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https://www.courtlistener.com/api/rest/v3/opinions/1536312/ | 364 B.R. 854 (2007)
In re PUBLISHERS CONSORTIUM, INC., Debtor.
American National Bank & Trust Company of Chicago n/k/a JP Morgan Chase Bank, Plaintiff,
v.
Common Courage Press, Inc., et al., Defendants.
Bankruptcy No. 02-31588 (ASD), Adversary No. 02-3048.
United States Bankruptcy Court, D. Connecticut.
March 12, 2007.
*855 Douglas S. Skalka, James A. Lenes, Lucas Bennett Rocklin Neubert, Pepe, and Monteith, P.C., New Haven, CT, for Plaintiff.
James Berman, Louis J. Testa, Zeisler & Zeisler, P.C. Bridgeport, CT, for Debtor.
Heidi H. Zapp, Tracy Alan Saxe, Saxe Doernberger & Vita, P.C., Hamden, CT, Myles H. Alderman, Jr., Alderman & Alderman, Hartford, CT, Edward Y. Crossmore, The Crossmore Law Office, Ithaca, NY, Dean W. Baker, Law Offices of Dean W. Baker, New Haven, CT, Christopher J. Major, Robinson & Cole, LLP, Stamford, CT, for Defendants.
Park Avenue/California, Santa Monica, CA, pro se.
MEMORANDUM OF DECISION ON REMAND FROM DISTRICT COURT
ALBERT S. DABROWSKI, Chief Judge.
I. INTRODUCTION
On December 9, 2004, the United States District Court for the District of Connecticut (Covello, J.) issued a Memorandum and Order in an appeal from rulings of this Court in the above-captioned case and adversary proceeding. That Memorandum and Order, inter alia, remanded the proceedings back to this Court for a determination of the parties' priorities in the subject property. This Memorandum of Decision responds to the District Court's remand.
II. FACTUAL BACKGROUND
For the purposes of remand this Court finds the following facts, not inconsistent with those previously found by the District Court.
Publishers Consortium, Inc. (hereafter, the "Consortium" or "Debtor") was for many years a publisher and distributor of *856 books. As part of its business, the Consortium entered into distribution agreements with various publishing houses (hereafter, the "Publisher(s)"). Although each of those distribution agreements differed in minor respects, all contained essentially the same material terms and conditions, to wit: each individual Publisher would consign books to the Consortium, and the Consortium would perform services customarily performed by a book distributor, including marketing, invoicing, shipping, customer service, collection of the receipts of sale, warehousing, and processing of returns. The distribution agreements further provided that the books would remain the property of the individual Publishers until sold to customers.
The Consortium's customers were typically large book retailers and wholesalers. The Consortium would market and ship books to those customers, then collect the accounts receivable generated by those sales. Under the distribution agreements the Consortium was independently obligated to remit the book sale price, less a commission and service costs, to individual Publishers regardless of whether, and when, it was paid by its customers. Under a typical distribution agreement, payment from the Consortium to the Publisher was due 90 days after the "report date" a scheduled day each month as of which the Consortium reported the total sales and the net amount due to each Publisher from the preceding month.
None of the distribution agreements obligated the Consortium to segregate funds received in connection with sales of a particular Publisher's books, and the Consortium was not otherwise restricted in its use of those funds. The individual Publishers had no direct contact with the Consortium's customers, and always logged their own accounts receivable as due from the Consortium, rather than from any of the customers of the Consortium.
In 1999, American National Bank & Trust Company of Chicago n/k/a JP Morgan Chase Bank (hereafter, the "Bank") provided the Consortium with a revolving line of credit. In connection with that credit transaction the Consortium executed, and the Bank accepted, a Loan and Security Agreement dated January 13, 1999 (hereafter, the "Security Agreement"),[1] which granted the Bank a security interest in certain of the Consortium's property, including present and after-acquired accounts, contract rights, general intangibles, monies, reserves, deposits and deposit accounts.[2]
*857 On August 29, 2001, through an Agency Fulfillment Agreement (hereafter, the "Agency Agreement"), the Consortium subcontracted with Client Distribution Services, Inc. (hereafter, "CDS") to perform its book distribution operations beginning November 1, 2001. In that regard the Consortium delegated to CDS certain of its duties under the various distribution agreements, including its warehousing,[3] order receipt, order processing, shipping, invoicing, collection and book return processing obligations. Under the Agency Agreement, the Consortium retained its obligation to market books, report sales, and remit funds to the individual Publishers.
The Consortium's President, David Wilk, testified that the Consortium entered into the Agency Agreement because CDS could perform various "back office" functions more efficiently than the Consortium. The Publishers played no role in the Consortium's negotiations with CDS, and in fact most, if not all, of the Publishers knew nothing of that development until its execution was announced by the Consortium. Gilbert Perlman, the president of CDS, testified that CDS was not equipped to administer relationships with small publishers such as were represented by the Consortium. From and after November 1, 2001, the Publishers delivered their books directly to the CDS warehouse in Tennessee.[4] CDS then invoiced those customers in its own name, collected payments, and placed those funds in its general operating account without segregation from other monies received. The Agency Agreement required CDS to remit payment to the Consortium within 88 days of a monthly report date, thus allowing the Consortium two days to pay timely those Publishers whose distribution agreements called for payment within 90 days of that same report date. Further, as was the case before the advent of the Agency Agreement, the Consortium was obligated to pay the Publishers regardless of whether it had received payment from CDS.
On or before January 22, 2002, the Consortium fell into default of its obligations to the Bank. On March 28, 2002, CDS wired the sum of $1,095,860.76 into the Consortium's deposit account at the Bank as payment for books sold in December 2001 (hereafter, the "December Sales Payment"). On the same day, the Bank exercised a set-off against the deposit account containing the December Sales Payment (hereafter, the "Set-Off"). Due to, inter alia, the fiscal impact of the Set-Off, the Consortium filed a petition in this Court on April 2, 2002 (hereafter, the "Petition Date"), seeking protection under Chapter 11 of the United States Bankruptcy Code.
On the Petition Date the Consortium owned accounts receivable due from CDS in connection with books sold in the months of January, February and March of 2002, and those accounts (hereafter, the "Pre-Bankruptcy Receivables") became part of its bankruptcy estate. During the pendency of this bankruptcy case, but not later than July 1, 2002, the Consortium, as debtor-in-possession, received into a deposit account in the ordinary course of business, and pursuant to the terms of the Agency Agreement, the cash proceeds of the Pre-Bankruptcy Receivables (hereafter, *858 the "January-March Sales Payments"). None of the January-March Sales Payments were interrupted, interdicted or impounded prior to their possession and commingling by the Consortium;[5] and some, or all, of the proceeds of those Payments were used or disbursed by the Consortium, as debtor-in-possession, pursuant to orders of this Court, including, without limitation, orders authorizing the use of cash collateral.
On April 26, 2002, the Bank commenced an adversary proceeding (Adv.Pro. No. 02-3048) against the Consortium and individual Publishers, seeking a declaratory judgment that the Consortium owned, and the Bank had a first priority lien in, the book inventory and/or accounts receivable that gave rise to payments from CDS to the Consortium (hereafter, the "Adversary Proceeding"). Certain of the Publishers answered and asserted counterclaims, arguing, inter alia, that as the owners of the books consigned to CDS and the Consortium, they had a right to the proceeds of sale. These Publishers also argued before this Court that they were entitled to the proceeds of the January-March Sales Payments as third-party beneficiaries of the Agency Agreement. These Publishers likewise objected to confirmation of the Debtor's proposed Chapter 11 plan on these bases, inter alia.
On August 7, 2002, this Court issued an order providing for a trial of the common issues presented by the Adversary Proceeding and the Debtor's proposed Chapter 11 plan which depended for its confirmation upon the Consortium's ownership of, and the Bank's priority in, the proceeds of the January-March Sales Payments. A multi-day trial ensued and, on November 20, 2002, this Court issued an oral ruling concluding that the Consortium was the owner of the January-March Sales Payments. This Court further concluded that the Publishers were not third-party beneficiaries of the Agency Agreement, finding instead that "CDS did not intend to benefit the publishers by providing them with rights in the book proceeds through the . . . [Agency Agreement] or in any other manner" and that "there existed no facts capable of granting [the Publishers] third-party beneficiary status." Accordingly, on November 26, 2002, this Court issued an order confirming the Debtor's Chapter 11 plan (Doc. I.D. No. 501), and on November 27, 2002, entered judgment in the Adversary Proceeding generally in favor of the Bank (Doc. I.D. No. 67) (hereafter, the "Bankruptcy Court Ruling").
A timely appeal (hereafter, the "Appeal") by certain of the Publishers (hereafter, the "Contesting Publishers") followed the Bankruptcy Court Ruling. The subject of the Appeal was whether or not this Court erred in concluding (i) that the Consortium owned the accounts receivable, and proceeds thereof, arising from the sale of the Contesting Publishers' books; and (ii) that the Contesting Publishers were not third-party beneficiaries of the Agency Agreement. In its appellate ruling (hereafter, the "District Court Ruling"), the *859 District Court (Covello, J.) upheld this Court's finding that the Consortium owned the accounts receivable and proceeds arising from the sale of the Contesting Publishers' books, and that the Bank had properly exercised the Set-Off. However, the District Court concluded, contrary to this Court, that the Contesting Publishers were indeed third-party beneficiaries of the Agency Agreement with possible priority over the interest of the Bank in the subject property, i.e. the January-March Sales Payments. Accordingly, the District Court (i) reversed this Court's confirmation of the Consortium's Chapter 11 plan; (ii) vacated this Court's judgment for the Bank in the Adversary Proceeding; and (iii) remanded with instructions to "reconsider the matter and the extent of the [B]ank's financial interest and each of the [P]ublisher-appellants' interests as third party beneficiaries of the Agency . . . Agreement. . . ."
III. DISCUSSION
The instant case and adversary proceeding present novel and analytically challenging issues. In fact it might easily be said of this case what was written by Circuit Judge Cardamone in Septembertide Publishing B.V. v. Stein and Day, Inc., et al., 884 F.2d 675, 676 (2d Cir.1989) a case implicating similar legal principles that the Court is "required to resolve a difficult and close question involving third-party beneficiary and commercial law principles. . . ."
The specific issue presented on this remand is whether, with respect to funds arising from the sale of the Publishers' books and ultimately paid to the Consortium, but not then remitted to those Publishers (e.g., the January-March Sales Payments), such Publishers' third-party beneficial rights, as recognized by the District Court, are subordinate to or superior to the Bank's security interest in the same property. Of course, in answering this question the Court is constrained by certain determinations already made by Judge Covello in the District Court Ruling. Accordingly, an examination of the legal contours of that Ruling is the logical starting point of the present analysis.
A. The District Court Ruling.
The analytical section of the District Court Ruling is divided into two subsections, titled as follows: "1. Ownership Accounts Receivable/Proceeds" and "2. Third Party Beneficiary". The litigants here have confessed to some difficulty in reconciling these two subsections of the District Court Ruling. One might argue as have some of the parties that Subsection 1 contains an analysis of pre-Petition Date rights and activity, and Subsection 2 addresses post-petition circumstances. It might also be that Subsection 1 is concerned more generally with title to the subject property with respect to the efficacy of the Bank's setting off of funds already paid to the Consortium, while Subsection 2 deals with competing rights to funds not yet paid to the Consortium and/or in the control of the Bank. This Court admits that it too may not fully appreciate the relationship between the two subsections as intended by the District Court. Nonetheless, this Court believes that those subsections can be harmonized by reading the District Court Ruling to provide the following express and implied holdings:
1. Although the subject books were provided by the Publishers on consignment, the Consortium had an exclusive ownership interest in the funds it received from CDS in connection with the sale of *860 those books.[6]
2. The Contesting Publishers are third-party beneficiaries of the Agency Agreement,[7] and their third-party rights in the subject funds are in conflict with the security interest of the Bank in those same funds.
3. The rights of the Contesting Publishers to the subject funds, including their third-party beneficial rights, are defeated by the commingling of those funds in the hands of the Consortium.[8]
4. Thus, in order to realize upon their alleged superior interest in the subject funds, the Contesting Publishers must (a) interdict the flow of those funds before they reach the Consortium and are commingled, and (b) establish that their third-party rights in those funds are superior to the security interest of the Bank.
Accordingly, the issues raised by the twin requirements of holding "4", above, are the principal questions on remand. This. Court now turns to a more in-depth analysis of those critical questions.[9]
B. The Law of the Case Commingling.
The District Court Ruling is presently the law of the instant case and adversary proceeding. It is clear from that Ruling that once funds subject to the rights or interests of a third party become irretrievably commingled by a debtor, the third party is relegated to the status of a "simple creditor".
It is equally clear that the District Court considered the December Sales Payment to fit this profile i.e. with respect to that payment from CDS, the District Court stated that the Publishers "did not require the [C]onsortium to segregate the proceeds of sale from other funds held within *861 the operating account. . . . With respect to these proceeds, then, the [P]ublishers became simple creditors of the [C]onsortium." District Court Ruling at 12.
Because the rights of "simple" creditors, i.e. general unsecured creditors, are subordinate to the interest of a secured creditor in its collateral, it is apparent that the District Court would have concluded that with respect to the December Sales Payment, the Publishers would lose out to the Bank even in the absence of Bank's Set-Off rights.[10] So the critical question is suggested: if the Publishers are "simple creditors", through commingling, with respect to the December Sales Payment, why then are they not likewise simple creditors and thus subordinate to the Bank's interest with respect to the January-March Sales Payments, which were similarly received by, and commingled in the hands of, the Consortium?[11]
The answer to this question does not appear to be found within the four corners of the District Court Ruling. Perhaps, as suggested by more than one party here, the District Court failed to appreciate the fact that the only funds that remained in dispute the January-March Sales Payments had already been received by the Consortium in the identical manner as the December Sales Payment. This explanation suggests that had the District Court appreciated the true status of the January-March Sales Payments, it would have concluded that as to those funds the Publishers are "simple creditors", and thus the Bank's security interest therein is superior to their rights. `This Court concurs with that inference and conclusion. Accordingly, the law of the case compels judgment for the Bank in the Adversary Proceeding, and confirmation of the Debtor's pending Chapter 11 plan.
C. The Wisdom of Septembertide First in Time, First in Right.
Assuming, contrary to the conclusion of the preceding subsection of this Memorandum of Decision, that the law of the case does not mandate a determination that the Bank has a superior interest in the January-March Sales Payments, this Court turns to an examination of the principles necessary to resolve the competition between a third-party beneficiary and the holder of a security interest in funds generated pursuant to a contract. In this respect, the decision of the Second Circuit Court of Appeals in Septembertide involving a similar competition is persuasive and determinative of the case at bar.
In Septembertide, the firm of Stein & Day, a New York publishing house (hereafter, the "Hardcover Publisher"), and Septembertide Publishing, B.V. (hereafter, the "Author"), a corporation representing the interests of the author of a certain work of fiction (hereafter, the "Work"), were parties to a licensing agreement that provided the Hardcover Publisher with, inter alia, exclusive licensing rights to *862 publish a hardcover edition of the Work in exchange for the payment of royalties. In addition, the Hardcover Publisher was permitted to sub-license its rights in the Work to a paperback publisher. In consideration for the sub-licensing rights, `the Hardcover Publisher was obliged, inter alia, to pay the Author a two-thirds share of its sub-licensing income.
Contemporaneous with the Hardcover Agreement, the Hardcover Publisher entered into a sub-license contract (hereafter, the "Paperback Agreement") with New American Library, giving it (hereafter, the "Paperback Publisher") the right to publish a paperback edition of the Work. In consideration therefor, the Paperback Publisher agreed to advance to the Hardcover Publisher $750,000 in several installments, of which $364,500 remained unpaid at the time of the subject dispute. The Paperback Publisher, aware of conflicting claims to these unpaid funds, deposited the same with the court rather than pay them (hereafter, the "Impounded Funds") to the Hardcover Publisher.[12]
Approximately one year after the Hardcover and Paperback Agreements were executed, the Hardcover Publisher arranged a credit facility with Bookcrafters U.S.A., Inc. (hereafter, the "Lender"). To secure the obligation due under that facility, the parties entered into a security agreement in which the Hardcover Publisher collaterally assigned all its contract rights and accounts to the Lender, including the rights it had to receive sublicense payments from the Paperback Publisher pursuant to the Paperback Agreement.
The Hardcover Publisher subsequently became insolvent and bankrupt, leaving both the Author and the Lender unpaid. The resulting dispute concerned the competing rights and/or interests of those two parties in the Impounded Funds. The Author claimed two-thirds of those Funds as a third-party beneficiary of the Paperback Agreement; whereas the Lender contended that it had a prior and superior right to those same Funds as proceeds of its security interest in the Hardcover Publisher's contract rights and accounts receivable, specifically including the rights and accounts flowing from the Paperback Agreement.
The parallel structure of Septembertide and the case at bar should be readily apparent. The Consortium, like the Hardcover Publisher, is a debtor; CDS, like the Paperback Publisher, is the source, pursuant to contract, of the funds subject to dispute; and the Contesting Publishers and the Bank, like the Author and Lender, are the competing third-party beneficiaries and security interest holders, respectively.
Septembertide affirmed a district court's determination that the Author was an intended third-party beneficiary of the Paperback Agreement. The Circuit Court also appears to have concluded that the Paperback Agreement's creation of third-party rights in the Author was tantamount to an actual assignment of a portion of the Hardcover Publisher's contract rights in the Paperback Agreement. In view of that deemed "assignment", the Circuit Court then concluded, in essence, that the debtor Hardcover Publisher could only have granted the Lender a security interest in one-third of its income under the Paperback Agreement because rights to the other two-thirds of those proceeds had been previously assigned to a third-party beneficiary the Author at the time of *863 the making of the Paperback Agreement. Id., at 681-82. This novel chain of holdings (hereafter, the "Fundamental Holdings")[13] is what ultimately fuels the contentions of the Contesting Publishers here. Nonetheless, despite any initial or superficial appearance of support, the decision in Septembertide is actually hostile to the Contesting Publishers' point of view. That is because what the Circuit Court found to be most salient, and ultimately dispositive, was the timing of the acquisition of the competing parties' rights and interests.
In Septembertide the Circuit Court concluded that "[i]n resolving the question of priority between a secured creditor and an intended third-party beneficiary whose interest in the collateral preceded it, a first in time, first in right rule applies." Id., at 682 (emphasis supplied). While this holding is technically limited to Septembertide's unique facts, i.e. where the third-party rights "preceded" the interest of the secured creditor, this Court can think of no principled reason why the "first in time, first in right" rule would not also apply under the reverse scenario, i.e. where the acquisition of the third-party rights followed the granting of the security interest. Otherwise, Septembertide's first in time, first in right "rule" would not be a rule at all; it would be merely a description of the particular outcome when third-party rights precede a security interest.
The Contesting Publishers may well admit that their third-party rights were acquired after the execution of the Security Agreement i.e. at the time of the making of the Agency Agreement yet not concede that the Bank was "first in time" because, they might argue, the Bank's security interest in the Consortium's contract rights in the Agency Agreement was not enforceable until the existence of the Agency Agreement because its interest did not attach until the making of that Agreement. See generally, UCC § 9-203 (2000). At best though, such an argument would establish simultaneous attachment of the Bank and Contesting Publishers' respective interests in the subject property; it would not elevate the Contesting Publishers to "first in time" status.
Assuming arguendo that there was simultaneous attachment of the interests of *864 the Bank and the Contesting Publishers, how should a court ultimately determine priority? Given the absence of direct authority on the simultaneous attachment of the interests of a secured creditor and the rights of a third-party beneficiary, this Court logically turns for guidance to the closely analogous competition between two secured creditors in the same item of collateral, e.g., contract rights in a specific agreement. Under that instructive paradigm it is interesting to note that if the subject contract was made at or after the granting and perfection of the latter of the two security interests, then both creditors' security interests would attach at the same time, i.e. at the time of the making of the subject contract. Yet despite such simultaneous attachment, it is black letter law that if Secured Creditor "A" possessed a valid and perfected security interest prior to Secured Creditor "B", then Secured Creditor "A" would be granted priority and allowed to satisfy fully its secured claim from the proceeds of the subject contract rights before Secured Creditor "B" would be entitled to any satisfaction from the same collateral.[14]See generally, UCC § 9-322 (2000). The key temporal principle is not attachment, but the granting and perfection of the respective interests. In other words, in the case of the instant competition, an appropriate rule would accord priority to the claimant which first dealt with the debtor with respect to the collateral. Accordingly, the Bank must be the prevailing party under Septembertide's first in time, first in right rule, even if its interest did not attach to the Consortium's contract rights in the Agency Agreement until the advent of that Agreement.
Other statements in the Septembertide opinion are directly supportive of the Bank's primacy. For instance, the Circuit panel observed that "[i]t has always been the law in New York" that an assignee stands in the shoes of its assignor and takes subject to those liabilities of its assignor that were in existence prior to the assignment." Id. (emphasis supplied). Applying this statement of law to the instant factual circumstances, it should be self-evident that the "assignee" here (the Bank) does not "take subject to" the "liabilities" of its "assignor" (the Consortium) because those liabilities (the Contesting Publishers' third-party rights) were not "in existence prior to the assignment [of the Security Agreement]." (emphasis supplied).
A final observation by the Septembertide panel is instructive here, to wit: "It seems fair to require, as between a trade creditor and an author, that the creditor-assignee prudently ascertain the actual existence of its collateral before agreeing to take a security interest in it." 884 F.2d at 682. In Septembertide, "[a]n examination of the Hardcover Agreement; flagged by the Paperback Agreement, would quickly have revealed [the Author's third-party] interest. . . ." Applying this principle to the instant case again confirms the wisdom of a rule that elevates the creditor which first dealt with the debtor with respect to the collateral. If the assignee here (the Bank) had "prudently" sought to ascertain the existence and extent of its prospective collateral e.g., contract rights and accounts it would not have discovered the Contesting Publishers' third-party rights in the Agency Agreement since that Agreement was not extant at that time.
*865 In sum, an extension of the principles announced in Septembertide to the facts of the instant case and adversary proceeding compel this Court to accord priority to the interest of the Bank over that of the Contesting Publishers in the January-March Sales Payments.
D. Equitable Considerations.
The outcome impelled by Septembertide and the law of the case is strengthened and confirmed by an examination of principles of equity. A ruling recognizing a superior property right in the Contesting Publishers would be a windfall for them, and effect an undue forfeiture upon the Bank, because the Contesting Publishers' acquisition of their superior interest would have occurred simply through the intervention of the Agency Agreement, the making of which was unknown to them and for which they gave no value.
With respect to the proceeds from the sale of their books, the Publishers never bargained to be anything more than general unsecured creditors. At the time they entered into their distribution agreements with the Consortium, the Publishers' expectation and reliance was upon a state of affairs in which the Consortium's sales transactions with its customers were on an open account basis, which did not serve as a source of third-party beneficial rights. The only rights the Publishers had beyond those of general unsecured creditors of the Consortium were consignment rights entitling them to repossession of their unsold book inventory. However, once the book inventory was sold, the Publishers had no rights or interests in the resulting accounts receivable, cash proceeds, deposit accounts, etc., in which the Bank held a security interest.
Following the advent of the Agency Agreement, the Publishers still possessed consignment rights in their books; yet in addition, the Contesting Publishers claim, they also then enjoyed third-party beneficial rights in the "proceeds" resulting from the sale of their book inventory. These additional, putative rights were not bargained for by the Publishers, nor does the record suggest that they gave any value for them. In point of fact, most, if not all, of the Publishers were completely ignorant of the prospect and/or terms of the Agency Agreement until it was announced to them by the Consortium. Hence, any rights or interests acquired by them via the Agency Agreement can be fairly characterized as a windfall.
The flip-side of the Contesting Publishers' windfall is a forfeiture from the Bank. Prior to the creation of the Agency Agreement, the Bank acquired a property interest in, inter alia, all of the Consortium's existing and future contract rights and accounts: Thus, the Bank bargained for and received its interest in future contracts, such as the Agency Agreement, well before the time when the Contesting Publishers argue that they too acquired an interest in the Agency Agreement. Under those circumstances, a recognition by this Court of superior rights in the Contesting Publishers would amount to a forfeiture of the Bank's property. Equity abhors a forfeiture. E.g., Jones v. New York Guaranty & Indemnity Co., 101 U.S. 622, 25 L.Ed. 1030 (1879). Accordingly, equity dictates that this Court recognize and protect the superior interest of the Bank in the January-March Sales Payments.
IV. CONCLUSION
The law of this case and adversary proceeding, together with persuasive Second Circuit authority, and ultimately confirmed by a consideration of principles of equity, compel this Court to declare that the Bank has an interest in the subject property that is superior to the third-party beneficial *866 rights and/or interests of the Contesting Publishers. A separate order and judgment shall enter effectuating this declaration in the instant case and adversary proceeding.
NOTES
[1] Section 8.13 of the Security Agreement provides that it "shall be governed and controlled by the internal laws of the State of Illinois; and not the law of conflicts."
[2] Specifically, the Security Agreement provided, inter alia, that:
3.1 Borrower [the Consortium] grants to Bank a security interest in and to, the following Borrower's property, wherever located, whether now or hereafter existing, owned . . ., consigned (to the extent of Borrower's ownership therein), arising and/or acquired, including without limitation all of Borrower's . . . Accounts . . . contract rights . . . general intangibles . . . monies, reserves, deposits [and] deposit accounts. . . .
3.2 All of the aforesaid property and products and proceeds of the foregoing . . . are herein individually and collectively called the "Collateral". The terms used herein to identify the Collateral shall have the same meaning as are assigned to such terms as of the date hereof in the Illinois Uniform Commercial Code.
On January 20, 1999, the Bank filed a UCC-1 Financing Statement with the Illinois Secretary of State covering, inter alia, accounts, contract rights, general intangibles, monies, reserves, deposits and deposit accounts.
By a Second Amendment to Loan and Security Agreement dated February 7, 2001, the Consortium granted to the Bank a security interest in classes of property which largely overlapped the classes enumerated in the Security Agreement.
[3] The Consortium transferred all books located at its warehouse in Illinois to CDS's warehouse in Tennessee.
[4] CDS acknowledged that it, like the Consortium, received the books on consignment and that they remained the property of the Publishers until shipped to customers.
[5] Over three months into this Chapter 11 case, it appears that the Consortium, the Bank and certain Publishers agreed to a segregation of funds in the hands of the Consortium. See Fourth Preliminary Order Authorizing Interim Use of Cash Collateral (Doc. I.D. No. 193) (hereafter, the "Fourth Cash Collateral Order") signed and entered on June 26, 2002. This order prepared in the first instance by one or more of the parties in interest provided, inter alia, that "75% of all funds held and received by the Debtor shall be segregated and maintained in a separate bank account at the [Bank] until further Order of this Court. The segregation of funds as set forth herein is based upon the request of certain Publishers and is not and shall not be deamed [sic] a determination of the rights of any party in the Debtor's accounts on [sic] the Proceeds thereof."
[6] District Court Ruling at 12 (". . . CDS wired $1,095,860.76 to the [C]onsortium as payment for books sold in December 2001. These funds then became the property of the [C]onsortium." (emphasis supplied)).
[7] District Court Ruling at 16 (reversing and vacating this Court's Ruling rejecting a claim of third-party beneficiary status). Notwithstanding the binding nature of the District Court Ruling, this Court continues to respectfully disagree with the District Court's conclusion regarding the third-party beneficial status of the Publishers.
[8] See, e.g., District Court Ruling at 11-12.
[9] The local law governing these questions is debatable, but thankfully, not an issue which this Court must definitively determine. Certainly, in the absence of the Contesting Publishers' third-party rights, the efficacy of the Bank's security interest would be determined by the local law (UCC Article 9) of the State of Illinois (the Bank was an Illinois entity; the Consortium was an Illinois entity; and the Security Agreement (entered into in Illinois) provides that it is governed by the law of Illinois). It is also apparent to the Court that Illinois conflicts law would respect the Agency Agreement's governing law stipulation to New York law, and thus, since the Contesting Publishers' third-party rights spring from the Agency Agreement, their legal characteristics arguably are measured by the local law of New York. Unfortunately, the law governing the intersection and competition of these rights and interests is not nearly as self-evident. Fortunately though, it is not necessary for this Court to determine finally that question because the issue at bar is largely determined on the basis of the law of this case, as announced in the District Court Ruling, and the wisdom and authority of Septembertide. That decision an interpretation of New York commercial and contract law is equally persuasive with this Court even if Illinois law ultimately governs because (i) this Court has great respect for opinions of the Second Circuit Court of Appeals, even if they are not technically controlling of a given situation; and (ii) there appears to be no authority in the Illinois statutes, or from courts of Illinois jurisdiction, which is contrary to, or inconsistent with, the relevant areas of New York law as announced by the Second Circuit in Septembertide.
[10] The efficacy of a bank creditor's right to set-off against a debtor's deposit account is not dependent upon the existence or perfection of a security interest in the funds in that account. Rather, this self-help remedy depends solely upon the bank's control of the subject deposit account and the mutuality of debts e.g., the debt owed by the Consortium to the Bank as lender, as against the" obligation owed by the Bank to the Consortium as depositor. See, e.g., In re The Bennett Funding Group, Inc., 146 F.3d 136, 139 (2d Cir.1998).
[11] The segregation of funds established by the Fourth Cash Collateral Order acted only upon commingled funds after they were received by the Consortium. Further, given the timing of the initiation of that segregation, it appears that it would have affected, at most, the final (i.e. March) payment of the January-March Sales Payments.
[12] Because the Impounded Funds were not placed in the hands of the promisee (the Hardcover Publisher), where they might have been commingled, the decision in Septembertide is not inconsistent with the law of this case as detailed in Section III.B. of this Memorandum of Decision.
[13] Septembertide's Fundamental Holdings are novel in that they appear to announce a significant leap in the nature of remedies afforded an intended third-party beneficiary under New York law. Traditionally, third-party beneficiary status was thought to bestow upon the third party a simple, "procedural" remedy i.e. standing to bring a direct action against the promisor under the contract whose terms were intended to benefit it. In other words the beneficial status gave the third-party claimant general contract creditor rights against the promisor despite a technical lack of privity. Septembertide appears to expand that limited remedy somewhat dramatically by holding that a third-party beneficiary not only enjoys an enforceable contract claim against the promisor, but is also deemed to have an interest in specific property rights of the debtor-promisee, e.g., a deemed ownership interest in a promisee's contract rights.
This Court notes that Septembertide's Fundamental Holdings were stated without reference or citation to pre-existing decisional authority, except for the ruling of the district court below. This Court has searched for precedent from other jurisdictions supporting the substantive remedy announced in Septembertide, but has located nothing akin to that principle. This Court is not the first observer to note the novelty and reach of Septembertide's Fundamental Holdings. See Orna S. Paglin, How Secure is a Secured Creditor? The Septembertide Case, 113 Banking L.J. 784, 789-95 (1996).
Nonetheless, even under the novel remedial approach of Septembertide a case where the subject funds were impounded it is far from clear that such doctrine would be extended to a case in which the subject funds were not impounded, but rather, received by the promisee, commingled, and ultimately disbursed to various payees.
[14] This statement excludes marshalling and any other equitable doctrine not implicated by the facts of the present case and proceeding. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536317/ | 928 A.2d 429 (2007)
Linda DAVIS, Petitioner
v.
WORKERS' COMPENSATION APPEAL BOARD (WOOLWORTH CORPORATION), Respondent.
Commonwealth Court of Pennsylvania.
Submitted on Briefs May 11, 2007.
Decided July 5, 2007.
*430 Richard A. Jaffe, Philadelphia, for petitioner.
Audrey E. Timm, Philadelphia, for respondent.
BEFORE: LEADBETTER, President Judge, FRIEDMAN, Judge, McCLOSKEY, Senior Judge.
OPINION BY Judge FRIEDMAN.
Linda Davis (Claimant) petitions for review of the August 30, 2006, order of the Workers' Compensation Appeal Board (WCAB) reversing the decision of a workers' compensation judge (WCJ) to deny the petition to compel a physical examination filed by Woolworth Corporation (Employer) pursuant to section 314 of the Workers' Compensation Act (Act)[1]. We affirm.
The facts are not in dispute. Claimant suffered an injury to her wrist in November 1990, and, in February 1991, Employer accepted liability for that injury in a notice of compensation payable. Claimant underwent an independent medical examination in 1997. In May 1999, a WCJ approved a compromise and release agreement under which Claimant received a lump sum payment of $36,000 and attorney fees. The WCJ's order confirmed the parties' stipulation that Employer would remain responsible for Claimant's reasonable and necessary medical expenses.
In November 2003, Claimant filed a request for utilization review, and a determination issued in February 2004 found Claimant's prescription medications to be reasonable and necessary. In March 2004, Employer filed a petition to compel a physical examination, contending that Claimant's last physical examination was in 1997 and that Claimant had refused Employer's requests that she submit to an examination. Claimant opposed the petition, arguing that there was no reasonable basis for a medical examination because her prescriptions very recently had been found to be reasonable and necessary. By *431 order dated April 30, 2004, WCJ Robert Simmons denied Employer's petition. In so doing, WCJ Simmons concluded as follows:
Based on the fact that there has been no contention that the requested examination was being requested to ascertain a change in Claimant's condition and with the continuing medical treatment having been found reasonable and necessary, which finding also encompassed the issue of the unchanged, on-going nature of the Claimant's work-related injury for medical benefits purposes, Employer has failed to present a reasonable basis upon which to predicate an order compelling Claimant to submit to the requested examination.
(WCJ's April 30, 2004, decision, WCJ's Conclusions of Law, No. 2) (emphasis added).
On appeal, the WCAB held that WCJ Simmons erred by misconstruing the purpose of utilization review, which does not address, let alone decide, questions concerning a claimant's disability.[2] The WCAB further held that, contrary to the WCJ's reasoning, it is irrelevant whether Employer explicitly alleged a change in Claimant's condition. Observing that a primary purpose of an examination under section 314 is to determine whether the claimant's status has changed, the WCAB concluded that an employer filing a petition under section 314 does not have to explicitly allege this purpose. Because no record was made of the hearing before the WCJ, the WCAB vacated the WCJ's decision and remanded the matter to the WCJ so that the parties could present evidence on relevant issues, such as the circumstances of the proposed physical examination and the qualifications of the examiner.
WCJ Simmons held a remand hearing on October 12, 2005. Employer offered into evidence the notice of an April 6, 2004, physical examination, which Claimant failed to attend, and the curriculum vitae of Wilhelmina Korevaar, M.D. Claimant entered her answer to Employer's petition. No testimony was presented, but Employer's counsel stated on the record that Claimant's last physical examination occurred seven years ago and that Employer's petition was intended to ascertain Claimant's present condition, not to harass her. (O.R., N.T. at 9.) After discussion with counsel,[3] the record was closed. By decision dated November 29, 2005, WCJ Simmons found that Employer offered no reasonable basis for the requested examination other than the passage of time. Citing Conaway v. Workers' Compensation Appeal Board (City of Philadelphia), 728 A.2d 1037 (Pa.Cmwlth.), appeal denied, 560 Pa. 731, 745 A.2d 1225 (1999), *432 and Fairmount Foundry v. Workers' Compensation Appeal Board (Baylor), 702 A.2d 373 (Pa.Cmwlth.1997), appeal denied, 553 Pa. 708, 719 A.2d 747 (1998), the WCJ concluded that the mere passage of time does not meet the "reasonable and necessary" standard for compelling an examination set forth in section 314(a) of the Act. Accordingly, the WCJ again denied Employer's petition.
Employer appealed to the WCAB, which again reversed the WCJ's decision. The WCAB concluded that the WCJ erred as a matter of law in applying Conaway and Fairmount Foundry, which involved irreversible occupational diseases and, therefore, were not controlling. The WCAB concluded that Employer was entitled to another physical examination of Claimant where the last such examination took place in 1997.[4] Accordingly, the WCAB reversed the WCJ's decision and ordered Claimant to submit to a physical examination upon further notice by Employer.
On appeal to this court,[5] Claimant correctly notes that the grant or denial of a petition to compel a physical examination pursuant to section 314 is within the sound discretion of the WCJ, and our court will not interfere with that decision absent an abuse of discretion. Linton v. Workers' Compensation Appeal Board (Amcast Industrial Corporation), 895 A.2d 677 (Pa. Cmwlth.2006). Claimant argues that the WCJ did not abuse his discretion in denying Employer's petition in this case because Employer asserted no reasonable basis for its request. We disagree.
We agree with the WCAB that the WCJ erred in relying Conaway and Fairmount Foundry, which involve irreversible occupational disease claims and have no relevance to the facts of this case. Pursuant to our holding in Linton, the WCJ further erred in concluding that the passage of time in and of itself is not a reasonable basis to support the grant of a petition under section 314.
In Linton, a WCJ granted the employer's petition to compel a vocational interview of the claimant three years after the claimant's last vocational assessment. On appeal, we observed that Form LIBC-499 (Petition for Physical Examination or Expert Interview of Employee (Section 314)) does not require an employer to provide any reason for the request.[6] Noting that a vocational interview may be the only mechanism by which an employer can determine the existence and/or extent of a change in a claimant's vocational status, we concluded that it would not be reasonable to require an employer to allege such a change in order to request a subsequent *433 interview. Finally, we held in Linton that the mere passage of time did constitute grounds to compel a claimant to submit to a subsequent vocational interview pursuant to section 314(a) of the Act.
