½% of the sale price. This contract will terminate after the expiration of said 180 days on June 14, 1986.
Over the years NEHR expended considerable time and effort in marketing the Eastern property. NEHR had shown the property to several prospective purchasers. One such prospective purchaser, first shown the property by NEHR, was Della Pasqua, the ultimate purchaser. NEHR presented at least three offers on Della Pasqua's behalf to Eastern for the property. The rejected offers ranged from a low of $900,000 in 1983 to a high of $1,300,000 in 1985. The final offer was submitted in the early fall of 1985. NEHR had no further contact with Della Pasqua after that.
In the Fall of 1985 Della Pasqua, for reasons unclear to this court, began to work with Benny's. At about the same time NEHR, through Steve Farrar, began working with Harper Sibley, President and sole owner of Sibley Management, Inc.. Sibley had looked at the property in late 1984 and contacted Farrar in late 1985 or early 1986 expressing his continued interest.
On February 28, 1986, upon ex parte application by Debtors' attorney, the Court authorized the Debtors to retain Benny's to market the Kittery property. The order provided that the real estate commission payable to Benny's not exceed $50,000.00.
*420 Shortly thereafter a flurry of activity commenced:
Early in March Della Pasqua, through Benny's, submitted an offer of $1,550,000 for the property.
On March 12, 1986, Sibley, through NEHR, submitted an offer of $1,565,000 for the property.
On April 3, 1986, NEHR, through its attorney, wrote to Debtors' attorney claiming NEHR's right to a commission in the event of a sale to Della Pasqua.
On May 20, 1986, after further negotiations, the Debtors signed a contract with Della Pasqua, with a sale price of $1,585,000, with a $30,000 commission payable to Benny's.
On May 28, 1986, the Debtor filed a "Notice of Intent to Sell Real Property Free and Clear of Liens" to Della Pasqua. The notice provided for a purchase price of $1,585,000 with a broker's commission of $30,000 payable to Benny's.
On June 2, 1986, NEHR objected to the sale on the ground that NEHR had introduced Della Pasqua to the property and had worked with him over several years; that Debtors' attorney had dealt unfairly with NEHR; and that the Debtors sought to deny NEHR its commission which it had earned. NEHR's objection was scheduled for hearing on June 12, 1986. On that date the Court entered an order authorizing the sale to Della Pasqua and providing that Debtor's attorney place $87,175 in escrow, in an interest bearing account, pending a final order of this Court as to which broker, if any, is entitled to a commission from the Debtor as a result of the sale.
NEW ENGLAND HOTEL REALTY'S CLAIM
NEHR basis its claim to a commission on the so-called "extension clause" of its listing agreement and that Della Pasqua is a "person to whom the property has been shown or offered by you [NEHR] during the original listing period." Such clauses have been recognized and upheld in Maine. Strout Company v. Hubbard, 104 Me. 366, 71 A. 1020 (1908). In a bankruptcy case, however, the employment of professionals and their compensation is governed by the Bankruptcy Code.
Section 327 of the Code provides:
(a) Except as otherwise provided in this section, the trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title.
Real estate brokers are "professional persons" under Section 327. In re Roberts, 58 B.R. 65 (Bankr.N.J.1986). Section 327, by virtue of Section 1107, applies to debtors in possession. In re Martin, 59 B.R. 140 (Bankr.Me.1986).
Courts have taken a strong stand against paying compensation to professionals whose employment was not properly authorized. In re Certain Special Counsel to Boston & Me. Corp., 737 F.2d 115 (1st Cir.1984). In this District a bankruptcy court may, in the exercise of its sound discretion, upon a proper showing, grant compensation to professionals who have performed services for the estate without prior court approval. In re Cormier, 35 B.R. 424 (D.Me.1983). As a minimum, there must be a showing that the estate has benefited from the professional's services. In re Wallingford Fruit, 35 B.R. 426 (D.Me.1983).
Here, it is clear that the debtors' estate did not benefit from the efforts of NEHR. NEHR was not the effective and producing cause of the sale of the debtor's property. It does not claim to be. It relies completely upon the extension clause of its listing agreement.
NEHR alleges that Debtors' counsel, Richard E. Poulos, failed, refused, or neglected to apply for approval of NEHR as a broker and that Mr. Poulos has not dealt fairly with NEHR.[1] These allegations, if *421 proven, would not help NEHR here. Even if Mr. Poulos had obtained approval of NEHR as a broker, this would not entitle NEHR to a commission under the facts of this case. Section 330 of the Code provides for reasonable compensation "based on the nature, the extent and the value of such services. . . ." NEHR's services, unfortunately, had no value to the debtors' estate. The Court, therefore, is not authorized to approve employment of NEHR nunc pro tunc, or allow compensation to NEHR.
BENNY'S REAL ESTATE CLAIM
As previously noted, Sections 327 and 1107 of the Code provide that a debtor in possession, with the Court's approval, may employ professional persons, who, among other things, are "disinterested persons."
Section 101(13)(A) defines a "disinterested person" as one that "is not a creditor, an equity security holder, or an insider."
At the hearing it was developed that Benjamin Dagostino, Sr. was a partner in Benny's Real Estate with his son and that he was the founder of the business. It also was established that it was Benjamin, Sr. who worked with Della Pasqua on the sale of the motel. Benjamin, Jr. met Della Pasqua for the first time at the courthouse on the first day of the hearing. More importantly, it was established that Benjamin, Sr. was a creditor of the debtors at the time of the Court's approval of the employment of Benny's Real Estate by the Debtor. This fact was not revealed to the Court in the Debtors' application for authority to employ Benny's. If these facts had been revealed to the Court, the Court would not have approved the employment of Benjamin Dagostino, Jr., d/b/a Benny's Real Estate, because Benjamin Dagostino, Sr., a partner in the firm, was not a disinterested person.
It was also revealed at the hearing that two other brokers, Beacon Ventures, of Boston, and Omni Group, of New Hampshire, each expect one-third of any commission received by Benny's. This arrangement was not revealed to the Court at any time prior to the hearing.
Because Benjamin Dagostino, Jr., d/b/a Benny's Real Estate, was not a "disinterested person" within the meaning and intent of Section 327, this Court's order of February 28, 1986 authorizing Benny's employment will be vacated and Benny's application for compensation will be denied.
An appropriate order will be entered.
NOTES
[1] Poulos, in turn, accuses NEHR of bad faith and NEHR accuses Mr. Dagostino, Sr. of unethical conduct. The Court makes no findings on these allegations.
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480 F. Supp. 903 (1979)
Mary DAVENPORT et al., Plaintiffs,
v.
William Holmes BORDERS, John H. Robinson, Wheat Street Three, Inc., d/b/a Wheat Street Gardens, Defendants,
and
HOUSING RESOURCES MANAGEMENT, INC., Defendant and Third-Party Plaintiffs,
v.
Patricia Roberts HARRIS and William A. Hartman, Third-Party Defendants.
Civ. A. No. C79-637A.
United States District Court, N. D. Georgia, Atlanta Division.
December 10, 1979.
*904 Robert L. Connelly, Jr., Dennis A. Goldstein and Phillip A. Bradley, Atlanta, Ga., for plaintiffs.
*905 W. M. Mathews, Jr., Michael T. Nations, Mayer & Nations, Curtis E. Anderson, Asst. U. S. Atty., Atlanta, Ga., for defendants.
ORDER
TIDWELL, District Judge.
The above-styled matter was originally filed as a class action in the Superior Court of Fulton County on behalf of tenants residing in that portion of the Wheat Street Gardens apartments known as Wheat Street Three. The plaintiffs are seeking redress for the alleged disrepair and unhabitability of their residences. After the defendants impleaded Patricia Roberts Harris and William A. Hartman, individually and in their official capacities as the Secretary and the Atlanta Area Manager, respectively, of the United States Department of Housing and Urban Development (HUD), the third-party defendants removed the case to the district court pursuant to the provisions of 28 U.S.C. §§ 1442(a)(1) and 1446. By Order dated October 16, 1979, this Court requested briefs on the issue of whether a federal officer who is impleaded as a third-party defendant in a state court civil action can remove the case under 28 U.S.C. § 1442(a)(1), in light of the seemingly contrary holding in Westwood Development Co. v. Higley, 266 F.2d 555 (5th Cir. 1959). The third-party defendants responded to this request, and in addition, have filed a motion to dismiss or in the alternative, for summary judgment. The other parties to the suit have neither responded to the Court's October 16 Order nor to the aforementioned motion.