In this case, approximately seven years have elapsed since Claimant's last physical examination; we conclude that a period of such length patently satisfies the "mere passage of time" basis for granting a petition under section 314.[7]Linton.
Accordingly, we affirm.
ORDER
AND NOW, this 5th day of July, 2007, the order of the Workers' Compensation Appeal Board, dated August 30, 2006, is hereby affirmed.
NOTES
[1] Act of June 2, 1915, P.L. 736, as amended, 77 P.S. § 651. In pertinent part, section 314(a) of the Act provides as follows:
At any time after an injury, the employe, if so requested by his employer, must submit himself at some reasonable time and place for a physical examination . . . by an appropriate health care provider . . . who shall be selected and paid for by the employer. If the employe shall refuse upon the request of the employer, to submit to the examination . . . a workers' compensation judge assigned by the department may, upon petition of the employer, order the employe to submit to such examination. . . . The workers' compensation judge may at any time after such first examination . . . upon petition of the employer, order the employe to submit himself to such further physical examinations . . . as the workers' compensation judge shall deem reasonable and necessary. . . .
77 P.S. § 651(a) (emphasis added).
[2] The limited purpose of the utilization review procedures set forth in section 306(f.1)(6) of the Act, 77 P.S. § 531(6), is to determine the reasonableness and necessity of treatment in relation to a specified work injury. Reinhardt v. Workers' Compensation Appeal Board (Mt. Carmel Nursing Center), 789 A.2d 871 (Pa. Cmwlth.2002). Bureau regulations specify that reviewers "shall decide only the issue of whether the treatment under review is reasonable or necessary for the medical condition of the employe." 34 Pa.Code § 127.470(a) (emphasis added).
[3] The record includes the following exchange:
[WCJ]: So it's clear on the record, [Employer's] position is that it's entitled as a matter of law to this exam simply because of the passage of time?
[Employer's counsel]: Yes, your honor.
[WCJ] Okay. Claimant takes exception to that, and pretty much the Claimant's position is that regardless of the passage of time, [Employer] has an obligation to establish before the [WCJ] a reasonable basis for the request. Have I stated your position properly . . . ?
[Claimant's counsel]: [Yes.]
(O.R., N.T. at 13-14.)
[4] The WCAB observed that custom and practice have established six months as a reasonable period of time for a new examination where a claimant continues to receive benefits. The WCAB stated that this custom and practice is reflected in section 306(a.2) of the Act, added by the Act of June 24, 1996, P.L. 350, 77 P.S. § 511.2, which permits two impairment rating evaluations during a twelve-month period. The WCAB opined that two independent medical examinations per year is "an adequate rule of thumb." (WCAB's op. at 5.)
[5] Our scope of review is limited to determining whether an error of law was committed, whether constitutional rights were violated or whether necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704.
[6] Indeed, Form LIBC-499 provides space for an employer to set forth only the following information: (1) the date on which it requested the employee to submit to a physical examination or vocational interview; (2) the date of the last physical examination or expert interview of the employee; and (3) a date by which the employer seeks to have the employee submit to the physical examination or expert interview.
[7] Absent a statutory provision similar to that in section 306(a.2) of the Act, 77 P.S. § 511.2, we decline to hold that two examinations per year is reasonable per se, believing that doing so would impermissibly infringe on the authority and discretion given to the WCJ under section 314. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536513/ | 223 B.R. 159 (1998)
In re Debra E. SPEARS, Debtor.
Debra E. SPEARS, Plaintiff,
v.
FORD MOTOR CREDIT CO., Defendant.
Bankruptcy No. 98 B 02371, Adversary No. 98 A 00902.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
August 6, 1998.
*160 Erik A. Martin, Chicago, IL, for Plaintiff.
Sherman & Sherman, Chicago, IL, for Defendant.
Craig Phelps, Chicago, IL, Trustee.
MEMORANDUM OPINION
JOAN H. LEFKOW, Bankruptcy Judge.
Plaintiff-debtor, Debra E. Spears ("plaintiff"), has brought this adversary proceeding to recover a 1997 Ford Escort that she purchased under a retail installment sales contract financed by defendant, Ford Motor Credit Company ("FMCC"). In addition, she moves that FMCC be sanctioned for willfully violating the automatic stay in her case under Chapter 13 of the Bankruptcy Code ("Code"),[1] 11 U.S.C. §§ 1301 et seq.
Because it repossessed the vehicle before plaintiff filed her Chapter 13 petition, FMCC takes the position that the vehicle is not subject to turnover as property of plaintiff's bankruptcy estate. Responding to plaintiff's request for sanctions, FMCC further contends that it did not violate the stay by refusing to voluntarily turn over the vehicle at the outset of this case. For the reasons set forth below, plaintiff's motion for turnover under § 542(a) is granted, but her request for sanctions under § 362(h) is denied.
Procedural Background
When plaintiff filed her Chapter 13 petition on January 26, 1998, she proposed to retain the vehicle, with payments on a secured claim of $15,000 to be paid FMCC over the course of a 36-month plan. Plaintiff alleges that on January 28, 1998, her counsel notified FMCC of the filing, and requested voluntary return of the vehicle. Complaint, ¶ 7 and Ex. A. FMCC did not return the vehicle, and it filed a motion to modify the automatic stay on February 17, 1998. That motion first came before the court on February 24, 1998.
*161 This court denied FMCC's motion to lift the stay on March 19, 1998, after an evidentiary hearing. At that time, the court made findings that although plaintiff lacked equity in the vehicle, it was reasonably necessary for an effective reorganization under § 362(d)(2)(B). Also, FMCC's security interest was adequately protected, as the vehicle was fully insured and monthly payments under plaintiff's Chapter 13 plan were considerably greater than the rate at which the vehicle was depreciating each month.
Much of the evidence at the hearing had addressed the question whether plaintiff's second Chapter 13 case had been filed in good faith. Based on the testimony and documents in evidence, the court found that while plaintiff's second plan was in most respects the same as her first plan, the debtor's inability to fulfill the first plan was related to a partial loss of income. The second plan was not materially in default and plaintiff had agreed to payroll deduction, which had been established. While observing that FMCC's doubts regarding plaintiff's good faith were not unreasonable, the court found that plaintiff had filed her Chapter 13 petition in good faith. Ultimately, the court determined that if plaintiff would enter into a two-month default order, FMCC could be further assured that plaintiff was in good faith, and that its interest in the property was adequately protected. Finally, the court directed that upon entry of such default order, FMCC would be obligated to return the vehicle to plaintiff.
On March 24, 1998, FMCC moved that the court alter or amend the March 19 order, arguing that the evidentiary hearing had been a preliminary hearing, and that there should be a final hearing on the motion to lift the stay. Among other arguments made, FMCC contended that plaintiff had presented no evidence of insurance at the hearing, and that FMCC was not in possession of any information or knowledge regarding any insurance on the vehicle. Addressing the question whether it should turn the vehicle over to plaintiff, FMCC argued that unless plaintiff commenced an adversary proceeding for turnover, the court lacked jurisdiction to order return of the vehicle. The court ruled that an adversary proceeding was required, and plaintiff filed an adversary complaint for sanctions and turnover of property on May 5, 1998. The case was then tried to the court on June 11, 1998.
At the threshold of the hearing, plaintiff objected to the admission of new evidence, asserting that FMCC was collaterally estopped by the determination of fact issues on the motion to lift the stay. The court overruled the objection and received evidence on all fact issues save that of depreciation of the vehicle. Neither party has offered legal authority concerning the question of preclusion of evidence. The court will, therefore, consider all the evidence received at the hearing, in light of its earlier findings of fact, in reaching its judgment.
Findings of Fact
In August, 1997, plaintiff purchased a 1997 Ford Escort automobile under a retail installment sales contract financed by FMCC in the approximate amount of $21,000. Plaintiff made a down payment of $1,500 and agreed to pay $375 per month for 60 months.
Plaintiff made no payments on the contract before filing a chapter 13 petition, Case No. 97 B 30513 on October 3, 1997. The case was dismissed on December 2, 1997 for failure to commence making payments pursuant to § 1326(a)(1). Because plaintiff had made no payments under the contract, FMCC repossessed the vehicle during or about the second week of January, 1998. Plaintiff then commenced this case by filing a second petition under Chapter 13 on January 26, 1998. Plaintiff admits that she filed this case for the purpose of saving her automobile.
Plaintiff testified that she failed to fund the first Chapter 13 plan because of loss of employment. Although plaintiff's testimony was not entirely clear, the court infers from it that plaintiff's principal place of employment is at Market Day in Itasca, Illinois, where she has worked for about three-and-one-half years. In addition, plaintiff has worked as a part-time "casual" worker for the United States Postal Service, for successive periods of not more than 89 days, as needed. Two weeks after she filed her first bankruptcy case, plaintiff lost the casual employment for one-and-one-half weeks. (Income *162 from the casual employment had not been included in the budget for plaintiff's first Chapter 13 plan.)
Plaintiff continues to work at Market Day since she has lost her car, but she cannot work at the Postal Service because of lack of transportation. Plaintiff also uses her car to take care of family business such as shopping, laundry, transporting her son, and so forth.
Plaintiff's plan provides for monthly payments of $440, with full payment on secured claims and payment of 10% of unsecured claims. The plan was confirmed on April 7, 1998, and, with the exception of a small default noted in this court's March 19, 1998 order, there is no evidence that payments under the plan have not been made.
Plaintiff has maintained full coverage insurance on the vehicle for an unknown period of time. On April 29, 1998, she received a notice of cancellation. She resumed payments, so that as of the date of trial, there was full coverage insurance on the vehicle. Plaintiff makes monthly payments of $87 for insurance. Although plaintiff budgeted only $50 per month for automobile insurance in her Chapter 13 plan, she may amend her plan to take into account the fact that premiums are higher than anticipated.[2]
Based on all the evidence received, the court adheres to its earlier findings that FMCC's security interest is adequately protected and that plaintiff did not file her petition in bankruptcy in bad faith. Looking to the latter question, plaintiff's desire to save her car from repossession is not an improper motive. The court credits plaintiff's testimony that reduction in income, even though apparently small, caused the dismissal of her first case, and because plaintiff has funded her second plan, the court finds that this debtor in good faith seeks to adjust her debts as provided by the Bankruptcy Code.
Conclusions of Law
As previously noted, plaintiff's complaint raises two legal issues. First, in connection with her claim under § 542(a), FMCC argues that plaintiff does not possess a sufficient property interest in the vehicle, such that turnover may be ordered. Second, FMCC contends that sanctions under § 362(h) are not required here, as it did not violate the automatic stay in refusing to return the vehicle after receiving notice of plaintiff's Chapter 13 filing. Because a decision in FMCC's favor on the question under § 542(a) would obviate the need to address the issue under § 362(h), this opinion addresses it first.
(1) Turnover Question Under § 542(a)
Section 542(a) generally empowers a bankruptcy trustee to recover property of the debtor that is in the possession, custody or control of third parties. In re USA Diversified Products, Inc., 100 F.3d 53, 56 (7th Cir.1996). With exceptions not relevant here, § 542(a) provides,
[A]n entity, other than a custodian, in possession, custody, or control, during the case, of property that the trustee may use, sell, or lease under section 363 of this title, or that the debtor may exempt under section 522 of this title, shall deliver to the trustee, and account for, such property or the value of such property, unless such property is of inconsequential value or benefit to the estate.
11 U.S.C. § 542(a). Since turnover is a remedy to obtain what is acknowledged to be property of the bankruptcy estate, it follows that if the debtor does not have an interest in property at the commencement of the bankruptcy case, turnover cannot be ordered. See In re Johnson, 215 B.R. 381, 386 (Bankr. N.D.Ill.1997).
The Supreme Court has determined that turnover may be ordered in cases where, prior to the commencement of reorganization proceedings, property of a Chapter 11 debtor has been repossessed by a secured creditor. United States v. Whiting Pools, 462 U.S. 198, 206, 103 S.Ct. 2309, 2314, 76 L.Ed.2d 515 (1983). Although an order under § 542(a) modifies a creditor's procedural rights available to protect and satisfy its lien, the Court *163 reasoned that the creditor's rights under the Bankruptcy Code, including the right to adequate protection, replace the protection afforded the creditor by its repossession remedy. 462 U.S. at 206-07, 103 S.Ct. at 2314-15. In addition, the Whiting Pools decision commented that the rehabilitation of a debtor's business is facilitated if property subject to creditors' security interests is included in the reorganization estate. 462 U.S. at 203, 103 S.Ct. at 2313. Whiting Pools noted that its analysis depended in part on the reorganization context before it, and the Court left open the question whether § 542(a) would have the same broad effect in liquidation or adjustment of debt proceedings. 462 U.S. at 208 n. 17, 103 S.Ct. at 2315 n. 17.
Despite the reservation in Whiting Pools, the vast majority of courts have concurred that where repossession of a vehicle has occurred prepetition, but the vehicle has not yet been sold, a Chapter 13 debtor retains a sufficient interest in the vehicle so that turnover may be appropriate. National City Bank v. Elliott (In re Elliott), 214 B.R. 148, 151 (6th Cir. BAP 1997); American Honda Finance Corp. v. Littleton (In re Littleton), 220 B.R. 710, 715 (Bankr.M.D.Ga.1998); In re Fitch, 217 B.R. 286, 290 (Bankr.S.D.Cal. 1998); Mattheiss v. Title Loan Express (In re Mattheiss), 214 B.R. 20, 32 (Bankr. N.D.Ala.1997); Turner v. DeKalb Bank (In re Turner), 209 B.R. 558, 562 (Bankr. N.D.Ala.1997); In re Sharon, 200 B.R. 181, 187 (Bankr.S.D.Ohio 1996); In re Pluta, 200 B.R. 740, 744 (Bankr.D.Mass.1996); In re Young, 193 B.R. 620, 621 (Bankr.D.D.C. 1996); Karr v. General Motors Acceptance Corp. (In re Karr), 129 B.R. 498, 502 (Bankr. S.D.Ohio 1991); Leverette v. NCNB South Carolina (In re Leverette), 118 B.R. 407, 409 (Bankr.D.S.C.1990); In re Bingham, 116 B.R. 541, 543 (Bankr.N.D.Ohio 1990); Wallace v. G.M.A.C. (In re Wallace), 102 B.R. 114, 116 (Bankr.S.D.Ohio 1989). See also Pileckas v. Marcucio, 156 B.R. 721, 725 (N.D.N.Y.1993) (vehicle part of estate where creditor had failed to perfect its security interest).
In addition, in cases where the issue litigated is whether a creditor has violated the automatic stay by refusing to turn over a vehicle repossessed prepetition, courts have observed that the vehicle is property of the estate. See General Motors Acceptance Corp. v. Ryan, 183 B.R. 288 (M.D.Fla.1995); Carr v. Security Sav. & Loan Ass'n, 130 B.R. 434 (D.N.J.1991); Massey v. Chrysler Financial Corp. (In re Massey), 210 B.R. 693 (Bankr.D.Md.1997); Brown v. Joe Addison, Inc. (In re Brown), 210 B.R. 878 (Bankr. S.D.Ga.1997); Brooks v. World Omni (In re Brooks), 207 B.R. 738 (Bankr.N.D.Fla.1997); Deiss v. Southwest Recovery, U.S. (In re Deiss), 166 B.R. 92 (Bankr.S.D.Tex.1994); In re Richardson, 135 B.R. 256 (Bankr.E.D.Tex. 1992). Under the Uniform Commercial Code ("UCC") as adopted in most states, after repossession, the debtor's interest in the vehicle is a right to redeem the vehicle.[3]
Where a bankruptcy court orders that a secured creditor turn over a repossessed vehicle, a Chapter 13 debtor may modify the rights of a secured creditor through the terms of its Chapter 13 plan. See, e.g., In re Sharon, 200 B.R. at 198-99 (discussing §§ 1322 and 1325). Notably, though, the Eleventh Circuit has recently reached a contrary result in a decision under Alabama law. Charles R. Hall Motors, Inc. v. Lewis (In re Lewis), 137 F.3d 1280, 1283 *164 (11th Cir.1998).[4] As discussed below, Lewis reaches its result by finding that a right of redemption is not a sufficient property interest to warrant turnover of a repossessed vehicle.
In Lewis, the secured creditor argued that upon default, title and the right to possess a debtor's automobile pass to the creditor. The Eleventh Circuit upheld the district court's decision in favor of the creditor, finding that at the commencement of his Chapter 13 case, the debtor "did not retain title, possession or any other functionally equivalent ownership interest in the repossessed automobile." Id. at 1284. Lewis found that in order to "change the [debtor's] otherwise dormant right to redeem repossessed collateral into a meaningful ownership interest," the trustee would have to tender "fulfillment of all obligations secured by the collateral" as well as the expenses required to exercise the estate's right of redemption. Id. (citing Ala. Code § 7-6-506). Since the debtor's plan proposed to pay only 62 cents on the dollar in return for his use of the automobile, Lewis concluded that the estate had not chosen to exercise its right of redemption and the debtor's request for turnover under § 542(a) was denied.
FMCC argues that Lewis should control in this case, and that turnover should be denied because plaintiff's Chapter 13 plan does not provide FMCC with the amounts it would receive in a redemption pursuant to the Illinois UCC. For the reasons explained below, this court disagrees.
The linchpin of the creditor's argument in Lewis was that, after default, a creditor acquires title to a repossessed automobile, as well as the right to possession provided by the UCC. Id. at 1283-84. To find where title lay, Lewis looked to Alabama common law, and decisions finding that a debtor must have both title to and possession of a property in order to maintain an action for conversion of that property. Id. Thompson v. Ford Motor Credit Co., 550 F.2d 256 (5th Cir.1977); American Nat'l Bank & Trust Co. of Mobile v. Robertson, 384 So.2d 1122 (Ala.Civ.App. 1980); Pierce v. Ford Motor Credit Co., 373 So.2d 1113 (Ala.Civ.App.1979). See also Huntsville Golf Dev., Inc. v. Ratcliff, Inc., 646 So.2d 1334 (Ala.1994) (action against assignee of debtor's secured creditor). From the fact that Alabama courts would not allow a debtor to sue its secured creditor for conversion of repossessed collateral, Lewis made a judgment that the debtor's rights were not meaningful.
This court has looked to Illinois law discussing the nature of a debtor's property interest in a repossessed vehicle. As under the Alabama cases, the Illinois Appellate Court has found that legal title to property subject to a security interest passes to a secured creditor after it takes possession following default. Kouba v. East Joliet Bank, 135 Ill.App.3d 264, 268, 481 N.E.2d 325, 329, 89 Ill.Dec. 774, 778 (3rd Dist.1985). In contrast to the conclusion in Lewis, however, Kouba found that the debtors before it had rights under Illinois law that erode a common law creditor's claim to absolute title. Id. Having concluded that the debtors retained significant rights and responsibilities with respect to the creditor's collateral after default, Kouba held that the debtors had standing to maintain an action against a third party that negligently damaged the vehicle after default and repossession. Id., 135 Ill. App.3d at 269, 481 N.E.2d at 329, 89 Ill. Dec. at 778.[5]
*165 Whiting Pools instructs that § 542(a) is among sections of the Code that bring into the bankruptcy estate property in which the debtor did not have a possessory interest at the time bankruptcy proceedings commenced. Whiting Pools, 462 U.S. at 205, 103 S.Ct. at 2313-14. For example, the Court noted that a debtor's interest in property seized prepetition by the Internal Revenue Service specifically, rights to notice and the surplus from a tax sale are already part of the estate by virtue of § 541(a)(1). Id. at 207, 103 S.Ct. 2309 at n. 15. Because § 542(a) grants a trustee or debtor in possession greater rights than those held by the debtor on the date of its petition, though, the seized property in its entirety may be recovered as part of the bankruptcy estate. See id., 462 U.S. at 208-09, 103 S.Ct. at 2315. Also, the Court explicitly referred to a creditor's right of repossession under UCC § 9-503 in its discussion of the proposition that § 542(a) modifies the procedural rights available to creditors to protect and satisfy their liens. Id. 462 U.S. at 206 & n. 14, 103 S.Ct. at 2314 & n. 14.
This court believes that the situation presented in this case falls squarely within Whiting Pools' conclusion that until a sale is taken place, property seized prepetition pursuant to a creditor's provisional remedy remains property of the estate, and as such, is subject to the turnover requirement of § 542(a). Id., 462 U.S. at 211, 103 S.Ct. at 2316-17. Also, bearing in mind that Kouba finds the property interest to be a significant one, the court concludes that Lewis is inapposite here. The court having previously determined that FMCC's interest in plaintiff's vehicle is adequately protected, plaintiff's motion for turnover is granted.
(2) Question Whether FMCC Violated the Automatic Stay
Any action taken by a creditor for the purpose of collecting a prepetition debt violates the automatic stay if it amounts to pressure on the debtor to pay. Divane v. A and C Electric Co., Inc., 193 B.R. 856, 859 (N.D.Ill.), appeal dismissed, 105 F.3d 660 (7th Cir.1996). Under § 362(h), "[a]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(h). If it is determined that a party has willfully violated the automatic stay, the award under § 362(h) is mandatory, rather than discretionary. Martino v. First Nat'l Bank of Harvey (In re Garofalo's Finer Foods, Inc.), 186 B.R. 414, 437 (N.D.Ill.1995).
Plaintiff takes the position that in refusing to turn over the vehicle upon her attorney's request, FMCC violated the prohibition under § 362(a)(3) of "any act to obtain possession of property of the estate or of property from the estate or to exercise control over property of the estate." She does not contend that FMCC took steps to sell the vehicle after she filed her Chapter 13 petition. Thus, the alleged violation of the stay would consist of inaction, rather than the kind of affirmative action that a claim under § 362(h) commonly calls to mind.[6]
There are two lines of authority on the question whether a creditor violates the stay by refusing to turn over a debtor's vehicle that it has repossessed prior to the filing of a petition in bankruptcy. As discussed in the paragraphs that follow, the critical question is whether turnover can be ordered before findings as to adequate protection are made.
A number of courts have determined that upon a debtor's informal request for return of its vehicle, a secured creditor must turn it over to the debtor. E.g., Ryan, 183 B.R. at 289; In re Sharon, 200 B.R. at 191; In re Brooks, 207 B.R. at 741; Carr, 130 B.R. at 438. As part of their analysis, these decisions *166 reason that a debtor should not have to move for turnover to recover from recalcitrant creditors, and that the creditor can move to modify the automatic stay if its interest is not adequately protected. E.g., Ryan, 183 B.R. at 289. The following passage from the Eighth Circuit's decision in Knaus v. Concordia Lumber Co. (In re Knaus), 889 F.2d 773 (8th Cir.1989), has been cited in support of such result:
The principle is simply this: that a person holding property of a debtor who files bankruptcy proceedings becomes obligated, upon discovering the existence of the bankruptcy proceedings, to return that property to the debtor (in chapter 11 or 13 proceedings) or his trustee (in chapter 7 proceedings.) Otherwise, if persons who could make no substantial adverse claim to a debtor's property in their possession could, without cost to themselves, compel the debtor or his trustee to bring suit as a prerequisite to returning the property, the powers of a bankruptcy court and its officers to collect the estate for the benefit of creditors would be vastly reduced. The general creditors, for whose benefit the return of property is sought, would have needlessly to bear the cost of its return. And those who unjustly retain possession of such property might do so with impunity.
Id. at 775.
The countervailing position, which appears to be finding increasing support, is that a creditor need not turn over its collateral until adequate protection has been provided. See, e.g., In re Fitch, 217 B.R. at 290-91; In re Massey, 210 B.R. at 696; In re Deiss, 166 B.R. at 94; In re Richardson, 135 B.R. at 260. See also In re Brown, 210 B.R. at 883 (reaching same result, although concluding that debtor's right to recover property arises under § 1306, rather than § 542(a)).[7] As these decisions interpret the law, § 362(a)(3) reaches only postpetition affirmative actions to take control of a debtor's property. E.g., In re Richardson, 135 B.R. at 259. The passive act of continuing to possess property does not fall within the prohibition under § 362(h). In re Young, 193 B.R. at 625. If a vehicle has been lawfully repossessed prepetition, the creditor had a right to possess the vehicle on the date the debtor filed for bankruptcy. In re Fitch, 217 B.R. at 288. Since the purpose of the automatic stay is to maintain the status quo that existed on the date of a debtor's bankruptcy filing, the creditor should not have to turn over the vehicle absent assurance that its prepetition position will be protected. Id. at 291.
The often-cited decision in Young comments that if § 362(a)(3) were interpreted as requiring immediate turnover, it would represent a dramatic shift from the pre-Code practice of allowing secured creditors to retain repossessed collateral until adequate protection was provided by the debtor. In re Young, 193 B.R. at 626. Importantly, too, it would contravene the statutory scheme under §§ 363(e) and 542(a) to find that a creditor has an affirmative duty to turn over collateral repossessed prior to bankruptcy.
. . . § 542(a) also limits turnover to property that can be used under § 363. Under § 363(e) the creditor can obtain an order prohibiting a proposed use of the property unless the estate provides adequate protection. This constitutes a significant defense to the grant of a turnover order under § 542(a). The defense would be abrogated by an interpretation of § 362(a)(3) requiring turnover without permitting invocation of the defense.
Such an approach is contrary to the logical interaction of §§ 363(e) and 542(a). The burden is on the trustee, when the issue is raised, to prove adequate protection. 11 U.S.C. § 363 (o)(1). Logically, therefore, the creditor should be entitled to hold onto the property during the pendency of the § 542 action until the adequate protection question is resolved. The obvious rationale implicit in permitting the secured creditor to retain possession of the seized property while opposing turnover under § 542(a) is that the creditor may *167 suffer the very harm that adequate protection is designed to avoid if the property is turned over to the trustee before the trustee proves that the creditor is being given the adequate protection to which it is entitled.
Id. at 625.
Looking to the facts presented here, at the commencement of this case, FMCC justifiably had doubts as to plaintiff's ability to provide adequate protection, as she had previously failed to fund another Chapter 13 plan that contained substantially the same terms as the plan that has been confirmed in this case. FMCC brought a motion to modify the stay within several weeks of the petition, and there was no apparent obstacle to the bringing of an adversary proceeding for turnover had plaintiff chosen to do so. Taking these considerations into account, the court concludes that FMCC did not violate the automatic stay in refusing to voluntarily surrender plaintiff's vehicle to her at the commencement of this case. Accordingly, plaintiff's motion for sanctions is denied.
Conclusion
For the reasons set forth below, plaintiff's motion for turnover is granted. Upon the entry of a two-month default order, FMCC shall be obliged to return plaintiff's vehicle to her. Plaintiff will be required to make provision for FMCC's repossession costs in her Chapter 13 plan. Plaintiff's motion for sanctions for violating the automatic stay is denied.
NOTES
[1] Hereafter, unless otherwise noted, all references to statute are to the Bankruptcy Code.
[2] Where there is a significant discrepancy between the actual cost of insurance coverage and the amount designated for payment of insurance premiums in a Chapter 13 debtor's budget, the lender's collateral may not be adequately protected. See In re Richardson, 135 B.R. 256, 259-60 (Bankr.E.D.Tex.1992).
[3] Section 9-503 of the Illinois UCC provides that "unless otherwise agreed a secured party has on default the right to take possession of the collateral." 810 ILCS 5/9-503. Pursuant to UCC § 9-504, the secured party also has the right to dispose of collateral after default. 810 ILCS 5/904.
UCC § 9-506 provides in the following terms for a debtor's right to redeem repossessed collateral:
At any time before the secured party has disposed of collateral or entered into a contract for its disposition under Section 9-504 or before the obligation has been discharged under Section 9-505(2) the debtor or any other secured party may unless otherwise agreed in writing after default redeem the collateral by tendering fulfillment of all obligations secured by the collateral as well as the expenses reasonably incurred by the secured party in retaking, holding and preparing the collateral for disposition, in arranging for the sale, and to the extent provided in the agreement and not prohibited by law, his reasonable attorneys' fees and legal expenses.
810 ILCS 5/906.
[4] Lewis was decided on March 25, 1998. To date, one Alabama bankruptcy court has followed its holding. Warren v. SouthTrust Bank, N.A. (In re Warren), 221 B.R. 843 (Bankr. N.D.Ala.1998). Warren found that because a debtor's Chapter 13 plan failed to comply with the requirements for redemption under the Alabama UCC, her repossessed automobile was not property of her bankruptcy estate. Id. at 848-49. Accordingly, Warren concluded that § 542(a), by its terms, did not mandate return of the automobile.
[5] Kouba addressed a situation in which joint debtors complained of injuries sustained when individuals hired by their secured creditor repossessed a truck. Ultimately, the truck was destroyed by a fire at the garage where it was stored. In concluding that the debtors had standing to sue the garage owner for negligence, Kouba found that the debtors had the following rights and responsibilities with respect to the collateral: (1) a right to an accounting for surplus proceeds of the collateral; (2) a right to redeem the collateral by tendering fulfillment of all obligations secured by the collateral plus the creditor's reasonable expenses; (3) an insurable interest in the collateral; and (4) a duty, while the collateral was in the possession of the secured party, to bear the risk of accidental loss or damage to the extent of any deficiency in insurance coverage. Kouba, 135 Ill.App.3d at 268-69, 481 N.E.2d at 329, 89 Ill.Dec. at 778.
[6] At the June 11, 1998 hearing, the parties argued as to whether FMCC violated the stay in refusing to turn over the vehicle after plaintiff filed her Chapter 13 case. Because the topic was not addressed, this opinion does not address whether any subsequent actions (or inaction) by FMCC would violate the automatic stay.
[7] Within the Seventh Circuit, it appears that only one bankruptcy court has addressed the issue. Gouveia v. Internal Revenue Service (In re Quality Health Care), 215 B.R. 543 (Bankr.N.D.Ind. 1997). Quality Health Care rejects the reasoning of that line of cases that would require immediate turnover of property rightfully seized prepetition. Id. at 573-58. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536269/ | 928 A.2d 948 (2007)
395 N.J. Super. 380
Danna GOLDHABER and Richard Goldhaber, Plaintiffs-Respondents,
v.
Charles KOHLENBERG, Defendant-Appellant.
Superior Court of New Jersey, Appellate Division.
Argued January 31, 2007.
Decided August 2, 2007.
*949 Noel E. Schablik, Parsippany, argued the cause for appellant (Mr. Schablik, attorney and on the brief; Joseph P. Kreoll, on the brief).
Jason A. Storipan, Lawrenceville, argued the cause for respondent (Stark & Stark, attorneys; Paul W. Norris, of counsel and on the brief; Mr. Storipan, on the brief).
Before Judges WEFING, PARKER and YANNOTTI.
The opinion of the court was delivered by
WEFING, P.J.A.D.
In this appeal, we are called upon to consider principles of long-arm jurisdiction in the context of Internet activity. Plaintiffs, New Jersey residents, sued defendant, a California resident, for libel, based upon postings he made to an Internet newsgroup. Plaintiffs obtained a default *950 judgment awarding them compensatory damages of $2,644.11 and punitive damages of $1,000,000. The trial court denied defendant's motion to vacate that default judgment. After reviewing the record in light of the contentions advanced on appeal, we affirm in part, reverse in part, and remand for further proceedings.
Plaintiffs, who are father and daughter, reside in New Jersey. Defendant resides in California; he has no contacts of any type with New Jersey. In 1999, plaintiff Richard Goldhaber joined an Internet newsgroup devoted to information concerning cruises and cruise ships; plaintiff Danna Goldhaber joined the group in 2002. Defendant is a member of the same group. Plaintiffs alleged that, commencing in January 2003, defendant began to post on this newsgroup a series of messages that were extremely derogatory about plaintiffs. These messages accused plaintiffs of base activities, including incest and bestiality. Some of the messages contained cruel references to the hearing limitations of plaintiff Danna Goldhaber. We decline to set forth in the body of this opinion examples of these vile messages because doing so would serve no purpose. The record contains no explanation of what motivated defendant to act in such a manner if, indeed, he did so.
Plaintiffs filed a one-count complaint seeking damages for libel. After plaintiffs attempted to serve defendant in California, defendant, according to his certification, consulted with counsel in California who advised him that New Jersey did not have jurisdiction over him. Based upon that, defendant did not respond to plaintiff's suit, and default was entered against him and, subsequently, the default judgment at issue on appeal. Defendant then retained New Jersey counsel who filed a motion to set aside that default judgment. Defendant appeals from the court's order denying his motion.
I
Defendant presents a number of arguments on appeal. His principal contention, however, is that he is not subject to jurisdiction in New Jersey. The topic of long-arm jurisdiction premised upon use of the Internet has generated a number of comments. Patrick J. Borchers, Symposium: Personal Jurisdiction in the Internet Age: Internet Libel: The Consequences of a Non-Rule Approach to Personal Jurisdiction, 98 Nw. U.L.Rev. 473 (2004); Dennis T. Yokoyama, You Can't Always Use the Zippo Code: The Fallacy of a Uniform Theory of Internet Personal Jurisdiction, 54 DePaul L.Rev. 1147 (2005); Rachael T. Krueger, Traditional Notions of Fair Play and Substantial Justice Lost in Cyberspace: Personal Jurisdiction and On-Line Defamatory Statements, 51 Cath. U.L.Rev. 301 (2001).
Our Supreme Court addressed the question of long-arm jurisdiction in the context of communications over the Internet in Blakey v. Continental Airlines, 164 N.J. 38, 751 A.2d 538 (2000). Plaintiff in that case, a female pilot who worked for Continental Airlines, sued her employer, alleging workplace discrimination in violation of Title VII of the 1964 Civil Rights Act, 42 U.S.C.A. § 2000e et seq. A number of Continental male pilots, in response to Blakey's suit, published on an on-line computer bulletin board used by Continental pilots a series of messages about her that she viewed as harassing, false and defamatory. Blakey, supra, 164 N.J. at 48, 751 A.2d 538.
This on-line bulletin board was called the Crew Members Forum. It was not maintained by Continental but was made available to Continental employees by CompuServe, an Internet service provider, *951 as part of Continental's company-wide computer network. Id. at 48-49, 751 A.2d 538.
Blakey amended her lawsuit to contend that Continental had a duty to monitor the usage of this on-line bulletin board by its employees and was thus responsible for the defamatory messages posted about her; she also joined as defendants the offending pilots, contending that they had libeled her in these on-line messages. The individual pilots moved to have her claims against them dismissed, contending that as non-residents with no contacts with New Jersey, New Jersey had no jurisdiction over them. In taking up that issue, the Court ultimately concluded that the record did not contain sufficient information to determine whether New Jersey did, indeed, have jurisdiction over these pilots based upon their postings to this on-line bulletin board. Specifically, the Court noted that there was no evidence in the record whether these pilots knew that Blakey was pursuing her law suit in New Jersey, as opposed to any other forum (Blakey herself did not reside in New Jersey and no longer flew out of Continental's Newark terminal) and whether they knew that their messages would be published in New Jersey. Id. at 70, 751 A.2d 538. The Court, therefore, remanded for discovery on those jurisdictional issues.
Significantly, in approaching the question, the Court declined to adopt new principles to analyze the fundamental concept of long-arm jurisdiction in an Internet context. "Rather than to attempt to create a new order of jurisdictional analysis adapted to the Internet, we prefer in this case to adhere to the basics." Id. at 64, 751 A.2d 538. The Court summarized the principles underlying the fundamental concept of jurisdiction, holding that these same principles would govern resolution of the question before it.
[T]he test for "due process requires only that in order to subject a defendant to a judgment in personam, if he [or she] be not present within the territory of the forum, he [or she] have certain minimum contacts with it such that the maintenance of the suit does not offend `traditional notions of fair play and substantial justice.'" Those unchanging commands of due process govern every foray into the realm of long-arm jurisdiction over non-residents.
[Id. at 66, 751 A.2d 538 (citations omitted).]
"The question is whether `the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there.'" Id. at 67, 751 A.2d 538 (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 501 (1980)). "An intentional act calculated to create an actionable event in a forum state will give that state jurisdiction over the actor." Id. at 67, 751 A.2d 538 (quoting Waste Management, Inc. v. Admiral Ins. Co., 138 N.J. 106, 126, 649 A.2d 379 (1994), cert. denied sub nom WMX Tech., Inc. v. Canadian Gen. Ins. Co., 513 U.S. 1183, 115 S.Ct. 1175, 130 L.Ed.2d 1128 (1995)). The Court held that "it would be fair to posit jurisdiction where the effects of the harassment were expected or intended to be felt." Id. at 69-70, 751 A.2d 538. Based upon the deficiencies in the record to which we have referred, the Court remanded for further discovery.
In our judgment, Blakey, although instructive, is not determinative of the results in this appeal in light of the differences in the nature of the site upon which the Continental pilots posted their messages (accessible only to other Continental pilots) and the particular site before us. The on-line bulletin board involved in Blakey was accessible only to other Continental *952 pilots and was part of a "closed" network. The parties have variously referred to the site in question as a listserve and a newsgroup. The distinction between the two is not material to our analysis.[1] It is undisputed that postings to the site were not monitored by a moderator either for relevance or content.
Courts in other jurisdictions, when confronted with jurisdictional questions in the context of posting messages upon such a listserve or newsgroup, have concluded that the mere posting of messages upon such an open forum by a resident of one state that could be read in a second state was not sufficient to confer jurisdiction upon the latter. Griffis v. Luban, 646 N.W.2d 527 (Minn.2002), cert. denied, 538 U.S. 906, 123 S.Ct. 1483, 155 L.Ed.2d 225 (2003), illustrates the principle. Plaintiff Griffis was an Alabama resident who taught courses in Egyptology at the University of Alabama, and defendant Luban was a Minnesota resident with an interest in Egyptology. The two had a disagreement on Egyptology, and Luban posted a series of messages on an on-line newsgroup, sci.archeology, that disparaged the credentials of Griffis. Griffis sued Luban in Alabama for defamation and recovered a default judgment, which she sought to enforce in Minnesota. The Minnesota court, however, declined to enforce the judgment, holding that the Alabama court did not have personal jurisdiction over Luban. It concluded that there was no evidence that Luban "expressly aimed the allegedly tortious conduct at the forum such that the forum was the focal point of the tortious activity." Id. at 535. The court stated that "[t]he fact that messages posted to the newsgroup could have been read in Alabama, just as they could have been read anywhere in the world, cannot suffice to establish Alabama as the focal point of the defendant's conduct." Id. at 536.
Other courts have come to the same conclusion. Young v. New Haven Advocate, 315 F.3d 256 (4th Cir.2002), cert. denied, 538 U.S. 1035, 123 S.Ct. 2092, 155 L.Ed.2d 1065 (2003); Bible and Gospel Trust v. Wyman, 354 F.Supp.2d 1025 (D.Minn.2005); Medinah Mining, Inc. v. Amunategui, 237 F.Supp.2d 1132 (D.Nev. 2002); Burleson v. Toback, 391 F.Supp.2d 401 (M.D.N.C.2005); Barrett v. Catacombs Press, 44 F.Supp.2d 717 (E.D.Pa.1999); Novak v. Benn, 896 So.2d 513 (Ala.Civ. App.2004).
A Virginia district court did find jurisdiction in such a factual complex. Bochan v. La Fontaine, 68 F.Supp.2d 692 (E.D.Va. 1999). The court agreed with the plaintiff that jurisdiction existed under Virginia's long-arm statute. It rested its conclusion as to defendants La Fontaine, residents of Texas, on the fact that their on-line postings passed through server hardware located in Virginia. Id. at 699. As to defendant Harris, a resident of New Mexico, the court relied upon the fact that he solicited business in Virginia through a website accessible to Virginia residents promoting his computer hardware company. Id. at 701-02. The court found no violation of due process in such exercise. Id. at 702. *953 We do not find the approach adopted in Bochan applicable here.
Those courts that have declined to find jurisdiction upon the basis of mere posting of messages upon an open on-line forum have done so either on the basis that there was insufficient evidence that the alleged tortfeasor had directed or focused the defamatory comments to the forum state or on the basis that the site in question was passive, as opposed to active or interactive. Consideration of whether the defamatory comments were directed or focused to the forum state has been described as a "targeting-based" analysis. Michael A. Geist, Is There a There There? Toward Greater Certainty for Internet Jurisdiction, 16 Berkeley Tech. L.J. 1345, 1353 (2001) (noting the undesirable consequences that can flow from an analysis that rests upon whether the site in question is characterized as active or passive. "If the target is unable to sue locally due to a strict adherence to the passive versus active test, the law might be seen as encouraging online defamatory speech by creating a jurisdictional hurdle to launching a legal claim." Id. at 1377).
In Blakey, supra, our Supreme Court, by determining that jurisdiction may be posited based upon where the effects of the harassment "were expected or intended to be felt," implicitly adopted the "effects" test enunciated by the United States Supreme Court in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). 164 N.J. at 70, 751 A.2d 538. That case was a defamation action commenced in California by the entertainer Shirley Jones against the National Enquirer, a publication headquartered in Florida. She joined as defendants the author and editor of the article, who also were Florida residents. They sought dismissal of the suit, maintaining they did not have sufficient minimum contacts with California to justify that State exercising in personam jurisdiction over them. The Supreme Court rejected their arguments. Writing for a unanimous Court, Chief Justice Rehnquist stated:
Petitioner[s] wrote and . . . edited an article that they knew would have a potentially devastating impact upon respondent. And they knew that the brunt of that injury would be felt by respondent in the State in which she lives and works and in which the National Enquirer has its largest circulation. Under the circumstances, petitioners must "reasonably anticipate being haled into court there" to answer for the truth of the statements made in the article. An individual injured in California need not go to Florida to seek redress from persons who, though remaining in Florida, knowingly cause the injury.
[Calder, supra, 465 U.S. at 789-90, 104 S.Ct. at 1487, 79 L.Ed.2d at 812.]
Here, as opposed to the cases cited earlier, there is, in our judgment, evidence that the author of these messages did, indeed, target them to New Jersey. The author not only knew that plaintiffs resided in New Jersey, he knew the municipality in which they resided and made specific disparaging references to that municipality in many of his postings. Certain of his postings were made in response to plaintiffs' replies to the offending comments. He also made insulting comments about that municipality's police department. In addition, he referred to plaintiffs' neighbors in the apartment complex in which they resided and at one point even posted their address. Conduct of that nature and its connection to New Jersey "are such that [defendant] should reasonably [have] anticipate[d] being haled into court" here. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490, 501 *954 (1980). Indeed, we would deem it against the policy of our courts to deny these plaintiffs a forum in which to seek redress. We thus affirm the determination of the trial court that New Jersey could exercise in personam jurisdiction over defendant.
II
We turn now to defendant's remaining contentions.
A.
Defendant challenges the sufficiency of service of process on two grounds: that plaintiff failed to file an affidavit of diligent inquiry and that service itself was deficient. The trial court did not deal in its written opinion with these arguments. Defendant maintains that plaintiffs' failure to file an affidavit of diligent inquiry in connection with their attempt to serve him personally in the State of California renders the default judgment void. We are unable to agree, particularly in the context of this action in which defendant maintains in his jurisdictional argument that he has absolutely no contacts with New Jersey. Presumably, an affidavit of diligent inquiry would only have supported that position. "[D]efault judgments will not be vacated for minor flaws in the service of process." Sobel v. Long Island Entertainment, 329 N.J.Super. 285, 292, 747 A.2d 796 (App.Div.2000). The underlying purpose to an affidavit of diligent inquiry is to establish the impossibility of serving the defendant in this state. There is no dispute here as to that fact.
Defendant also challenges the manner in which process was served. Specifically, he certified that on the day stated in the return of process, he was in the State of Nevada. He further stated only he and his wife live at his California residence and that her physical description does not comport with that provided by the process server of the individual with whom he left the summons and complaint. There is, however, no dispute that service was achieved at defendant's California address and that the papers were promptly delivered to him. "[D]elivery of a summons and complaint to someone at the defendant's home who transmits them to the defendant in a timely fashion will be treated as valid service of process even if the recipient of the process was not a member of defendant's household." Ibid.
B
A defendant seeking to set aside a default judgment must establish that his failure to answer was due to excusable neglect and that he has a meritorious defense.[2] Defendant submitted a certification in support of his motion, in which he stated that upon learning of plaintiffs' New Jersey action, he consulted with a California attorney who advised him that New Jersey did not have jurisdiction over him, and that, as a consequence, he need take no steps to defend himself. This, according to the trial court, was insufficient to establish excusable neglect. We are unable to agree.
In Court Invest. Co. v. Perillo, 48 N.J. 334, 225 A.2d 352 (1966), the Court found excusable neglect when defendants had relied upon the word of their then-attorney that he had properly attended to matters to resolve a title question affecting *955 their property when, in fact, he had done nothing. Here, defendant sought the advice of counsel as to the best method of proceeding. One can question the soundness of the advice here, but the record provides no basis to dispute that defendant acted in reliance upon it.
Because the trial court here found no excusable neglect, it did not find it necessary to address the question of a meritorious defense. Our review of the record before us on this aspect is guided by our Supreme Court's statement that "[T]he opening of default judgments should be viewed with great liberality, and every reasonable ground for indulgence is tolerated to the end that a just result is reached." Housing Authority of Town of Morristown v. Little, 135 N.J. 274, 283-84, 639 A.2d 286 (1994) (quoting Marder v. Realty Constr. Co., 84 N.J.Super. 313, 318-19, 202 A.2d 175 (App.Div.), aff'd, 43 N.J. 508, 205 A.2d 744 (1964)). Viewed in this light, the record in our judgment supports a finding that defendant did put forth a meritorious defense. In his certification in support of his motion to vacate the default judgment, defendant referred to a prior suit he had filed in California against these plaintiffs, in which he asserted that they were falsely accusing him of posting defamatory messages about them. If defendant can establish he did not post the offending messages, it would constitute a defense.
C
We also reject defendant's contention that plaintiffs are judicially estopped from challenging whether New Jersey has jurisdiction over him. At one point, plaintiff Danna Goldhaber felt threatened by messages that she understood defendant to have posted about her, and she sought protection from her local police department. Defendant responded by filing suit in California, alleging that she had filed a false police report and criminal complaint against him and that her father had conspired to assist her. Plaintiffs sought to dismiss the California action on the basis that California had no jurisdiction over them. Their action in doing so, defendant contends, estops them from contesting his argument that New Jersey does not have jurisdiction over him. Judicial estoppel is inapplicable, however, because the California courts never ruled upon plaintiffs' motion, defendant having voluntarily dismissed his California action. Ali v. Rutgers, 166 N.J. 280, 288, 765 A.2d 714 (2000); Kinsella v. NYT Television, 382 N.J.Super. 102, 112, 887 A.2d 1144 (App. Div.2005).
D
Because we are satisfied that the default judgment must be set aside and the matter proceed on its merits, it is not necessary to address defendant's contention that the award of punitive damages is excessive. We merely note that the award does not appear to comply with the terms of the Punitive Damages Act, N.J.S.A. 2A:15-5.9 to -5.17.
We affirm the determination of the trial court that New Jersey has jurisdiction to adjudicate plaintiffs' allegation that defendant has libeled them. We reverse the trial court's determination denying defendant's application to set aside the default judgment entered against him.
Affirmed in part, reversed in part, and remanded for further proceedings. We do not retain jurisdiction.
NOTES
[1] The development of the Internet, and the distinctions in the various methods of communicating upon it, such as listserves and newsgroups, are described in American Civil Liberties Union v. Reno, 929 F.Supp. 824, 830-38 (E.D.Pa.1996), aff'd, 521 U.S. 844, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997). The court notes in its opinion that the "Internet is not a physical or tangible entity, but rather a giant network which interconnects innumerable smaller groups of linked computer networks." 929 F.Supp. at 830. The difficulty in analyzing jurisdiction in Internet-related matters "is that the Internet enables users to make contact with all states simultaneously." No Bad Puns: A Different Approach to the Problem of Personal Jurisdiction, 116 Harv. L.Rev. 1821, 1822 (2003).
[2] Defendant's motion to set aside the default judgment entered against him did not specify under which portion of R. 4:50-1 the motion was brought. In his brief on appeal, defendant does not dispute, however, that if we reject his argument that service of process was defective and void, he must establish excusable neglect in order to have the default judgment set aside. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536296/ | 928 A.2d 448 (2007)
KENNETH S. HANTMAN, INC., Petitioner
v.
OFFICE OF UNEMPLOYMENT COMPENSATION TAX SERVICES, Respondent.
Commonwealth Court of Pennsylvania.
Submitted on Briefs June 1, 2007.
Decided July 11, 2007.
*449 Joel M. Flink, Philadelphia, for petitioner.
Jane C. Pomerantz, Harrisburg, for respondent.
BEFORE: LEADBETTER, President Judge, FRIEDMAN, Judge, and McCLOSKEY, Senior Judge.
OPINION BY Senior Judge McCLOSKEY.
Kenneth S. Hantman, Inc. (Petitioner) petitions for review of a final decision and order of the Secretary of the Department of Labor and Industry (the Department), denying its request for nunc pro tunc review and re-determination of its 2002, 2003 and 2004 contribution rates. We now affirm.
*450 Kenneth S. Hantman was the president and sole owner of Petitioner. Petitioner engaged in the sale of fencing in Huntingdon Valley, Pennsylvania. Petitioner had been formerly known as Eagle Fence Company, Inc.[1] Petitioner first paid wages as an employer subject to the Pennsylvania Unemployment Compensation Law (UC Law)[2] on January 1, 1992. As an employer subject to the UC Law, Petitioner was responsible for the filing of unemployment compensation reports with the Department and for the payment of contributions based upon those reports into the Commonwealth's unemployment fund. Under the UC Law, the Department determines an employer's rate of contribution and thereafter notifies the employer of the same.[3]
The Office of Unemployment Compensation Tax Services (OUCTS) notified Petitioner of its 2002 contribution rate under mailing date of November 30, 2001. This 2002 notice reflects the assignment of a delinquency rate of contribution based upon Petitioner's failure to file a tax report for the first quarter of 2001. OUCTS notified Petitioner of its 2003 contribution rate under mailing date of December 31, 2002. This 2003 notice reflects the assignment of a delinquency rate of contribution based upon Petitioner's failure to file tax reports for the first, third and fourth quarters of 2001 and the second quarter of 2002. Petitioner did not file these tax reports until February of 2003.
OUCTS notified Petitioner of its 2004 contribution rate under mailing date of December 31, 2003. This 2004 notice reflects the assignment of a delinquency rate of contribution based upon Petitioner's failure to pay the contributions, interest and penalties owing on the quarterly reports which were filed in February of 2003. While Petitioner did submit a payment with these quarterly reports at the time of filing, the payment was dishonored by the bank. Petitioner did not resubmit this payment, along with returned check penalties, until June of 2005.
Nevertheless, approximately two months earlier, by letter dated April 11, 2005, Mr. Hantman attempted to appeal the Department's 2002, 2003 and 2004 contribution rate determinations and requested an abatement of all penalties.[4] In this letter, Mr. Hantman alleged that he suffered from a psychological disability and that this disability, coupled with admitted embezzlement by an employee, should result in an abatement of penalties.[5] By letter *451 dated November 22, 2005, OUCTS denied Mr. Hantman's appeal and request for abatement of penalties as untimely, noting that an employer only has ninety days from the mailing date of the contribution rate notice within which to file an appeal of a rate determination. Mr. Hantman thereafter requested review by the Unemployment Compensation Tax Review Office (Tax Review Office).
OUCTS forwarded all documents in Petitioner's file to the Tax Review Office, including the 2002, 2003 and 2004 contribution rate notices, Mr. Hantman's appeal letter, Mr. Hantman's September 8, 2005, letter, all attachments to Mr. Hantman's letters and the denial letter dated November 22, 2005. The Department thereafter appointed a Tax Review Officer to act as the presiding officer on behalf of the Secretary for purposes of hearing and certifying the record. A hearing was thereafter scheduled and held before this presiding officer on July 20, 2006.
Mr. Hantman appeared at this hearing without counsel and testified on behalf of Petitioner, relating a history of his psychological problems. Mr. Hantman testified that as a result of his psychological disability, he became "almost phobic about forms." (Certified Record at Item No. 3; N.T., July 20, 2006, Hearing, p. 38). Mr. Hantman noted that he relied on third parties to fill out forms. Mr. Hantman also noted that such reliance was to his detriment, referring to the aforementioned embezzlement by his former office manager.
In opposition, OUCTS presented the testimony of its operations manager, Colleen Williams. Ms. Williams described the contribution rate notices, indicating that the last day to appeal said notice is specifically included directly beneath the actual rate determination. Ms. Williams also indicated that the 2002, 2003 and 2004 notices sent to Petitioner were never returned as undelivered. Additionally, Ms. Williams noted that the first challenge to these notices was not received by OUCTS until April 11, 2005.
Following the hearing, Petitioner submitted a brief in support of its appeal. OUCTS did not file a responsive brief. The presiding officer then forwarded the certified record to the Secretary. By final decision and order dated December 6, 2006, the Secretary denied Petitioner's request for nunc pro tunc review and redetermination of its 2002, 2003 and 2004 contribution rates. In rendering his decision, the Secretary specifically rejected the testimony of Mr. Hantman regarding the nature of his disability as not credible. The Secretary further noted the lack of credible evidence supporting consideration of Petitioner's appeal of its 2002, 2003 and 2004 contribution rates nunc pro tunc. Petitioner thereafter filed a petition for review with this Court.
On appeal,[6] Petitioner argues that the Secretary erred as a matter of law in denying his appeal nunc pro tunc. We disagree.
Section 301(e)(2) of the UC Law provides, in relevant part, as follows:
The department shall promptly notify each employer of his rate of contribution for the calendar year . . . The determination of the department of the employer's rate of contribution shall become *452 conclusive and binding upon the employer, unless within ninety (90) days after the mailing of notice thereof to the employer's last known post office address the employer files an application for review, setting forth his reasons therefore. . . .
43 P.S. § 781(e)(2). Petitioner does not deny that it failed to file an application for review within the prescribed ninety days for each of the rate determinations at issue, i.e., 2002, 2003 and 2004. Rather, Petitioner alleges that his untimely appeal should be excused based upon his psychological disability.
"It is well settled that the statutory time limit for filing an appeal is mandatory in the absence of fraud or manifestly wrongful or negligent conduct of the administrative authorities." Blast Intermediate Unit No. 17 v. Unemployment Compensation Board of Review, 165 Pa. Cmwlth. 513, 645 A.2d 447, 449 (1994). In other words, an appeal nunc pro tunc was initially limited to circumstances of fraud or a breakdown in the court's operations. Criss v. Wise, 566 Pa. 437, 781 A.2d 1156 (2001).
However, in Bass v. Commonwealth, 485 Pa. 256, 401 A.2d 1133 (1979), our Supreme Court expanded the limited exceptions for allowing an appeal nunc pro tunc to include a situation where (1) the appeal was filed late as a result of nonnegligent circumstances, either on appellant's part or on the part of his counsel, (2) the appeal was filed shortly after the expiration date and (3) the appellee was not prejudiced by the delay. These exceptions were further expanded in Cook v. Unemployment Compensation Board of Review, 543 Pa. 381, 671 A.2d 1130 (1996), wherein the Court allowed an appeal nunc pro tunc due to the appellant's unexpected illness and hospitalization which resulted in a late filing. Nevertheless, the party attempting to file an appeal nunc pro tunc carries a "heavy burden to justify an untimely appeal." Blast Intermediate Unit No. 17, 645 A.2d at 449.
In the present case, we agree with the Secretary that the record lacks credible evidence supporting consideration of Petitioner's appeal of its 2002, 2003 and 2004 contribution rates nunc pro tunc. Petitioner herein did not file the appeal shortly after the expiration date relative to the application contribution rates at issue. Rather, Petitioner's appeal was not filed until three years, two years and one year, respectively, after the expiration date relative to those rate determinations. Moreover, the Secretary rejected the testimony of Mr. Hantman regarding the reasons underlying his untimely appeal as not credible. As the Secretary noted in his decision, despite Mr. Hantman's claimed psychological disability and his inability to complete forms, Mr. Hantman did submit previously unfiled tax reports to OUCTS along with a payment in February of 2003 and he did complete a form requesting an abatement of penalties from the IRS in October of 2004. Thus, we see no error on the part of the Secretary in refusing to permit Petitioner's appeal nunc pro tunc.
Next, Petitioner argues that the Secretary violated Mr. Hantman's rights under Title II of the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12131-12165, by failing to accommodate his covered disability. Again, we disagree.
The ADA prohibits public entities from excluding, denying access to or otherwise discriminating against any person because of a disability. See 42 U.S.C. § 12132. In order to prevail on a claim for a violation of Title II of the ADA, a plaintiff must show that: (1) he is a qualified individual with a disability; (2) he was either excluded from or otherwise denied *453 the benefits of some public entity's services, programs or activities, or was otherwise discriminated against by the public entity; and (3) such exclusion, denial of benefits or discrimination was by reason of the plaintiff's disability. Kramer v. Port Authority of Allegheny County, 876 A.2d 487 (Pa.Cmwlth.), petition for allowance of appeal denied, 586 Pa. 743, 891 A.2d 735 (2005).
Under the ADA, the term "disability," with respect to an individual, means "a physical or mental impairment that substantially limits one or more of the major life activities of such individual." 42 U.S.C. § 12102(2)(A). Merely having an impairment does not qualify a person as suffering from a "disability" under the ADA. See Toyota Motor Manufacturing v. Williams, 534 U.S. 184, 122 S.Ct. 681, 151 L.Ed.2d 615 (2002). The ADA regulations define "major life activities" as including such functions as "caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working." 29 C.F.R. § 1630.2(i); see also Sutton v. United Air Lines, Inc., 527 U.S. 471, 119 S.Ct. 2139, 144 L.Ed.2d 450 (1999).
In the present case, Petitioner alleges that Mr. Hantman suffers from a psychological disability such that he is unable to complete forms. However, the record lacks evidence establishing that such a disability is recognizable under the ADA. Even if this was a recognized disability under the ADA, the fact remains that the Secretary rejected the testimony of Mr. Hantman regarding his alleged psychological disability as not credible. While the Secretary did not specifically reject the report of Mr. Hantman's treating psychologist, Dr. Salerno, the Secretary did conclude that the record lacks credible evidence to accept the untimely filing and to consider the appeal nunc pro tunc. We believe that this conclusion by the Secretary necessarily encompasses a rejection of the report of Dr. Salerno.[7] Thus, we cannot say that the Secretary violated Mr. Hantman's rights under Title II of the ADA.
Accordingly, the final decision and order of the Secretary is affirmed.
ORDER
AND NOW, this 11th day of June, 2007, the final decision and order of the Secretary of the Department of Labor & Industry is hereby affirmed.
NOTES
[1] In its brief to this Court, Petitioner indicates that Mr. Hantman essentially sold all of his assets relating to the business in October of 2004.
[2] Act of December 5, 1936, Second Ex. Sess., P.L. (1937) 2897, as amended, 43 P.S. §§ 751-914.
[3] Petitioner's mailing address did not change throughout the entire time period at issue here.
[4] Petitioner also attempted to appeal its 2005 contribution rate determination. However, the parties later agreed that this determination was no longer at issue. In this letter, Petitioner indicates that it paid penalties in the amount of $3,353.10 for 2002, $3,708.54 for 2003 and $4,157.97 for 2004. (Certified Record at Item No. 13).
[5] Mr. Hantman enclosed a copy of the report of his treating psychologist, Dr. John Salerno, with this appeal letter. The embezzlement issue was further detailed in a subsequent letter to OUCTS dated September 8, 2005, which included three confession letters from Petitioner's former office manager, Annemarie Prelle. In this September 8, 2005, letter, Mr. Hantman also included a copy of an IRS form requesting an abatement of penalties relating to federal tax based upon this same disability as well as a letter from the IRS dated April 13, 2005, granting this abatement.
[6] Our scope of review of the Secretary's decision is limited to determining whether the necessary findings of fact are supported by substantial evidence, whether there has been an error of law or whether a petitioner's constitutional rights have been violated. See Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704; Ourstaff, Inc. v. Department of Labor and Industry, 749 A.2d 560 (Pa.Cmwlth.2000).
[7] Contrary to Petitioner, we see no error, or, at the very most, harmless error, on the part of the Secretary in failing to specifically address the report of Dr. Salerno. Further, we reject Petitioner's argument that OUCTS was required to hire its own expert to evaluate Mr. Hantman. Petitioner cites no authority in support of this proposition and, as noted above, the burden remained on Petitioner to justify its untimely appeal. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2414628/ | 199 F.Supp.2d 656 (2002)
UNITED STATES of America, Plaintiff,
v.
Karim KOUBRITI; Ahmed Hannan; Youssef Hmimssa, a/k/a Patrick J. Vuillaume, a/k/a, Michael Saisa, a/k/a Jalali; Abdella Lnu, a/k/a Jean Pierre Tardelli, a/k/a George Labibe, a/k/a Hussein Mohsen Safiddine, a/k/a Nabil Hayamm; and Farouk Ali-Haimoud, a/k/a "Khalid," Defendants.
No. 01-CR-80778.
United States District Court, E.D. Michigan, Southern Division.
April 15, 2002.
*657 *658 Richard Convertino, Asst. U.S. Atty., Detroit, MI, for U.S.
Richard Helfrick, Detroit, MI, for Koubriti.
Stephen T. Rabaut, St. Clair Shores, MI, for Hmimmsa.
James C. Thomas, Detroit, MI, for Hannan.
Kevin S. Ernst, Detroit, MI, for Ali-Hammoud.
OPINION AND ORDER DENYING DEFENDANTS' MOTION TO SUPPRESS
ROSEN, District Judge.
On September 27, 2001, the Grand Jury returned a two-count Indictment charging Karim Koubriti, Ahmed Hannan, and Youssef Hmimssa with "Fraud and Misuse of Visas, Permits and Other Documents" in violation of 18 U.S.C. § 1546(a) and 2, and "Fraud and Related Activities in Connection with Identification Documents and Information" in violation of 18 U.S.C. § 1028(a)(6) and 2.[1] The charges against Defendants arose out of the FBI's search for Nabil Al-Marabh, a suspect/potential witness concerning the September 11, 2001 attacks on the World Trade Center which led the FBI to a residence at 2653 Norman Street in Detroit which was found to be occupied by Koubriti and Hannan. The false documents giving rise to the initiation of this action were found in the Norman Street residence on September 17, 2001.
*659 This matter is presently before the Court on Defendant Koubriti's Motion to Suppress Evidence in which Koubriti seeks an Order suppressing the evidence seized in the search of the Norman Street residence and suppressing statements made by him during the search. Defendant Hannan has joined in his co-defendant's motion.[2] The Court conducted a two-day evidentiary hearing on this matter on January 28, 2002 and February 7, 2002, at which hearing the Court heard the testimony of FBI Agents Mary Ann Manescu and Michael Thomas, INS Agent Mark Pilat, and Arabic language specialist Nazih "George" Moaikel, who acted as an interpreter at the time of the search. At the close of the hearing, the Court directed the parties to file briefs addressing the Miranda and Fourth Amendment issues raised by Defendants. The parties have complied with the Court's directive and filed their post-hearing briefs on February 28, 2002.
Having heard the testimony of the witnesses, and having reviewed and considered the parties' briefs and the arguments of counsel, the Court is now prepared to rule on this matter. This Opinion and Order sets forth the Court's ruling.
I. PERTINENT FACTS
On September 17, 2001, at approximately 5:45 p.m., Agents of the Detroit Joint Terrorism Task Force,[3] went to 2653 Norman Street in Detroit, Michigan to interview Nabil Al-Marabh, a potential witness concerning the September 11, 2001 attacks six days earlier on the World Trade Center and the Pentagon. Al-Marabh was listed as on the FBI "Watch List" of people believed to participate in possible terrorist activities. He also had an outstanding warrant for his arrest for assault with a dangerous weapon.
The FBI had connected Al-Marabh with two possible addresses in Detroit the Norman Street address and another address on Wyoming Street. Based upon the information they had obtained, Task Force agents determined that the Norman Street address looked like a good address. Therefore, FBI Special Agents Mike Thomas, Paul Heyard, and Mary Ann Manescu; INS Agents Joe Gillette and Mark Pilat, State Department Special Agent Edward Seitz and FBI language specialist Nazih "George" Moaikel were dispatched to that address to locate and interview Al-Marabh.
Because the information the Task Force had on Al-Marabh indicated that he could be dangerous, when the agents arrived at the house, Agents Heyard, Manescu, Pilat and Seitz proceeded to the backyard of the house, while Agents Thomas and Gillette proceeded to the front door. Language Specialist Moaikel also proceeded the front of the house, but he remained on the sidewalk at the bottom of the stairs.
2653 Norman Street is the upper flat of a two-flat house. It is entered by a street-level door that opens to a stairway leading up to the upper-level apartment. Upon approaching the door, the agents noticed that Al-Marabh's name was on the *660 mail box for the upper flat. Agent Thomas testified that he knocked on the door and Defendant Karim Koubriti answered. At the time, Mr. Koubriti was wearing only boxer shorts and a tee shirt. Agent Thomas identified himself to Koubriti and told him that the agents were looking for Al-Marabh and showed him a picture of Al-Marabh for identification. Koubriti told Agent Thomas that he did not know Al-Marabh. When asked about the name on the mailbox, Koubriti replied that he had only lived there for two weeks and that Al-Marabh may have previously lived in the apartment.
Agent Thomas then asked Koubriti for his identification. Koubriti said that it was upstairs in the apartment. As Koubriti turned to go up the stairs, Agent Thomas asked, "Excuse me. Do you mind if we come up with you?" [1/28/02 Tr. p. 188.] Koubriti answered, "No, not at all." Id. Accordingly, Agents Thomas and Gillette followed Koubriti up the stairs. Agent Thomas testified that the conversation with Koubriti at the door was conducted entirely in English. Id. at 187.
Upon entering the upper-flat apartment, Agents Thomas and Gillette conducted a protective sweep of the premises during which they found Defendants Ahmed Hannan and Farouk Ali-Haimoud. Ali-Haimoud was immediately observed sleeping in the dining room area. Mr. Hannan was found sleeping on the floor in the back bedroom on the left-hand side. Agent Thomas woke him and ordered both Hannan and Ali-Haimoud into the living room.
Once all three men were gathered together, Agent Thomas went downstairs and signaled to the others that it was safe for them to enter. (Agent Gillette, meanwhile, remained with the three Defendants.) Agents Manescu, Pilat, Heyard and Language Specialist Moaikel then went up the stairs and entered the upper flat. Special Agent Seitz remained outside of the house.
The agents then proceeded to interview the three Defendants. All of the agents testified that while talking to the Defendants, the atmosphere was very calm, very matter-of-fact and conversational. The Defendants sat or stood, as they chose, and at least one of them smoked cigarettes. The testimony was uniform that no threats were made, nobody made any threatening gestures, and no guns were unholstered.
The agents questioned the Defendants about their citizenship, United States residency and employment history. While Agents Manescu and Thomas questioned the men about their employment history, Agent Pilat questioned the men about their alien registration and then verified their status with the INS. Only Defendant Koubriti was able to produce a resident alien "green" card. Hannan and Ali-Haimoud told the agents that their green cards were in a safe deposit box. Agent Pilat testified that it is a violation of federal law for a resident alien over 18 years old not to be in possession of his resident alien "green" card.[4] [See 2/7/02 Tr. pp. 74-75.]
During the protective sweep of the Norman Street residence conducted by Agents Thomas and Gillette, Agent Thomas observed in plain view on top of a dresser in one of the bedrooms two SkyChef/Detroit Metropolitan Airport employee identification badges bearing Koubriti's and Hannan's pictures. Agent Thomas testified that when he discovered the SkyChef badges, he did not know what level of airport access those badges allowed.
However, when the Defendants were asked about where they had been employed *661 since entering the United States, Defendants Koubriti and Hannan never mentioned SkyChef. They stated that they worked at Technicolor in Livonia and detailed several other restaurant/dishwashing jobs, but did not indicate that they had ever worked at SkyChef.
When confronted with the SkyChef IDs, Hannan and Koubriti appeared surprised. [See Agent Manescu testimony, 1/28/02 Tr. pp. 28-30.] When they were asked to explain why they had them, the men indicated that they had worked at SkyChef until they were involved in a car accident.
Agent Thomas testified that his overriding concern was that the Defendants may have had access to aircraft at the Detroit Metropolitan Airport. [2/7/02 Tr. p. 46.][5] Because the Defendants' story "did not add up," Agent Thomas testified that he was suspicious and, therefore, decided that the agents should search the flat. He told the Defendants that he wanted to handcuff them for the safety of both the agents and the Defendants. [2/7/02 Tr. p. 22.]
Before beginning the search, the agents asked for the Defendants' consent to do so. Language Specialist Moaikel testified that he translated the agents' request for permission to search and asked all three of the Defendants for their consent. [See 1/28/02 Tr. pp. 130-131; 168-169] Mr. Moaikel testified that Koubriti immediately said that it was okay, id. at 130, and that Koubriti turned to the other two Defendants and asked them if they had any objection, and that they said, no, because they had nothing to hide. Id. at 169. [See also, Testimony of Mary Ann Manescu, 1/28/02 Tr. p. 34.] Mr. Koubriti also executed a written consent which Mr. Moaikel testified he translated into Arabic for the Defendants, sentence-by-sentence.[6]
The agents then began the search in one of the bedrooms. (Agent Pilat and Language Specialist Moaikel remained in the living room with the three Defendants while the search was being conducted by the other agents.) Within five minutes of initiating the search, Koubriti told Language Specialist Moaikel that there were false documents in the bedroom. [1/28/02 Tr. p. 137-138.] Moaikel testified that he did not ask Koubriti anything; that Koubriti simply volunteered the information. Id. at 138.
Mr. Moaikel then told Agent Thomas what Koubriti had said and he then escorted Koubriti into the bedroom. Agent Thomas at the time was searching the desk while Agent Manescu was opening a bag found in the bedroom closet.
Koubriti pointed with his head to a drawer of the desk indicating that the documents were in that drawer underneath some video tapes. Id. The documents were then retrieved by Agent Thomas.[7] Koubriti indicated that the documents *662 belonged to a former roommate who Koubriti only knew as "Jalali." Agent Manescu, meanwhile, discovered a day planner in the bag she found in the closet.[8] Koubriti indicated that those items also belonged to "Jalali."
Agent Thomas testified that after the discovery of the day planner and the documents, the agents immediately stopped the search and obtained a search warrant for the premises. The Defendants, meanwhile, were placed under arrest, and transported to the Detroit FBI office where they were read their Miranda rights for the first time.
II. DISCUSSION
A. THE PROTECTIVE SWEEP OF THE APARTMENT WAS JUSTIFIED
Defendants first argue that the agents were not justified in performing a "protective sweep" upon entering the apartment. They contend that a "protective sweep" cannot be justified because there was no "in-home arrest" prior to the protective sweep nor any intention to arrest anyone at the time the agents initially entered the apartment. Their position is that Maryland v. Buie, 494 U.S. 325, 110 S.Ct. 1093, 108 L.Ed.2d 276 (1990) only authorizes protective sweeps when they are done in conjunction with an arrest. While the Court acknowledges that some circuits appear to take this restrictive view of the holding in Buie, see e.g., United States v. Wilson, 36 F.3d 1298, 1306 (5th Cir.1994), the Sixth Circuit has expressly rejected such a narrow construction. .
The same argument advanced by Defendants was made by the Defendant in United States v. Taylor, 248 F.3d 506 (6th Cir.2001). In that case, officers from the Kalamazoo Valley Enforcement Team had received information that Joseph Taylor was suspected of dealing drugs and selling illegal weapons. Although the officers did not have probable cause to arrest Taylor, they decided to go to his apartment to question him.
Upon arriving at the apartment, the officers knocked on the door to which someone from within the apartment asked, "Who is it?" They identified themselves as police officers at which point they heard "shuffling" inside. Ultimately, the door was answered by a man who later identified himself as Taylor's brother, Renaldo Hill. The officers asked if they could come inside and Hill invited them in.
The officers told Hill that they were looking for Taylor. Hill acknowledged that Taylor lived there but said that he had gone to the gym. The officers then observed in plain view a stem of marijuana at which point they told Hill they were going to secure the area so they could get a search warrant and were going to perform a protective sweep to ensure that there were no other people in the apartment.
During the execution of the protective sweep, the officers discovered Defendant Hill crouching fully clothed in the bathtub behind the shower curtain. One of officers, Officer Bagley, also opened a closet near the bathroom and discovered an open *663 duffle bag revealing baggies of processed marijuana. Officer Bagley did not seize the marijuana but instead left the premises to obtain a search warrant.
When Bagley returned an hour later with a search warrant, the officers seized the duffle bag which, it turns out, contained approximately 20-30 pounds of marijuana. They also found and seized approximately one pound of powder cocaine, some cocaine base, nearly $25,000 in cash, an assortment of drug paraphernalia, and a 9 mm pistol equipped with a laser scope strapped underneath an ironing board aimed at the front door. After completing the search, the officers arrested Taylor. Id. at 510.
Taylor moved to suppress the evidence found in his apartment. He argued that the officers violated his Fourth Amendment rights by conducting a protective sweep of his apartment when they had not first placed Hill under arrest and in the absence of facts that would have warranted such a search in conjunction with an arrest, and thus the subsequent search that ultimately exposed the hidden cocaine, crack, marijuana, money and gun was tainted. Both the district court and the Sixth Circuit found no merit in Taylor's argument. The Court of Appeals explained:
The United States Supreme Court has endorsed the practice of conducting a protective sweep of an area to ensure police officer safety when arresting suspects. See Maryland v. Buie, 494 U.S. 325, 110 S.Ct. 1093, 108 L.Ed.2d 276 (1990). In Buie, the Court concluded:
[T]he Fourth Amendment would permit the protective sweep undertaken here if the searching officer "possesse[d] a reasonable belief based on `specific and articulate facts which, taken together with the rational inferences from those facts, reasonably warrant[ed]' the officer in believing" that the area swept harbored an individual posing a danger to the officer or others.
Id. at 327, 494 U.S. 325, 110 S.Ct. 1093, 108 L.Ed.2d 276 (quoting Terry v. Ohio, 392 U.S. 1, 88 S.Ct. 1868, 20 L.Ed.2d 889 (1968), and Michigan v. Long, 463 U.S. 1032, 103 S.Ct. 3469, 77 L.Ed.2d 1201 (1983)).