The third-party defendants maintain that Westwood, supra, focused upon removal under 28 U.S.C. § 1441(c), which provides as follows:
Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.
In Westwood, the Fifth Circuit Court of Appeals held that removal by the third-party defendant, who was the Veterans' Affairs Administrator, was improper under § 1441(c), inasmuch as there was no separate and independent claim or cause of action alleged against him. It appears that the Veterans' Affairs Administrator had removed the case pursuant to 28 U.S.C. § 1442(a)(1), which provides for the removal of suits against
Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office or on account of any right, title or authority claimed under any Act of Congress for the apprehension or punishment of criminals or the collection of the revenue.
In reaching its decision, the Fifth Circuit never specifically addressed the issue of whether the case was removable under the provisions of § 1442(a)(1). However, the United States Supreme Court later held that the Congressional determination of a need for federal officers to have the protection of a federal forum should not be frustrated by a narrow, grudging interpretation of 28 U.S.C. § 1442(a)(1). Willingham v. Morgan, 395 U.S. 402, 89 S. Ct. 1813, 23 L. Ed. 2d 396 (1969). For this reason, this Court holds that a federal official who is impleaded as a third-party defendant in a state civil suit is free to remove the case to federal court pursuant to 28 U.S.C. § 1442(a)(1), and such removal was proper in this case.
Since the Court has thus determined that it has jurisdiction of the present case, it remains to be decided whether the action should be dismissed as to the third-party defendants. The third-party complaint alleges that HUD virtually dominates and controls the financial condition of housing projects, such as Wheat Street Three, which carry HUD-insured mortgages. It is therefore alleged that the dilapidated condition of Wheat Street Three is due solely to the acts and omissions of the HUD officials, in *906 that: (1) HUD has failed to approve a transfer of physical assets and to restructure the finances of the project; and (2) HUD has granted no rent increases since July of 1976 despite being obligated by its own regulations to make automatic annual adjustments in rental levels. In addition, the defendant Housing Resources Management, Inc. alleges that it is managing the project only at the suggestion and virtual insistence of HUD as one of the requirements for the approval of the transfer of physical assets.
The Court will first address the issue of whether the third-party plaintiffs can properly seek a recovery over from the HUD officials "individually" as well as in their official capacities. It is clear that in a suit for damages arising from allegedly unconstitutional actions, federal officials are entitled to only a qualified immunity. Butz v. Economou, 438 U.S. 478, 98 S. Ct. 2894, 57 L. Ed. 2d 895 (1978). The third-party complaint has not raised any constitutional claims, however. The Fifth Circuit has recognized that the doctrine of qualified immunity, as outlined in Butz, supra, is limited to actions for violations of constitutional rights, and therefore, in the area of ordinary tort claims, federal officials retain absolute immunity from liability as long as they act within the outer limits of their authority during the performance of their official duties. Evans v. Wright, 582 F.2d 20 (5th Cir. 1978). This Court concludes that the third-party defendants are entitled to such official immunity in this case. Affidavits submitted by the HUD officials indicate that they acted within the scope of their employment and in accordance with applicable laws and regulations at all relevant times. This evidence is uncontroverted. Accordingly, the Court concludes that the suit must be dismissed as to the third-party defendants, at least insofar as it attempts to hold them individually liable.
The question remains as to whether the suit should be dismissed as to the third-party defendants in their official capacities. The third-party complaint alleges that HUD failed to approve a transfer of physical assets which was intended to attract needed capital and improved management services. It is clear that HUD approval was necessary before such a transfer could become effective. When HUD first became involved with the Wheat Street apartments by insuring the project's mortgage pursuant to 12 U.S.C. § 1715l(d)(3), defendant Borders, as president of Wheat Street Three, Inc., was required to sign a "Regulatory Agreement" outlining the manner in which the project would be operated during the term of the mortgage insurance. Paragraph 7(a) of the Regulatory Agreement provides that the owners will not convey, transfer or encumber any of the mortgaged property without HUD's prior approval. The uncontroverted evidence provided by the HUD Loan Specialist in the Atlanta Area Office shows that the application for transfer of physical assets that is in issue was processed in accordance with HUD procedures. (Affidavit of Robert Becker, ¶¶ 9-15.) The record also reveals that the proposed transfer was approved on July 20, 1979. (Id.) Therefore, this part of the third-party complaint is unfounded.
It has also been alleged that HUD has granted no rent increases since July of 1976, despite being obligated by its own regulations to do so. According to the HUD regulations found at 24 C.F.R. § 401 et seq., there is no provision for automatic annual adjustments in rental levels. Instead, the project owners must submit a formal request to the Department with supporting data. The record shows that such a request was submitted regarding the Wheat Street apartments by letter dated June 10, 1977. The record also shows that HUD granted a rent increase of 7.8 per cent on July 11, 1977. Subsequently, no formal requests for rental increases were ever submitted to the Department. (Becker affidavit, ¶ 8.)
In addition, it is clear that HUD had the right to insist on professional, competent management for the project. (Regulatory Agreement, ¶ 10(a).) However, the list of possible management firms considered competent by HUD was not limited to Housing Resources Management, Inc. (Becker affidavit, ¶ 16.)
*907 Once the moving party has properly supported his summary judgment motion, the nonmoving party must rebut with significant probative evidence. Ferguson v. National Broadcasting Co., 584 F.2d 111 (5th Cir. 1978). The Court finds that the third-party defendants have properly supported their motion for summary judgment. The third-party plaintiffs have offered no evidence in rebuttal. Since there are no genuine issues of fact in dispute, the Federal Rules of Civil Procedure provide that summary judgment is proper. Rule 56, Fed.R.Civ.P. For the foregoing reasons, the motion for summary judgment filed by the third-party defendants Patricia Roberts Harris and William A. Hartman is hereby granted and sustained. Since this action was removed to federal court at the behest of the third-party defendants, it is further ordered that Civil Action No. C79-637A be, and hereby is, remanded to the Superior Court of Fulton County, for such further proceedings as that court deems advisable and proper.
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37 N.J. Super. 175 (1955)
117 A.2d 156
IN THE MATTER OF THE APPEAL OF THE CITY OF NEWARK, FROM THE ASSESSMENTS OF PROPERTIES IN THE CITY OF NEWARK, COUNTY OF ESSEX, FOR THE YEAR 1953, IVY HILL PARK SECTIONS ONE, INC., TO SECTION FIVE, INC., INCLUSIVE.
CITY OF NEWARK, PETITIONER-APPELLANT,
v.
DIVISION OF TAX APPEALS, RESPONDENT, AND IVY HILL PARK SECTIONS ONE, INC., TO SECTION FIVE, INC., INCLUSIVE, SITUATE IN THE CITY OF NEWARK, COUNTY OF ESSEX, RESPONDENTS-RESPONDENTS.
Superior Court of New Jersey, Appellate Division.
Argued September 7, 1955.
Decided September 30, 1955.
*178 Before Judges CLAPP, JAYNE and FRANCIS.
Mr. Vincent P. Torppey, corporation counsel, argued the cause for the appellant.
Mr. Morton Stavis argued the cause for the respondents (Messrs. Gross & Blumberg, attorneys).
The opinion of the court was delivered by FRANCIS, J.A.D.
These appeals are primarily concerned with two questions: First, whether certain consent judgments entered on appeals pending in the Division of Tax Appeals were properly authorized by the City of Newark, and second, whether the Division of Tax Appeals committed reversible error in denying the subsequent motion of the city to reopen them.
The record discloses that the five apartment buildings involved were in various stages of completion on October 1, 1952, the assessing date, and they were assessed as in the course of construction. Upon completion, they were revalued when the added assessment rolls were made up for 1953. Each building was appraised at $1,250,000 from the date alleged by the city to be the date of its completion.
The corporate taxpayers paid the taxes under R.S. 54:3-27 and appealed to the Essex County Board of Taxation where, after a full hearing on the merits, the true value of each building was reduced to $1,100,000. The portion of the year for which each one was assessed was also reduced.
On January 19, 1954, further appeals to the Division of Tax Appeals were filed by the owners. Thereafter on January 25 a meeting of the Board of Assessment and Revision of Taxes of the City of Newark was held. It was attended by all of the commissioners, including the president, Jack Slavitt. Representatives of the taxpayers also appeared and, according to the minutes, a discussion took place with respect to adjusting the differences represented by the pending appeals. After discussion, the board went into executive session and resolved to accept the county board valuations *179 but with the agreement that each building would be deemed completed for a longer portion of the year than was fixed by that board, except in one instance, where the same time period was retained. A motion was made and adopted (with one member dissenting) to put this decision into effect. Slavitt, the president of the board, voted in the affirmative.
Up to this time the city had not appealed from the action of the county board. Presumably because it was considered incongruous to enter consent judgments increasing the liability of the taxpayers in the pending appeals instituted by them to achieve a reduction thereof, it was decided that appeals should be taken by the city in the five cases and appropriate stipulations entered into before the Division of Tax Appeals to accomplish the desired result. The minutes contain a detailed statement of the stipulation to be made in each case. A representative of the taxpayers was recalled and advised of the proposal. He agreed thereto.
On this same day the city filed the petitions of appeal, all of them executed by Slavitt as president of the board of assessment and revision of taxes. And on January 29 a letter was written by the board to the then corporation counsel, advising him of the agreement in each case and instructing him to execute the necessary papers.
Six months elapsed before the consent judgments were obtained. On May 27, 1954 counsel for the taxpayers and for the city executed a formal stipulation in each case which set forth the agreement as to valuation and assessment period. Each stipulation was supported by an affidavit of Arthur Padula, an officer and owner of 50% (and possibly all) of the stock of each corporation, submitted presumably to meet the requirements of R.S. 54:2-42 for verification "by qualified experts as to the facts" alleged in the stipulation "in support of the valuations therein consented to." The five consent judgments were approved by the Division and entered on June 29, 1954.
The comparative effect of these judgments may be shown as follows:
*180
State
County board
1953 city Portion board Portion consent Portion
assessed of year assessed of year assessed of year
value assessed value assessed value assessed
----------------------------------------------------------------------------
SECTION
ONE . . $1,250,000 3 mos. $1,100,000 2 mos. $1,100,000 3 mos.
----------------------------------------------------------------------------
SECTION
TWO . . $1,250,000 4 mos. $1,100,000 3 mos. $1,100,000 4 mos.
----------------------------------------------------------------------------
SECTION
THREE $1,250,000 6 mos. $1,100,000 4 mos. $1,100,000 5 mos.
----------------------------------------------------------------------------
SECTION Both sides
FOUR . $1,250,000 8 mos. $1,100,000 4 mos. withdrew appeals
----------------------------------------------------------------------------
SECTION
FIVE . $1,250,000 12 mos. $1,100,000 10 mos. $1,100,000 11 mos.
----------------------------------------------------------------------------
It will be observed that in each case, except the one wherein both sides withdrew their appeals and adopted the county board determination, the settlement resulted in acceptance of the conclusion of the county board as to true value and an increase over its determination of the portion of the year assessed. Furthermore, the additional period of assessment increased the taxable valuations substantially above those fixed by the county board.
On July 1, 1954 a new administration came into office in the city. In August, payment of the refunds arising out of the consent judgment was refused. However, no appeal was taken from the judgments nor was a motion made to reopen them.
In October 1954 an action in lieu of prerogative writ was commenced to compel payment of the refunds. Upon the filing of an answer, plaintiffs moved for summary judgment. It is clear from the record that the trial court considered himself bound by the judgments of the Division of Tax Appeals. However, he continued the motion to permit the city to apply to reopen or to vacate them.
Such a motion was made on January 6, 1955. The grounds therefor were: (1) that the corporation counsel had not been authorized by resolution of the governing body of the municipality to consent to the entry of the judgments, and (2) that *181 R.S. 54:2-42, regulating the entry of consent judgments by the Division, had not been complied with in certain particulars. Decision was reserved and on January 20 the motion was denied without opinion.
Thereafter the motion for summary judgment was renewed in the Law Division and granted. The city now appeals both from that judgment and from the refusal of the Division to reopen or to vacate the consent judgment. As we see the problem for our determination, unless the Division erred in refusing to reopen or to vacate the judgments, the action in the Law Division was proper.
There is no express statutory authorization for the Division to reopen or to vacate its judgments. However, discretionary power to do so exists by implication and the exercise thereof will not be interfered with by the courts unless the circumstances demonstrate a mistaken use of it. Air-Way Branches, Inc., v. Board of Review, 10 N.J. 609, 614 (1952); Heather Holding Co. v. Division of Tax Appeals, 36 N.J. Super. 195 (App. Div. 1955). Of course, the applicant for such relief must exercise reasonable diligence in seeking it. Handlon v. Town of Belleville, 4 N.J. 99, 106 (1950).
The city maintains that the former corporation counsel lacked authority to consent to the judgments because no resolution was adopted by the then board of commissioners authorizing him to do so. Most of its argument is devoted to the establishment of the contention that in the absence of such a resolution, the judgments cannot be considered binding and should have been reopened.
It appears that on July 22, 1953, the board of commissioners adopted a resolution that:
"Appeals to the State Board of Tax Appeals * * * shall be made in behalf of the City of Newark and the governing body, the Board of Commissioners, by and through Jack Slavitt, president of the Board of Assessment and Revision of Taxes, and the said Jack Slavitt be and he is hereby authorized to sign petitions of appeal, as aforesaid, in all cases for and in behalf of the City of Newark and the governing body thereof, and the Director of the Department of Revenue and Finance, and to do all things necessary concerning the filing and presenting of said tax appeals."
*182 Such a resolution seems to have been the practice in the city. Newark v. Van Wagenen & Schickhaus Co. (New Jersey State Tax Reports 1934-1939, at 456 (1937)); Art Metal Works, Inc. v. Newark (Id., at 474 (1937)). The record shows also that over a number of years the procedure with respect to the adjustment of tax appeals and the entry of consent judgments was the same as that pursued by the city in this instance. At the oral argument we were informed that such procedure is not followed by the new regime and that all formalities now argued as conditions precedent to the legal propriety of consent judgments are required.
If the judgments here are invalidated because of the absence of specific resolution of the board of commissioners, the colloquy before the Division of Tax Appeals indicates that a great many other such settlements may share the same fate.
In the view we have taken of the matter, it is not necessary to pass upon (1) whether the resolution was broad enough to confer upon Slavitt the authority to effectuate compromises of tax appeals instituted by him on behalf of the city, or simply empowered him to appeal if he felt it to be advisable in the interest of the city and then to act as a mere ministerial agent in handling the mechanics of the appeal; (2) whether the resolution is void because it contains a delegation of power without any standards to control its exercise, or whether by implication it carries with it the statutory limitation of true value (see New Jersey Bell Telephone Co. v. City of Newark, 136 N.J. Eq. 479 (E. & A. 1945); Consolidated Cigar Corp. v. Brunner, 133 N.J.L. 77 (Sup. Ct. 1945); R.S. 54:4-23); or (3) whether the settlement agreement made in form by the Board of Assessment and Revision of Taxes presided over by Slavitt, but consented to and voted for by him, constituted an exercise of the authority seemingly conferred on him as an individual to take and do all things necessary to present the appeals. See Daly v. City of New Brunswick, 3 N.J. 397, 400 (1950).
When the motion to reopen or to vacate the consent judgments was made, the city was required to show that *183 meritorious grounds existed in support of its appeal to the discretion of the Division.
More than six months passed between the consummation of the settlement agreement and the entry of the judgments. During this period, the board of commissioners which passed the Slavitt resolution was still in office. Nothing was done in the way of an attack on their legal propriety or to indicate dissatisfaction with them.
Five more months elapsed after the advent of the new administration before the motion was made to reopen or to vacate the consent judgments. And it was not done until a judgment was about to be entered in the action in lieu of mandamus to compel the delivery of the checks in payment of the tax refunds.