Citing Buie, we have said that "[i]n order for officers to undertake a protective sweep of an area they must articulate facts that would warrant a reasonably prudent officer to believe that the area to be swept harbored an individual posing a danger to those on the scene." See United States v. Biggs, 70 F.3d 913, 915 (6th Cir.1995). Biggs was also decided in the context of a protective sweep made incident to the lawful arrest of a suspect.
Taylor argues that a protective sweep is authorized only when it is made incident to a lawful arrest. Therefore, he contends, because Hill had not been arrested when the officers made their cursory search of Taylor's apartment, the sweep was per se invalid. In contrast, the government argues that while Buie and Biggs were each decided in the factual context of officers' making an arrest, nothing in the those opinions indicates that an arrest is a mandatory prerequisite for conducting a protective sweep of the area. The government further points out that the Buie decision was based upon the reasoning set forth in the Supreme Court's earlier decisions in Terry and Long, both of which were investigative stop cases.
We believe the government presents the more compelling argument. Once an officer has probable cause to believe contraband is present, he must obtain a search warrant before he can proceed to *664 search the premises. [Citation omitted.] However, the Supreme Court has held that because evidence may be removed or destroyed before a warrant can be obtained, an officer does not violate the Fourth Amendment by securing the area to be searched and waiting until a warrant is obtained. . . . We think that it follows logically that the principle enunciated in Buie with regard to officers making an arrest that the police may conduct a limited protective sweep to ensure the safety of those officers applies with equal force to an officer left behind to secure the premises while a warrant to search those premises is obtained. We emphasize, however, that the purpose of such a protective sweep is to protect the safety of the officer who remains at the scene, and for that reason, the sweep must be limited to a cursory search of the premises for the purpose of finding persons hidden there who would threaten the officer's safety.
248 F.3d at 513 (emphasis added). See also, United States v. Morgan, 2002 WL 480964, 33 Fed.Appx. 603 (3rd Cir.2002) (unpublished decision; text available on WESTLAW) (police officers found to have had reasonable suspicion that criminal activity was taking place in defendant's residence were justified in entering and subsequently conducting a protective sweep of the premises without having any prior intent to arrest defendant); United States v. Brooks, 2 F.3d 838, 842 (8th Cir.1993) (after a consensual entry into a private residence, police can pat down a suspect if they have a reasonable particularized suspicion that the suspect is armed); United States v. Flippin, 924 F.2d 163, 165-66 (9th Cir.1991).
In this case, Agent Thomas had a reasonable belief that a dangerous individual, Nabil Al-Marabh, or an associate of his, might be present inside the apartment based upon the following specific facts and the rational inferences that could be drawn therefrom.
The Norman Street apartment had been identified as a result of FBI database searches, including a search of a classified data base, as the most likely current residence of Al-Marabh. Al-Marabh was number 27 on the FBI's Watch List of suspected terrorists or associates of known terrorists. Al-Marabh also had an outstanding warrant for his arrest for assault with a deadly weapon. Further, when the agents arrived at the Norman Street address, they saw Al-Marabh's name on the apartment's mailbox and, although Koubriti said that Al-Marabh did not live there, Koubriti's explanation as to why his name remained on the mailbox did not dispel Agent Thomas's belief that Al-Marabh might be on the premises.
The Court also cannot ignore the context in which the protective sweep took place. This occurred only six days subsequent to the September 11th terrorist attacks on the United States and all law enforcement personnel were on an especially heightened state of alert. As noted, the object of the investigation, Al-Marabh, was not only wanted in connection with violent conduct, but was himself suspected of terrorist-related activities. To have not conducted an initial protective sweep under these circumstances would have been foolhardy, and accordingly, based upon all of these factors, the Court finds the protective sweep entirely justified.
Furthermore, even if the agents had not immediately swept the apartment, the Court finds that they would inevitably have done so with justification. Agent Thomas testified that when he and Agent Gillette entered the small apartment, the observed Farouk Ali-Haimoud sleeping in the dining/living room area, an area that both agents would inevitably have walked into or through to wait for Koubriti to *665 locate his identification papers. The agents certainly would have asked Ali-Haimoud to produce his alien registration card, which he did not have in his possession. The agents could have immediately placed him under arrest for violating 8 U.S.C. § 1304(e), and, accordingly, would have been entitled to conducting a search incident to arrest pursuant to Chimel v. California, 395 U.S. 752, 89 S.Ct. 2034, 23 L.Ed.2d 685 (1969), entitling them to "as a precautionary matter and without probable cause or reasonable suspicion, look in closets and other spaces adjoining the place of arrest." Because the apartment was small in size, the agents would have been justified in looking into the two bedrooms, thereby locating Defendant Hannan and the SkyChef badges which were in plain view on top of the dresser.
For all of the foregoing reasons, the Court finds that the "protective sweep" conducted by the Agents upon entering the premises pursuant to Koubriti's consent was justified. Therefore, the protective sweep provides no basis for exclusion of the evidence of the SkyChef badges observed in plain view by Agent Thomas while conducting the sweep.
B. THE SEARCH CONDUCTED AFTER THE PROTECTIVE SWEEP WAS CONSENSUAL
Defendants also contend that Defendant Koubriti's consent to the search was not voluntarily given.
It is well-settled that the government carries the burden of establishing through "clear and positive testimony" that, absent a search warrant, law enforcement officials obtained a valid consent to search. United States v. Riascos-Suarez, 73 F.3d 616, 625 (6th Cir.), cert. denied, 519 U.S. 848, 117 S.Ct. 136, 136 L.Ed.2d 84 (1996). It is undisputed that the fraudulent documents that were seized from the Norman Street residence were not in plain view and there were no demonstrated exigent circumstances. Therefore, the only basis upon which evidence could have been obtained was through a free and voluntary consent to search, which was not "the result of duress or coercion, express or implied." Schneckloth v. Bustamonte, 412 U.S. 218, 248, 93 S.Ct. 2041, 36 L.Ed.2d 854 (1973); Mincey v. Arizona, 437 U.S. 385, 390-91, 98 S.Ct. 2408, 57 L.Ed.2d 290 (1978).
For consent to be voluntary, it must be unequivocal, specific, intelligently given, and free from duress or coercion. See United States v. Scott, 578 F.2d 1186, 1188-89 (6th Cir.1978). "Voluntariness is a question of fact to be determined from all the circumstances, and while the subject's knowledge of a right to refuse is a factor to be taken into account, the prosecution is not required to demonstrate such knowledge as a prerequisite to establishing a voluntary consent." Schneckloth, supra at 248-49, 93 S.Ct. 2041 (footnote omitted). See also, United States v. Guimond, 116 F.3d 166, 170-71 (6th Cir.1997).
The fact of custody alone is not enough to demonstrate that consent was coerced. United States v. Watson, 423 U.S. 411, 424, 96 S.Ct. 820, 828, 46 L.Ed.2d 598 (1976). In Watson, the Supreme Court considered the following factors in concluding that a defendant, who after being arrested, voluntarily consented to the search of his car: (1) there was no overt act or threat of force committed against the defendant; (2) there were no promises made or subtle forms of coercion that might flaw the defendant's judgment; (3) the consent was given in public, not in the police station; (4) the defendant was not a "newcomer to the law"; (5) the defendant was not mentally deficient; (6) the record did not indicate that the defendant was unable, while arrested, to exercise a free choice regarding the consent; and (7) the *666 arresting officers had administered Miranda warnings to the defendant prior to the consent. Id. at 424-25, 96 S.Ct. at 828-29.
Furthermore, even if consent is obtained while a person is illegally detained, it can still be found to be voluntary "provided that the totality of circumstances confirms that the consent was not coerced." United States v. Boone, 245 F.3d 352, 362-63 (4th Cir.2001). See also, United States v. Guimond, supra.
Viewing the totality of the circumstances in this case, the Court finds that the consent obtained from Defendant Koubriti, as well as the verbal consent given by Defendants Hannan and Ali-Haimoud, was voluntarily given. Clearly, there was no coercive or illegal conduct on the part of the agents. The testimony, which the Court finds credible, was undisputed that no agent or officer at any time ever drew a weapon or made any threats or any threatening gestures. Although the three men were handcuffed at the time that Defendant Koubriti was presented with the consent to search form which he signed after having it translated for him, the agents testified that all three men verbally consented to the search. Furthermore, at the time they were handcuffed, the Defendants were told that they were being handcuffed only as a safety precaution. They were allowed to be together, to sit or stand, as they chose, and were allowed to smoke.
The Defendants were further advised, by way of Language Specialist Moaikel's translation of the consent form, that they had a constitutional right to refuse to give consent. Language Specialist Moaikel testified that he went over the form with the Defendants very carefully, both in English and in Arabic. Moreover, the record indicates that Defendant Koubriti understood English, as evidenced by his initial "all English" conversation with Agent Thomas at the door.
No testimony was adduced at the hearing to contradict these facts, and the Court finds that all witnesses testified consistently and credibly. Accordingly, the Court is satisfied that the Defendants voluntarily consented to the search of the Norman Street residence.
C. KOUBRITI'S STATEMENTS CONCERNING THE DOCUMENTS WERE NOT MADE IN RESPONSE TO INTERROGATION AND, THEREFORE, MIRANDA IS NOT IMPLICATED.
In order to safeguard the right against self-incrimination, incriminating statements elicited during a custodial interrogation of a suspect generally may not be admitted into evidence without invocation of the defendant's Miranda rights. See Dickerson v. United States, 530 U.S. 428, 120 S.Ct. 2326, 2329-30, 147 L.Ed.2d 405 (2000); Stansbury v. California, 511 U.S. 318 322, 114 S.Ct. 1526, 1528, 128 L.Ed.2d 293 (1994). However, the Government's Miranda obligations arise only in the event of a custodial "interrogation." See Stansbury, supra, 511 U.S. at 322, 114 S.Ct. at 1528-29; United States v. Salvo, 133 F.3d 943, 953 (6th Cir.1998).
Thus, in order for Miranda to apply, the defendant must either have been actually taken into custody or the restraint on his freedom must rise to the level associated with a formal arrest, Salvo, supra, and there must be an "interrogation." In Rhode Island v. Innis, 446 U.S. 291, 301, 100 S.Ct. 1682, 64 L.Ed.2d 297 (1980), the Supreme Court defined "interrogation" in the context of Miranda to "extend only to words or actions on the part of police officers that they should have known were reasonably likely to elicit an incriminating response." Id., 446 U.S. *667 at 302, 100 S.Ct. 1682. However, "interrogation, as conceptualized in the Miranda opinion, must reflect a measure of compulsion above and beyond that inherent in custody itself." Id. at 300, 100 S.Ct. at 1689. In United States v. Avery, 717 F.2d 1020, 1024 (6th Cir.1983), the Sixth Circuit cautioned that factual circumstances are important to determine whether interrogation is present.
Courts have held that, generally, questioning a defendant about biographical information is insufficient to trigger the Miranda rule. See United States v. Clark, 982 F.2d 965, 968 (6th Cir.1993); United States v. Avery, supra. See also, United States v. Ozuna, 170 F.3d 654, 657 n. 1 (6th Cir.1999) ("Questions to someone coming into this country about his identity and national origin are equally `biographical,' and every bit as important to the officer's performance of his duties as are the questions normally asked following a suspect's arrest when he is booked into custody. In neither circumstance is interrogation occurring.")
Likewise, "where a defendant makes a voluntary statement without being questioned or pressured by an interrogator, his statements are admissible despite the absence of Miranda warnings." United States v. Murphy, 107 F.3d 1199, 1204 (6th Cir.1997).
In Murphy, the defendant was charged and convicted on two felon-in-possession-of-a-firearm counts. He was arrested and taken into custody after having fled from police and crashing his mother's car through a chain-link fence and into an apartment building. Murphy had abandoned the car and fled on foot. The police inventoried the contents of the car and found on the passenger seat a .38 caliber revolver and a blue knit ski mask. Murphy was subsequently found at his mother's house and arrested. He was placed in the rear of the police car to await identification by officers who had seen him fleeing the scene of crash. After he had placed been placed in the squad car, defendant voluntarily stated that he had been driving his mother's car and that he did not possess a driver's license.
The identifying officers arrived a few minutes later. They testified that no one else was in the police car with the defendant. When the officers opened the car door to get a good look at him, Murphy spontaneously bragged about having evaded the police. He stated that he knew nothing about the gun and ski mask, though neither officer had mentioned finding those objects.
Murphy sought suppression of the statements he made after being arrested and placed in the police car contending that his statements, in addition to being made without benefit of Miranda warnings, were coerced. With respect to coercion Murphy argued that there is an inherent coerciveness of the backseat of a police car and this inherent coerciveness and lack of Miranda warning rendered his statements coerced and involuntary.
The Sixth Circuit rejected Murphy's coercion argument out-of-hand, and emphasized that "the critical inquiry in determining the voluntariness of a confession is whether the confession is the product of free and rational choice. The court must look at the totality of the circumstances to determine whether the defendant's will was overborne." Id. at 1205. Although the Murphy court acknowledged that the defendant may have been of "low intelligence," was in custody and had not been Mirandized, it held that these factors alone "form an insufficient basis for concluding that a defendant is incapable of exercising free will." Id. at 1206. Therefore, the court concluded that Murphy's statements were not coerced. Id.See also, United States v. Avery, supra, 717 F.2d 1020 (defendant's statement inquiring *668 whether if he made restitution, the charges against him would be dropped, which was made to the police after defendant was arrested, taken into custody, and booked, held not to implicate Miranda despite the fact that the defendant was in custody and had asserted his right against self-incrimination because the statement was not the result of any interrogation but rather was spontaneously and voluntarily given); United States v. Montano, 613 F.2d 147, 149 (6th Cir.1980) (statement made by defendant after he had been arrested and taken into custody upon overhearing the agents were discussing among themselves the question as to whether the other adults should be placed under arrest to the effect that "They don't know anything about it. Leave them here. It's my stuff," held to constitute volunteered statements not within the purview of the Miranda guidelines).
The Sixth Circuit's decision in United States v. Blackmon, 1998 WL 109992, 142 F.3d 437 (6th Cir.1998), although unpublished, well illustrates the foregoing principles. Blackmon was detained, along with two other men, by police investigators in Jackson, Tennessee after they had received a tip about narcotics activity in the area where Blackmon and his friends were found. Although the initial frisk of Blackmon yielded nothing suspicious, he was taken into custody when the police discovered that there was an outstanding warrant for his arrest for a parole violation. The arresting officers then took Blackmon to the County Jail. In the booking area of the jail, Blackmon was asked routine biographical questions and he relinquished his personal effects.
While engaged in the booking procedure, one of the officers, Officer Frizzell, received a phone call indicating that one of investigators on the scene believed Blackmon had a gun in his pants, near his crotch. Frizzell then asked Blackmon if had taken everything out of his pockets and if there was anything else he needed to know about, which caused Blackmon to become noticeably uneasy. After another frisk, Blackmon was taken into a side office where his pants were pulled down to his knees. This search too failed to uncover anything. He was then taken upstairs to the jail so that he could change from his street clothes into prison garb. While en route to changing, Blackmon said that he wanted to talk to the two investigating officers who had picked him up on the street. He was told by Frizzell that he had to change into prison clothes first.
Frizzell testified that at this point Blackmon replied, "Okay, I have a gun," and directed the officer to his pants leg, where after lifting up the pant leg, the officer found a gun protruding from Blackmon's high-top tennis shoe. According to Blackmon, when the investigating officers arrived, they asked him how he managed to get the gun into the jail, but that he denied the gun was his. The investigators denied that they asked Blackmon any questions. They stated that Blackmon contended that the gun was not his, but that he was holding it for one of the other men detained on the scene. It was undisputed that no Miranda warnings were ever given to Blackmon.
Blackmon moved to suppress the gun and all statements made by him arguing that the evidence was obtained while he was subjected to custodial interrogation and without having been advised of his Miranda rights. The District Court denied Blackmon's motion to suppress and the Court of Appeals affirmed, explaining:
Blackmon asserts that he was interrogated when Frizzell asked him, after being informed that Blackmon might have a gun in his pants near the crotch, if there was "anything else that he had that we needed to know about." Further into Blackmon's booking, Frizzell also asked *669 him, "is there something you're wanting to tell me?"
Though these were not biographical questions, Frizzell's questions were merely part of a routine booking process. . . . Blackmon's alleged retort was also voluntary in that it did not immediately follow one of Frizzell's questions but, instead, immediately preceded the need for him to change into a prison uniform. It does not appear, therefore, that his response was compelled by Frizzell's questioning, but rather, was volunteered by Blackmon in expectation of the guns exposure. . . .
. . . Blackmon also claims that any statements he made to investigators Wray and Smith after the gun was obtained should also be suppressed due to the alleged interrogating by Frizzell before the gun was found. For the reasons discussed above, Frizzell's questions did not merit applying Miranda exclusions, and the district court, therefore, properly refused to suppress these later statements as well.
Blackmon claims that the gun should also be suppressed because it was the product of this alleged interrogation. Non-testimonial physical evidence proximately derived from a Miranda violation may require suppression as "fruit of the poisonous tree." United States v. Sangineto-Miranda, 859 F.2d 1501, 1516 (6th Cir.1988). As stated above, because the Miranda exclusionary rule does not apply, the gun was not acquired from any illegally obtained statements. It follows that the district court was correct in denying the motion to suppress the gun.
1998 WL 109992 at *2-3, 142 F.3d 437 (emphasis added).
In this case, Nazih "George" Moaikel testified that after the search had been underway for approximately five minutes, Koubriti told him, without any prompting or questioning whatsoever, that there were false documents in the bedroom. Moaikel immediately related this information to Agent Thomas and then he accompanied Koubriti into the bedroom to show Agent Thomas specifically where the documents were. Once in the bedroom, Koubriti indicated with his head the desk drawer containing the false documents, and Agent Thomas retrieved the documents from the drawer. Moaikel testified that at the same time, Agent Manescu was alongside of a suitcase going through the day planner. Moaikel further testified that, again without being asked, Koubriti volunteered that neither the documents nor the day planner belonged to him; that they belonged to "Jalali."
Thus, the undisputed testimony of record establishes that Koubriti's indication that there were false documents in the bedroom and his subsequent statement that the documents did not belong to him, but rather belonged to Jalali, were spontaneously and voluntarily made and were not made in response to any questioning or "interrogation." Therefore, Miranda's prophylactic policies of protecting individuals from compelled or coerced statements through "interrogation" are simply not implicated here. Furthermore, since there was no Miranda violation, there similarly is no basis for application of the "fruit of the poisonous tree" doctrine to suppress the documents or the day planner.[9]
*670 D. INEVITABLE DISCOVERY
Even assuming arguendo that Miranda would bar the admission of Koubriti's statements, the documents and day planner would not necessarily have to be excluded by application of the "inevitable discovery" doctrine.
The inevitable discovery doctrine, an exception to the exclusionary rule, allows unlawfully obtained evidence to be admitted at trial if the government can prove by a preponderance that the evidence inevitably would have been acquired through lawful means. Nix v. Williams, 467 U.S. 431, 444, 104 S.Ct. 2501, 2509, 81 L.Ed.2d 377 (1984); United States v. Kennedy, 61 F.3d 494 (6th Cir.1995), cert. denied, 517 U.S. 1119, 116 S.Ct. 1351, 134 L.Ed.2d 520 (1996). See also, United States v. Leake, 95 F.3d 409, 412 (6th Cir.1996); United States v. Brown, 69 F.Supp.2d 925, 932-934 (E.D.Mich.1999).
The Sixth Circuit explained the policies and parameters of the inevitable discovery doctrine in United States v. Kennedy, supra:
In approving the inevitable discovery exception, the Supreme Court reasoned that "[i]f the prosecution can establish by a preponderance of the evidence that the information ultimately or inevitably would have been discovered by lawful means . . . then the deterrence rationale has so little basis that the evidence should be received." [Nix v. Williams, 467 U.S. at 444, 104 S.Ct. at 2509.]
Fairness can be assured by placing the State and the accused in the same positions they would have been in had the impermissible conduct not taken place. However, if the government can prove that the evidence would have been obtained inevitably and, therefore, would have been admitted regardless of any overreaching by the police, there is no rational basis to keep that evidence from the jury in order to ensure the fairness of the trial proceedings. In that situation the State has gained no advantage at trial and the defendant has suffered no prejudice. Indeed, suppression of the evidence would operate to undermine the adversary system by putting the State in a worse position than it would have occupied without any police misconduct.
Id. at 447, 104 S.Ct. at 2511. Therefore, when "the evidence in question would inevitably have been discovered without reference to the police error or misconduct, there is no nexus sufficient to provide a taint and the evidence is admissible." Id. at 448, 104 S.Ct. at 2511.
For the inevitable discovery exception to apply, it must be demonstrated that the evidence inevitably would have been acquired through lawful means had the government misconduct not occurred. Id. at 444, 104 S.Ct. at 2509; see Murray v. United States, 487 U.S. 533, 539, 108 S.Ct. 2529, 2534, 101 L.Ed.2d 472 (1988). Proof of inevitable discovery "involves no speculative elements but focuses on demonstrated historical facts capable of ready verification or impeachment and does not require a departure from the usual burden of proof at suppression hearings." Nix, 467 U.S. at 444 n. 5, 104 S.Ct. at 2509 n. 5. "The exception requires the district court to determine, viewing affairs as they existed at the instant before the unlawful search, what would have happened had the unlawful search never occurred." United States v. Eng, 971 F.2d 854, 861 (2d Cir.1992), cert. denied, 510 U.S. 1045, 114 S.Ct. 693, 126 L.Ed.2d 660 (1994).
61 F.3d at 497-499 (emphasis added).
Although some circuits have held that the inevitable discovery doctrine applies only when the Government can demonstrate the existence of an entirely independent, *671 untainted investigation, the Sixth Circuit has rejected such a narrow approach, and held in Kennedy that such an independent investigation is not required:
[T]he inevitable discovery exception to the exclusionary rule applies when the government can demonstrate either the existence of an independent, untainted investigation that inevitably would have uncovered the same evidence or other compelling facts establishing that the disputed evidence inevitably would have been discovered. Therefore, we hold that an alternate, independent line of investigation is not required for the inevitable discovery exception to apply.
Id. at 499-500 (some emphasis supplied). See also, United States v. Leake, supra.[10]
Here, the testimony of record clearly demonstrates that the false documents would have been discovered even if Koubriti had not told George Moaikel that there were false documents in the bedroom. Indeed, the testimony establishes that the search, pursuant to Koubriti's signed consent to search was already underway. Before Koubriti said anything to George about the false documents, Agent Manescu had already found and opened the suitcase in the closet and had found the day planner.[11] And, the testimony further establishes that Agent Thomas had already begun to look through the desk in which the false documents were located. Because Agent Thomas was already searching the desk and because the false documents were in one of the desk drawers underneath a couple of video tapes, it is clear that their discovery was inevitable.
CONCLUSION
For all of the reasons stated above in this Opinion and Order,
IT IS HEREBY ORDERED that Defendants' Motion to Suppress Evidence be, and hereby is, DENIED.
NOTES
[1] Defendant Hmimssa filed a motion for severance, and on March 22, 2002, pursuant to the stipulation of the parties, the Court entered an Order granting that motion. Subsequently, on March 27, 2002, the Grand Jury issued a First Superseding Indictment against Koubriti and Hannan which added to the document fraud charges alleged in the original indictment a third charge of Conspiracy to Engage in Fraud and Misuse of Visas, Permits and Other Documents. Two other individuals, Farouk Ali-Haimoud and Abdella Lnu, were also named as Defendants in the First Superseding Indictment. Farouk Ali-Haimoud was originally charged along with Koubriti and Hannan in a pre-indictment criminal complaint on September 18, 2001, however, the charges alleged against him in the complaint were dismissed without prejudice when he was not charged by the Grand Jury in the September 27, 2001 Indictment. As the Government's investigation into this matter continued, however, new evidence was discovered which led to the charges asserted against Ali-Haimoud in the First Superseding Indictment.
[2] At a pre-trial conference held on April 12, 2002, added Defendant Ali-Haimoud also verbally joined in this motion to suppress, but reserved the right to add additional arguments upon further review of the record. If, after reviewing the record and this Opinion and Order, Defendant Ali-Haimoud wishes to assert additional arguments, he may do so by way of a motion for reconsideration.
[3] The Detroit Joint Terrorism Task Force is comprised of agents and officers from the Federal Bureau of Investigation (FBI), the Bureau of Alcohol, Tobacco and Firearms (ATF), the Immigration and Naturalization Service (INS), the Drug Enforcement Administration (DEA), the Internal Revenue Service (IRS), U.S. Customs Service, the State Department, Michigan State Police and the Dearborn Police Department.
[4] 8 U.S.C. § 1304(e) requires all aliens over 18 years of age to carry their alien registration papers at all times. Violation of the statute is a misdemeanor.
[5] Agent Pilat later found out from the FAA that the badges did not grant restricted area access. [See 2/07/02 Tr. pp. 68-70.]
[6] Agent Thomas and Mr. Moaikel testified that, prior to executing the consent to search form, the Defendants were asked whose residence was it. Defendant Koubriti told the agents that it was his residence, and that although he did not have a lease, he was the one who paid $400 monthly rent to the landlord..
[7] The documents found in the desk drawer were the following:
a. "World Service Authority" passport in the name of Michael Saisa, date of birth, October 20, 1976.
b. United States Social Security Card in the name of Michael Saisa, number XXX-XX-XXXX.
c. United States Immigration form I-94, admission number 5303185 7 07.
d. United States visa, issued to Michael Saisa.
e. United States Immigration Service Alien Identification Card, number A91199150.
The INS and State Department subsequently confirmed that these documents were fraudulent.
[8] The day planner contained notations related to an American military base in Turkey, Alia Airport in Jordan and the "American foreign minister." It also contained hand-drawn sketches of what appeared to be a diagram of an airport flight plan, including aircraft and runways. The day planner is the subject of a pending discovery motion which will be addressed by the Court in a separate Order.
[9] The only other statements made by the Defendants were statements made concerning their nationality, alien registration, and work history. As indicated above, questioning a defendant about such biographical information is insufficient to trigger the Miranda rule. See United States v. Clark, supra; United States v. Avery, supra; United States v. Ozuna, supra.
[10] In two more recent cases, United States v. Dice, 200 F.3d 978 (6th Cir.2000), and United States v. Haddix, 239 F.3d 766 (6th Cir.2001) the court apparently ignored the Kennedy court's express holding that "an alternative, independent line of investigation is not required for the inevitable discovery rule to apply," and instead stated that application of the doctrine required such an independent, untainted investigation. Because there was no separate "independent" investigation in either case, both the Dice court and the Haddix court refused to apply the inevitable discovery doctrine. Sixth Circuit Rule 206(c) explicitly states, however, that
Reported panel opinions are binding on subsequent panels. Thus, no subsequent panel overrules a published opinion of a previous panel. Court en banc consideration is required to overrule a published opinion of the court.
Therefore, Kennedy still remains the law of the circuit.
[11] The fact that Agent Manescu had already found the day planner before Koubriti made any kind of statement as to what was in the bedroom or who it belonged to establishes that it could not be deemed "fruit of the poisonous tree" of any Miranda-less statements. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536147/ | 928 A.2d 1289 (2007)
COM.
v.
ISAAC.
No. 164 EAL (2007).
Supreme Court of Pennsylvania.
July 26, 2007.
Disposition of petition for allowance of appeal. Denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536157/ | 364 B.R. 285 (2006)
In re Denise TRAVIS, Debtor.
Vito Boscaino, Plaintiff,
v.
Denise Travis, Defendant.
No. 05-3331.
United States Bankruptcy Court, N.D. Ohio.
August 31, 2006.
*286 Ralph A. Kerns, Ralph A. Kerns, LLC, Worthington, OH, for Plaintiff.
Stephen T Priestap, Toledo, OH, for Defendant.
DECISION AND ORDER
RICHARD L. SPEER, Bankruptcy Judge.
Before this Court is the Plaintiff's Motion for Summary Judgment, together with the Parties' respective supporting Memoranda. The Plaintiff's Motion is brought on his Complaint to determine the dischargeability of multiple debts arising from and as a result of the termination of the marriage between the Parties. Previously, after reviewing the arguments raised by the Parties, the Court found that "oral arguments would be helpful to clarify many of the issues raised in the Parties' memoranda, e.g., specifying which debts are in controversy and, for each debt, setting forth the exact legal authority supporting the Parties' respective positions." (Doc. No. 25).
Just prior to the hearing set on this matter, counsel for the Parties requested, and were then afforded the opportunity to address the Court, in chambers, regarding the issues raised by the Plaintiff's Motion for Summary Judgment. After extensive discussions with the Court, counsel for the Parties ultimately agreed that, of the original points of controversy, only three[1] remained for resolution:
The dischargeability of two credit card debts, a Household Bank Credit Card and a Merrick Bank Visa Card, now totaling $1,366.00;
the dischargeability of $3,300.00 in contempt charges levied against the Defendant by the state divorce court for Plaintiff's attorney fees; and finally
whether the Plaintiff's liability on a $5,275.97 deficiency the Defendant incurred when her leased car was repossessed, *287 and for which the Defendant was required to hold the Plaintiff harmless, is a nondischargeable debt.
After considering these points of controversy, the Court, after again reviewing those arguments already before it, as well as considering the positions espoused by counsel at the conference held in this matter, makes the following findings of fact and conclusions of law in accordance with Bankruptcy Rule 7052:
On the first point of controversy, that regarding the credit-card debts, the Plaintiff alleges that the "applications for these particular obligations were completed by [Defendant] under the name of [Plaintiff] for the specific purpose of deceiving the creditor,. . . ." (Doc. No. 1, at pg. 4). To this end, there is no dispute that the cards, although issued in his name, were never ordered by the Plaintiff. Rather, the circumstances tend to show that it was the Defendant who obtained and then used these cards a fact which, although never actually admitted, was not repudiated.
Bankruptcy jurisprudence has long limited its protection to only honest debtors who have, due to unfortunate circumstances, incurred obligations beyond their ability to repay. Cohen v. de la Cruz, 523 U.S. 213, 118 S. Ct. 1212, 140 L. Ed. 2d 341 (1998). Various provisions of the Bankruptcy Code implement this policy, including: § 523(a)(2), excepting from discharge debts arising from acts committed by the debtor with intent to defraud; and § 523(a)(4), debts resulting from acts of larceny and/or embezzlement. Here, to the extent that the Defendant obtained credit cards in the Plaintiff's name without his permission, both these exceptions to dischargeability are applicable.
No matter from what angle one approaches the matter, any person who, without permission, uses another's identity to obtain credit in the other's name, has engaged in fraudulent conduct violative of §§ 523(a)(2) and (a)(4). There is simply no other logical explanation; it can be presumed that a person intends the natural and probable consequences of their actions. Accord Federal Deposit Insurance Corporation v. St. Paul Fire and Marine Insurance Company, 942 F.2d 1032 (6th Cir.1991). In fact, not only does this type of conduct run afoul of bankruptcy law, Federal law also makes it a crime, punishable by up to 15 years in prison, for acts involving identity theft, defined as occurring when "any person uses, without lawful authority, a means of identification of another person with the intent to commit, . . . any unlawful activity that constitutes a violation of Federal law, or that constitutes a felony under any applicable State or local law[.]" 18 U.S.C. § 1028(a)(7).
Similarly, the Court also finds the $3,300.00 in penalties levied against the Defendant as the result of her contempt, nondischargeable as a matter of law. Section 523(a)(7) excepts from discharge any debt "to the extent such debt is for a fine, penalty, or forfeiture payable to and for the benefit of a governmental unit, and is not compensation for actual pecuniary loss, . . ." The breadth of this section extends to sanctions imposed for contempt. See, e.g., Hansbrough v. Birdsell (In re Hercules Enters., Inc.), 387 F.3d 1024, 1029 (9th Cir.2004). This is true even if, as is the situation here, the sanctions are payable to a party-litigant, as opposed to a governmental unit; the only prerequisite: that the sanctions have been imposed to uphold the dignity and authority of the court.[2]
*288 Consistent with upholding its dignity and authority, the contempt sanctions levied by the state court against the Defendant must be viewed as having been imposed for vindication, not remuneration. The record in this matter establishes, beyond any doubt, that the charges levied by the state court against the Defendant served to fulfill these two objectives: to punish the Defendant for her flagrant violation of numerous provisions of the state court's decree of divorce; and then through the imposition of sanctions, to coerce future compliance from the Defendant of the court's orders. Any benefit conferred on the Plaintiff was simply a means to an end.
The last issue submitted to the Court for resolution is whether the deficiency incurred on an auto loan, for which the Plaintiff is jointly liable, but for which the Defendant was to hold him harmless, is dischargeable. The briefs and arguments submitted to the Court on this issue correctly pointed to § 523(a)(15) as being the operative provision controlling, this matter.
Under § 523(a)(15), any debt incurred as the result of the termination of a marriage, other than one in the nature of support which is excepted from discharge under paragraph (a)(5), is a nondischargeable obligation as to the other spouse. Two limited exceptions, however, are provided: (1) if the debtor does not have the "ability to pay" the martial obligation; or (2) if, on balance, the benefit of discharging the debt outweighs the detrimental consequences to the nondebtor spouse. By their very nature, however, determinations as to the applicability of both these exceptions to nondischargeability are factually intensive, involving a myriad of considerations e.g., income, expenses, number of dependents, health, lifestyle and so on. This makes determinations concerning the applicability of § 523(a)(15)'s two exceptions to nondischargeability difficult. See, e.g., Moden v. United States, 404 F.3d 1335, 1342 (Fed.Cir.2005) (summary judgment should not be granted precipitously in fact intensive cases). This case is no exception.
Summary Judgment is only appropriate when, after viewing the evidence in the light most favorable to the nonmoving party, the record reflects that there exists no genuine issue, of material fact, and that the moving party is entitled to judgment as a matter of law. FED.R.BANK. P. 7056(c); Anderson V. Liberty Lobby, Inc., 477 U.S. 242, 247, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). Contrary, however, to this standard, not only do the written arguments submitted to the Court show significant factual disagreement on many of the matters pertinent in a § 523(a)(15) analysis, but it was represented that the financial circumstances of each of the Parties have changed significantly since the time the Defendant sought relief in this Court. Notwithstanding, at this juncture, in lieu of holding a Trial, the Court will afford the Parties the opportunity to stipulate to the salient facts which would otherwise be put into evidence at the Trial, after which time, the Court will make a determination.
Accordingly, consistent with this Decision, it is hereby,
ORDERED that the Motion for Summary Judgment of the Plaintiff, Vito Boscaino, is Granted with respect to the nondischargeability of these debts: (1) the credit card obligations with Household Bank Credit and Merrick Bank, totaling *289 $1,366.00; and (2) the $3,300.00 in contempt charges levied against the Defendant by the state divorce court for Plaintiff's attorney fees.
IT IS FURTHER ORDERED that within 30 days, commencing from the issuance of this Order, the Parties file with the. Court a stipulation of facts relevant to the issue of dischargeability on the auto-loan deficiency under 11 U.S.C. § 523(a)(15), otherwise this matter will be set for Trial.
NOTES
[1] One point of controversy originally submitted to the Court was whether an escrow check, negotiated by the Defendant, but stemming entirely from funds deposited by the Plaintiff, was dischargeable. But, at the Court's direction, counsel for the Parties agreed to submit an entry consenting to the debt's nondischargeability.
[2] United States Dept. of Housing & Urban Development v. Cost Control Mktg. & Sales Mgmt. of Va., Inc., 64 F.3d 920, 928 (4th Cir.1995) ("[S]o long as the government's interest in enforcing a debt is penal, it makes no difference that injured persons may thereby receive compensation for pecuniary loss."); PRP Wine Int'l Inc. v. Allison (In re Allison), 176 B.R. 60, 64 (Bkrtcy.S.D.Fla.1994) (finding attorney fees and costs awarded for opposing party's contempious behavior nondischargeable under § 523(a)(7)). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536155/ | 364 B.R. 612 (2007)
In re ESTATE OF Virgil B. LaROSA, and Joan Larosa, Debtors.
No. 03-4115.
United States Bankruptcy Court, N.D. West Virginia.
February 28, 2007.
*613 Judy L. Shanholtz, McNeer Highland McMunn and Varner, LC, Clarksburg, WV, for Debtors.
MEMORANDUM OPINION
PATRICK M. FLATLEY, Bankruptcy. Judge.
On June 17, 2006, Virgil B. LaRosa died. His Chapter 11 bankruptcy case is continuing to be jointly administered with that of his spouse, Joan LaRosa. Judy L. Shanholtz and the law firm of McNeer, Highland, McMunn and Varner, L.C. ("MHMV"), counsel for the Chapter 11 debtors-in-possession Virgil and Joan LaRosa (the "Debtors"), filed an application with the court to approve the employment of MHMV as special counsel for the administration of Virgil B. LaRosa's death estate. That application is opposed by Joseph and Dominick LaRosa ("JDL") on the basis that the Debtor's bankruptcy estate ought not have to pay the costs of unrelated probate and/or non-probate proceedings, and that, if the court approved the application, MHMV would be representing interests adverse to that of the bankruptcy estate, which is prohibited by 11 U.S.C. § 327(e).
*614 The court held a telephonic hearing on the application on September 27, 2006, in Wheeling, West Virginia, at which time the court ordered the parties to submit supplemental briefing. That briefing is now complete, and for the reasons stated herein, the court will deny MHMV's application.