As already indicated, the Essex County Board of Taxation reduced all five of the assessments in question both as to valuation and period of assessment. Those determinations were presumptively correct. City of Trenton v. John A. Roebling Sons Co., 24 N.J. Super. 213 (App. Div. 1953); Schaffer Belts, Inc., v. Division of Tax Appeals, 1 N.J. Super. 35 (App. Div. 1948). With respect to the consummation of the agreement for the consent judgments between the taxpayers and Slavitt and the board of assessment and revision of taxes, no suggestion has been made that good faith was not exercised.
The consent judgments on their face (except for the one where the county board determination was acquiesced in) constituted an advantage to the city over the presumptively correct judgments. What was offered to the Division of Tax Appeals in the way of proof on the motion to reopen to show that the settlement was inequitable or unjust to the city? No affidavits were presented to indicate that the original assessments of its board were consistent with true value or even that those fixed by the county board did not conform to that criterion. Nor were affidavits or other proof submitted to show that the completion dates of the buildings involved were earlier than those fixed by the county board or agreed upon before the Division, and so the period of *184 assessment should have been longer. In fact, nothing was furnished to suggest that if the five appeals were fully tried in an adversary proceeding, the county board would or even might be reversed and higher valuations or longer periods of assessment adjudged.
On the other hand, when considering the motion the Division had before it the prima facie valid action of the county board and the affidavits of Padula which were accepted by the parties and the Division at the time the consent judgments were entered as a compliance with R.S. 54:2-42. These affidavits supported the county board valuation and the periods of assessment agreed upon by the parties. Reference to the schedule set out above indicates also that in two of the cases the settlement made adopted not the county board periods of assessment but the periods originally fixed by the city board of assessment.
On this phase of the problem therefore, we find no justification for a conclusion that the Division mistakenly used its discretion in declining to reopen the judgments.
The city claims, however, that the judgments were void because the conditions imposed by R.S. 54:2-42 for the approval by the Division of consent judgments were not complied with.
This statute provides:
"No judgment shall be entered by the Division of Tax Appeals * * * in any appeal from a county board, upon the oral consent or agreement * * *, but the division may enter judgment on such appeals, upon such proof and under such rules and regulations as it may from time to time prescribe, upon the written consents or agreements of the taxpayer and the * * * municipality * * * concerned, or their respective attorneys, verified by qualified experts as to the facts therein alleged in support of the valuations therein consented to."
The city challenges the sufficiency of the Padula affidavits which were submitted to meet the mandate of this act. Specifically it says no proof was furnished that Padula was a qualified expert and that no facts were alleged in support of the agreed valuations.
*185 The affidavit submitted in each case recited that Padula was a licensed real estate broker of this State, that he had knowledge of each building involved, and in his opinion its value was $1,100,000. Each one set forth also the amount for which the building had been assessed in its partial state of completion, the difference between that amount and the full value and the value for assessment purposes on the basis of completion for the period stated therein. The corporation counsel accepted these affidavits and submitted no independent expert proof.
There is no doubt that the Padula affidavits were sketchy and the Division, in pursuit of its duty under the statute, would have been entirely justified in requiring more detailed supporting proof. It must be kept in mind that the pertinent statutes, R.S. 54:4-23, provide but one basis for assessment of real property, namely, true value. Consequently the Legislature by R.S. 54:2-42 intended to impose on the Division the obligation of satisfying itself that the basic requirement for assessment is respected when settlements are made in pending tax appeals.
However, in studying the present situation, it will be recalled that the qualifications of an expert are left primarily to the discretion of the trial tribunal. Acceptance of them will not be overruled by an appellate court, if there is any evidence to support them. Rempfer v. Deerfield Packing Corp., 4 N.J. 135, 141 (1950); Carbone v. Warburton, 11 N.J. 418 (1953).
Moreover, when a witness undertakes to give evidence as an expert, either orally or, when permissible, in affidavit form, and no objection is made to his competency, error cannot be based upon a claim of absence of proof of proper qualifications.
The city made no objection to Padula's qualifications and they were accepted by the Division. In reviewing the recognition of an expert by an administrative agency like the Division of Tax Appeals in the absence of objection to the qualifications we cannot overlook the fact that tax appeals are being heard constantly during which valuation experts *186 testify. Inevitably some of the experts become known to the members of the agency and it is entirely likely that in the absence of objection or a demand for evidence of qualifications, such experts are frequently permitted to testify without such introductory proof. Acquiescence therein by a party to the proceeding would bar attack on their competency on appeal. Moreover, examination of Padula's statement before the board of assessment during the negotiations for settlement shows substantial qualifications. While this was not repeated in the Division, it was undoubtedly available to and known by the corporation counsel.
Having in mind that the county board had fixed the valuations of these properties after full hearing, the presumption of correctness that accompanies them into the Division of Tax Appeals, the general statement of Padula in the affidavits, and the absence of objection by the city or submission of any contrary proof, it cannot be said fairly that there was no meeting of the conditions laid down by the Legislature for approval of the consent judgment. Consequently the action of the Division cannot be considered void.
The city, having failed to establish improper use of discretion by the Division in denying the motion to reopen or to vacate, the judgments remain in full force and effect. In this posture of the record, the Law Division was correct in granting summary judgment in favor of the plaintiffs.
Affirmed.
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72 B.R. 253 (1987)
In re Eugene F. WEITZEL, Debtor.
Amy PESAK, Plaintiff,
v.
Eugene F. WEITZEL, Defendant.
Bankruptcy No. 86-0179, Related Case No. 86-00940.
United States Bankruptcy Court, N.D. Ohio, W.D.
March 24, 1987.
*254 David C. Barrett, Jr., C. Drew Griffith, Toledo, Ohio, for plaintiff.
William White, Lima, Ohio, for defendant.
MEMORANDUM OPINION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
This cause comes before the Court on Plaintiff's Motion for Summary Judgment in the above entitled adversary action. The parties have filed their written arguments respecting the merits of the Motion, have had the opportunity to respond to the arguments of opposing counsel, and affidavits have been submitted. The Court has reviewed the written arguments, the affidavits, as well as the entire record in this case. Based upon that review, and for the following reasons, the Court finds that the Motion for Summary Judgment should be DENIED.
*255 FACTS
The facts necessary for this decision do not appear to be in serious dispute. Summary Judgment is sought pursuant to a judgment rendered in the Court of Common Pleas of Franklin County, Ohio, in April of 1985. Plaintiff's Complaint states that the lawsuit resulted from the sale of a solar energy system to the Plaintiff, Amy Pesak, on November 1, 1983. The system cost $7,000.00. The Complaint further alleges that the Defendant made false statements to induce the Plaintiff to purchase the system, in violation of Ohio consumer protection statutes.
The judgment was rendered in Case Number 83CV-12-7014, styled Amy Pesak v. American Sun-Lite, et al which states:
Referee's Report
To the Honorable George C. Smith
Franklin County Court of Common Pleas
Pursuant to Civil Rule 53, this case was referred to this Referee. In off the record discussions, Plaintiff and Defendant Virgil Poling were able to reach a mutually acceptable settlement agreement. The Referee recommends that the Court sign an entry to be prepared by Plaintiff's counsel dismissing Defendant Poling with prejudice.
As to the remaining Defendants, neither Defendant Eugene Weitzel nor Defendant American Sun-Lite, Inc. appeared personally or through counsel, even though they had notice of the scheduled trial date.
Based on the evidence presented, the Referee finds that Defendant American Sun-Lite, acting through its employees, and Defendant Weitzel, made several false representations to Plaintiff Amy Pesak to induce her to buy their solar heating system. Once installed, the system did not perform as promised; did not suit Plaintiff's stated needs; would not have lasted long enough to create a net savings to Plaintiff, and caused damage to her roof and attic. The Referee incorporates Plaintiff's exhibits into this report. These failings of American Sun-Lite's product and Defendant's sales promotion were violations of the Ohio Consumer Sales Practices Act, § 1345.01 et seq. O.R.C.
As a result of these violaitons, Plaintiff lost her down payment of $3,500.00, incurred costs of $325.00 to remove the panels, and $3,100.00 to fix the roof and attic. This was in part offset by a $1,000.00 credit from the panel manufacturer for returned goods. Plaintiff's out-of-pocket expenses total $5,925.00. She has also incurred attorney fees of $3,500.00.
Because of the statutory violations, and the existence of false representations by Defendants about the solar heating system, the Referee recommends that the Court enter judgment for Plaintiff Amy Pesak against American Sun-Lite, Inc., and Eugene Weitzel in the amount of $5,925.00 compensatory damages, $3,500.00 attorney fees, $8,500.00 punitive damages, plus costs and interest.
The Plaintiff alleges that the Defendant participated in the state court proceeding up to the point of the Referee's Hearing. No documentation was filed with the Court evidencing such participation.
Plaintiff seeks to have the state court judgment found to be nondischargeable under 11 U.S.C. § 523(a)(2)(A) and § 523(a)(6). The Motion for Summary Judgment is based on the prior adjudication in the state court proceeding acting to preclude the relitigation of the claims in Bankruptcy Court under the doctrines of res judicata and collateral estoppel.
Defendant-Debtor, Eugene Weitzel, opposes the Motion for Summary Judgment. He claims that he was financially unable to afford legal counsel at the time the case was being tried. Defendant claims he was a "scapegoat" who was not directly involved in the sale of the solar energy system. The Defendant cites Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979) as requiring the Court to deny Plaintiff's Motion and allow evidence to be presented to the Court on the dischargeability of the debt.
*256 LAW
Summary Judgment is properly granted when the Movant can demonstrate that there are no genuine issues of material fact, and that they are entitled to judgment as a matter of law. See, Bankruptcy Rule 7056 and Fed.R.Civ.P. 56. However, Movant must be able to demonstrate all the elements of a cause of action in order to prevail. In re Hartwig Poultry, Inc., 57 B.R. 549, 551 (Bankr.N.D.Ohio 1986). A Motion for Summary Judgment must be construed in the light most favorable to the party opposing the Motion. In re Sostarich, 53 B.R. 27 (Bankr.W.D.Ky.1985).
First, Plaintiff contends that the state court judgment precludes relitigation of the finding of fraud by the Bankruptcy Court under the doctrine of res judicata. Res judicata is "claim preclusion" which forecloses the litigation of matters which may have never been litigated. Claim preclusion therefore encompasses the law of merger and bar. See Migra v. Warren City School District Board of Education, 465 U.S. 75, 77 n. 1, 104 S. Ct. 892, 894 n. 1, 79 L. Ed. 2d 56, 59 n. 1 (1984). Plaintiff argues that the Supreme Court case Brown v. Felsen is not applicable to the case before the Court because Brown only discussed evidence extrinsic to the judgment and record of a previous state court decision (emphasis added in Plaintiff's memorandum).
A narrow reading of Brown v. Felsen is not supported by the overwhelming weight of authority. See Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979); Spilman v. Harley, 656 F.2d 224, 226 (6th Cir.1981); Matter of Wintrow, 57 B.R. 695, 698 (Bankr.S.D.Ohio 1986). This Court agrees with the majority of case law, that res judicata, or claim preclusion, does not limit the Bankruptcy Court's inquiry into dischargeability issues.
The Plaintiff further argues that only under § 523(a)(5)(B) does the Bankruptcy Code grant the Court the authority to relitigate issues previously decided by a state court. Plaintiff notes that § 523(a)(2)(A) does not contain language granting a right to relitigate disputes that have been heard and decided at the state court level. This argument runs contra to the developing judicial interpretation of the exclusive nature of the Bankruptcy Court's power to determine the dischargeability of debts under 11 U.S.C. § 523(c). As stated in Spilman v. Harley, 656 F.2d 224, 226 (6th Cir.1981):
The power to determine dischargeability was granted to bankruptcy courts by the 1970 Amendments to the Bankruptcy Act. Congress intended to take the determinations governed by 11 U.S.C. § 523(c) away from state courts and grant exclusive jurisdiction in the bankruptcy courts. See Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 2211-12, 60 L. Ed. 2d 767 (1979); Matter of Pigge, 539 F.2d 369, 371 (4th Cir.1976)
(footnote omitted)
In light of this controlling Sixth Circuit Court of Appeals Opinion, among others, this Court is chary of adopting so exotic an interpretation.
Finally, Plaintiff has asked, in the alternative, for the debt to be found nondischargeable based on collateral estoppel. In Brown v. Felsen the Supreme Court expressly left open the question whether or not collateral estoppel would apply in dischargeability proceedings:
This case concerns res judicata only, and not the narrower principle of collateral estoppel. Whereas res judicata forecloses all that which might have been litigated previously, collateral estoppel treats as final only those questions actually and necessarily decided in a prior suit.
442 U.S. at 139 n. 10, 99 S.Ct. at 2213 n. 10, 60 L.Ed.2d at 776 n. 10.
In Spilman v. Harley, the Sixth Circuit Court of Appeals addressed the use of collateral estoppel, or "issue preclusion", in dischargeability litigation. The Court held that where all the requirements of collateral estoppel are met, collateral estoppel should preclude relitigation of factual issues. 656 F.2d at 228.
The use of collateral estoppel in a dischargeability proceeding requires that *257 the precise issue constituting the grounds for nondischargeability were raised in the prior proceeding, that the issue was actually litigated, and that the determination was necessary to the outcome. Spilman, supra at 228; In re Sostarich, 53 B.R. 27 (Bankr.W.D.Ky.1985). Therefore, the initial inquiry must address whether the issue was actually litigated in state court.
As reproduced above, the only materials documenting the state court litigation is the Referee's Report. This does not appear to be a sufficient record to invoke the doctrine of collateral estoppel under existing case law. Although the Debtor, Eugene P. Weitzel, is listed under "Appearances" in the Referee's Report, Plaintiff's Reply Memorandum acknowledges that the Debtor did not appear. If this is in fact a default judgment against the Debtor, the necessary issues were not actually litigated. In re Sostarich, 53 B.R. at 29.
Further, the burden of proof in an action to prevent discharge is "clear and convincing evidence". In re Martin, 761 F.2d 1163, 1165 (6th Cir.1985). In the present case, an examination of the record before the Court does not reveal the standard of proof used to arrive at the judgment against the Debtor. Generally, to establish fraud in Ohio, a "preponderance of the evidence" standard is used. See Household Finance Corp. v. Altenberg, 5 Ohio St. 2d 190, 214 N.E.2d 667 (1966); 51 O.Jur.3d Fraud and Deceit §§ 255, 256 (1984). For collateral estoppel to preclude relitigation, the burdens of proof must be identical, or the standard used in the state court must be even more stringent. If the standards of proof are not identical, as in the present case, Summary Judgment based on collateral estoppel is inappropriate. Wheeler v. Laudani, 783 F.2d 610, 615 (6th Cir.1986); Matter of Wintrow, 57 B.R. at 702; Schwartz v. Renville Farmers Co-op Credit Union, 44 B.R. 266 (Minn.1984).
Finally, Plaintiff has failed to provide the extensive record necessary if the Court is to grant Summary Judgment. As stated in Spilman v. Harley, supra:
Thus, before applying the doctrine of collateral estoppel, the bankruptcy court must determine if the issue was actually litigated and was necessary to the decision in the state court. To do this, the bankruptcy court should look at the entire record of the state proceeding, not just the judgment . . . or hold a hearing if necessary . . .
(citation omitted)
Plaintiff's Reply Memorandum states that the Debtor was deposed, with counsel present, in preparation for the state court proceeding. However, this deposition has not been filed with the Court. Nor has Debtor's state court counterclaim been provided. Moreover, the Referee's Report includes the statement "The Referee incorporates Plaintiff's exhibits into this report", but those exhibits were not filed in the present case. As previously noted, the only record before this Court is the Referee's Report, which was apparently adopted in its entirety by the state court. This is not the detailed record which appears to be contemplated by the Sixth Circuit Court of Appeals in Spilman and Wheeler.