I. BACKGROUND
On November 19, 2003, the Debtors filed their Chapter 11 bankruptcy petition, listing assets in excess of $3.3 million and liabilities of $5 million. JDL filed the only unsecured proof of claim in the case stating that they were owed about $4.5 million based on a pre-petition judgment. The Debtors have been disputing the amount and validity of that claim since the beginning of this case.
After Virgil B. LaRosa's death on June 17, 2006, Joan LaRosa was named executrix of his death estate. As part of her duties as executrix, Joan LaRosa is required to file Federal Form 706 which requires that an appraisal be done on all property of Virgil's death estate. On September 29, 2006, by the consent of the parties, this court granted the Debtors authorization to employ MHMV for the limited purpose of notifying State and County agencies about the current status of the bankruptcy case and to request a continuance of the requirement that Joan LaRosa make an appraisement of Virgil B. LaRosa's death estate.
II. DISCUSSION
JDL asserts that the non-exempt property of the Debtors' bankruptcy estate may not be charged with the fees associated with administering Virgil B. LaRosa's death estate. Moreover, JDL asserts that a conflict of interest would exist should the court approve the retention of MHMV as special counsel for the administration of Virgil's death estate as well as being counsel for the Debtors inasmuch as MHMV owes a fiduciary duty to, maximize recovery for creditors of the Debtors' bankruptcy estate and, if the application is approved, would also owe a duty to maximize recovery for the beneficiaries of Virgil's death estate.
A. Deceased Debtors
Federal bankruptcy courts do not administer the estates of deceased debtors. E.g., Marshall v. Marshall, 547 U.S. 293, 126 S. Ct. 1735, 1748, 164 L. Ed. 2d 480 (2006)("[T]he probate exception [to federal court jurisdiction] reserves to state probate courts the probate or annulment of a will and the administration of a decedent's estate; it also precludes federal courts from endeavoring to dispose of property that is in the custody of a state probate court."). Indeed, the Commission on the Bankruptcy Laws of the United States recommended as part of the Bankruptcy Reform Act of 1978 that "the Bankruptcy Act not be extended to administration of decedents' estates other than to the extent necessary to wind up the administration of the estate of debtors who die after the date of the petition." Report of the Commission on the Bankruptcy Laws of the United States, H.R. Doc. No. 137, 93rd Cong., 1st Sess. (1973). Federal Rule of Bankruptcy Procedure 1016 implements this policy by stating:
If a reorganization . . . is pending under chapter 11, . . . the case may be dismissed; or if further administration is possible and in the best interest of the parties, the case may proceed and be concluded in the same manner, so far as possible, as though the death . . . had not occurred.
Fed. R. Bankr.P. 1016.
In this case, the deceased debtor's spouse, Joan LaRosa, who is also a co-debtor, *615 is the executrix of the decedent's estate, and the case is proceeding, so far as possible, as if the death of Virgil B. LaRosa had not occurred. No plan has yet been filed in this case inasmuch as it is largely a two creditor dispute, and depending on the outcome of that dispute, the proposed plan will likely involve the disposition of property, rather than being dependent on the future income of the deceased debtor. See, e.g., 9 Collier on Bankruptcy, ¶ 1016.03 (Alan N. Resnick & Henry J. Sommer, eds. 15th ed. rev. 2006) ("[I]n many cases a successful, plan will not depend on the future earnings or involvement of the debtor. . . . [I]t is conceivable that the debtor's estate could continue to be administered notwithstanding the death or insanity of the debtor.").
B. Property of the Bankruptcy Estate and Property of a Debtor's Death Estate
As defined by statute, property of the bankruptcy estate includes "all legal or equitable interests of the debtor in property as of the commencement of, the case." 11 U.S.C. § 541(a)(1). What constitutes property of the bankruptcy estate is to be interpreted, broadly. United States v. Whiting Pools, 462 U.S. 198, 204-05, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983). What constitutes property of the bankruptcy estate for a Chapter 11 individual debtor after the commencement of the case is the subject of some controversy especially in cases filed before the effective date of the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act. See, e.g., In re Prince, 85 F.3d 314, 322-23 (7th Cir.1996) (classification of post-petition goodwill); In re FitzSimmons, 725 F.2d 1208, 1211 (9th Cir.1984) (distinguishing an individual Chapter 11 debtor's post-petition personal services from property of the estate). The bankruptcy estate does not include, however, any property, or the value of such property, to the extent it is exempted by the debtor. 11 U.S.C. § 522(b) ("Notwithstanding section 541 of this title, an individual debtor may exempt from property of the estate. . . . ").
Thus, after the filing of a Chapter 11 petition, two estates exist the bankruptcy estate, and the estate of the debtor to the extent that any legal or equitable interest of the debtor did not become property of the bankruptcy estate, and to the extent that post-petition property is not property of the bankruptcy estate. Importantly, the creation of a bankruptcy estate is to fulfill the purposes of the Bankruptcy Code, which "aims, in the main, to secure equal distribution among creditors." Howard Delivery Serv., Inc. v. Zurich Am. Ins. Co., ___ U.S. ___, 126 S. Ct. 2105, 2109, 165 L. Ed. 2d 110 (2006). To achieve this goal, the bankruptcy estate is treated as a separate entity from the debtor. This separate treatment is evident in the Bankruptcy Cede. For example, special rules apply to creditors that seek to obtain property of the estate as opposed to property of the debtor, the bankruptcy estate acquires interests in property beyond that which the debtor had as of the petition date,.a debtor is allowed to remove specified property from the ambit of the bankruptcy estate, and the bankruptcy estate has a separate tax identification number. See §§ 362(a) (separating the effects of the automatic stay as between the debtor and the estate); 522 (allowing the debtor to exempt certain property to the exclusion of the estate); 541(a) (defining property of the estate, which extends beyond that of the individual debtor); 544 (granting the trustee, as the representative of the bankruptcy estate, certain rights to property that are not available to the debtor); In re Mirman, 98 B.R. 742, 745 (Bankr.E.D.Va.1989) ("[W]hen an individual's Chapter 7 or *616 Chapter 11 proceeding commences, a separate taxable entity is created . . . and [it] is completely distinct from the individual[']s [estate] for income tax purposes."). Furthermore, the Bankruptcy Code specifically defines an estate to be an "entity" 11 U.S.C. § 101(15). This background gives context to the comments made in the legislative history to § 541 of the Bankruptcy Code concerning the difference between the bankruptcy estate and a decedent's estate:
Once the estate is created, no interests in property of the estate remain in the debtor. Consequently, if the debtor dies during the case, only property exempted from property of the estate or acquired by the debtor after the commencement of the case and not included as property of the estate will be available to the representative of the debtor's probate estate. The bankruptcy proceeding will continue in rem with respect to property of the estate, and the discharge will apply in personam to relieve the debtor, and thus his probate representative, of liability for dischargeable debts.
HR Rep. No. 595, 95th Cong., 1st Sess. 367-68; S.Rep. No. 989, 95th Cong., 2nd Sess. 82-83 (1978). See also In re Gridley, 131 B.R. 447, 451 (Bankr.D.S.D.1991) (finding no violation of the automatic stay by opening a probate proceeding after the filing of a Chapter 7 case because "[p]robate is concerned with exempt assets and any assets that have come into existence after the bankruptcy petition has been filed" and "everything up to the time of bankruptcy filing is handled by the bankruptcy court and everything post-petition and after death is administered by the probate court")
C. Bankruptcy Estate Payment for Legal Fees Incurred in Administration of a Decedent's Estate
Joan LaRosa seeks to have this court approve the application for employment of MHMV as legal counsel for Virgil B. LaRosa's death estate, and to approve the payment of those legal expenses and costs out of funds belonging to the bankruptcy estate, i.e., at the expense of the bankruptcy estate's only unsecured creditor JDL. The contemplated services to be performed by MHMV include: providing assistance to Joan LaRosa as it relates to the administration of Virgil B. LaRosa's death estate under West Virginia law; preparation of a federal estate transfer tax return (Form 706); preparation of appraisals, inventories, and reports for West Virginia authorities pursuant to W. Va.Code § 44-1-14; and such other legal services as may be necessary on behalf of Virgil B. LaRosa's death estate in the pending bankruptcy case and related adversary proceedings. Additionally, MHMV contends that all transfers of real and personal property that occurred within three years of the decedent's death for less than adequate consideration must be reported. MHMV asserts that a debtor-in-possession has the obligation to file these reports on the basis that the estate is in possession of property of the decedent's estate, and that Virgil B. LaRosa's transfer of property to the bankruptcy estate was not related to a bona fide sale for the adequate and full consideration in money or money's worth, which would otherwise permit that transfer to be excluded under Internal Revenue Code § 2035(d).
JDL asserts that the bankruptcy estate will not receive any benefit from the approval of MHMV's application to be appointed as special counsel for the administration of Virgil B. LaRosa's death estate. The court agrees.
Section 327(e) of the Bankruptcy Code allows special purpose employment, the purpose of which is generally to allow *617 the continuation of an attorney's employment when the debtor is involved in complex litigation before the petition date and changing attorneys in the middle of the case would be detrimental to the progress of the pre-petition litigation. 11 U.S.C. § 327(e); H.R. No. 95-595 (1978). When a bankruptcy estate may benefit from the administration of a deceased debtor's death estate, however, the trustee may seek the appointment of special counsel pursuant to § 327(e). In re Schuler, 354 B.R. 37, 44 (Bankr.W.D.N.Y.2006); see also Vining v. Taunt (In re M.T.G., Inc.), 298 B.R. 310, 318 (E.D.Mich.2003) (holding that no, requirement' exists that the proposed attorney must have previously represented the debtor with respect to those specified special purposes). To hire special counsel under § 327(e), the trustee, or debtor-in-possession, must show, inter alia, that the representation is in the best interest of the estate, and the attorney does not represent or hold an interest adverse to the debtor or the debtor's estate. Stapleton v. Woodworkers Warehouse, Inc. (In re Woodworkers Warehouse, Inc.), 323 B.R. 403, 406 (D.Del.2005).
An attorney's employment under § 327(e) is in the best interests of the bankruptcy estate when: (1) "property of the estate is threatened and the need for services is real;" and (2) special counsel provides some-benefit to the estate not merely to the debtor which benefit is "gauged by needs of the estate and whether ,it is directly related to the debtor in possession's performance of duties under the bankruptcy code." Ferrara & Hantman v. Alvarez (In re Engel), 124 F.3d 567, 575 (3rd Cir.1997). Retention of counsel under § 327(e) is merely the preliminary step compensation of special counsel requires a separate analysis under § 330(a), and compensation is only to be awarded for the "actual, necessary services rendered by the . . . attorney. . . ." 11 U.S.C. § 330(a)(1)(A). No compensation is appropriate for "services that were not (I) reasonably likely to benefit the debtor's estate; or (II) necessary to the administration of the estate." § 330(a)(4)(A)(ii)(I-II).
In this case, property of the Debtors' Chapter 11 bankruptcy estate came into existence as of the petition date. The only property that Virgil B. LaRosa was possessed of as of the date of his death was that which was exempted under' the Bankruptcy Code, or acquired after the petition was filed (to the extent it was not postpetition property of the estate under § 541). In addition, Virgil B. LaRosa had a contingent interest in the bankruptcy estate to the extent that a surplus may exist after his creditors will either be paid in full, or to the extent that his creditors' may agree to some other treatment pursuant to the terms of a confirmed Chapter 11 plan that can be approved by the court. It is axiomatic that the bankruptcy court administers property of the bankruptcy estate pursuant to the provisions of the Bankruptcy Code the court is not guided by state probate and nonprobate law on how to distribute assets that do not belong to the deceased debtor.[1]
The employment of MHMV as special counsel for the administration of the estate of Virgil B. LaRosa will serve to benefit the beneficiaries of his death estate not the bankruptcy estate. MHMV has not proven how its assistance to Joan LaRosa *618 in administering Virgil's death estate would protect the bankruptcy estate from threatened actions, or further the performance of a debtor-in-possession's duties `under the Bankruptcy Code. The court doubts that MHMV would have any "claim" against the bankruptcy estate for its contemplated services. See 11 U.S.C. § 101(5)(A) (defining a "claim" to be a "right to payment" from the bankruptcy estate); In re Schuler, 354 B.R. at 44 (stating that counsel for the deceased debtor's estate really served the interests of the deceased debtor's spouse; therefore, counsel's "claim" against the bankruptcy estate was disallowed and the court directed counsel to seek compensation from either the spouse or from assets that were exempted from property of the estate).
Moreover, MHMV is already approved as counsel to the debtors-in-possession. To the extent that property of the bankruptcy estate overlaps with that of Virgil B. LaRosa's death estate for probate, nonprobate and/or tax purposes (no overlap exists for purposes of the. Bankruptcy Code), MHMV already has the opportunity to request approval of fees and expenses for services that benefit the bankruptcy estate, such as, if applicable, obtaining updated appraisals of property, and/or obtaining a higher basis for property to be sold under the plan. At that time, MHMV will have the opportunity to demonstrate that the performed service was actual and necessary to the administration of the bankruptcy case pursuant to 11 U.S.C. § 330. In sum, MHMV has failed to demonstrate that the creditors of the Debtors' bankruptcy estate should bear the burden of paying for the administration of Virgil B. LaRosa's death estate when property of the bankruptcy estate is separate from the property that Virgil B. LaRosa owned at his death, and when, the administration of the death estate has not been proven to have any impact on the administration of the bankruptcy estate for purposes of the Bankruptcy Code.
III. CONCLUSION
For the above stated reasons, the court will deny MHMV's application to be employed as special counsel to the Debtors for the purpose of administrating the death estate of Virgil B. LaRosa. Given the court's disposition of this issue, it is not necessary to address whether MHMV would hold any interest adverse to the bankruptcy estate under § 327(e) that would prohibit their employment as special counsel. The court will enter a separate order pursuant to Fed. R. Bankr.P. 9021.
NOTES
[1] MHMV asserts that the bankruptcy estate is like a trust that the debtor has the power to revoke. That analogy is inaccurate. While a debtor has prudential standing to move to dismiss a Chapter 11 case, that dismissal may only be granted by the court for cause, and a court's determination that a case should be dismissed is guided by the best interest of the creditors test. 11 U.S.C. § 1112(b). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536140/ | 928 A.2d 786 (2007)
2007 ME 100
Patricia MONAGHAN
v.
JORDAN'S MEATS et al.
Supreme Judicial Court of Maine.
Argued: November 28, 2006.
Decided: July 31, 2007.
*789 James MacAdam, Esq. Anna Priluck, Esq. (orally), MacAdam Law Offices, Portland, for the Employee.
Kevin M. Gillis, Esq. (orally), Troubh, Heisler, Portland, Robert J. Piampiano, Esq., Piampiano Law Office, Yarmouth, for the Employer.
Panel: SAUFLEY, C.J., and CLIFFORD, ALEXANDER, CALKINS, LEVY, and SILVER, JJ.[*]
SAUFLEY, C.J.
[¶ 1] In this workers' compensation appeal, we are asked to revisit the "work search rule" and to decide whether, pursuant to that rule, evidence that the injured employee made unsuccessful job inquiries at 147 potential employers compels a determination that work is unavailable to her in her local community, thereby requiring an award of 100% partial incapacity benefits. The Workers' Compensation Board hearing officer (Jerome, HO), finding Monaghan's work search to be insufficient, awarded only partial benefits. We review the state of the law regarding the work search rule, and, in light of our analysis, we vacate the hearing officer's decision and remand for further consideration.
I. FACTUAL BACKGROUND
[¶ 2] Patricia Monaghan worked for Jordan's Meats from 1997 until the plant closed in 2005. She was hired as a packer on a production line. She eventually became a team leader, supervising other line employees. Before going to work at Jordan's Meats, she did piece work in a shoe factory for eleven years, and worked as a finance clerk for the City of Westbrook for an additional ten years. She has, from time to time, earned extra money reselling items at flea markets. She resides in the greater Portland area and has a GED.
[¶ 3] On September 19, 2003, Monaghan injured both knees when she tripped and fell over a fan at work. She was able to continue working for Jordan's Meats within her medical restrictions, and suffered no earning incapacity until after the plant closed in 2005. Monaghan filed a petition to fix and for award of workers' compensation benefits. Although she has a full-time work capacity, she continues to be on work *790 restrictions. Her restrictions require that she must vary position and not stand constantly, not climb ladders, stairs or ramps, not lift more than twenty-five pounds, and avoid squatting and kneeling.
[¶ 4] Monaghan sought "100% partial incapacity benefits." She attempted to establish that work was unavailable to her in her local community as a result of her injury with evidence of a work search. She presented evidence that she had contacted 147 employers regarding available work, that she took typing and computer classes in an effort to improve her prospects, but did not secure employment.
[¶ 5] Jordan's Meats submitted a labor market report that identifies fifty advertised jobs in the local labor market within Monaghan's restrictions, and contains the opinion that "there is and has been a stable labor market for Ms. Monaghan."
[¶ 6] The hearing officer concluded that Monaghan continues to suffer partial incapacity from the knee injury, but was not persuaded by the evidence that work within Monaghan's restrictions is unavailable to her as a result of her work injury. Thus, she awarded Monaghan ongoing partial benefits based on her 2003 average weekly wage, less an imputed earning capacity of $300 per week, with an offset for any unemployment benefits received.
[¶ 7] Monaghan filed a request for additional findings of fact and conclusions of law, which the hearing officer denied. She then filed a petition for appellate review, which we granted pursuant to 39-A M.R.S. § 322 (2006) and M.R.App. P. 23.
II. DISCUSSION
[¶ 8] Monaghan asks us to consider whether a particular quantum of evidence, in this case 147 employer contacts and job retraining efforts, should compel the conclusion that a work search is adequate as a matter of law pursuant to the work search rule. In order to address this question, we examine the nature and history of the work search rule, and the manner in which we have evaluated the adequacy of work searches to date.
A. The "Work Search" Rule
[¶ 9] Whether an injured employee receives total or partial incapacity benefits depends on the extent to which that employee retains the ability to earn income after a workplace injury. 39-A M.R.S. §§ 212, 213, 214 (2006). The employee's post-injury earning capacity is based on both "(1) the employee's physical capacity to earn wages, and (2) the availability of work within the employee's physical limitations." Morse v. Fleet Fin. Group, 2001 ME 142, ¶ 5, 782 A.2d 769, 771. An employee who retains some ability to earn may nevertheless be entitled to receive the full amount of workers' compensation benefits, with no deduction for earning capacity, if the persisting effects of the work-related injury prevent the employee from engaging in any remunerative work. Tripp v. Philips Elmet Corp., 676 A.2d 927, 929 (Me.1996).
[¶ 10] An injured employee whose capacity for employment exists but is limited may be entitled to receive the full amount of workers' compensation either as "total" incapacity benefits or as "100% partial" incapacity benefits. The critical distinction between total incapacity and 100% partial incapacity is found in the available duration of the benefits. Those benefits that fall within the 100% partial category are potentially subject to the maximum-week limitation in section 213, while total incapacity benefits awarded pursuant to section 212 would not be. Alexander v. Portland Natural Gas, 2001 ME 129, ¶ 22, 778 A.2d 343, 351.
*791 [¶ 11] There are three ways in which an injured employee can show entitlement to the full amount of workers' compensation benefits.[1] First, an employee who demonstrates a total physical incapacity, that is, the medically demonstrated lack of the physical ability to earn, can prove entitlement to "total" incapacity benefits pursuant to section 212 without a showing of any work search or other evidence that work is unavailable. Morse, 2001 ME 142, ¶ 8, 782 A.2d at 772.
[¶ 12] Second, in limited situations, an employee suffering only partial incapacity to earn may be entitled to "total" benefits pursuant to section 212 if the employee can establish both (1) the unavailability of work within the employee's local community, and (2) the physical inability to perform full-time work in the statewide labor market, regardless of availability. Id.; Alexander, 2001 ME 129, ¶ 19, 778 A.2d at 351.
[¶ 13] Third, a partially incapacitated employee may be entitled to "100% partial" incapacity benefits pursuant to section 213 based on the combination of a partially incapacitating work injury and the loss of employment opportunities that are attributable to that injury. Morse, 2001 ME 142, ¶ 6, 782 A.2d at 771. In order to obtain the 100% benefit, it must be established, pursuant to the "work search rule" that work is unavailable within the employee's local community as a result of the work injury. Id. ¶ 7, 782 A.2d at 772.
[¶ 14] The "work search rule" is a judicially created doctrine designed to allocate the order and presentation of proof related to the availability of work.[2]Tripp, 676 A.2d at 929. When the employee is the petitioning party, as in this case, the employee has the ultimate burden of proof to show that work is unavailable as a result of the work injury within the employee's local community. Morse, 2001 ME 142, ¶ 7, 782 A.2d at 772.
[¶ 15] In a case in which the employer files a petition for review of incapacity, once the employer demonstrates that the employee has regained partial work capacity, the employee bears a burden of production to show that work is unavailable as a result of the injury, and if the employee meets that minimal burden, the employer's "never shifting" burden of proof may require it to show that it is more probable than not that there is work available in the community within the employee's physical ability. Tripp, 676 A.2d at 929.
[¶ 16] We have noted that the term "work search rule" is somewhat of a misnomer because the rule does not limit the employee's ability to prove unavailability of work to demonstration of unsuccessful work searches alone; any competent and persuasive evidence to show the unavailability of work in his or her local community is acceptable, including labor market surveys, or other credible evidence regarding availability of work for a particular employee in the local community. Id. *792 Often, however, a work search is the most straightforward and persuasive method of demonstrating the availability of work, or lack thereof.
[¶ 17] When an employee attempts to show the unavailability of work through work search evidence, the work search must be adequate as a matter of law. Morse, 2001 ME 142, ¶ 12, 782 A.2d at 773. We have described an adequate work search as follows:
[Work search] evidence should disclose that the worker made a reasonable exploration of the labor market in his community for the kind of work he has regained some ability to perform and that he was unable to obtain such work for remuneration either because no stable market for it existed or, if there was such a market, the work was not available to him by reason of the continuing limitations, caused by his work-related injury, upon his ability to perform it.
Ibbitson v. Sheridan Corp., 422 A.2d 1005, 1009 (Me.1980). Further, work search evidence should:
give a rational person reasonable cause to believe that the work-related injury this particular worker sustained is preventing him from obtaining remunerative work "ordinarily" available in the competitive labor market of his community. Such reasonable cause will arise where the worker's exploration of the labor market in his community discloses a number of search experiences manifesting a "pattern", . . . from which it becomes reasonable to infer either that a stable market for the kind of work the worker has regained some ability to perform does not exist in his community, or, if such a market does exist, that work will not be made available to this particular worker because of the persisting effects of the work-related injury he sustained.
Id. at 1011.[3]
B. Evaluating the Employee's Work Search
[¶ 18] The issue of adequacy of a work search is a mixed question of fact and law. Morse, 2001 ME 142, ¶ 12, 782 A.2d at 773. Findings regarding the actual efforts made by the employee to obtain work are factual. Theriault v. Walsh Constr. Co., 389 A.2d 317, 320 (Me.1978). The evaluation of the reasonableness of those efforts, however, is a mixed question requiring us to examine the reasonableness and legality of the hearing officer's ultimate conclusion, with deference to her relevant expertise. Id.
[¶ 19] In the matter before us, the hearing officer made the following findings relevant to Monaghan's work search:
[Monaghan] has looked for work and engaged in various typing/computer classes since [the plant closed]. She has not found work.
Ms. Monaghan must demonstrate, on a more probable than not basis, that work within her restrictions and consistent with her educational and vocational background is unavailable to her on account of the effects of her work injury if she is to receive 100% partial incapacity benefits. Ms. Monaghan has presented work search evidence in this regard but I find that it fails to carry her burden of proof. While I found Ms. Monaghan to be well-intentioned, I note that the way she went about looking for work was *793 problematic in terms of demonstrating that appropriate work was not available. Many of the places she visited were not hiring. The work search was not targeted to available and appropriate work and thus it is not persuasive evidence on Ms. Monaghan's burden of proof.
(Emphasis added.)
[¶ 20] Monaghan contends that the hearing officer erred because the evidence in this case, including evidence that she made 147 unsuccessful employer contacts, compels the conclusion that work was unavailable to her in her local community. She proposes that we adopt a bright line test for evaluating the number of inquiries necessary to establish an adequate work search, contending that such a test would simplify the proceedings and would help provide predictability and uniformity. Ultimately, Monaghan suggests that twenty-five inquiries should be deemed adequate as a matter of law.
[¶ 21] However, as the diversity of analyses in our opinions illustrates, the inquiry must go deeper than a mere examination of the number of contacts that the employee makes with employers. When evaluating a hearing officer's decision regarding the adequacy of a work search, we have in the past taken a variety of factors into consideration. These factors provide guideposts for the evaluation of whether the employee has made a reasonable exploration of the labor market in her community for the kind of work she is able to perform. Those factors include, but are not limited to:
(1) The number of inquiries made or applications submitted by an employee. Bowen v. Maplewood Packing Co., 366 A.2d 1116, 1119 (Me.1976).
(2) Whether the search was undertaken in good faith. McIntyre v. Great N. Paper, Inc., 2000 ME 6, ¶ 7, 743 A.2d 744, 747.
(3) Whether the search was too restrictive. See Cote v. Osteopathic Hosp. of Me., Inc., 432 A.2d 1301, 1305 (Me.1981).
(4) Whether the search was limited solely to employers who were not advertising available positions, or whether the employee also made appropriate use of classified ads or other employment resources in the search. See Ibbitson, 422 A.2d at 1011-12; Bowen, 366 A.2d at 1117-18.
(5) Whether the search was targeted to work that the employee is capable of performing. See Cote, 432 A.2d at 1305.
(6) Whether the employee over-emphasized work restrictions when applying for jobs. Pelchat v. Portland Box Co., Inc., 155 Me. 226, 231, 153 A.2d 615, 618 (1959).
(7) Whether the employee engaged in other efforts to find employment or increase prospects for employment. McIntyre, 2000 ME 6, ¶ 7, 743 A.2d at 747.
(8) The employee's personal characteristics such as age, training, education, and work history. Johnson v. Shaw's Distrib. Ctr., 2000 ME 191, ¶ 12, 760 A.2d 1057, 1060.
(9) The size of the job market in the employee's geographic area. See Bolduc v. Pioneer Plastics Corp., 302 A.2d 577, 581 (Me.1973).
[¶ 22] While all of the factors set forth in this nonexclusive list have been noted in our prior decisions, we restate them here in order to clarify that the hearing officer's task is not to focus on any single aspect of the employee's efforts, but to view the evidence through a broad lens to determine whether the employee's efforts demonstrate that she was unable to find work because (1) no stable market for the kind of work she is able to perform exists in the local community; or (2) if *794 there is such a market, that work is unavailable to the employee due to the persisting effects of the work-related injury. Establishing a bright line beyond which a particular number of contacts would constitute an adequate work search as a matter of law cannot substitute for a thorough evaluation and weighing of the factors bearing on the reasonableness of the work search.
[¶ 23] Having rejected Monaghan's call for a bright line rule, we turn now to whether the hearing officer adequately addressed the relevant factors when evaluating Monaghan's work search. The hearing officer considered several appropriate factors. She determined that the search was conducted in good faith, that Monaghan did look for work, and that she had taken computer and typing classes to improve her job prospects. On the other hand, she also found that Monaghan had conducted the work search in a manner that was not targeted to employers who were hiring, and that Monaghan randomly contacted employers instead of targeting the search to advertised, appropriate work. While the hearing officer found that many of the places Monaghan contacted were not hiring, she did not evaluate the extent to which Monaghan may have responded to advertisements or used other resources for finding jobs, in addition to making cold calls.
[¶ 24] Other factors may have been a part of the hearing officer's analysis, but are not set forth in the decision. For example, although the hearing officer may have been persuaded by the labor market evidence presented by the employer showing fifty available jobs within Monaghan's restrictions, she did not make any findings with respect to that evidence. In addition, the hearing officer did not expressly consider whether Monaghan's personal characteristics, such as age and experience, had any bearing on her lack of success, whether she properly presented her work restrictions to employers, or whether she focused on jobs that were beyond her physical capabilities.
[¶ 25] Because we have not previously addressed the factors to be considered in determining the accuracy of a work search in the detail we have set forth here, and because we are unable to determine what additional facts may have played a part in the hearing officer's decision and how those facts would ultimately have been weighed, we vacate the decision and remand to the hearing officer for reconsideration of the evidence in light of the principles announced in this decision.[4]
The entry is:
The decision of the Workers' Compensation Board hearing officer is vacated, and the matter remanded for proceedings consistent with this opinion.
NOTES
[*] Justice Howard H. Dana Jr. sat at oral argument and participated in the initial conference but retired before this opinion was certified.
[1] Both the total incapacity benefit and the 100% partial benefit would be calculated by taking 80% of the employee's after tax average weekly wage, without any deduction for earning capacity, capped at the maximum benefit. 39-A M.R.S. §§ 211, 212, 213 (2006).
[2] The Legislature has, from time to time, codified various aspects of the work search rule. The current version of the Act contains no explicit codification of the rule. We have held, however, that the partial incapacity statute, 39-A M.R.S. § 213, implicitly incorporates the rule by providing that partial benefits are to be calculated according to what the post-injury employee is "able to earn." Bureau v. Staffing Network, Inc., 678 A.2d 583, 587-89 (Me.1996).
[3] Ibbitson v. Sheridan Corp., 422 A.2d 1005 (Me.1980) involved an employer's petition for review of incapacity. While the language cited herein describes the employee's burden of production, we find it equally descriptive of the employee's burden of proof, the difference resting in the quantum and persuasive quality of the evidence required to meet the burden.
[4] Monaghan also urges us to place an initial burden of production on the employer to show that work exists within the employee's restrictions in the local community, even when the employee has the burden of proof. We decline to do so because we discern no compelling reason to require the employer to develop labor market evidence in every case. Moreover, in this case, Jordan's Meats presented labor market evidence that would have been sufficient to meet any such proposed burden of production. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536474/ | 223 B.R. 431 (1998)
In re Joseph S. LEFRAK, Debtor.
Alexander SCHACHTER, as Trustee of the Estate of Joseph S. Lefrak, Plaintiff,
v.
Susan LEFRAK, Defendant.
Bankruptcy No. 96 B 43478 (SMB), Adversary No. 98-8154A.
United States Bankruptcy Court, S.D. New York.
August 14, 1998.
*432 Rosenman & Colin LLP, New York City, A. Peter Lubitz, Melissa A. Hager, of counsel, for Plaintiff.
Law Offices of Ian J. Gazes, New York City, Ian J. Gazes, of counsel, for Defendant.
MEMORANDUM DECISION DIRECTING DEFENDANT TO TURN OVER COOPERATIVE APARTMENT
STUART M. BERNSTEIN, Bankruptcy Judge.
Under section 365(d)(1) of the Bankruptcy Code, a chapter 7 trustee must assume or reject a debtor's unexpired lease within sixty days of the order for relief. If he fails to do so, and if the court does not grant him *433 additional time to decide, the lease will be deemed rejected. The primary issue before the Court is whether the debtor-shareholder's proprietary lease in a cooperative apartment building is a lease for purposes of section 365. The Court holds that it is not, and for the reasons set forth below, directs the occupant of the apartment, the debtor's non-debtor wife, the defendant Susan Lefrak ("Susan"), to turn over possession to the trustee. In addition, the trustee is entitled to payment of postpetition use and occupation in an amount to be determined in a subsequent hearing.
BACKGROUND
A. Prior Proceedings
This adversary proceeding represents the second round in a dispute between the trustee and the Lefraks. The first culminated in a decision that the estate owns the entire interest in the subject cooperative apartment (the "Apartment"), see Schachter v. Lefrak (In re Lefrak), 215 B.R. 930 (Bankr.S.D.N.Y. 1998), and the trustee subsequently commenced this suit to compel its turnover and to recover use and occupation from Susan. The relevant facts have been determined in the previous litigation or are not in dispute.
The debtor, Joseph S. Lefrak ("Joseph"), and Susan married in September 1952, and moved into the Apartment (14D), located at 983 Park Avenue in Manhattan, in 1976. In 1982, the building converted to cooperative ownership. Joseph acquired the shares (the "Shares") representing an interest in the corporation that owned the building (the "Corporation"), and entered into a proprietary lease (the "Lease") with the Corporation to occupy the Apartment. Joseph was the sole owner of the Shares and the sole lessee under the Lease.
The prior litigation concerned the ownership of the Shares and Lease.[1] The Lefraks contended that Joseph conveyed a 50% joint interest in the Shares and Lease to Susan in 1984. Thereafter, pursuant to a 1994 oral separation agreement, Joseph conveyed the remaining 50%. Prior to but certainly no later than the oral separation agreement, Joseph moved out, and Susan became (and has remained) the sole occupant of the Apartment. The Lefraks argued that as a result of these transactions, Susan owned the Shares and Lease, and they never became property of Joseph's estate when he subsequently filed his chapter 7 petition in 1996.
The trustee challenged the transfers. He commenced the first adversary proceeding to avoid them and to obtain a judicial declaration that the estate owned 100% of the interest in the Apartment. Following a trial, the Court held that both transfers were ineffective. As a consequence, the entire interest in the Apartment became property of the estate. In re Lefrak, 215 B.R. at 938.[2]
B. This Adversary Proceeding
The ruling did not address Susan's continued occupancy; she has lived in the Apartment, rent free, during the entire case. The parties agree that the unpaid postpetition maintenance is approximately $35,000.00, and continues to accrue at the monthly rate of about $2,500.00. The unpaid maintenance is secured by the interest in the Shares. (By-Laws of 983 Tenants Corp. ("By-Laws"), art. VI, § 6.) In addition, the Shares and Lease secure Joseph's loan from Dime Savings Bank, and this loan has not been satisfied. As a result, the failure to make monthly maintenance or mortgage payments eats away at the estate's equity.
Following the first decision, the trustee commenced this adversary proceeding to compel Susan to turn over the Apartment and to recover postpetition use and occupation charges of approximately $140,000.00. Susan did not answer, and the clerk entered her default. See Fed R. Civ. P. 55(a). Susan subsequently moved to vacate her default, and the trustee opposed the motion. He argued that she had failed to show a meritorious defense to the turnover application. It became evident that the dispute raised purely legal issues, and accordingly, the Court, with the parties' consent, vacated the default, accepted Susan's proposed answer and treated *434 the submissions as cross-motions for summary judgment.
In response to the trustee's turnover application, Susan makes two arguments.[3] First, Susan challenges the trustee's standing. The trustee failed to assume the Lease within sixty days following the judgment in the first adversary proceeding, and Susan argues that the Lease has been deemed rejected under 11 U.S.C. § 365(d)(1). The rejection, she maintains, results in an abandonment of the estate's interest in the Lease to Joseph, and the trustee has no right to evict her. Second, she contends that under the 1994 oral separation agreement, Joseph gave her a possessory interest in the Apartment which is superior to the estate's title. The parties have made other arguments as well, but in light of the Court's disposition, it is unnecessary to reach them.
DISCUSSION
A. The Scope of Section 365
To the extent relevant here, section 365 permits a chapter 7 trustee to assume or reject an unexpired lease. The purpose of this section is to benefit the estate by permitting assumption of beneficial leases and rejection of burdensome ones. See Liona Corp. v. PCH Assocs. (In re PCH Assocs.), 804 F.2d 193, 200 (2d Cir.1986). The Code further provides that a lease is deemed rejected if the trustee does not move to assume it, or to extend his time to decide, within sixty days of entry of the order for relief. 11 U.S.C. § 365(d)(1).
It is well-settled that section 365 applies only to "true" or "bona fide" leases, see International Trade Admin. v. Rensselaer Polytechnic Inst., 936 F.2d 744, 748 (2d Cir.1991); In re PCH Assocs., 804 F.2d at 198-99,[4] and its applicability presents a question of federal law. Barney's, Inc. v. Isetan Co. (In re Barney's, Inc.), 206 B.R. 328, 332 (Bankr.S.D.N.Y.1997). Thus, while state law may treat the agreement as a lease,[5] this does not mandate the application of section 365. In re Moreggia & Sons, Inc., 852 F.2d *435 1179, 1182-83 (9th Cir.1988); In re KAR Dev. Assocs., L.P., 180 B.R. 629, 638-39 (D.Kan.1995); Hotel Syracuse, Inc. v. City of Syracuse Indus. Dev. Agency (In re Hotel Syracuse, Inc.), 155 B.R. 824, 838 (Bankr. N.D.N.Y.1993).