CONCLUSION
Plaintiff has failed to show the applicability of collateral estoppel in this matter. The record does not show that the issue of fraud was actually litigated. Instead, it appears that the Judgement is a default, or is in the nature of a default. Equally important, the record does not reveal the standard of proof used by the state court in rendering the Judgment. Further, a Judgment, unless extraordinarily detailed, usually does not appear to be a sufficient record upon which to grant Summary Judgment in an action to prevent discharge based on collateral estoppel. Plaintiff's other arguments run counter to well established legal principles, and, therefore, are not grounds for Summary Judgment for the Plaintiff.
In reaching these conclusions, the Court has considered all the evidence and arguments of counsel, regardless of whether or *258 not they are specifically referred to in this Opinion.
It is ORDERED that the Plaintiff's Motion for Summary Judgment be, and is hereby, DENIED.
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681 S.W.2d 43 (1984)
Bobby GEORGE
v.
The STATE of Texas, Appellee.
No. 274-84.
Court of Criminal Appeals of Texas, En Banc.
December 5, 1984.
Marc May, Odessa, for appellant.
Robert Huttash, State's Atty., and Alfred Walker, First Asst. State's Atty., Austin, for the State.
Before the court en banc.
OPINION ON STATE'S PETITION FOR DISCRETIONARY REVIEW
CLINTON, Judge.
The offense alleged in the indictment in this cause is aggravated assaultintentionally, knowingly and recklessly causing serious bodily injury to another by shooting him with a handgun. V.C.T.A. Penal Code, §§ 22.01(a)(1) and 22.02(a)(1) and (4). In an unpublished opinion the El Paso Court of Appeals found there was evidence to support a requested instruction on what appellant calls the "defensive issue of accident," but was transformed in the court below into a "defense of involuntary conduct;" the court held that refusal of such instruction was error and, accordingly, reversed the judgment of conviction for assault and remanded the cause. George v. State (Tex. *44 App.El Paso, No. 08-82-00295-CR, delivered December 28, 1983). Concluding that the analysis leading to the finding of the court of appeals is faulty, we will reverse its judgment and affirm that of the trial court.
Sufficiency of evidence to support conviction for assault is not challenged; the material facts of the matter are not substantially disputed. We set them out practically as found by the court of appeals, supplementing its account with an exposition in greater detail when deemed helpful to an understanding of our resolution of the problem presented.
On the late afternoon of a March day, thirteen year old Leonard Martin was visiting younger brothers of appellant in the home of appellant and other members of his family. Appellant was then seventeen. All present were friends. Standing in front of a seated Martin, appellant demanded a dollar from him; when the latter verbally refused to produce it appellant drew a .22 caliber revolver from a pocket, thumbed its hammer partially back and, pointing it at Martin's face, told Martin to "give me the dollar;"[1] the gun discharged, its bullet striking Martin in the left maxilla of his face, crossing the frenulum of the nose and traveling under the skin until it came out from the right frontal area of his face. Appellant threw the gun aside, striking a brother in the chest; he went with Martin to the home of a neighbor to seek aid, but they were denied. At another house, however, an ambulance was summoned.[2]
In his confession and testimony at trial appellant described in greater detail that after he asked Martin a second time for a dollar he cocked the hammer back short of its locked position; that he "stuck [the gun] up in [Martin's] face;" that Martin "turned his face away;" that then "the hammer slipped off my thumb" and the gun "went off." Appellant further told the jury that he did not know the gun would nor did he mean for it to go off "when he cocked the hammer back;" he denied ever pulling the trigger and stated that he did not intend to shoot Martin or harm him in any wayit was an accident.
The offense of assault is committed when one intentionally, knowingly or recklessly causes bodily injury to another; the assault becomes aggravated when the conduct causes serious bodily injury or involves use of a deadly weapon. Sections 22.01(a)(1) and 22.02(a)(1) and (4). In the instant case the trial court fully charged the jury with respect to both offenses, and in a general verdict the jury found appellant guilty of assault. That is, that appellant "intentionally or knowingly or recklessly caused bodily injury to Leonard Martin by shooting him with a handgun." While we do not presume to say what culpable mental state the jury believed had been proved, the fact is that the theory of the case presented by the State was that appellant recklessly caused serious bodily injury.[3]
*45 The court of appeals analyzed the situation thus presented as follows:
"In this case, the State chose to proceed on a theory of aggravated assault consisting of intentionally, knowingly or recklessly causing serious bodily injury by shooting with a gun. There is a distinction between voluntarily discharging a weapon in a reckless manner and handling a weapon in a reckless manner so that it discharges involuntarily or by accident. This is the case even where the same degree of injury results. The State alleged the former; the evidence raised the latter. Consequently, it was error to refuse the requested charge."[4]
In full Section 6.01(a) reads: "A person commits an offense only if he voluntarily engages in conduct, including an act, an omission, or possession."
In Williams v. State, 630 S.W.2d 640 (Tex.Cr.App.1982) this Court found that "[t]here is no law and defense of accident in the present penal code," but it further discerned that the Legislature had not jettisoned the notion.
"The function of the former defense of accident is performed now by the requirement of V.T.C.A. Penal Code, Section 6.01(a), that, "A person commits an offense if he voluntarily engages in conduct..." Dockery v. State, 542 S.W.2d 644, 649-650 (Tex.Cr.App.1976). If the issue is raised by the evidence, a jury may be charged that a defendant should be acquitted if there is a reasonable doubt as to whether he voluntarily engaged in the conduct of which he is accused." Id., at 644.
However, the Court found that overruling an objection to the charge in that respect was not error since "there was no evidence that the appellant did not voluntarily engage in the conduct which injured the complainant; he merely said he did not intend the resulting injuries." Ibid.
By its ellipsis of the remaining underscored language of Section 6.01(a), obviously the Williams opinion focused on the meaning of "voluntarily" engaging in conduct rather than examining the meaning of "conduct" as used in the penal code. Thus, while instructive on the matter of "voluntariness," Williams alone will not solve our problem.
The metamorphosis of Section 6.01(a) is traced in the Practice Commentary following it, and the view of the writers is that the underscored phrase "appears to be a partial definition of `conduct'"partial because there is a general definition of "conduct" in Section 1.07and, therefore, redundant. According to § 1.07(a)(8), "`Conduct' means an act or omission and its accompanying mental state." And under § 1.07(a)(1), "`Act' means a bodily movement, whether voluntary or involuntary, and includes speech."
While the § 6.01(a) phrase may be somewhat redundant, it also may be in conflict with §§ 1.07(a)(1) and (8) insofar as one can read parts of those two general definitions to mean that "conduct" may consist of an involuntary act and its accompanying mental state. Nonetheless, we construe the provisions to mean that one voluntarily engages in conduct when the conduct includes, inter alia, a voluntary act and its accompanying mental state, if any. That such conduct also includes an involuntary act does not necessarily render engaging in that conduct involuntary.[5] Nor is conduct rendered involuntary merely because an accused does not intend the result of his conduct. Williams v. State, supra, at 644; Simpkins v. State, 590 S.W.2d 129, 135 (Tex.Cr.App.1979).
*46 Under the former penal code the Court drew a distinction between accidental homicide and negligent homicide, viz.:
"The difference between accidental homicide and negligent homicide is whether the act resulting in death was intentionally or unintentionally done. The focus is on the accused's act, not on the result of his act. Accidental homicide is the result of an unintentional act while negligent homicide may only result from an intentional act ..." (Emphasis in original.)
Stiles v. State, 520 S.W.2d 894, 896 (Tex. Cr.App.1975).
While there was disagreement on the rationale in Dockery v. State, 542 S.W.2d 644, 647-655 (Tex.Cr.App.1976) (Opinion on Appellant's Motion for Rehearing), all agreed that the "intentionalunintentional" formulation of Stiles v. State, supra, is no longer valid. Similarly, the present penal code has changed the focus of reckless criminal assault from an act of violence with intent to injure to the result that bodily injury is recklessly inflicted. See Practice Commentary following § 22.02. An intent to injure is not required. Williams, supra, at 644.
In Dockery there was also disagreement over whether in a homicide case the present penal code requires the State to prove "both voluntary conduct and a culpable mental state," Dockery, supra, at 650, or just "a culpable mental state," id., at 654-655.[6] However, Dockery does not address the situation where the proof shows conduct that includes a voluntary act, as well as an involuntary actnor does Williams.
In the instant case the court of appeals found that the evidence raised what it characterized as appellant's "handling a weapon in a reckless manner so that it discharges involuntarily or by accident." But "handling" is surely a voluntary act and "reckless manner" is simply another way of saying one is acting "recklessly." Thus appellant is shown to have voluntarily engaged in conduct up to that very second when appellant would have it that "the hammer slipped off my thumb," and the handgun discharged a bullet onto the face of Martin. Under strikingly similar circumstances the Dockery court held that "[his] actions were sufficiently voluntary to establish the offense ...," 542 S.W.2d at 650.[7] Compare Withers v. State, 631 S.W.2d 595 (Tex.App.El Paso 1982, affirmed on other grounds, 642 S.W.2d 486 [Tex.Cr.App.1982]).[8]
*47 Here the evidence shows that appellant's actions were sufficiently voluntary until "the hammer [of the handgun he was holding] slipped off [his] thumb," but the court of appeals then turned its focus to the handgun, finding that it discharged "involuntarily or by accident." We cannot accept that a mechanical object is capable of volition, and if the court meant to say that appellant was not at that moment doing an "act," we do not agree. If the hammer "slipped off [his] thumb," it had to be that the thumb holding the hammer partially back released just enough pressure for the hammer to "slip" forward. However slight, that is "bodily movement" within the meaning of § 1.07(a)(1), and there is no evidence that it was involuntary. Accordingly, the trial court was correct in refusing the requested charge on "defense of involuntary conduct."
Under the circumstances of this case, however, factually whether appellant's precise bodily movement that released the hammer of his handgun was voluntary or involuntary is of little moment. Where the issue is whether an accused recklessly caused bodily injury by shooting with a gun and the evidence shows that the accused voluntarily engaged in conduct that includes, inter alia, one or more voluntary acts leading to the actual shooting, we hold as a matter of law the fact that when such conduct also includes a bodily movement of the accused sufficient for the gun to discharge a bullet, without moresuch as precipitation by another individual, as in Garcia and Simpkins, both supraa jury need not be charged on the matter of whether the accused voluntarily engaged in the conduct with which he is charged. For that reason also the court was correct in refusing appellant's requested instruction.
The judgment of the El Paso Court of Appeals is reversed and the judgment of conviction entered by the trial court is affirmed.
ONION, P.J., and TEAGUE and MILLER, JJ., dissent.
NOTES
[1] The righthanded appellant drew, thumbed the hammer and held the handgun with his left hand.
[2] At trial a treating emergency physician determined that wounds were "not immediately life threatening," and the ophthalmologist to whom Martin was referred for further care agreed with a characterization of wounds to an eyelid as "superficial." They accounted for such relatively slight damage by the angle at which the bullet struck and then glanced; Martin demonstrated to the jury just how the bullet hit at an angle and "bounced" off his face, hit his nose and moved under facial skin to exit from the right frontal area.
[3] In his opening argument to the jury the prosecutor emphasized that his medical testimony showed serious bodily injury, and then disclaimed any intention "to prove that Bobby George intentionally or knowingly committed this offense," adding "I am not going to ask you to go in there and deliberate on intentionally or knowingly." Therefore, he asserted that "the argument in this case is going to boil down to serious bodily injury." For his part counsel for appellant interpreted certain testimony of appellant to mean that he was not aware of any risk in partially cocking the pistol by thumbing back its hammer and, perforce, did not act recklessly. (All emphasis is supplied throughout by the writer of this opinion unless otherwise indicated.)
[4] The court further opined that appellant "could have been indicted and properly convicted of reckless conduct," proscribed by V.T.C.A. Penal Code, § 22.05, and noted that a requested instruction to that effect had been refused by the trial court.
[5] The point is illustrated in the Practice Commentary with an example of an intoxicated driver charged with involuntary manslaughterhe "may not successfully defend with the argument he fell asleep before the collision ..." Note, however, that he may claim his conduct constituted criminally negligent homicide. Ormsby v. State, 600 S.W.2d 782 (Tex.Cr.App.1979).
[6] It occurs to the writer of this opinion that if the burden of proving voluntary conduct rests on the State, as the three judge majority held in Dockery, then absence of voluntary conduct is not a "defense" such that when raised by the evidence must be the subject of an instruction for the jury to acquit if there is a reasonable doubt as to whether an accused voluntarily engaged in the conduct of which he is charged. But the Williams court declared that the instruction must be given. Williams v. State, supra, at 644.
[7] Dockery was sleeping face down on a mattress on the floor of a bedroom with a .32 caliber pistol in his hand when the deceased and two others entered; he raised up off the floor and the pistol "accidently went off, just that fast," Dockery then explaining to the two eyewitnesses that he "was trying to uncock the pistol and the pistol went off." Id., at 648.
[8] In Withers, he was seated on a stool trying to repair the "hanging hammer" of a handgun when his wife came out with a puppy and sat on a stool beside him; the puppy jumped into her lap, she pushed it off and it jumped onto Withers; he then pushed the dog away with his hand holding the gun and "the hammer slipped," the gun firing a bullet into the head of his wife. The El Paso Court of Appeals stated the rule to be that "if the discharge of the weapon does not result from the voluntary conduct of the defendant, i.e., conduct of a third party, as in Garcia [v. State, 605 S.W.2d 565 (Tex.Cr.App.1980)], then the issue of accidental homicide is raised and an instruction must be given," but found under the circumstances that "there was no [evidence of] involuntary conduct which raises the issue of accidental homicide." Id., at 597.
In Garcia the offense charged was murder; this Court noted his testimony that as they were walking along together the deceased gave him a gun with its hammer "already pulled," and when he told deceased that he was going to throw the gun into a canal, the deceased suddenly grabbed Garcia's right elbow with one hand and the gun with his other hand in a move to take it away from Garcia, at which point the gun went off; such testimony was held sufficient to raise an issue of fact as to "the voluntariness of appellant's conduct," id., at 566. When Garcia is contrasted with Dockery (see note 7, ante and accompanying text), the perception of the court of appeals that such a rule is developing may be correct. However, it did not apply that rule in the instant case, though "the hammer slipped" and conduct of a third party is not implicated.
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19 N.J. 419 (1955)
117 A.2d 498
JOURNAL SQUARE MERCHANTS ASSOCIATION, AN UNINCORPORATED ASSOCIATION OF SEVEN OR MORE PERSONS HAVING A RECOGNIZED NAME, PLAINTIFF-RESPONDENT,
v.
JAMES L. McNAMARA, CHIEF OF POLICE OF JERSEY CITY, CAPTAIN JAMES B. CAREY, AND FREDERICK T. LAW, HUDSON COUNTY PROSECUTOR, DEFENDANTS-APPELLANTS.
The Supreme Court of New Jersey.
Argued September 27, 1955.
Decided October 24, 1955.
*420 Mr. Ralph L. Fusco, Deputy Attorney-General, argued the cause for the appellant (Mr. Grover C. Richman, Jr., Attorney-General).
The opinion of the court was delivered by VANDERBILT, C.J.
This is an appeal from a judgment of the Law Division of the Superior Court, in favor of the plaintiff in a suit which sought by way of declaratory judgment to determine the legality of a business promotion program providing for a prize drawing. The case was certified by this court on its own motion while pending in the Appellate Division of the Superior Court. The matter presents the same legal issue under the Lottery Act, N.J.S. 2A:121-1, as in Lucky Calendar Co., Inc., v. Cohen.
The plaintiff is an unincorporated association of approximately 75 businessmen and three banks all located in the Journal Square area of Jersey City, existing for the purpose of promoting business and civic activities in that section of the city. By means of a three-day sales promotion campaign, one of three held each year, it intended to dramatize the advantages of Journal Square and the facilities made available to the public by its stores and financial institutions. In the campaign planned for June 1954, which was in part carried out, spectacular advertisements were placed in the Hudson County newspapers and, to induce patronage, free transportation by bus from any part of the City of Jersey City to Journal Square was offered. Various members of the association distributed to the public without cost, charge or express condition, about one-half million *421 coupons, which entitled the holders thereof to participate in a drawing for some 51 valuable prizes which were to have been awarded on June 28, 1954. The grand prize was a new Studebaker automobile. The other prizes were mainly gift certificates donated by the various merchant members of the association.