Instead, courts consider the economic substance of the transaction, see International Trade Admin., 936 F.2d at 748; In re PCH Assocs., 804 F.2d at 200, and whether "the parties intended to impose obligations and confer rights significantly different from those arising from the ordinary landlord/tenant relationship." In re PCH Assocs., 804 F.2d at 200; see In re Moreggia & Sons, Inc., 852 F.2d at 1184. Typically, the reported cases address the distinction between "true" leases and financing arrangements, and apply criteria that focus on that distinction. These include whether the "rent" reflects compensation for the use of the property or is structured as a return on an investment, whether the purchase price is based on the market value of the land or the amount necessary to finance the transaction, whether the property was purchased specifically for the lessee's use, whether the transaction is structured as a lease for tax reasons, whether the lessee assumes the obligations normally associated with outright ownership and whether the lessee can acquire the property at the end of the term for a nominal payment. See, e.g., In re PCH Assocs., 804 F.2d at 200-01; In re KAR Dev. Assocs., L.P., 180 B.R. at 639; In re Barney's, Inc., 206 B.R. at 334; In re Challa, 186 B.R. 750, 757 (Bankr. M.D.Fla.1995); In re Hotel Syracuse, Inc., 155 B.R. at 838-39; see S. Rep. No. 95-989, at 64 (1978). Other relevant considerations are the length of the lease, International Trade Admin., 936 F.2d at 749-50, and whether the lease is part of a larger agreement. In re TAK Broadcasting Corp., 137 B.R. 728, 731, 733-34 (W.D.Wis.1992).
B. The Proprietary Lease and Section 365
The Lease in question is clearly not a financing device. The Corporation, the landlord under the Lease, did not lend Joseph any money, and there is no debt to secure. It does not follow, however, that because the Lease fails the test of a disguised security agreement it must therefore be a "true" lease. Rather, the issue is whether the Lease created a typical residential landlord-tenant relationship, or instead, conferred the risks and rewards of home ownership. The inquiry remains the same the economic substance or reality of the transaction and many of the criteria used to distinguish leases from security arrangements are germane.
In the usual landlord-tenant relationship, a landlord acquires a building for his own benefit, and then rents apartments to his tenants at a profit, subject to the effects of the various rent control laws. The residential tenant does not fund the landlord's acquisition, and, aside from a security deposit, does not make an initial payment. The tenant receives a relatively short lease, and pays a fixed rent. He does not assume any of the obligations associated with ownership; he has no liability for operating costs beyond the payment of rent. Similarly, he does not face the risks or enjoy the rewards of fluctuating values in the real property market. While the tenant has the right to use and enjoy the premises during the term of his lease, he does not acquire an asset that he can pledge or sell, and at the end of his lease (and absent a lease renewal), he simply leaves.
The Lease reflects many aspects of an ordinary residential tenancy, and as noted, New York law often treats the proprietary lessee in the same manner as a residential tenant. Nevertheless, the economic reality of the entire transaction between the Corporation and Joseph demonstrates that Joseph purchased real property, and his interest cannot be distinguished from that of another debtor who buys a home. An interest in a cooperative apartment is sui generis. Estate of Carmer, 71 N.Y.2d 781, 530 N.Y.S.2d 88, 525 N.E.2d 734, 735 (1988). A corporation owns the land and building, a prospective resident purchases shares in the corporation, and the share ownership entitles the shareholder to a long term proprietary lease for a specific apartment. State Tax Comm'n v. Shor, 43 N.Y.2d 151, 400 N.Y.S.2d 805, 371 N.E.2d 523, 526 (1977).
*436 The Corporation, though titular landlord under the Lease, acts as a representative of the tenant shareholders, and acquires and operates the building for the tenant shareholders' benefit rather than its own. The by-laws of the Corporation state that "[t]he primary purpose of the Corporation is to provide residences for the shareholders who shall be entitled, solely by reason of their ownership of the shares, to proprietary leases for apartments in the building owned by the Corporation." (By-Laws, art. I, § 1.)[6] No one shareholder could acquire the entire building, and become a real estate owner in the usual sense. Instead, the Corporation acted as a conduit, facilitating the acquisition so that Joseph and the other shareholders could then purchase the interests in their individual apartments.
In order to acquire his cooperative interest, Joseph had to make a substantial payment, similar to buying a house, which the Corporation used to fund the acquisition of the building. The Corporation raised the cash portion of the purchase price approximately $7.5 million (see Offering Plan at 14) from the shareholders. It offered 75,053 shares of stock for sale at $100.00 per share, (see id. at 4c), but its offering did not include a profit factor. (See id. at 25.) The shares were allocated to the fifty-five apartments in the building based upon each apartment's perceived value relative to the perceived value of all other apartments in the building. (See id. at 3.)[7] The Corporation allocated 919 shares, and a purchase price of $91,900.00 to the Apartment, (id. at 4c), which Joseph had to pay to become a shareholder.
Once Joseph became a shareholder, he acquired the right to enter into a 98 year proprietary lease. (Proprietary Lease at 1). His maintenance obligation under the Lease reflected his pro rata share of the Corporation's projected cash requirements, i.e., operating expenses, mortgage and taxes, (Proprietary Lease at 1, 2; Offering Plan at 4-4e), budgeted annually by the Corporation's board of directors without regard to profit. (See Proprietary Lease at 2.) In this manner, the usual landlord expenses of operating the building were passed through the Corporation directly to the tenant shareholders who bore the ultimate obligation to pay them. If operating expenses increased, or the Corporation suddenly needed cash that it did not have, Joseph had pay his share through maintenance increases or assessments. Even if expenses did not change, the shareholders were ultimately responsible to cover a short fall created when another shareholder failed to pay maintenance or an assessment.
Like other real property owners, Joseph also enjoyed the risks and rewards of a fluctuating real estate market. His interest represented a substantial asset which he could sell, or as he did, pledge to secure a loan. If real estate values rose, he benefitted through the ability to sell his interest at a higher price, or secure a greater amount of indebtedness; if they fell, he suffered a corresponding detriment.
In addition, and as already mentioned, the execution of the Lease was part of a larger transaction with non-lease attributes. To be eligible to enter into the Lease, Joseph had to purchase the Shares. The Shares and Lease are inseparable, State Tax Comm'n v. Shor, 400 N.Y.S.2d 805, 371 N.E.2d at 524, and cannot be viewed in isolation. Bland v. Two Trees Management Co., 498 N.Y.S.2d 336, 489 N.E.2d at 227. Yet, while Susan contends that the Lease must be assumed or rejected, she never argues that the Shares are subject to section 365. Interestingly, Susan nonetheless reaches this very result through the back door. She maintains that once the Lease was rejected, the inseparability *437 of the Shares rendered them valueless to the trustee, and he should be compelled to abandon the Shares. Susan implicitly assumes that the Lease can drag the Shares within the scope section 365, and ignores the opposite possibility.
As a shareholder, Joseph had rights that a residential tenant does not. For example, his share ownership entitled him to vote for a board of directors. The directors run the Corporation for the tenant shareholders' benefit, and owe them fiduciary duties. See, e.g., Levandusky v. One Fifth Avenue Apartment Corp., 75 N.Y.2d 530, 554 N.Y.S.2d 807, 553 N.E.2d 1317, 1321-22 (1990); Smolinsky v. 46 Rampasture Owners, Inc., 230 A.D.2d 620, 646 N.Y.S.2d 110, 112 (1996); Katz v. 215 West 91st Street Corp., 215 A.D.2d 265, 626 N.Y.S.2d 796, 797-98 (N.Y.App.Div.1995). The Corporation must keep "full and correct books," which any proprietary lessee may inspect, and must also deliver certified annual financial statements. (Proprietary Lease at 5); see N.Y. Bus. Corp. Law § 624 (McKinney 1986).
Thus, the relationship between the cooperative housing corporation and the proprietary lessee is atypical, and the limited authorities support the conclusion that the Shares and Lease should not be treated as a "true" lease under section 365. In In re Rosenfeld, 23 F.3d 833 (4th Cir.), cert. denied, 513 U.S. 874, 115 S. Ct. 200, 130 L. Ed. 2d 131 (1994), a discharged chapter 7 debtor argued that his trustee's failure to assume his proprietary lease resulted in its "deemed" rejection, and terminated his obligation to pay cooperative dues. Id. at 838. The Court disagreed, noting that under the Virginia statutes which are similar to the laws of New York the proprietary lease was not a lease in the traditional sense, and hence, not subject to rejection:
More importantly, Rosenfeld's argument is not supported by the statute. The cooperative interest is defined as "an ownership interest in the [cooperative] association coupled with a possessory interest in a unit under a proprietary lease." [Citation omitted.] Any transfer of an ownership interest in an association without the possessory interest in the unit to which the ownership interest is related is void. [Citation omitted.] Thus, the possessory interest granted by the proprietary lease is inseparable from the ownership interest in the cooperative. The proprietary lease is not a lease in the traditional sense, but a method of indicating in which of the commonly-owned apartments a particular owner has a possessory interest. Rosenfeld retains title to his cooperative interest and the possessory interest in his apartment as well.
Id. at 838-39.
In re Robertson, 147 B.R. 358 (Bankr. D.N.J.1992) dealt with a different but analogous issue, and its reasoning supports the same conclusion. There, the court was called upon to decide whether a proprietary lessee could be dispossessed through the state court procedures available to ordinary residential landlords under New Jersey law. The bankruptcy court contrasted the proprietary lessee with the usual residential tenant, and ultimately concluded that the differences were sufficient to deprive the cooperative housing corporation of recourse to the typical landlord's remedies:
Likewise, the role of the cooperator/shareholder is not the same as that of the typical tenant. Nor does the function of the cooperative achieve the same results of the landlord/tenant relationship. As stated previously, the cooperator/shareholder is entitled to occupancy permanently for the life of the cooperative corporation. The tenant does not have such security, in fact, his occupancy is limited to the term of the lease, or if there is no written lease, to a month to month tenancy. The cooperator is a stockholder-occupant who pays one lump sum (as the Debtor did in this case) at the beginning of the cooperative/cooperator relationship for the ownership of the unit and then continues to pay monthly maintenance costs for the expenses incurred in operation of the cooperative corporation. The tenant merely rents a space and pays an equal sum in installments for the duration of his or her tenancy. The cooperators/shareholders are responsible for the expenses related to maintaining the premises *438 amongst themselves. If one cooperator/shareholder fails to make a monthly payment, the other cooperators/shareholders are responsible for that payment. By contrast, the tenant is solely responsible for his monthly payments and depends upon the landlord to properly maintain the premises. If that tenant fails to pay his rent, he subjects himself to removal from the premises. Finally, a cooperative generally is not a money making venture. On the other hand, a landlord rents to tenants for the landlord's own economic benefit.
Id. at 365.
Finally, the Internal Revenue Code allows the cooperative tenant-shareholder, rather than the corporation, to take an income tax deduction for real estate taxes and mortgage interest paid by the corporation. See 26 U.S.C. § 216. The purpose of section 216 is to put cooperative tenant-shareholders on an equal footing with home owners, who can deduct mortgage interest and property taxes under 26 U.S.C. §§ 163 and 164, respectively. Eckstein v. United States, 196 Ct. Cl. 644, 452 F.2d 1036, 1047-48 and nn. 19-20 (1971). In contrast, residential rental expenses are in the nature of personal, family or living expenses and are not deductible. Id., 452 F.2d at 1048 n. 20; see 26 U.S.C. § 262.
Susan's authorities do not support a contrary conclusion. In Bentley v. 75 East End Owners, Inc. (In re Bentley), 26 B.R. 69 (Bankr.S.D.N.Y.1982), the court held that an anti-assignment clause in a proprietary lease was unconscionable. The only hint of the section 365 issue appears in background facts; the court noted that "[o]n June 29, 1981, Bentley was authorized to assume, without opposition, the unexpired proprietary lease for the Apartment as an executory contract." Id. at 70 (emphasis added); compare In re Lippman, 122 B.R. 206, 207 and n. 1 (Bankr.S.D.N.Y.1990) (reaching merits of cooperative corporation's motion to deem debtor's proprietary leases rejected, but specifically noting that the debtor did not object to movant's characterization of his interests as true leaseholds). Thus, the court did not decide that a proprietary lease fell within the reach of section 365.
In In re Miller, 125 B.R. 441 (Bankr. W.D.Pa.1991), the bankruptcy court allowed the debtors, who owned a condominium, to reopen their no-asset chapter 7 case to schedule and reject an executory maintenance contract with the condominium association. At the time of filing, the debtors were current on their maintenance obligations and intended to abandon the condominium to the undersecured mortgagee. Id. at 442. The parties' arguments and the court's analysis focused on the dischargeability of postpetition assessments for condominium maintenance. The court assumed that the maintenance contract was an executory contract capable of being rejected by a debtor. Accordingly, the case offers little guidance as to whether a proprietary lease falls within section 365.
In summary, the Lease is not a "true" lease under section 365. Accordingly, the trustee's failure to assume the Lease did not lead to its rejection or affect the estate's interest. The economic substance of the transaction, particularly the allocation of rights, obligations, risks and rewards between Joseph and the Corporation, indicate an intent to pass the incidents of ownership interest through the Corporation to the tenant shareholders. Had the parties called their occupancy agreement a "cooperative apartment deed" rather than a proprietary lease, they would have more accurately expressed the nature of the interest that Joseph acquired.
C. Susan's Possessory Interest
Susan contends that even if the estate owns the Apartment, she nevertheless holds a possessory interest, and apparently, can remain indefinitely without paying maintenance or use and occupation. First, she argues that the Apartment is a "marital asset," and implies that this gives her a right of possession. "Marital property" is a concept unique to equitable distribution. It consists of "all property acquired by either or both spouses during the marriage and before the execution of a separation agreement or the commencement of a matrimonial action, regardless of the form in which title is held." N.Y. Dom. Rel. Law § 236, Part B, subd. 1(c) *439 (McKinney 1986). Joseph's interest in the Apartment qualifies as "marital property."
Under New York law, a spouse's right in "marital property" owned by the other, debtor spouse, does not affect the rights of the debtor spouse's creditors. Aluminum Co. of Am. v. Moskovitz, No. 88 Civ. 2616, 1991 WL 177246, at *3 (S.D.N.Y. Sept. 5, 1991). The rights in "marital property" are inchoate and do not vest until entry of a judgment dissolving the marriage. In re Cole, 202 B.R. 356, 360 (Bankr.S.D.N.Y.1996)(citing cases). If the state court enters a divorce decree, makes an equitable distribution award and transfers title to the nondebtor spouse prior to bankruptcy, the property will not become property of the debtor spouse's estate. See In re Purpura, 170 B.R. 202, 208 (Bankr.E.D.N.Y. 1994); In re Greenwald, 134 B.R. 729, 730-31 (Bankr.S.D.N.Y.1991). However, if bankruptcy intervenes prior to the divorce decree, the bankruptcy cuts off the inchoate right in "marital property," and leaves the nondebtor spouse with an unsecured claim. See In re Cole, 202 B.R. at 360. The Lefrak's marriage has never been dissolved, and no court has rendered an equitable distribution award or granted Susan any rights in the Apartment. Accordingly, although the Apartment may meet the definition of "marital property," Joseph's intervening bankruptcy cuts off her rights, and renders his interest in the Apartment subject to the claims of his creditors through his bankruptcy.
Second, Susan contends that she acquired a possessory interest in the Apartment under the oral separation agreement. According to Susan, the 1994 agreement contained the following material terms:
1. The Lefraks would live separate and apart.
2. Joseph would relinquish his interest in the Apartment, and Susan would be the sole owner, free of any right or claim by Joseph.
3. All personal property, furniture and fixtures in the Apartment would be Susan's sole property.
4. Joseph would support Susan in a manner comparable to her pre-separation standard of living, and pay the maintenance, mortgage, taxes and insurance on the Apartment.
(Affidavit of Susan Lefrak, sworn to May 19, 1998, ¶ 2.)
Her argument is merely a rehash of one she and Joseph have already lost. In the prior adversary proceeding, the Court ruled that the 1994 attempted transfer was ineffective. See In re Lefrak, 215 B.R. at 932. Her present argument bifurcates possession and title, suggesting that if the transfer of the latter fell, somehow, the transfer of the former did not. There are two fallacies with this argument: one factual and one legal. The 1994 agreement does not state or imply that Joseph will remain the owner and provide rent-free occupancy to Susan. Rather, the agreement provides that Joseph will transfer his remaining ownership interest, and live elsewhere. Further, Susan does not articulate why, as a matter of law, the transaction she describes created a possessory right apart from the transfer of title that has been ruled invalid.
In the absence of a possessory interest granted by valid agreement or decree, Susan occupies the Apartment solely by virtue of her right to support inherent in the marital relationship. See Rosenstiel v. Rosenstiel, 20 A.D.2d 71, 245 N.Y.S.2d 395, 401 (1963). However, Joseph's obligation to provide suitable housing does not, without more, give Susan a right in specific property, i.e., the Apartment. See id., 245 N.Y.S.2d at 402-03 (Steuer, J. concurring). Further, the trustee stands in the shoes of a judicial lien creditor. 11 U.S.C. § 544(a). If a judgment creditor executed on Joseph's interest outside of bankruptcy, Susan could not remain in the Apartment absent the consent of the judgment creditor. See Algemene Bank Nederland N.V. v. Toepfer, 175 A.D.2d 4, 573 N.Y.S.2d 72, 74-75 (1991). The trustee's turnover proceeding serves the same function, and Susan, who does not allege an occupancy agreement with the trustee, must vacate the Apartment.
D. The Trustee's Right to Use and Occupation
Having determined that Susan has no right to occupy the Apartment, the Court *440 must turn to whether she must pay use and occupation to the estate. Susan essentially argues that she may live rent free. Each month, the unpaid maintenance becomes a lien on the Shares. If the estate ultimately prevails on the title question and owns the entire interest in the Shares and Lease, the creditors will be substantially prejudiced by Susan's failure to pay maintenance and the resulting increase in the Corporation's lien. Her refusal to vacate or pay maintenance grants her a windfall a rent free, six room apartment on Park Avenue near 81st Streetat the creditors' expense. This would appear to fit the dictionary definition of unjust enrichment. See In re Chateaugay Corp., 10 F.3d 944, 957-58 (2d Cir.1993).
The two cases cited by Susan do not support her claimed right to live rent free. Campo v. Sontag (In re Sontag), 151 B.R. 664, 669 (Bankr.E.D.N.Y.1993) and Oliva v. Oliva, 136 A.D.2d 611, 523 N.Y.S.2d 859, 860 (1988) both state the common law rule that one cotenant has no obligation to pay rent to another cotenant. As this Court has already determined, Joseph was the sole owner of the Shares and the Lease, and he and Susan were not tenants in common. Further, in each case, the spouse occupied the residence pursuant to a matrimonial court order. See In re Sontag, 151 B.R. at 669; Oliva v. Oliva, 523 N.Y.S.2d at 860. In contrast, no court has awarded Susan exclusive possession or any possession of the Apartment. The Lefraks had well over a year to convert their oral agreement into a court-approved arrangement before Joseph filed this case. Further, the relevant equities to consider are not those between Joseph and Susan, but those between Susan and the creditors of Joseph's estate. The Court has not been presented with any factors which tilt the balance of these equities in Susan's favor, and accordingly, she is liable to the estate for use and occupation.
CONCLUSION
The trustee is entitled to an order directing Susan to surrender the Apartment. The trustee is also entitled to use and occupation in an amount to be fixed at a subsequent hearing. The parties are directed to contact chambers to obtain a hearing date.
Settle order on notice.
NOTES
[1] Joseph pledged both to Dime Savings Bank to secure the loan Dime made to enable Joseph to purchase the interest. Dime still retains possession of the Shares and Lease.
[2] The Lefraks' appeal from the ensuing judgment is pending before the District Court.
[3] In addition, Susan continues to press that the Court's original decision was wrong, and she owns the Shares and Lease. This issue is on appeal and will not be considered.
[4] In PCH, the Second Circuit concluded that a broader reading of section 365 would create a large class of "lessors" who would benefit at the expense of the other creditors, with no concomitant benefit to the estate. In re PCH Assocs., 804 F.2d at 200. Although not stated in so many words, the Court was doubtless concerned that assumption elevates a lessor's prepetition claim because the debtor must cure all defaults, including prepetition defaults, at the time of assumption or promptly thereafter. 11 U.S.C. § 365(b)(1)(A). Thus, while other unsecured creditors, at best, generally receive a percentage of their claims at the end of the case, the lessor under an assumed lease receives full payment and is not required to wait. Further, the assumption frees the lessor from the restrictions imposed on the amount of his claim under 11 U.S.C. § 502(b)(6) in the event that the debtor (or trustee) subsequently breaches the lease. In re Klein Sleep Prods., Inc., 78 F.3d 18, 28-29 (2d Cir.1996).
While the PCH Court did not consider the effect of a lease rejection on the estate, rejection can similarly grant an unintended windfall at the creditors' expense. Susan's argument illustrates just how this can occur. Susan maintains that the trustee's "deemed" rejection of the Lease results in an abandonment, taking the Lease out of the estate and revesting title in Joseph. See In re Rosenfeld, 23 F.3d 833, 839 (4th Cir.), cert. denied, 513 U.S. 874, 115 S. Ct. 200, 130 L. Ed. 2d 131 (1994); Rich Mar Apartments v. Knight (In re Knight), 8 B.R. 925, 929 (Bankr.D.Md.1981). In addition, she argues that because the Shares and the Lease are inseparable, the estate must now abandon the Shares as well. Since Joseph has obtained a discharge, he would, therefore, receive title to the Shares and the Lease free of the claims of his unsecured creditors, and subject only to the liens of the Corporation (for unpaid maintenance) and the Dime (on account of the unpaid loan). Thus, the "deemed" rejection does not serve to free the estate from an onerous obligation to perform, but instead, strips it of a valuable interest in property, and grants a windfall to Joseph and, possibly, Susan.
[5] New York treats tenant shareholders as lessees for some purposes and as real property owners for others. Kessler v. Grand Cent. Dist. Management Ass'n, Inc., 960 F. Supp. 760, 767-68 & nn. 8-9 (S.D.N.Y.1997). The shares in the cooperative corporation and the proprietary lease cannot be viewed in isolation from one another. Bland v. Two Trees Management Co., 66 N.Y.2d 556, 498 N.Y.S.2d 336, 489 N.E.2d 223, 227 (1985). Courts must assess, "on case-by-case basis which aspect of this paradoxical interest predominates, in order to determine the applicability of a particular rule of law or statutory scheme." Estate of Carmer, 71 N.Y.2d 781, 530 N.Y.S.2d 88, 525 N.E.2d 734, 735 (1988).
[6] The by-laws are part of the Offering Plan [re Conversion to Cooperative Ownership of Premises at 983 Park Avenue, New York, New York 10028], dated Apr. 2, 1982 ("Offering Plan"). The Offering Plan was received in evidence at the first trial as Plaintiff's exhibit "B."
[7] For example, the "D" line, which included the Apartment, consisted, with one exception, of a six room apartment with three bathrooms. Moving from lowest to highest floors, the share allocation ranged from 869 (second floor) to 923 (fifteenth floor), and the purchase price from $86,900.00 to $92,300.00. These values vary based on the floor location of the apartment without regard to its condition. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536333/ | 928 A.2d 1135 (2007)
LINDH
v.
LINDH.
No. 639 WDA 2006.
Superior Court of Pennsylvania.
April 19, 2007.
Reversed and Remanded. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536330/ | 223 B.R. 193 (1998)
In re Linda Ballard DeVORE, Debtor.
Linda Ballard DeVORE, Appellant,
v.
Richard MARSHACK, Trustee; Jeffrey W. Virden, Esquire, Appellees.
BAP Nos. CC-97-1836-BOvH, CC-97-1837-BOvH, Bankruptcy No. SA 93-21869-LR.
United States Bankruptcy Appellate Panel of the Ninth Circuit.
Argued and Submitted May 20, 1998.
Decided July 31, 1998.
*194 Linda Ballard DeVore, Tacoma, WA, Pro se.
Jon K. Alban, Santa Ana, CA, for Richard Marshack.
Before BRANDT, HAGAN, and OVERSTREET[1], Bankruptcy Judges.
*195 OPINION
BRANDT, Bankruptcy Judge.
Debtor appeals two related bankruptcy court orders, the first denying her motion for an order directing the Chapter 7 trustee to release state court litigation proceeds, and the second approving fees for special counsel's services in the state court litigation. We REVERSE both orders and REMAND the former for further proceedings in accordance with this disposition.
FACTUAL BACKGROUND
Appellant-Debtor Linda Ballard DeVore ("DeVore" or "Debtor") filed a petition for relief under Chapter 7[2] on 1 November 1993. Richard Marshack ("Marshack" or "trustee") was appointed Chapter 7 trustee. Among the assets listed in DeVore's Schedule B was a cause of action filed in Los Angeles County Superior Court, Linda Ballard DeVore v. Trans Union Corporation, et al., Case No. BC077839 ("state court litigation").
By order dated 16 September 1994, the trustee was authorized to employ Jeffrey Virden ("Virden") as special counsel to the trustee to represent the estate in the state court litigation. The order provides that Virden is to "receive 33 1/3% of any amounts (including principal, interest, costs or attorneys' fees) from settlement, award, judgment or other recovery from the State Court Action."
DeVore moved from her Orange County, California residence in October of 1994 and currently resides in Tacoma, Washington. She filed a change of address with the bankruptcy court on 22 September 1997.
On 12 July 1996, after jury trial in the state court litigation, a judgment of $15,000 plus costs was entered in favor of the plaintiff-debtor against defendant Bank of America. On 31 October 1996, Marshack filed a Trustee's Report of No Assets, and an order closing the case was entered the following day.
DeVore contacted the trustee's office in January of 1997 to inquire as to why the case had been closed. The individual who answered her call told her the trustee had closed the case because he did not believe it was economical to administer the judgment against the Bank of America. DeVore also contacted Virden, who told her the trustee had abandoned the judgment. Subsequently, believing that she would be the recipient of the litigation proceeds, DeVore promised payment to Schick Moving and Storage Company for storage of items for which $11,031.77 was past due. Schick agreed to forego its right to foreclose based on DeVore's promise of payment.
As a result of Virden's collection efforts, Bank of America issued a check on 23 June 1997 for $18,652.00, made payable to Jeffrey W. Virden, Esq., Linda Ballard DeVore, and Richard A. Marshack, Trustee. Virden forwarded the check to DeVore, who signed and returned it to Virden. Virden then signed the check and forwarded it to Marshack on 18 July 1997.
By letter to the court dated 4 August 1997, DeVore indicated her new counsel to be Robert J. Anderson ("Anderson") and provided his address. In the letter, DeVore stated, "[i]f there are any motions to reopen the case or for other relief, we wish the opportunity to oppose the motions." The "cc:" notation at the bottom of the letter indicates a copy was sent to Marshack, Anderson, and Virden.
On 12 August 1997, the trustee filed and served a motion to reopen the case to administer the award from the state court action. The motion was served on the U.S. Trustee, DeVore, and DeVore's former attorney, Joseph A. Weber, who had withdrawn from the case on 30 August 1994. Two copies were mailed to DeVore at two different Yorba Linda addresses, her respective residence and business addresses of record.
DeVore did not file an objection to the trustee's motion to reopen, and neither she nor Anderson appeared at the hearing on 2 September 1997. That day the court orally *196 granted the trustee's motion, and a written order reopening the case and withdrawing the Trustee's No Asset Report was entered and served on DeVore's addresses of record on 19 September 1997. The order did not expressly refer to the judgment against Bank of America or to the proceeds of that judgment.
Prior to entry of the written order, on 9 September 1997, Anderson spoke with trustee's counsel, Thomas Casey ("Casey"). At that time, Casey informed Anderson that a motion to reopen had been filed and an order had been signed. Two days later, Anderson went to the Santa Ana bankruptcy clerk's office and requested a copy of the order; he was told the file was not there and was referred to the Laguna Niguel office.
On 22 September 1997, the trustee filed a Notification of Asset Case, and, on 29 September 1997, a Notice of Possible Dividend and Order Fixing Time to File Claims was issued by the clerk.
On 7 October 1997, Virden filed an application for fees of $6,217.33 and costs of $1,971.88 incurred in connection with the state court litigation pursuant to the contingency agreement previously approved by the court. DeVore timely filed an objection to Virden's fee application.
On 9 October 1997, DeVore filed a "Motion for a Court Order Pursuant to 11 U.S.C. § 725 (or other statute) Directing Trustee Richard Marshack to Release the State Court Litigation Proceeds and For Findings." The trustee timely filed an objection to this motion.
Virden's fee application and DeVore's motion were both heard by the court on 28 October 1997. At the hearing, the court denied DeVore's motion for release of litigation proceeds and approved Virden's fees. DeVore timely filed notices of appeal of both orders.
ISSUES
A. Whether the trustee's motion to reopen was properly served on debtor.
B. Whether the order reopening the case and withdrawing the no asset report was effective to bring the litigation proceeds back into the estate.
C. Whether the court's denial of debtor's motion for release of proceeds was an abuse of discretion.
D. Whether the award of final fees to special counsel in the state court litigation and authorization of payment from the state court litigation proceeds was an abuse of discretion.
STANDARD OF REVIEW
The bankruptcy court's conclusions of law are reviewed de novo, and its findings of fact are reviewed under the clearly erroneous standard. In re Johnston, 49 F.3d 538, 540 (9th Cir.1995). A bankruptcy court necessarily abuses its discretion if it bases its decision on an erroneous view of the law or clearly erroneous factual findings. Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S. Ct. 2447, 2461, 110 L. Ed. 2d 359 (1990).
On appeal, a bankruptcy court's award of attorneys' fees will not be disturbed absent a finding that the court abused its discretion or erroneously applied the law. In re Reimers, 972 F.2d 1127 (9th Cir.1992).
DISCUSSION
A. Service.
DeVore argues that the trustee's motion to reopen did not provide "valid notice" to her, as it was served on her old addresses. The order reopening the case is not on appeal, and this due process issue becomes significant only if the reopening order had the effect of undoing the abandonment.
Mailing a notice by first class mail to a party's last known address is sufficient to satisfy due process. See In re Eagle Bus Mfg., Inc., 62 F.3d 730, 736 (5th Cir.1995). In Eagle Bus, a creditor who failed to keep the debtor apprised of changes in her mailing address was "herself to blame" for not receiving notice of the claims bar date. Eagle Bus, 62 F.3d at 736. Here, the debtor left her address of record in 1994. The case remained open until 1 November 1996, yet she did not file a change of address with the court until September of 1997. LBR 105(e) *197 provides in relevant part: "It shall be the responsibility of the debtor . . . to ensure that the . . . master mailing list . . . [is] complete and correct." Arguably, Marshack had actual knowledge of DeVore's new address, if it is assumed he received the copy of her 4 August letter. However, the pleadings were served by trustee's counsel, who, not unreasonably, served the addresses on the court's mailing matrix, which the debtor had not updated.
Additionally, the debtor's letter of 4 August indicates she knew the trustee intended to file a motion to reopen the case to administer the state court litigation proceeds. "Whatever is notice enough to excite attention and put the party on his guard and call for inquiry, is notice of everything to which such inquiry may have led." In re Gregory, 705 F.2d 1118, 1123 (9th Cir.1983). The trustee's motion was filed and served on 12 August 1997; DeVore or her counsel could have obtained copies of the relevant documents from the court's file in time to respond. Moreover, Anderson had actual notice of the order before the appeal period expired (indeed, before the written order had been entered). While it appears he unsuccessfully attempted to obtain a copy of the order, the record does not indicate any further attempts to do so or why these were or were not fruitful.
In light of the above, we agree with the bankruptcy court that DeVore was thoroughly on notice of the trustee's position, and that she received adequate notice of the proceedings. Respecting the orders on appeal, DeVore does not assert any defect in notice of Virden's fee application, and the order denying release of the proceeds was on her motion.
B. Did the Court's Order Reopening the Case and Withdrawing the No Asset Report Bring the Litigation Proceeds Back into the Estate?
DeVore argues that the trustee's abandonment of the litigation proceeds via the no asset report and closing of the case is irrevocable, thus the bankruptcy court's order reopening her case and withdrawing the no asset report was of no effect. She further argues that the doctrine of laches bars the trustee from asserting control over the proceeds, and that the bankruptcy court abused its discretion in not making a ruling on her request for prejudgment interest on the proceeds.
Abandonment of estate property is governed by § 554, which provides:
(a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.
(b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.
(c) Unless the court orders otherwise, any property scheduled under section 521(1) of this title not otherwise administered at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title.
(d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not administered in the case remains property of the estate.
11 U.S.C. § 554 (West 1998).
In the absence of an order directing abandonment, subsection (c) deems abandoned to the debtor any scheduled property of the estate that is unadministered at the close of the case. 5 Collier on Bankruptcy ¶ 554.02[7] (Lawrence P. King ed., 15th ed.1997). This is generally referred to as a technical abandonment. In re Shelton, 201 B.R. 147, 154 (Bankr.E.D.Va.1996). Unlike abandonment under § 554(a) or (b), an abandonment under § 554(c) occurs automatically upon case closure, without notice or hearing.
A number of cases recognize a general rule that abandonment is irrevocable, even if it is subsequently discovered that the abandoned property had greater value than previously believed. In re Lintz West Side Lumber, Inc., 655 F.2d 786, 789 (7th Cir.1981); In re Ozer, 208 B.R. 630, 633 (Bankr.E.D.N.Y. 1997); In re Gracyk, 103 B.R. 865, 867 *198 (Bankr.N.D.Ohio 1989); In re Atkinson, 62 B.R. 678, 679 (Bankr.D.Nev.1986); In re Enriquez, 22 B.R. 934, 935 (Bankr.D.Neb.1982). These cases do not distinguish between technical abandonment under § 554(c) and abandonment under §§ 554(a) or (b) after notice and hearing. But see Shelton, 201 B.R. at 156 (distinguishing In re Sutton, 10 B.R. 737 (Bankr.E.D.Va.1981), which involved an express abandonment). The rationale for the general rule is that once an asset has been abandoned, it is no longer part of the estate and is effectively beyond the reach and control of the trustee. E.g. Ozer, 208 B.R. at 633. Courts have also noted the policy of preserving finality. E.g. Gracyk, 103 B.R. at 867.
Notwithstanding the general rule, the prefatory language of § 554(c), "unless the court orders otherwise," indicates that courts have discretion to affect or prevent technical abandonment simply by ordering otherwise. Shelton, 201 B.R. at 155. The statute does not limit such an order to the period prior to case closure, Shelton, 201 B.R. at 155; In re Neville, 192 B.R. 825, 832 (D.N.J.1996), and courts have set aside technical abandonments in "appropriate circumstances." Shelton, 201 B.R. at 155. "Appropriate circumstances" have been found where the trustee is given false or incomplete information about the asset by the debtor; the debtor fails to list the asset altogether; or where the trustee's abandonment was the result of a mistake or inadvertence, and no undue prejudice will result in revocation of the abandonment. Ozer, 208 B.R. at 633 (citations omitted). Likewise, we observed in Gross v. Petty (In re Petty), 93 B.R. 208, 212 (9th Cir. BAP 1988), that where an asset was not disclosed in the bankruptcy petition, the case was never fully administered within the meaning of § 350(a), and therefore not properly and finally closed under that section. In essence, these cases depend on a finding that the property in question was not properly scheduled, and thus the § 554(c) requirement was not met, or on equitable considerations.
Here, the court ordered the case reopened and the no asset report withdrawn. We disagree with the trustee that the order negated the technical abandonment and brought the litigation proceeds back into the estate. While the motion to reopen was for the purpose of administering the litigation proceeds, and the notice so indicated, the order did not expressly revoke abandonment of the litigation proceeds. We fail to see how the reopening of a bankruptcy case and withdrawal of a no asset report, without more, negate a valid technical abandonment. The reopening of a case is "merely a ministerial or mechanical act which allows the court file to be retrieved from the stacks of closed cases to enable the court to receive a new request for relief; the reopening, by itself, has no independent legal significance and determines nothing with respect to the merits of the case." In re Germaine, 152 B.R. 619, 624 (9th Cir. BAP 1993).
Notwithstanding the ministerial nature of the act, courts have held that reopening a bankruptcy case puts the bankruptcy estate back into the process of administration and revives the original case. Bumb v. Bonafide Mills, Inc., 327 F.2d 544, 547 (9th Cir.1964); Figlio v. American Management Services, Inc. (In re Figlio), 193 B.R. 420, 424 (Bankr. D.N.J.1996) (citing In re Cassell, 41 B.R. 737, 740 (Bankr.E.D.Va.1984)). According to some courts, this includes the negating of a technical abandonment under § 554(c). Compass Bank for Savings v. Billingham (In re Graves), 212 B.R. 692, 695 (1st Cir. BAP 1997); Shelton, 201 B.R. at 155. Our conclusion that the order reopening DeVore's case and withdrawing the trustee's no asset report was insufficient to bring the litigation proceeds back into the estate appears to be at odds with these cases. However, both Graves and Shelton are distinguishable, as those cases are in the equitable revocation category.
Shelton involved a motion to reopen a case to administer tenancy by the entirety property where the court concluded the married debtors' separate filings were an attempt to shield that property from administration for the benefit of joint creditors. Shelton, 201 B.R. at 153. The court was concerned that the trustee "may not have been afforded the ability to make an informed decision with respect to administering the . . . property due to the state of the information contained *199 within Mr. Shelton's schedules." Id. at 155. The court rejected the debtor-husband's argument that abandonment was irrevocable and that the property could not be "unabandoned" by reopening his bankruptcy case. By extending the rule that reopening revives all procedural and substantive rights of the debtor, the court concluded that reopening revives the procedural and substantive rights of the trustee and "revives the trustee's right to administer all property that was in the estate prior to the initial closure." Id.