Any member of the public could receive one or more coupons by going into any of the stores or establishments of the participating merchants and asking for them, or taking them from the counter. No purchase was required. In addition the executive secretary of the plaintiff association distributed five thousand of the one-half million coupons on the sidewalks of Bergen Avenue, Hudson Boulevard and Journal Square to all who chose to accept them but the advertising gave no notice of this fact.
These coupons each contained a serial number and had a duplicate stub attached. The stubs were to be delivered to association members and by them to the plaintiff for ultimate deposit in a receptacle from which the prize drawings were to be made.
The costs and expenses of the promotional program were to be paid by the plaintiff; this, of course, was made possible by the contributions made by the various members of the plaintiff association.
On the second day of the campaign the Jersey City Police Department, acting under instructions from the Hudson County Prosecutor, demanded that the plaintiff discontinue the program insofar as it involved the drawing for the award of prizes on the ground that the scheme was in violation of the Lottery Act, N.J.S. 2A:121-1.
The plaintiff obeyed and abstained pendente lite from consummating the advertised awarding of prizes. In lieu of the drawing the plaintiff placed advertisements in the newspapers to apprise the holders of coupons of its predicament and it advised them to retain their coupons pending the determination of the legality of the program. This action was immediately instituted. The issue was submitted to the trial court on the pleadings and a stipulation of facts *422 and it was there held that the program was not in violation of the Lottery Act on the ground that the consideration necessary to a lottery was, on the facts of this case, lacking, the trial judge expressing the opinion that the holding in Furst v. A. & G. Amusement Co., 128 N.J.L. 311 (E. & A. 1942), should not be extended beyond the facts of that case. This was error. What we have said in disposing of the case of Lucky Calendar Co., Inc., v. Cohen, is equally applicable here. The scheme involves all the evils of a classic lottery from the standpoint of the public welfare but aggravated by the specious appearance of innocence.
The judgment is reversed.
HEHER, J., concurring in result.
For reversal Chief Justice VANDERBILT, and Justices HEHER, WACHENFELD, BURLING, JACOBS and BRENNAN 6.
For affirmance Justice OLIPHANT 1.
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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/1531246/
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72 B.R. 63 (1987)
In the Matter of MICRO MART, INC., Debtor.
BLEICHNER BONTA MARTINEZ & BROWN, INC., Plaintiff,
v.
NATIONAL BANK OF GEORGIA, Defendant.
Bankruptcy No. A86-02535-ADK, Adv. No. 86-0907A.
United States Bankruptcy Court, N.D. Georgia, Atlanta Division.
March 12, 1987.
*64 Peter S. Wynkoop, Lee, Lynch & Lamb, Atlanta, Ga., for plaintiff.
Richard G. Murphy, Southerland, Asbill & Brennan, Atlanta, Ga., for defendant.
MEMORANDUM OF OPINION AND ORDER
A.D. KAHN, Bankruptcy Judge.
Plaintiff commenced the instant action in the State Court of Fulton County, Georgia alleging that Defendant, as the depository bank, failed to meet the "midnight deadline" set forth in O.C.G.A. § 11-4-301. Defendant removed the action to this Court pursuant to 28 U.S.C. § 1452(a). It is now before the Court on Plaintiff's Motion for Remand and Mandatory Abstention and Defendant's Motion for Leave to File Third-Party Complaint.
Plaintiff moves that this adversary complaint be remanded to the State Court of Fulton County pursuant to 28 U.S.C. § 1452(b) which provides that
The Court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground. An order entered under this subsection remanding a claim or cause of action, or a decision to not remand, is not reviewable by appeal or otherwise.
In the case of Browning v. Navarro, 743 F.2d 1069 (5th Cir.1984), the Fifth Circuit Court of Appeals noted that equitable grounds include:
1. forum non conveniens;
2. a holding that, if the civil action has been bifurcated by removal, the entire action should be tried in the same court;
3. a holding that a state court is better able to respond to questions involving state law;
4. expertise of the particular court;
5. duplicative and uneconomic effort of judicial resources in two forums;
6. prejudice to the involuntarily removed parties;
7. comity considerations; and
8. a lessened possibility of an inconsistent result.
743 F.2d at 1076 n. 21. Of course, this list is not exhaustive.
Plaintiff has also requested that this Court abstain pursuant to 28 U.S.C. § 1334(c). Section 1334(c) provides that
(1) Nothing in this section prevents a district court in the interest of justice, or in the interest of comity with State courts or respect for State law, from abstaining from hearing a particular proceeding arising under title 11 or arising in or related to a case under title 11.
(2) Upon timely motion of a party in a proceeding based upon a State law claim or State law cause of action, related to a case under title 11 but not arising under title 11 or arising in a case under title 11, with respect to which an action could not have been commenced in a court of the United States absent jurisdiction under this section, the district court shall abstain from hearing such proceeding if an action is commenced, and can be timely adjudicated, in a State forum of appropriate jurisdiction. Any decision to abstain made under this subsection is not reviewable by appeal or otherwise. This subsection shall not be construed to limit the applicability of the stay provided for by section 362 of title 11, United States Code, as such section applies to an action affecting the property of the estate in bankruptcy.
The Court concurs with the holding in Paul v. Chemical Bank (In re Associates), 57 B.R. 8 (Bankr.S.D.N.Y.1985) in which § 1334(c) was found to be inapplicable to removed cases. However, the policy embodied in § 1334(c) is instructive of Congress' intentions regarding the jurisdiction of this Court. As one court has stated, "the congressional mandate of abstention in certain `related to' cases enhances the importance of comity as an equitable ground for remand." Thomasson v. Amsouth *65 Bank, 59 B.R. 997, 1002 (N.D.Ala. 1986).
In the instant proceeding, the action removed from the State Court is only remotely related to the bankruptcy case of Micro Mart, Inc. It is a cause of action by a payee against a depository bank for allegedly violating a provision of the Georgia Code, O.C.G.A. § 11-4-301. The only connection of this action to the Micro Mart, Inc. bankruptcy case is that 1) it involves a check written by Micro Mart, Inc. prior to bankruptcy and 2) there is a possibility that the bank may assert a claim against the estate for any amount recovered by the Plaintiff in this action.
This action could not have been commenced in a federal court absent the pendency of the Micro Mart, Inc. bankruptcy case in this Court. The action can be "timely" adjudicated in the State Court of Fulton County. Defendant has made no showing that the outcome of this dispute will have a significant impact upon the administration of the bankruptcy estate. Even if Plaintiff is successful and, in turn, Defendant successfully asserts a claim against the estate, the amount of that claim would be relatively small in comparison to the total amount of the estate's outstanding claims. Although this Court is certainly competent to resolve this dispute according to the laws of Georgia, comity requires that this action be remanded. This Court will not usurp the State Court's jurisdiction where the action removed is so remotely related to the bankruptcy case.
Therefore, the Court will grant Plaintiff's Motion to Remand. The Court, however, is unable to grant Plaintiff's request for mandatory abstention in that § 1334(c) is inapplicable to removed cases. In accordance with the reasoning of General Instrument Corp. v. Fin. and Bus. Serv., Inc., (In re Finley), 62 B.R. 361 (Bankr.N. D.Ga.1986), the Court will enter a final dispositive order.
Furthermore, because the Court will remand this action, there is no reason to allow the bank to implead the Trustee as a third-party defendant. In any event, the correct procedure would be to assert the estate's liability for any recovery obtained against the Defendant in the form of a Proof of Claim where the Trustee could choose whether or not to object to said claim.
ORDER
In accordance with the reasoning above, it is the Order of the Court that Plaintiff's Motion for Remand and Mandatory Abstention be, and the same hereby is, GRANTED IN PART.
The instant action is hereby REMANDED to the State Court of Fulton County, Georgia.
It is the further Order of the Court that Defendant's Motion for Leave to File Third-Party Complaint be, and the same hereby is, DENIED.
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01-03-2023
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10-30-2013
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