In Graves, the case was reopened 11 days after closing to allow the trustee to administer a lawsuit. A creditor argued that the reopening did not restore technically abandoned real property to the estate. The Bankruptcy Appellate Panel for the First Circuit disagreed, citing Shelton for the proposition that an order reopening a case negated the technical-abandonment. Graves, 212 B.R. at 695. The case had been reopened in 1993, 11 days after closing, to allow the trustee to administer a state lawsuit relating to environmental contamination, and the reopening was not challenged. Three years later, after the trustee obtained a judgment of almost $1 million, which was to be used solely for cleaning up the property in question, the creditor sought a determination that the property was not within the estate or relief from stay. The panel noted:
What was once a potentially worthless piece of property due to environmental contamination may now be a valuable asset of the bankruptcy estate. Not until the Trustee obtained the judgment in 1996 did the Bank express any interest in the property, even though, pursuant to the stipulation, the Bank had grounds in 1991 to obtain relief from the automatic stay because of the Debtors' default. In the years prior to the judgment, the Bank refused to take action to repossess the property, to clean up the property, or to fund any part of the litigation against Packer.
Graves, 212 B.R. at 694-695. There are no similar equitable considerations in this case, and, as noted, the asset has been scheduled.
The withdrawal of the no asset report does not change our analysis. The order withdrawing that report did not change the facts that (1) the judgment was not otherwise administered, and (2) the case was closed. Those facts equal abandonment under § 554(c), unless the court ordered otherwise.
When DeVore's case was closed, it had been fully administered under the Code and thus was "properly and finally closed." The state court litigation had been administered, but not disposed of. It was listed on the debtor's schedules, and the trustee hired counsel on behalf of the bankruptcy estate, who obtained judgment in the state court. The trustee was aware of the judgment when he filed his no asset report: in response to the debtor's motion for release of proceeds, the trustee indicated he then knew of the judgment. Although the trustee argued before the bankruptcy court that the settlement check was a "newly discovered asset[,]" this argument was not advanced on appeal. We do not address it here.
The order, which did not mention the judgment or its proceeds, reopening the case and withdrawing the no asset report did not negate the technical abandonment and bring the judgment proceeds back into the estate: the court has never expressly "order[ed] otherwise," and having not done so, the technical abandonment stands. We do not here decide whether a court can, for equitable reasons, or because of the trustee's inadvertence, set aside a valid technical abandonment: those issues must await other cases.
C. Denial of Motion for Release of Proceeds.
DeVore's motion for release was based on the premise that the order reopening the case was not effective to revoke the abandonment because of the general rule that abandonment is irrevocable. The bankruptcy court was unconvinced:
[I]t might well have been reasonable to leave [the state court judgment] unadministered and allow the case to be closed in the event it was never funded, but since it has funded, to open it and [give] notice that claims can be filed and make proper distribution. In my view, then, it's appropriate to deny the motion of the debtor to require a release of the funds.
*200 We understand these remarks refer to leaving the case closed, rather than to closing the case, as the judge had shortly before entered the reopening order, and the motion papers recounted that fact. Of course, the trustee could have accomplished this result by requesting an order excepting the judgment from abandonment prior to closing. In re Hart, 76 B.R. 774 (Bankr.C.D.Cal.1987); In re Prospero, 107 B.R. 732 (Bankr.C.D.Cal. 1989).
Because the court's ruling was based on an erroneous view of the law, in that it did not take into consideration the validity of the abandonment, denying the debtor's motion for release of the proceeds was an abuse of discretion.
D. Attorney's Fee Award.
DeVore argues, among other things, that the fee award was improper because there were no bankruptcy estate funds from which to pay the award. She argues that Virden should be compensated from estate funds, as he was representing the estate rather than the debtor and that the fees should not come from this award because they are not estate funds. However, DeVore concedes she owes Virden $942.00 for services performed on her behalf after the bankruptcy case was closed.
Abandonment removes the asset from the jurisdiction of the bankruptcy court. Sherrell v. Fleet Bank of New York (In re Sherrell), 205 B.R. 20, 22 (N.D.N.Y.1997) (citation omitted). We agree with DeVore that the fee award was improper to the extent it is an award from the abandoned proceeds of the state court judgment.
At this point, the payment of Virden's contingency fee is an issue between an ex-debtor and a non-party respecting non-estate property. That is a matter to be resolved by agreement or in another, non-bankruptcy, forum.
E. Remaining issues.
Because of our ruling, we need not consider the debtor's laches argument, but the issue of prejudgment interest remains. The bankruptcy court did not rule on DeVore's request for prejudgment interest. That issue remains for determination on remand.
CONCLUSION
The order reopening the case and withdrawing the no asset report was not effective to bring the litigation proceeds, technically abandoned under § 554(c), back into the estate for administration by the trustee. Consequently, the court should have granted the debtor's motion to release the litigation proceeds to her. Further, the court had no jurisdiction to award fees from the litigation proceeds.
We REVERSE both orders and REMAND for further proceedings in accordance with this opinion.
NOTES
[1] Hon. Karen A. Overstreet, Bankruptcy Judge for the Western District of Washington. sitting by designation.
[2] Absent contrary indication, all section and chapter references are to the Bankruptcy Code, 11 U.S.C., and all "Rule" references are to the Federal Rules of Bankruptcy Procedure. "FRCP" references are to the Federal Rules of Civil Procedure, and "LBR" references are to the Local Bankruptcy Rules for the Central District of California. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536357/ | 928 A.2d 388 (2007)
Constantine N. POLITES, Petitioner
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION, Respondent.
Commonwealth Court of Pennsylvania.
Submitted on Briefs May 11, 2007.
Decided June 11, 2007.
*389 Constantine N. Polites, petitioner, pro se.
Patricia T. Wiedt, Asst. Counsel and Frank B. Wilmarth, Deputy Chief Counsel, Harrisburg, for respondent.
Thomas T. Niesen, Harrisburg, for intervenor, Aqua Pennsylvania, Inc.
BEFORE: SMITH-RIBNER, Judge, and PELLEGRINI, Judge, and LEAVITT, Judge.
OPINION BY Judge PELLEGRINI.
Constantine N. Polites (Complainant) appeals pro se from an order of the Pennsylvania Public Utility Commission (Commission) dismissing his complaint against Aqua Pennsylvania, Inc. (Provider) because it lacked jurisdiction to adjudicate his complaint regarding the testing of backflow devices.
Complainant operated a commercial warehouse and because of his commercial use of water, was required to install and maintain on his main service line a backflow prevention device approved by Provider. This device was used to isolate contaminants or pollutants within Complainant's water system which could potentially backflow through his service connection and into the public water supply system. To ensure the proper functioning of the backflow devices, Provider's tariff (Tariff) required an annual inspection of the devices by a certified tester at the customer's expense.[1] Although any person *390 could become a tester, to be certified, an individual must have completed a 40-hour training course and passed a written examination and field test.[2]
Disputing the Tariff's testing method, Complainant filed a complaint against Provider and requested that Provider amend the Tariff to exempt commercial consumers, whose operations are similar to residential users, from the annual testing scheme because residential consumers were not required to undergo backflow device testing. In place of the certified testing, Complainant proposed that small commercial consumers assume personal liability for the maintenance and annual testing of the devices. He suggested that testing could be performed by visually inspecting the function of the backflow valve by reversing the flow of water, thereby eliminating the need for a certified tester. Provider timely filed an answer and new matter wherein it denied the allegations in the complaint and noted that its backflow device testing was required to be completed by a certified tester in accordance with the requirements of the Department of Environmental Protection (Department). After a hearing before an Administrative Law Judge (ALJ) where Complainant testified regarding his disagreement over the Tariff's required testing method, his complaint was dismissed because the Commission lacked jurisdiction.
The ALJ reasoned that although the Commission has jurisdiction over the backflow device itself, 66 Pa.C.S. §§ 1501 and 1505; see also Lansdale Borough v. Philadelphia Electric Co., 403 Pa. 647, 170 A.2d 565 (1961), what was involved here was not the backflow device, but testing for water purity which was statutorily regulated by the Pennsylvania Safe Drinking Water Act[3] (Act) and the Federal Safe Drinking Water Act.[4] He stated that enforcement of these statutes was vested in the Department and the Environmental Protection Agency. The ALJ further noted that when water purity or quality was compromised, the Commission was only able to certify to the Department a question of fact about the purity of water supplied by a public utility. 66 Pa.C.S. § 318(b).[5] Because the Commission lacked jurisdiction, the ALJ dismissed Complainant's complaint, and Complainant filed exceptions with the Commission. The Commission denied Complainant's exceptions and adopted the ALJ's decision that the backflow testing required by the Tariff was based upon water quality requirements of the Department, and the Commission was without jurisdiction to adjudicate issues of water quality. This appeal by Complainant followed.[6]
*391 Without addressing the issue of whether the Commission lacked jurisdiction, Complainant again argues that small commercial consumers should be exempt from backflow device testing, and a visual inspection of the device performed by a non-certified individual with minimum mechanical skills is sufficient to ensure its functionality. However, unless we determine that the Commission erroneously concluded that it lacked jurisdiction, we may not address Complainant's substantive argument. In re May 15, 2001 Municipal Primary, 785 A.2d 146 (Pa. Cmwlth.2001).
At issue is not whether Provider improperly required Complainant to install a backflow device on his main supply line, but the means in which the device is required to be tested to ensure appropriate functionality. The basis for this testing is to maintain quality and purity in the public water supply system by maintaining proper operation of the backflow valve. It is apparent, then, that Complainant is not objecting to any service of Provider's, but the requirements necessary to provide suitable water quality. See Rovin v. Pennsylvania Public Utility Commission, 94 Pa.Cmwlth. 71, 502 A.2d 785 (1986).
In Pennsylvania, pursuant to Section 5 of the Act, 35 P.S. § 721.5, the task of preserving water quality and monitoring for contaminants is within the authority of the Department. Any matters affecting water quality, such as the testing of backflow devices, are within its jurisdiction, not the Commission's, whose utilities provide water service. As such, the Commission properly dismissed Complainant's complaint for lack of jurisdiction.[7]
Accordingly, the order of the Commission is affirmed.
ORDER
AND NOW, this 11th day of June, 2007, the order of the Pennsylvania Public Utility Commission, No. C-20055157, is affirmed.
NOTES
[1] The Tariff provision provides, in pertinent part:
[Aqua] shall have the right, upon reasonable notice and at reasonable times, to conduct surveys and investigations of water use and practices at the Customer's premises to determine whether there are actual or potential cross-connections in the Customer's water system through which contaminants or pollutants could back flow into the public water system . . . The procedure for installation and maintenance of such device shall be in conformance with all federal, state and local municipal ordinances, rules and regulations if such exist and shall be in compliance with the Pennsylvania Safe Drinking Water Act and the regulations promulgated thereunder. In addition, the Customer shall be required, at such Customer's expense, to comply with the testing and overhauling requirements of the Company for such devices. The Company may authorize persons (with appropriate training or certification) to inspect premises, perform installations and testing of such special devices or make corrections of adverse conditions.
[2] Provider did not organize the courses and examination, but rather the American Society of Sanitary Engineering or the New England Water Works Association were responsible for coordinating the tester training.
[3] Act of May 1, 1984, P.L. 206, as amended, 35 P.S. §§ 721.1-721.17.
[4] 42 U.S.C. §§ 300j-330j-10
[5] Section 318(b) of the Public Utility Code provides:
PURITY OF WATER SUPPLY The commission may certify to the Department of Environmental Resources any question of fact regarding the purity of water supplied to the public by any public utility over which it has jurisdiction, when any such question arises in any controversy or other proceeding before it, and upon the determination of such question by the department incorporate the department's findings in its decision.
[6] Our scope of review of a Pennsylvania Public Utility Commission's decision is limited to determining whether constitutional rights have been violated, whether an error of law has been committed, or whether findings of fact and conclusions of law are supported by substantial evidence. UGI Utilities, Inc.-Gas Division v. Public Utility Commission, 878 A.2d 186 (Pa.Cmwlth.2005).
[7] Because we have determined that the Commission lacked jurisdiction to adjudicate Complainant's complaint, we will not address his substantive arguments. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536359/ | 928 A.2d 484 (2007)
2007 VT 43
STATE of Vermont
v.
Philip CHICOINE.
No. 05-529.
Supreme Court of Vermont.
May 24, 2007.
*485 Present: REIBER, C.J., DOOLEY, JOHNSON, SKOGLUND and BURGESS, JJ.
ENTRY ORDER
¶ 1. Defendant Philip Chicoine entered a conditional guilty plea to one count of felony possession of cocaine, 18 V.S.A. § 4231(a)(2), after the district court denied his motion to suppress evidence discovered in the course of a police officer's pat-down following a traffic stop. On appeal, the State did not seek to justify the warrantless search as a frisk for weapons, but defended the court's conclusion that the pat-down was reasonable as incident to a valid arrest for drug possession. We find, however, that the investigating officer lacked probable cause to arrest, so the warrantless pat-down search was not justified by the exigency of arrest. We therefore reverse the denial of suppression.
¶ 2. The trial court made the following factual findings.[*] On December 30, 2004, *486 the investigating officer and his partner drove to an address in South Burlington to conduct a search for illicit drugs. When they arrived they saw a car exit the driveway. The officers followed the car, noticed that one of its rear brake lights did not operate, and activated their cruiser's blue lights. Defendant did not pull over right away. After activating the cruiser's siren, both officers saw defendant's passenger quickly lean over and appear to place something in defendant's mouth before defendant pulled into a parking lot and came to a stop.
¶ 3. Believing that defendant and his passenger were attempting to dispose of illicit drugs, the officer rushed to defendant's car, opened the driver's-side door, and asked defendant to open his mouth. Defendant complied, and the officer found no illicit substances. The officer proceeded with the traffic stop and informed defendant of his inoperable brake light. The video shows that when asked where he was coming from, defendant said he had been visiting a coworker at the same house targeted by the police for the drug search. Defendant voluntarily exited his vehicle to inspect the light, and the officer informed him that he was not going to issue a ticket. Instead, the officer asked if defendant possessed any drugs and inquired about the passenger's activity prior to the stop. Defendant said he neither possessed nor destroyed any drugs. Upon request, defendant agreed to empty his pockets, but, based on the video depiction, apparently did not do so completely, saying "That's about it."
¶ 4. At this point the officer noticed defendant shielding the left side of his body and conducted a pat-down search without defendant's consent. He felt a soft package in defendant's left jacket pocket, which defendant insisted was napkins. The officer then handcuffed defendant, reached into the jacket pocket, and seized twenty-four grams of cocaine.
¶ 5. Police officers may conduct a warrantless pat-down search with the driver's consent, State v. Zaccaro, 154 Vt. 83, 87, 574 A.2d 1256, 1259 (1990), or if they reasonably believe that the driver may be armed and dangerous, State v. Jewett, 148 Vt. 324, 328-29, 532 A.2d 958, 960 (1987). Here, the trial court found that the pat-down was not consensual because defendant's statement, "You're going to frisk me!" evidenced surprise rather than assent. The court also found that the officer conducted the pat-down with the intent to discover illicit drugs, rather than to search for weapons. The trial court upheld the search as incident to arrest, finding that the officer had probable cause to believe defendant possessed illicit drugs because: (1) defendant drove from a suspected drug house; (2) the officer observed defendant and his passenger "engage in a known drug elimination ploy" by the companion placing something in defendant's mouth; (3) defendant gave evasive answers to the officer's questions; and (4) defendant appeared stressed and shielded the left side of his body after emptying his other pockets.
¶ 6. On appeal, defendant argues that the officer impermissibly expanded the scope of the initial traffic stop and conducted a warrantless search without consent and absent probable cause that a crime had been committed or reasonable suspicion that defendant was armed and dangerous. The State contends that both the initial traffic stop and request for defendant to open his mouth were supported by reasonable, articulable suspicion of criminal wrongdoing. The State asserts that the follow-up search was a valid *487 search incident to arrest based on probable cause that defendant possessed drugs. In an appeal of a motion to suppress, we review the trial court's factual findings for clear error and its legal conclusions de novo. State v. Yoh, 2006 VT 49A, ¶ 10, 180 Vt. 317, 910 A.2d 853.
¶ 7. Under both the Fourth Amendment to the United States Constitution and Chapter I, Article 11 of the Vermont Constitution, a police officer may initiate a traffic stop if the officer has reasonable, articulable suspicion of wrongdoing. State v. Beauregard, 2003 VT 3, ¶ 6, 175 Vt. 472, 820 A.2d 183 (mem.). Defendant does not contest the validity of the initial traffic stop for operating a motor vehicle with a faulty brake light in violation of 23 V.S.A. § 1221. Furthermore, a police officer may expand the scope of an investigatory stop and conduct a warrantless search if the officer has probable cause to arrest. State v. Meunier, 137 Vt. 586, 588, 409 A.2d 583, 584-85 (1979). A warrantless search incident to an arrest may occur prior to the arrest so long as the two are "substantially contemporaneous." State v. Greenslit, 151 Vt. 225, 229, 559 A.2d 672, 674 (1989) (citing United States v. Ilazi, 730 F.2d 1120, 1126 (8th Cir.1984)). Therefore, if the officer had probable cause to arrest defendant prior to conducting the first pat-down search, the trial court properly denied defendant's motion to suppress.
¶ 8. Probable cause for a warrantless arrest requires the same level of evidence needed for the issuance of a warrant. State v. Blais, 163 Vt. 642, 643, 665 A.2d 569, 570 (1995) (mem.). Probable cause exists when the facts and circumstances known to an officer are sufficient to lead a reasonable person to believe that a crime was committed and that the suspect committed it. Greenslit, 151 Vt. at 228, 559 A.2d at 674. This is a higher standard than the reasonable suspicion needed to temporarily detain a suspect for investigation. State v. Lamb, 168 Vt. 194, 196, 720 A.2d 1101, 1102 (1998). It is also a higher standard than the reasonable suspicion needed to justify a pat-down search for weapons in the interest of officer safety in connection with an investigatory stop. Jewett, 148 Vt. at 327-28, 532 A.2d at 960 (explaining that arrest must be based on probable cause, while less justification is required for the lesser intrusion of a brief protective search for weapons). We review a finding of probable cause to see if it was based on substantial evidence. Blais, 163 Vt. at 643, 665 A.2d at 570.
¶ 9. We need not address defendant's claim that the officer unlawfully extended the original traffic stop because the trial court's conclusion that probable cause to arrest authorized the initial pat-down search is not supported by the record. The officer observed the passenger appear to place something quickly into defendant's mouth prior to the stop and defendant try to shield the left side of his body just prior to the first pat-down search. These kinds of furtive gestures, without more, are ambiguous and insufficient to give rise to probable cause to arrest. See State v. Emilo, 144 Vt. 477, 483-84, 479 A.2d 169, 172 (1984) (acknowledging that flight and other furtive gestures, while indicative of guilty knowledge, do not provide probable cause for arrest). Even though the officer witnessed defendant leave a suspected drug house, proximity to a location known for illegal activity is insufficient to provide probable cause for a search. Blais, 163 Vt. at 643-44, 665 A.2d at 570-71. Neither furtive gestures unaccompanied by specific knowledge connecting defendant with evidence of a crime, nor presence at a suspected drug residence, absent observations of defendant engaging in illegal behavior, provide the substantial evidence needed to *488 find probable cause for a search incident to arrest. See id. at 644, 665 A.2d at 571 (finding that although officers knew a felony had been committed, they had no probable cause to believe defendant had committed it solely because he was the only person near a large field of marijuana); Emilo, 144 Vt. at 484, 479 A.2d at 173 (concluding that arresting officer lacked reasonable, articulable suspicion of any wrongdoing based on a suspect's flight alone).
¶ 10. Defendant's departure from a suspected drug house, his hurriedly placing something in his mouth, and his anxious and furtive behavior may all be suspicious, but do not amount to probable cause. The totality of the situation falls short of the "laminated total" of merely suspicious bits of information found sufficient for probable cause in United States v. Harlan, 35 F.3d 176, 179 (5th Cir.1994) (quotations omitted), and cited by the State in support of probable cause in this case. In addition to odd travel plans, nervous behavior in airports, a bulging jacket pocket, and misleading statements to police, the suspect in Harlan was also known as a suspected cocaine trafficker, was carrying $8,000 cash in a garment bag, and admitted to police that some of his money might be illegal. Id. Such additional circumstances to bolster the officer's suspicion to the level of probable cause are missing here. There were no physical signs of illicit drugs on or near defendant prior to the pat-down. Cf. Greenslit, 151 Vt. at 228, 559 A.2d at 674 (finding probable cause where officer saw and smelled marijuana smoke contemporaneously). Defendant was a stranger to the officer. The trial court noted that, according to the officer's affidavit apparently admitted into evidence without objection, the officer had tips that defendant's companion was involved in the drug trade at a local bar, but on the face of the affidavit none of the tips were founded on substantial recitations of reliability, such as a "basis for believing the source of the hearsay to be credible" or "a factual basis for the information furnished," as required for probable cause for a warrant under V.R.Cr.P. 41(c). See State v. Morris, 165 Vt. 111, 129-30, 680 A.2d 90, 102 (1996) (citing Aguilar v. Texas, 378 U.S. 108, 84 S. Ct. 1509, 12 L. Ed. 2d 723 (1964), and Spinelli v. United States, 393 U.S. 410, 89 S. Ct. 584, 21 L. Ed. 2d 637 (1969), in concluding that informant's information failed to establish probable cause because officer failed to establish its reliability).
¶ 11. The officer did not have probable cause to arrest before his pat-down of defendant. The trial court found that the pat-down was neither necessary for the protection of the officer nor consensual, but was solely intended to search for drugs. The merely suspicious surrounding circumstances of defendant's departure from a drug house and ingestion of something before stopping, followed by furtive and anxious behavior, without more, did not provide the probable cause necessary for arrest. Consequently, there was no justification for a search incident to arrest, and the officer's initial pat-down, as well as his subsequent search of defendant for drugs, violated the Fourth Amendment and Article 11.
Reversed and remanded.
NOTES
[*] The stop was videotaped by the officer. We rely on the videotape for matters not expressly found by the trial court, as well as the court's findings. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536397/ | 928 A.2d 391 (2007)
Eilene SHAFFER, Petitioner
v.
UNEMPLOYMENT COMPENSATION BOARD OF REVIEW, Respondent.
Commonwealth Court of Pennsylvania.
Submitted on Briefs May 18, 2007.
Decided June 25, 2007.
*392 Eilene Shaffer, petitioner, pro se.
Jason M. Worley, Asst. Counsel and Gerard M. Mackarevich, Deputy Chief Counsel, Harrisburg, for respondent.
BEFORE: LEADBETTER, President Judge, and FRIEDMAN, Judge, and McCLOSKEY, Senior Judge.
OPINION BY Judge FRIEDMAN.
Eilene Shaffer (Claimant), proceeding pro se,[1] petitions for review of the October 20, 2006, order of the Unemployment Compensation Board of Review (UCBR) affirming the decision of a referee and holding that Claimant was ineligible for unemployment compensation benefits pursuant to section 402(b) of the Unemployment Compensation Law (Law).[2] We affirm.
Claimant was employed by Lenox Collections (Employer) from February 11, 1992, until July 19, 2006, when she resigned from her position as a part-time, inside sales representative. When Claimant began working for Employer, Employer's offices were located in Langhorne, Pennsylvania; however, Employer moved its place of business to Bristol, Pennsylvania on July 19, 2006. Employer's new location is between ten and eleven miles farther away from Claimant's home than Employer's old location and adds an additional fifteen to thirty minutes each way to her daily commute. (UCBR's Findings of Fact, Nos. 1-5.)
Before Employer relocated, Claimant's in-laws provided daycare services for *393 Claimant's five-year-old daughter; however, Claimant's in-laws were unable to continue providing daycare after Employer's move because of the additional commute time involved. Moreover, when Employer was located in Langhorne, Claimant was able to see her fifteen-year-old son off to high school each day and be there when he returned home; however, as a result of her longer commute, Claimant would no longer be able to do this. (UCBR's Findings of Fact, Nos. 6-11.)
Before resigning her position, Claimant explored the possibility of sending her five-year-old daughter to a daycare facility near her home but determined that it would not be cost effective. On July 19, 2006, Claimant voluntarily terminated her position due to the childcare issues related to Employer's relocation and resulting increase in Claimant's commute time. (UCBR's Findings of Fact, Nos. 12-13.)
Subsequently, Claimant filed for unemployment compensation benefits, which were denied by the local service center. Claimant appealed, and, following a hearing,[3] the referee affirmed, concluding that Claimant failed to satisfy her burden of proving she left work for reasons of a necessitous and compelling nature. Claimant then appealed to the UCBR, which affirmed the decision of the referee denying benefits. In doing so, the UCBR found that Claimant failed to present evidence regarding additional efforts made to address the childcare problems created by Employer's relocation, such as securing alternative childcare for her daughter with other daycare facilities or other relatives, or having her son enroll in an after school activity or stay with a relative or neighbor before and after school. (UCBR's Findings of Fact, Nos. 14-15.) Claimant now appeals to this court.[4]
Claimant argues that the UCBR erred in denying her benefits based on its determination that she failed to demonstrate a necessitous and compelling reason to terminate her employment. Claimant contends that Employer's relocation constituted such cause where it rendered her current childcare arrangements unworkable and where an alternative childcare arrangement was financially impracticable.[5] We disagree.[6]
*394 The inability of a parent to care for her child may constitute a necessitous and compelling reason for terminating employment.[7]Ganter v. Unemployment Compensation Board of Review, 723 A.2d 272 (Pa.Cmwlth.1999). Typically, in order to prove a necessitous and compelling reason to quit, a claimant must establish that she exhausted all other alternative childcare arrangements, such as making a concerted effort to find another baby-sitter or locate a suitable day care center. Beachem v. Unemployment Compensation Board of Review, 760 A.2d 68 (Pa.Cmwlth. 2000).
The record here reveals that Claimant investigated only one daycare facility for her daughter, which she determined was not a cost effective alternative, but Claimant did not offer evidence that she looked into any other childcare arrangements. (O.R., N.T. at 5-6.) Moreover, Claimant offered no evidence that she explored alternative arrangements for her son's before and after school care. Under these circumstances, we conclude that Claimant did not establish that she made a concerted effort to find alternative childcare arrangements. Therefore, the UCBR did not err in holding that Claimant failed to meet her burden of proving that she had cause of a necessitous and compelling reason to voluntarily terminate her employment.
Accordingly, we affirm.
ORDER
AND NOW, this 25th day of June, 2007, the order of the Unemployment Compensation Board of Review, dated October 20, 2006, is hereby affirmed.
NOTES
[1] Our supreme court has adopted the Commonwealth Court's position that "any layperson choosing to represent himself in a legal proceeding must, to some reasonable extent, assume the risk that his lack of expertise and legal training will prove his undoing." Vann v. Unemployment Compensation Board of Review, 508 Pa. 139, 148, 494 A.2d 1081, 1086 (1985) (quoting Groch v. Unemployment Compensation Board of Review, 81 Pa.Cmwlth. 26, 472 A.2d 286, 288 (1984)).
[2] Act of December 5, 1936, Second Ex.Sess., P.L. (1937) 2897, as amended, 43 P.S. § 802(b). Section 402(b) of the Law provides that a claimant is ineligible for compensation if her unemployment is due to her voluntarily leaving employment without cause of a necessitous and compelling nature. 43 P.S. § 802(b).
[3] Before the referee, Claimant explained her decision to leave her position with Employer, testifying, inter alia, that: (1) as a result of Employer's relocation, Claimant would have to leave for work before her son left for school and would arrive home after he did; (2) she did not approve of children leaving for or coming home from school alone; and (3) she looked at a nearby daycare for her daughter but that it would not be cost effective to send her daughter there. (O.R., N.T. 1-8.)
[4] Our scope of review is limited to determining whether constitutional rights were violated, whether the adjudication is in accordance with law or whether necessary findings of fact are supported by substantial evidence. Section 704 of the Administrative Agency Law, 2 Pa.C.S. § 704.
[5] In a voluntary termination case, the claimant has the burden of proving that she left the employment for cause of a necessitous and compelling nature. Ganter v. Unemployment Compensation Board of Review, 723 A.2d 272 (Pa.Cmwlth.1999). Cause of a necessitous and compelling nature has been defined as circumstances that produce real and substantial pressure to terminate one's employment and that would compel a reasonable person to do the same. Id. Whether one had a necessitous and compelling reason for quitting one's job is a legal conclusion and is fully reviewable by this court. Id.
[6] As a threshold matter, the UCBR argues that Claimant's appeal should be quashed because her brief does not comply with Pa. R.A.P. 2119 which sets forth the requirements for an appellant's argument. The UCBR contends that the argument section of Claimant's brief is deficient because she fails to adequately develop the arguments raised in the Statement of Questions Involved and cites no legal authority to support her position. See Id. We decline to quash Claimant's appeal on this basis.
This court will quash appeals when substantially defective briefs impede us from conducting meaningful appellate review. Grosskopf v. Workmen's Compensation Appeal Board (Kuhns Market), 657 A.2d 124 (Pa. Cmwlth.), appeal denied, 542 Pa. 677, 668 A.2d 1139 (1995). When a brief is inadequate to present specific issues for review, the court will not consider the merits of the case. Id. Here, it is evident that Claimant is arguing that the UCBR erred in denying her benefits where her childcare difficulties produced real and substantial pressure for her to terminate her position. Therefore, we conclude that Claimant has adequately presented a specific issue for this court to review.
[7] We note that domestic childcare problems are deserving of both recognition and individualized determinations. Ganter. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/8304207/ | PER CURIAM.
This is an appeal from a conviction for contempt of court in the Circuit Court of Hamilton County, Tennessee. The contumacious conduct, occurred in an action for replevin brought by the original plaintiffs, Herbert Gr. Adcox and Edward E. Kirby, dba Adcox-Kirby Chevrolet. This action is still pending. The plaintiffs were attempting to recover possession of an automobile which had been purchased from them by the appellant here, James Ray McCraw, and his mother, Sarah E. Me Craw, who were the defendants in such original action.
The appellant here, a layman, elected to represent himself in the original replevin action. In the course of that action, he filed numerous hand drawn pleadings and motions. As the original action progressed, these pleadings and motions, all over the appellant’s personal signa-*593tare, became increasingly abusive, slanderous, and scurrilous. The contumely was directed toward The Honorable James F. Morgan, Judge of the Circuit Court of Hamilton County, and toward that Court. By way of example, but not exhaustive, appellant filed a motion for change of venue on April 19,1965, in which he said:
“This case lay dormant in Judge Goins Court for a long time. Judge Goins is the father-in-law of plaintiff's attorney, Keith Harber.
On the 12th day of April, 1965, Judge James- F. Morgan, Circuit Judge, and Attorney Keith Harber held a star chamber court proceeding.
Defendant moves for a change of venue, since he did not get a fair hearing on his plea in abatement on the said date of April, 1965.
James Kay McCraw
Defendant ’ ’
Thereafter, on June 14, 1965, appellant again, over his personal signature, filed a written motion, which contained the following language:
“Defendant, James Ray McCraw, moves that the Court disqualifies itself, and turn this case over to some Court which will handle it fair an (sic) impartial. Which Division II has not done. And will not do. ######
Then this case was transferred to Division II to be the hatchet Court.
Then Judge Morgan ruled in favor of plaintiff and told defendant that he, defendant, had 30 days to appeal to the Court of Appeals State of Tennessee, Knoxville, Tennessee.
*594Defendant does not understand any such, crookedness.
Defendant is most absolutely not going to let Judge James F. Morgan hear this Case No. 2379. #*'**##
Defendant protests the crookedness of Judge James F. Morgan in handling this case.
Defendant is aware of the fact that Attorney Keith Harber and Judge James F. Morgan plan a star chamber court proceeding or kangaroo trial for the alleged writ of replevin. * * *”
On July 26, 1965, the above motion was overruled b}r Judge Morgan, and he then proceeded to inquire into the contemptuous nature of appellant’s conduct. Counsel was appointed to consult with the appellant in this connection. The hearing resulted in a conviction of appellant for contempt; appellant being fined the sum of $50.00 and sentenced to ten days in the Hamilton County Jail. It is from this conviction that James Ray McCraw brings this appeal.
While it is at the very least questionable whether or not appellant has properly perfected this appeal, this Court will overlook any failure on his part to comply with the requisites of appellate procedure.
It is pertinent to mention that the “brief’ ’ of appellant, 'if it be subject to that designation, shows little or no improvement in' his contemptuous attitude from that indicated in the Circuit Court, which resulted in appellant’s conviction for contempt of court. This so-called *595“brief” contains nothing which, by any stretch, might be construed to be proper Assignments of Error. The whole theme is complaint of. appellant’s imagined mistreatment in the court below.
There appears to be no doubt that the appellant was justifiably found guilty of contempt of court by reason of these several abusive, scurrilous and slanderous motions and pleadings in the progress of the replevin action. That this is correct appears from the opinion in State ex rel. May v. Krichbaum (1925), 152 Tenn. 416, 278 S.W. 54, wherein it is said:
“Such an insult — a charge of corruption — offered to the judge ‘within the verge of the court,’ as some of the books put it, is, under the authorities, a contempt that may be punished summarily. Without considering the validity of the statutes' undertaking to restrict the power of the courts to punish for contempt committed in their presence, we think this case plainly falls under subsection 1 of section 5918, Thompson’s-Shannon’s Code, sanctioning the power of the court to punish ‘the willful misbehavior of any person in the presence of the court, or so near thereto as to obstruct the administration of justice.’ ”
The text authorities are the same — See 17 C.J.S. Contempt sec. 28, p. 75 which is as follows:
“The filing of papers in court in a contemptuous manner or papers of such a nature as to show disrespect for the dignity or authority of the court, or to tend to interfere with the due administration of justice constitutes contempt. ’ ’ ~
The law of Tennessee clearly authorized the Court against which and in whose presence a contempt is com*596mitted to try the contempt. Churdwell v. Callens (1952), 36 Tenn.App. 119, 252 S.W.2d 131; Pass v. State (1944), 181 Tenn. 613, 184 S.W.2d 1, and TC.A. sec. 23-901 et seq.
It seems equally clear that the appellant is guilty of criminal contempt, rather than civil contempt, as his contemptuous actions were intended to, and did, attack the dignity, probity and authority of the Court. It was not a case of commission or omission in connection with the enforcement of private rights. See Robinson v. Air Draulics Engineering Co. (1964), 214 Tenn. 30, 377 S.W.2d 908.
A careful study of the record in this case leaves no room for doubt that the appellant is guilty of criminal contempt, and that the action of the trial court was both permissible and, really, required. Therefore, it results that the judgment below must be, and hereby is, affirmed, with costs against the appellant. | 01-03-2023 | 10-17-2022 |
https://www.courtlistener.com/api/rest/v3/opinions/1536391/ | 928 A.2d 312 (2007)
Leonard SCOTT, Appellant
v.
Robin SHAY, Appellee.
Superior Court of Pennsylvania.
Argued November 15, 2006.
Filed June 26, 2007.
William G. Tressler, Bellefonte, for appellant.
*313 Douglas L. Hearn, State College, for appellee.
BEFORE: TODD, BENDER AND COLVILLE[*], JJ.
OPINION BY COLVILLE, J.:
¶ 1 This case is an appeal of a protection from abuse (PFA) order against Appellant. He argues: (1) Appellee had no standing to seek a PFA order and (2) there was insufficient evidence to support the order. We reverse.
Facts
¶ 2 At some point in the 1980s, when Appellee was a child, she was friends with Appellant's son. Appellee's father and Appellant also knew each other. In or around 1989, Appellant was convicted of indecent assault, Appellee being the victim. In the years that followed, Appellee saw Appellant from time to time in grocery stores, a restaurant where she used to work and a department store where she also worked. Sometimes Appellant was with his wife and/or members of his church. Other times he was alone.
¶ 3 In August 2004, Appellant went to Appellee's house. At the PFA hearing Appellee testified that she could not remember everything Appellant said when he came to her home, but he apparently asked where Appellee's father was and inquired about a lawn mower or mower part Appellant had sold to Appellee's father many years earlier. During the conversation, Appellant indicated that his cousin was Appellee's next-door neighbor. The conversation ended when Appellee told Appellant she would have her father and husband call him.
¶ 4 In October 2005, Appellee's church held a gathering as an alternative to Halloween. Several other churches, including Appellant's, were invited to take part. Appellant attended the function, having volunteered to work at the event. The gathering lasted approximately two hours, and there were some two hundred persons, adults and children, in attendance.
¶ 5 Roughly forty-five minutes into the event, Appellee arrived and learned from one of her friends that Appellant was there. Church leaders then told Appellant he had to remain in a limited area for the rest of the evening. They also assigned a church member to stay by Appellant's side. During the night, there was no contact or conversation between Appellant and Appellee, but Appellant apparently looked and smiled at Appellee more than once. At one point, the two were eight to ten feet apart.
¶ 6 Appellee subsequently filed a petition requesting a PFA order against Appellant. The trial court held a hearing and granted the petition. This appeal follows.
Statutory Construction
¶ 7 Appellant's first issue, standing, involves a question of law namely, the interpretation of a statute. For this issue, our standard of review is de novo and our scope of review is plenary. McCance v. McCance, 908 A.2d 905, 908 (Pa.Super.2006). When we undertake statutory interpretation, our object is to ascertain and then effectuate the intention of the Legislature. 1 Pa.C.S.A. § 1921(a). When possible, this Court construes every statute so as to give effect to all of its provisions. Id. If the terms of a statute are clear and free of all ambiguity, we will not disregard the letter of the law in favor of pursuing its apparent spirit. Id. at (b). However, when the words of a statute are not explicit, this Court must determine what it was that the General Assembly *314 intended. Id. at (c). We then apply the legislators' intent when interpreting the law in question. See id. at (a), (b), (c).
¶ 8 When determining legislative intent, there are a number of factors that may be helpful. See 1 Pa.C.S.A. § 1921(c) (listing factors to consider). Among these are the occasion, necessity and circumstances of the enactment of the statute, the mischief to be remedied and the object to be attained thereby. McCance, 908 A.2d at 908, 909. Also important are the consequences of our interpretation. Id. More specifically, we must consider whether that interpretation furthers the Legislature's purpose. See id.
Protection from Abuse Act
¶ 9 The purpose of the Protection from Abuse Act ("the Act") is to protect victims of domestic violence from the perpetrators of that type of abuse and to prevent domestic violence from occurring. Fonner v. Fonner, 731 A.2d 160, 161 (Pa.Super.1999). The intent of the remedies under the Act is to allow persons to reside peaceably and without injury within their families and/or residences. McCance, 908 A.2d at 911.
¶ 10 When passing this statute, the Legislature perceived that the criminal law sometimes failed to penetrate the familial setting. Snyder v. Snyder, 427 Pa.Super. 494, 629 A.2d 977, 981 (1993). More particularly, police and prosecutors were sometimes reluctant to pursue charges arising from close domestic relationships. Yankoskie v. Lenker, 363 Pa.Super. 448, 526 A.2d 429, 433 (1987). In this sense, the Act was designed to remedy perceived inadequacies in the criminal law with respect to the domestic landscape. Id. Accordingly, the mischief the Act seeks to remedy is the violence that can sometimes erupt in spousal, parent-child and/or other household or similarly close relationships. Snyder, 629 A.2d at 981. The object of the Act, then, is to forestall domestic abuse. Id.
¶ 11 For the Act to apply, the petitioner seeking to invoke it must have standing, which is to say that the petitioner and the intended respondent must be family or household members. McCance, 908 A.2d at 908; 23 Pa.C.S.A. §§ 6102(a), 6106(a). Family or household members are defined to be spouses or persons who have been spouses, persons living as spouses or who have lived as spouses, parents and children, other persons related by consanguinity or affinity, current or former sexual or intimate partners, or persons who share biological parenthood. 23 Pa.C.S.A. § 6102(a).
¶ 12 Consistent with § 6102(a), case law applies the Act only to those persons fitting the aforesaid definition. See McCance, 908 A.2d at 910 (applying the Act to in-laws interacting with respect to child custody dispute); Varner v. Holley, 854 A.2d 520, 522 (Pa.Super.2004) (applying the Act to persons who had a dating relationship); D.H. v. B.O., 734 A.2d 409, 410 (Pa.Super.1999) (applying the Act to paramours); Miller on Behalf of Walker v. Walker, 445 Pa.Super. 537, 665 A.2d 1252, 1254 (1995) (applying the Act to parent and children); Snyder, 629 A.2d at 978, 981 (applying the Act to husband and wife). In sum, the Act is concerned with persons who have or have had domestic, familial and/or romantic relationships. It is a domestic relations statute, not a statute governing persons without any such relations.
Analysis Standing
¶ 13 Appellant argues that Appellee has no standing to seek a PFA order because he and Appellee have never had any domestic relationship. Appellee claims she is entitled to protection under the Act by virtue of the fact that Appellant *315 sexually assaulted her some years ago. Appellant and Appellee are not now nor have they ever been spouses. They have never lived as spouses. They are not relatives by blood or marriage. They have not dated; they have not been paramours. The only way that Appellant and Appellee could fall within the definition of family or household members is if the phrase "sexual or intimate partners" is interpreted to include an assailant and a victim.
¶ 14 The Act does not define the term "partners," and it is otherwise unclear whether this term includes the victim of a sex crime. Thus, the term "partners" is not free of all ambiguity. Accordingly, we must interpret the term in light of the legislators' intent. As we have already made clear, their intent was to prevent domestic violence and to promote peace and safety within domestic, familial and/or romantic relationships.
¶ 15 There is certainly no domestic, familial or romantic relationship created between an assailant and a victim of a sex assault. By contrast, the persons who undoubtedly fit the Act's definition of family or household members e.g., spouses, parents, children, relatives, paramours, and persons who undertake romantic relationships typically share some significant degree of domestic, familial and/or intimate interdependence. There is often an obvious emotional bond. Frequently, these individuals interface in very practical areas of private life a mutual residence, common family obligations and/or shared involvement in the affairs of day-to-day living. Even in a dating relationship, where the functional interdependence might not be as substantial as in a family, the participants have elected some measure of personal interaction. This interaction often involves emotional or private concerns not unlike those found in family settings, albeit not normally as extensive or as intense. In sum, the persons protected by the Act as family or household members have a connection rooted in blood, marriage, family-standing, or a chosen romantic relationship.
¶ 16 There simply is no such connection created by an assault. Surely, a victim would not claim to have had a relationship with the attacker based solely on a sex crime. An assailant and a victim do not, by virtue a crime, suddenly have a bond regarding the private matters of life. They have no interface concerning personal issues and concerns. There is nothing at all about a sex crime that creates a domestic or familial link. We thus hold that a criminal assault does not establish a sexual or intimate partnership for the purposes of the Protection from Abuse Act. Rather, sexual or intimate partners are persons who have mutually agreed to enter such relationships.
¶ 17 It is critical to understand that the flaw in Appellee's argument is her contention that a sex assault creates a family or household relationship. To be sure, if individuals already are family or household members, a sex assault would constitute the type of abuse the Act seeks to prevent. See 23 Pa.C.S.A. § 6102(a)(1). However, a sex assault does not establish a family or household relationship, thus subjecting the parties to domestic relations law.
¶ 18 We must not lose sight of the fact that the Act was passed because the criminal law was sometimes an inadequate mechanism for dealing with violence that arose in the intimate environs of domestic life. Applying the Act to Appellant would not protect a victim of domestic violence because Appellee was not the victim of domestic violence. Also, since there has been no domestic abuse, a PFA order would not prevent domestic abuse from recurring. Similarly, subjecting Appellant to a PFA order would in no way help to *316 cultivate peace or safety in a household troubled by familial violence because the parties to this case do not and did not share a household or similar interaction. It is not within our authority to expand the Act beyond the arena in which it was intended to operate.
¶ 19 Moreover, we consider the consequences of our interpretation. By construing "partners" to mean those persons who mutually choose to enter relationships, we give effect to the provisions of the statute in a way that promotes its purpose of preventing violence among people with a domestic, familial or romantic bond, past or present. More simply, our interpretation means that persons who choose to have intimate or sexual relationships are within the purview of domestic relations law. By contrast, to interpret the Act as Appellee would have us do would mean that domestic protective orders could be granted for persons who have no personal relationship of any type. We cannot extend the domestic relations statutes so as to encompass persons who stand in the positions of Appellant and Appellee.
¶ 20 Also relevant is the fact that the criminal law already affords protection from harassment, stalking, assault and a multitude of other crimes. The Legislature has not determined that the criminal law is inadequate to deal with interactions between an assailant and a victim who are not in a family setting. There is no suggestion that police or prosecutors would be unable or unwilling to enforce the criminal law between Appellant and Appellee if the facts warranted its application.
¶ 21 This discussion in no way suggests that Appellant did engage in criminal behavior during the conduct about which Appellee complained in her PFA petition. However, when there is a crime, the criminal law is, in the judgment of the Legislature, sufficient recourse for non-domestic cases.
¶ 22 This observation leads us to comment on a particular aspect of Appellee's brief. The brief argues that, absent application of the Act, Appellee has ". . . little or no other recourse under the law to prevent [Appellant's] current behavior." Appellant's Brief at 10. By claiming that domestic relations law is essentially the only recourse, Appellee is necessarily suggesting that criminal law does not apply to Appellant's conduct. Despite her implication that Appellant's behavior is not criminal, Appellee believes Appellant should nonetheless be subject to some sanction. Appellant's conduct does not become subject to sanctions under domestic relations law solely because he was convicted under the criminal code at an earlier time. The Act is not intended to punish past criminal conduct. Snyder, 629 A.2d at 981. Because of the criminal charges against Appellant, he was subject to prosecution and punishment, and he now bears the life-long stigma of his conviction. It is inappropriate to suggest that, because someone was convicted of a crime, he or she is now and will always be subject to whatever restriction or sanction one might conceive. Such sanctions are left to the Legislature. The Legislature has passed criminal statutes dealing with crimes and domestic statutes dealing with domestic relations. The two areas of law may overlap, but a given fact pattern fits within the domestic relations statutes only if the persons involved in that situation are those contemplated by the statute.
¶ 23 Finally, we understand the emotional appeal to granting crime victims standing in a situation such as the present one. However, it is not our place to enforce domestic statutes against persons solely because they were once convicted of crimes.
*317 ¶ 24 Based on the foregoing analysis, we hold that Appellee lacked standing to pursue a PFA order against Appellant. It was, therefore, legal error for the trial court to issue the order in question.
Analysis Sufficiency
¶ 25 Although Appellee did not have standing, there was insufficient evidence to support the PFA order. When considering a claim that the evidence was insufficient to support a PFA order, this Court views the evidence and all reasonable inferences therefrom in the light most favorable to the petitioner. Walker, 665 A.2d at 1255. Proceeding in this fashion, we determine if the record contains sufficient evidence to prove abuse by a preponderance of the evidence. Karch v. Karch, 885 A.2d 535, 537 (Pa.Super.2005).
¶ 26 Under the Act, abuse is defined as follows:
§ 6102. Definitions
* * * * * * *
(1) Attempting to cause or intentionally, knowingly or recklessly causing bodily injury, serious bodily injury, rape, involuntary deviate sexual intercourse, sexual assault, statutory sexual assault, aggravated indecent assault, indecent assault or incest with or without a deadly weapon.
(2) Placing another in reasonable fear of imminent serious bodily injury.
(3) The infliction of false imprisonment pursuant to 18 Pa.C.S. § 2903 (relating to false imprisonment).
(4) Physically or sexually abusing minor children, including such terms as defined in Chapter 63 (relating to child protective services).
(5) Knowingly engaging in a course of conduct or repeatedly committing acts toward another person, including following the person, without proper authority, under circumstances which place the person in reasonable fear of bodily injury. The definition of this paragraph applies only to proceedings commenced under this title and is inapplicable to any criminal prosecutions commenced under Title 18 (relating to crimes and offenses).
23 Pa.C.S.A. § 6102(a).
¶ 27 There is no evidence whatsoever that would support a claim under Subparagraphs 1 through 4 of the foregoing definition. Therefore, the only question is whether Appellant's actions would violate Subparagraph 5.
¶ 28 For there to be a violation of Subparagraph 5, there must be a course of conduct. The term "course of conduct" is not defined by Chapter 61 (Protection from Abuse) of Title 23 of the Pennsylvania statutes. However, 23 Pa.C.S.A. § 6102(b) indicates that terms not otherwise defined by Chapter 61 shall have the meaning given to them by Title 18. Title 18 defines "course of conduct" as "[a] pattern of actions composed of more than one act over a period of time, however short, evidencing a continuity of conduct. . . ." 18 Pa.C.S.A. § 2709(f) (harassment); see also 18 Pa.C.S.A. § 2709.1(f) (stalking).
¶ 29 After the 2004 conversation at her home, more than a year passed before Appellee saw Appellant. Even then, the event at which she saw him was a well-attended public affair to which his church was invited and at which Appellant and Appellee had no contact. Two encounters that occur more than a year apart under dissimilar circumstances and that do not resemble each other can hardly be called a pattern evidencing a continuity of conduct. Compare R.G. v. T.D., 448 Pa.Super. 525, 672 A.2d 341, 342 (1996) (finding course of conduct where the appellant repeatedly initiated unwanted phone calls and e-mail messages to the appellee, told the appellee *318 she was the object of his obsessive-compulsive disorder, and persisted in continuing to speak with the appellee despite her pleas for him to desist).
¶ 30 We recognize that Appellee also saw Appellant at her work place in the past, but the last such incident took place in 1995. She likewise saw him in grocery stores over the years. However, the record does not support a finding of any connection between those past events and the recent encounters. Because Appellant's alleged behavior did not constitute a course of conduct, there could be no violation of the statute.
¶ 31 Subparagraph 5 also requires that the petitioner have a reasonable fear of bodily injury. Bodily injury is not defined in the Protection from Abuse chapter of Title 23. We therefore look to Title 18. There, bodily injury is defined to be impairment of physical condition or substantial pain. 18 Pa.C.S.A. § 2301. None of the encounters listed in Appellee's PFA petition involved any threat or suggestion that Appellant might inflict on Appellee any such physical pain or impairment of a physical condition. The record simply does not support a reasonable fear of bodily injury. Thus, although Appellee did not have standing under the Act, additionally, there was insufficient evidence to support the order.
¶ 32 Based on the foregoing analysis, we reverse the protection from abuse order.
¶ 33 Order reversed. Jurisdiction relinquished.
¶ 34 Judge TODD files a Concurring Statement.
CONCURRING STATEMENT BY TODD, J.:
¶ 1 I concur in the result. I agree completely with the thoughtful analysis set forth by my learned colleague with respect to the issue of standing. However, as I do not believe it is necessary to proceed with an analysis of the sufficiency of the evidence, I cannot join in that part of the majority's opinion. I therefore concur in the result.
NOTES
[*] Retired Senior Judge assigned to the Superior Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857796/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-005-CV
DEBRA ANN HOGG,
APPELLANT
vs.
ROBERT C. HOGG,
APPELLEE
FROM THE COUNTY COURT AT LAW NO. 1 OF WILLIAMSON COUNTY
NO. 88-701F3, HONORABLE TIMOTHY G. MARESH, JUDGE PRESIDING
Debra Ann Hogg appeals from a divorce decree naming Robert C. Hogg managing
conservator of their two children. We will affirm the judgment of the trial court.
THE CONTROVERSY
Robert and Debra Hogg were married in Texas in 1980. They lived in Georgetown
until 1983 when they were sent to England on assignment with the Air Force. At the end of 1985,
they returned to Texas, their legal domicile. In May 1986, the family moved to Florida. The
couple had two daughters; the first was born in Texas in 1981 and the second in England in 1985.
The couple separated in January 1988, at which time Robert moved back to Texas while Debra
and the daughters remained in Florida. In June 1988, apparently by agreement, the children came
to Texas to visit their father and stayed all summer. On August 4, 1988, while Debra was in
Texas, Robert filed this cause for divorce requesting that he be named managing conservator of
the children and obtained emergency temporary orders that were extended until a temporary
hearing could be held. On August 5th, Debra returned to Florida and petitioned a Florida court
for divorce, also requesting custody of the children.
Before filing any other pleading, Debra filed a motion to dismiss this cause on
August 25th on the basis that Florida was the home state of the children. On September 7, 1988,
the trial court held a hearing on temporary matters at which Debra appeared in person. The trial
court found that it had jurisdiction because Debra had not filed a special appearance under Rule
120a, but instead had filed a motion to dismiss and appeared in person at the hearing. See Tex.
R. Civ. P. Ann. 120a (Supp. 1992). Further, the trial court found in accordance with Robert's
pleadings that it had jurisdiction due to "a serious and immediate question concerning the welfare
of the children." Tex. Fam. Code Ann. § 11.53(a)(3)(B) (1986). The court overruled the motion
to dismiss. Thereafter, the parties reached an agreement, announced on the record in open court,
asking that the trial court appoint Robert as temporary managing conservator and Debra as
temporary possessory conservator, and that it require the children to remain in Texas with Robert.
The trial court signed its order incorporating the agreement October 4, 1988. No further action
occurred for some time and the children continued living with their father.
On July 17, 1989, Debra filed a plea in abatement and an application for writ of
habeas corpus requesting the return of the children. She alleged that on September 20, 1988, a
Florida court rendered a judgment of divorce in her favor, giving her primary custody over the
children. This Florida decree, Debra asserted, represented a full adjudication of all issues. No
such decree appears in the record before this court and apparently none was admitted into
evidence. At the final hearing on March 26, 1990, the trial court denied Debra's motions.
On August 20, 1990, the trial court rendered a decree of divorce containing orders
concerning the children and levied $750 in sanctions jointly and severally against Debra and her
lawyer for their failure to produce properly-requested discovery. This decree underlies the
appeal.
JURISDICTION
Debra's first three points of error complain that the trial court erred by denying her
plea in abatement, her writ of habeas corpus, and her motion to dismiss because the Texas court
lacked jurisdiction of the cause.
Debra argues correctly that jurisdiction generally lies in a child's home state. Tex.
Fam. Code Ann. § 11.53(a)(1)(A) (1986). Home state is defined as "the state in which the child
immediately preceding the time involved lived . . . for at least six consecutive months." Tex.
Fam. Code Ann. § 11.52(5) (1986). Even assuming Florida was the children's home state, Robert
contends that, if an emergency exists, a Texas court may assume jurisdiction over the matter when
necessary to protect the childen. The court found that such an emergency existed here.
Under the statute, a Texas court otherwise competent to decide custody matters has
jurisdiction to determine a child's custody if 1) the child is physically present in Texas and 2)
there is a serious and immediate question concerning the welfare of the child. Tex. Fam. Code
Ann. § 11.53(a)(3)(B) (1986); see also Garza v. Harney, 726 S.W.2d 198, 201 (Tex. App. 1987,
no writ). Robert alleged that his children met these criteria and he presented evidence in support
of his allegations. The trial court found accordingly. Because no findings of fact were requested
or filed, we must assume the court found facts in favor of its ruling. Lemons v. EMW Mfg. Co.,
747 S.W.2d 372, 373 (Tex. 1980); Renfro Drug Co. v. Lewis, 235 S.W.2d 609, 613 (1950).
During pretrial hearings, in which both parties participated, Robert demonstrated
that the children were presently residing in Texas and offered proof detailing the alleged
mistreatment of the children while under their mother's supervision. The children told Robert that
they slept on the floor; that they were intentionally locked outside the apartment; that Debra's
residence was roach infested, filthy, and unsanitary; that alcohol containers were left strewn about
the apartment; and that they were left in the care of two men and subjected to physical abuse by
Debra's live-in boyfriend, a marijuana user who had a ferocious temper. Robert asserted that his
eldest child required counseling for behavioral problems as a result of these circumstances. The
parties had discussed these conditions; although Debra had assured Robert that she had altered her
living arrangements, he discovered that she had come with the same boyfriend to Texas to pick
up the children and that her living conditions were unchanged.
Debra subjected herself to the jurisdiction of the Texas court system by personally
appearing at pre-trial hearings and filing pleadings without filing a special appearance under Rule
120a. See Tex. R. Civ. P. Ann. 120a (Supp. 1992). Additionally, Debra's complaint that the
trial court lacked jurisdiction is essentially a legal sufficiency contention. See Garza, 726 S.W.2d
at 201. This Court must examine the record for any probative evidence that would support the
trial court's actions and ignore all contrary evidence. Garza v. Alviar, 395 S.W.2d 821, 823
(Tex. 1965). The record contains legally-sufficient evidence upon which the trial court could have
made its determination. Trial courts may exercise substantial discretion in issuing orders for the
immediate protection of a child. McElreath v. Stewart, 545 S.W.2d 955, 958 (Tex. 1977). We
find that there was evidence to support the trial court's ruling and thus the trial court did not abuse
its discretion by assuming jurisdiction.
Debra alternatively contends that the Texas trial court lacked jurisdiction because
Florida had already adjudicated the matters in dispute in this cause. The parties agree that when
this cause was filed, no action had been commenced anywhere in any other court. Our record
contains no evidence of a Florida decree. Without any Florida judgment, there is no evidence
before this court to support Debra's request for a plea in abatement, habeas corpus relief, or a
dismissal. The burden is on appellant to present to this court an adequate record demonstrating
reversible error. Tex. R. App. P. Ann. 50(d), 52(a) (Pamph. 1992).
Further, an order denying a petition for writ of habeas corpus is not an appealable
order. The proper relief is by writ of mandamus. See Gray v. Rankin, 594 S.W.2d 409 (Tex.
1980). Finally, the trial court is not required to compel return of the children when one seeking
the writ relinquished her possession by consent or acquiescence. Tex. Fam. Code Ann.
§ 14.10(c) (Supp. 1992). We overrule Debra's first three points of error.
SANCTIONS
Debra's fourth point of error contends that the trial court erred by imposing
discovery sanctions against her and her lawyer. She asserts that the request for discovery was
invalid because the court did not have jurisdiction and the discovery did not relate to an inquiry
into the court's jurisdiction.
For the reasons stated, this argument fails. Debra complains only of the trial
court's jurisdiction to levy sanctions; thus we overrule appellant's fourth point of error.
We affirm the judgment of the trial court.
Marilyn Aboussie, Justice
[Before Chief Justice Carroll, Justices Aboussie and Kidd]
Affirmed
Filed: July 1, 1992
[Do Not Publish] | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1536411/ | 223 B.R. 870 (1998)
In re APP PLUS, INC., American Preferred Prescription Inc., American Preferred Plan, Inc., American Preferred Prescription-NY, Inc., American Preferred Prescription-FLA, Inc., American Preferred Prescription-GA, Inc., National Pharmacy Claims, Inc., Community Prescription Services, Inc., APP Pharmacy, Inc. and AP Plan-FLA, Inc., Debtors.
Bankruptcy No. 893-84170-478.
United States Bankruptcy Court, E.D. New York.
August 26, 1998.
*871 Kenneth P. Silverman, Jaspan Schlesinger Silverman & Hoffman LLP, Garden City, NY, for Chapter 11 Trustee of the Estate of Substantively Consolidated Debtors.
Eugene Cimini, Jaspan Schlesinger Silverman & Hoffman LLP, Garden City, NY, for Chapter 11 Trustee.
Bruce Frankel, Angel & Frankel, P.C., New York City, for Biokeys II, Inc.
Alan Freid, Schwartzfeld, Ganfer & Shore, New York City, for Debtors.
Stephen H. Case, Davis Polk & Wardwell, New York City, for Procare, Inc.
David Wiltenburg, Hughes Hubbard & Reed LLP, New York City, for Tracar S.A.
John G. Loughnane, Goodwin Proctor & Hoar LLP, Boston, MA, for Advent.
Thomas P. McGowan, Meltzer Lippe Goldstein Wolf & Schlissel, Mineola, NY, for Cost Controls, Inc.
Joseph Samet, Baker & McKenzie, New York City, for Fulltime Holding Corp. and Ray and Eleanor Adiel.
John Westerman, Meltzer Lippe Goldstein Wolf & Schlissel, Mineola, for Ryan Management Corp.
Dwight Yellen, Ballon Stoll Bader & Nadler, New York City, for American Preferred Prescription, Inc.
MEMORANDUM DECISION AND ORDER ON REQUEST FOR TOPPING FEE
DOROTHY EISENBERG, Bankruptcy Judge.
The Chapter 11 Operating Trustee moved this Court by Amended Order, dated July 29, 1998, Shortening Time and Fixing Dates, Times and Place of Hearings to Consider Motion for Further Orders Pursuant to Sections 363(b), 363(f) and 363(m) of the Bankruptcy Code and Fed. R. Bankr.P.2002(a)(2), 9006(c) and 6004:(1) Authorizing Trustee's Sale of substantially all of Debtors' Assets Free and Clear of all Liens, Claims and Encumbrances, (2) Authorizing the Trustee to Conduct an Auction to Sell Such Assets, (3) Authorizing the Trustee to Sell Such Assets to Biokeys II, Inc. or Any Higher or Better Bidder Pursuant to the Terms of an Agreement Dated July 28, 1998, (4) Approving a Break-Up Fee, Topping Fee and Certain Bidding Procedures, (5) Fixing Manner and Extent of Notice of Such Auction and Hearing and (6) Granting Related Relief (the "Scheduling Order"). The Scheduling Order, among other things, provided notice of two (2) hearings in connection with the Trustee's motion to sell substantially all of the Debtors' assets; i.e., a hearing to be held on August 12, 1998 (the "Procedures Hearing") to consider authorizing and approving, among other things, a Break-Up Fee, Topping Fee and Certain Bidding Procedures (collectively, the "Bidding Procedures") in connection with an auction sale to be held on September 28, 1998, as more fully described in the Trustee's motion and in the Asset Purchase Agreement (the "Purchase Agreement") entered into as of July 21, 1998 between Biokeys II, Inc. ("Biokeys"), as Buyer, and Kenneth P. Silverman, the Chapter 11 Trustee of the Debtors, as Seller.
*872 After the Procedures Hearing duly held on August 12, 1998, at which the Court considered the Trustee's motion and the proposed Bidding Procedures, as well as the objections thereto filed by (i) Procare, Inc. ("Procare"), an indirect subsidiary of CVS Corporation; (ii) Fulltime Holding Corp. ("Fulltime") and Ray and Eleanor Adiel ("the Adiels"); and (iii) Tracar S.A. ("Tracar") and after hearing argument in favor of the motion by the Trustee, Trustee's counsel, counsel to Biokeys; and hearing argument in opposition by counsel to Procare, counsel to Fulltime and the Adiels, and counsel to Tracar; the Court approved certain of the proposed Bidding Procedures, including authorizing a Break-Up Fee of up to $250,000 in the event that Biokeys was not the approved purchaser. The Court's decision was memorialized in an Order (i) Specifying Terms and Conditions for Submitting Competing Offers; (ii) Approving Break-Up Fee, as requested; and (iii) Granting Related Relief (the "Procedures Order"), which was entered on August 13, 1998. The only matter not decided at the Procedures Hearing was the issue of whether this Court should approve a Topping Fee, as defined in the motion. The Trustee supported the request, but several interested parties, the Debtors and creditors objected to the allowance of the Topping Fee. The Procedures Order specifically states in paragraph 13 that the Topping Fee, if any, will be determined by the Court at a later date. This memorandum opinion constitutes the Court's findings of fact and conclusions of law in accordance with Fed. R. Bank. P. 7052, made applicable to a contested matter by Fed. R. Bankr.P. 9014.
BACKGROUND
The Debtor and its affiliates operate retail, delivery and mail order pharmaceutical prescription businesses located in Melville, New York, Miami, Florida, Atlanta, Georgia, and New York, New York. American Preferred Prescription, Inc. (referred to herein as the "Debtor") filed a petition under Chapter 11 of the Bankruptcy Code on July 22, 1993. On March 8, 1996, the Court entered an Order confirming the Third Amended Plan of Reorganization of American Preferred Prescription, Inc. (the "Plan"), which provided for the payment of 100% of all allowed claims. On March 21, 1997, the Court issued a Decision and Order after trial awarding Cost Controls, Inc. ("CCI") $2,970,000 in compensatory damages, legal fees not to exceed $1,000,000, and punitive damages three times the amount of compensatory damages. Pursuant to CCI's application, on April 11, 1997, the Court appointed Kenneth P. Silverman as Trustee pursuant to Section 105 of the Bankruptcy Code, with certain limited powers, which powers were subsequently expanded by further Order of the Court authorizing him to settle or compromise claims after notice and hearing and approval by the Court.
On September 5, 1997, the Trustee commenced an adversary proceeding seeking the substantive consolidation of American Preferred Prescription, Inc. with its corporate parent and all entities under common control with American Preferred Prescription, Inc. (sometimes hereinafter referred to as the "APP Affiliates"). In response thereto, on December 1, 1997, the Trustee, American Preferred Prescription, Inc. and the APP Affiliates entered into a Secured Guaranty and Subordination Agreement (the "Guaranty Agreement") which, by its express terms and conditions, provided that upon the occurrence of certain specified material defaults by American Preferred Prescription, Inc. or one or more of the APP Affiliates, the Trustee could request the Court to enter judgment granting substantive consolidation.
After an extended trial, the Court found that American Preferred Prescription, Inc. and/or the APP Affiliates had materially defaulted under the Guaranty Agreement and, on June 19, 1998, entered a judgment substantively consolidating American Preferred Prescription, Inc. and the APP Affiliates. At a continued hearing held on June 22, 1998, the Court further found, based upon the conduct of American Preferred Prescription, Inc., that grounds existed to expand the authority and powers of the Trustee to that of a full operating trustee and, by "so ordering" the record of that hearing, the Trustee immediately assumed such authority and powers.
*873 FACTS
During the long history of this Chapter 11 proceeding, and particularly since CCI, a major creditor, was awarded its multi-million dollar judgment, the Court has repeatedly heard representations from the principals of American Preferred Prescription, Inc. and its counsel that American Preferred Prescription, Inc. was an extremely valuable business and that there were several parties interested in investing in the business and/or purchasing all or a portion thereof. However, such representations were never substantiated to the Court's satisfaction, since none of the interested parties went beyond discussions with the Debtor's principals and, although there appeared to be some parties interested in acquiring the Debtor and/or the APP Affiliates, none approached the Trustee with an offer until late June 1998, when the Trustee was given full authority as the operating Trustee of the Debtor and the APP Affiliates (the "Substantively Consolidated Debtors").
At the Procedures Hearing, the Trustee advised the Court that since having become the operating trustee of the estate of the Substantively Consolidated Debtors, he had been contacted by numerous substantial entities having an interest in purchasing the business and assets of the Substantively Consolidated Debtors, some of which prospective purchasers had previously been in discussions with the principals of American Preferred Prescription, Inc. The Trustee further advised the Court that the principals of American Preferred Prescription, Inc. had never disclosed the identities of any of the interested entities while the Trustee had only limited authority. By way of demonstrating such interest, the Trustee identified numerous substantial entities which have entered into confidentiality agreements with the Trustee to enable them to engage in due diligence regarding the financial condition of the Substantively Consolidated Debtors.
Biokeys 11, Inc. ("Biokeys") is the first bona fide offeror, having offered $20,000,000 for the assets and having signed a contract with the Trustee which binds Biokeys to furnish a $2,000,000 deposit, which will be forfeited as liquidated damages in the event Biokeys is unwilling or unable to consummate the closing. Biokeys is known colloquially as the "stalking horse". Biokeys is a newly formed corporation with no known assets, formed for the purpose of bidding and acquiring the subject assets for itself or its assignee.
As part of its negotiations with the Trustee, Biokeys requested a Break-Up Fee in an amount up to $250,000 subject to verification of such costs and expenses satisfactory to the Court to be paid to Biokeys in the event a higher or better offer to purchase the assets of the substantively consolidated Debtor is accepted by the Trustee and approved by the Court. It had further negotiated for the Trustee to pay to Biokeys a Topping Fee in the amount of $550,000 to be paid to Biokeys out of the sale proceeds in the event a higher or better offer to purchase the assets of the substantively consolidated Debtors in excess of $22,000,000 is accepted by the Court. In the event the Topping Fee is paid to Biokeys, no Break-Up Fee would be paid.
At the procedures hearing, counsel to Biokeys argued ably and eloquently that the Topping Fee would compensate Biokeys for the risk that its $20,000,000 offer would be used as a stalking horse to induce other bidders to top Biokeys' offer, while Biokeys had tied up $2,000,000 to make the required deposit and devoted its time, efforts and resources to consummate the proposed transaction.
The Debtor, and several creditors, objected to the Topping Fee for various reasons. Tracar argues that to more than double the Break-Up Fee of $250,000 merely because the sale process leads to an offer of $2,000,000 more than the original bid proposed by Biokeys is to hand Biokeys more than 25% of the benefit to the estate.
The interests of other potential bidders were also represented at the hearing, all of whom argued in opposition to the Topping Fee. In addition, the Trustee represented to the Court and the Court accepts this as a fact, that he had received an unprecedented amount of interest from substantial entities regarding the business of the substantively consolidated Debtors, as evidenced by their having executed confidentiality agreements in connection with their due diligence and by the fact that several of such interested entities *874 were represented by counsel who were present at the procedures hearing. It is anticipated that there will be several seriously interested bidders and that the ultimate highest and best offer will be substantially higher than Biokeys' offer.
At the hearing, there was little, if any, opposition to the Break-Up Fee and the Court approved the Break-Up Fee in an amount of up to $250,000, subject to verification of such costs and expenses satisfactory to the Court, and reserved decision on whether to permit the Topping Fee as requested.
DISCUSSION
Break-up fees and topping fees, while not uncommon outside of the bankruptcy context, are relatively new within bankruptcy.[1] Those few bankruptcy cases that have addressed the issue have imported many of the legal principles applied by courts in the non-bankruptcy context, specifically in the takeover area. Break-up fees are the fees paid to the proposed purchaser of assets by the seller, in the event that the transaction contemplated fails to be consummated for various reasons delineated in the purchase agreement, including the seller's acceptance of a later bid. Typically, the break-up fee covers reimbursement of the disappointed purchaser's out-of-pocket expenses related to the proposed acquisition and/or compensation for the time, efforts, resources, lost opportunity costs and risks incurred by the disappointed purchaser. In contrast, a topping fee is paid only in the event another bidder is the successful purchaser. The amount of the topping fee is usually a percentage of the amount over the unsuccessful purchaser's bid. Since topping fees are based on the amount of the overbid, they do not usually add a preset cost to the purchase price.
Rationale for Requesting Break-Up and Topping Fees
A. Purchaser's Rationale:
1. Such fees compensate the initial bidder for its legal and other professional fees and expenses incurred in connection with obtaining financing commitments, completing legal due diligence and negotiating and drafting agreements with the seller;
2. Compensate an initial bidder or the expenditure of its time, efforts and resources;
3. Compensate for the risk that the potential purchaser's offer will be used as a "stalking horse" to induce other purchasers to top the initial bidder's offer; and
4. Compensate the unsuccessful bidder for the risk of losing other business and investment opportunities while the bidding process unfolds.
B. Seller's Rationale:
1. Such fees may encourage the making of an initial "stalking horse" offer at a point where there are no competing bidders;
2. May discourage a bidding strategy designed to hold back competitive bids until late in the process;
3. Aid the seller in negotiating an initial bid that may be the offeror's highest bid;
4. May establish a high floor early in the bidding process; and
5. May enhance the bidding process by creating momentum towards the consummation of a sale.
In connection with the sale of assets in a bankruptcy context, the fiduciary duty of the officers and directors of the debtor-in-possession or, in this instance, the operating trustee, runs to the "diverse interests of the debtor, creditors and equity holders, alike." In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir.1983). See also In re America West Airlines, Inc., 166 B.R. 908, 909-10 (Bankr.D.Ariz.1994). Often, these interests differ, and must be evaluated by the bankruptcy court on a case-by-case basis. In re Crowthers McCall Pattern, Inc., 114 B.R. 877, 881 (Bankr.S.D.N.Y.1990). Bankruptcy *875 courts will carefully scrutinize the use of break-up fees and topping fees. In re Integrated Resources, Inc., 135 B.R. 746, 750-51 (Bankr.S.D.N.Y.1992), aff'd 147 B.R. 650 (S.D.N.Y.1992), app. dismissed, 3 F.3d 49 (2d Cir.1993) (dismissed on jurisdictional grounds). Integrated Resources, the leading case on break-up fees, sets forth a three-part test: (1) Was the negotiation of the break-up fee tainted by self-dealing and manipulation? (2) Does the fee discourage rather than encourage bidding? (3) Is the fee unreasonable relative to the proposed purchase price? Cf. In re Hupp Industries, Inc., 140 B.R. 191, 196 (Bankr.N.D.Ohio 1992) (the proposed break-up fee must be carefully scrutinized to insure that the Debtor's estate is not unduly burdened and that the relative rights of all the parties in interested are protected); In re America West Airlines, Inc., 166 B.R. 908, 912-13 (Bankr.D.Ariz.1994) (bankruptcy court has the jurisdiction and responsibility to determine if the proposed break-up fee, and the transaction as a whole, make economic sense and are in the best interest of the bankruptcy estate, its creditors, bondholders and shareholders).
Due to a dearth of cases dealing solely with topping fees and although the bankruptcy courts in Integrated Resources, Hupp Industries and America West were grappling with break-up fees, this Court has been guided by their analysis in determining whether to approve a Topping Fee in this case. That is to say, in addition to the three-part test enunciated in Integrated Resources, this Court has also analyzed whether the proposed Topping Fee is unduly burdensome to the estate in view of the specific facts and circumstances of this case and whether it is in the best interest of the bankruptcy estate, the creditors, and the equity holders.
The Court finds that there has been no taint of self-dealing or manipulation in connection with the parties' negotiation of a Topping Fee. As to the reasonableness of the proposed Topping Fee relative to the proposed purchase price, the Court notes that the Purchase Agreement contemplates a preset Topping Fee in the amount of $550,000, to be paid in the event the Court approves a competing bid of at least $22,000,000 and the transaction actually closes. When viewed as a percentage of the successful overbid, if the Court were to approve a competing bid of $22,000,000, the purchase price would be $2,000,000 higher than Biokeys' initial bid, and the Topping Fee would work out to 27.5% of the overbid, with the percentage decreasing as the successful overbid increases. If the purchase price would be $10,000,000 higher than Biokeys' initial bid, then the Topping Fee would work out to 5.5% of the overbid.
However, this Court must determine whether approval of a Topping Fee, in conjunction with the other Bidding Procedures in this case, will encourage rather than discourage the bidding, and whether it would enhance rather than detract from the ultimate maximum recovery to the estate. The Court believes that topping fees were intended to be awarded when, at the time the original offeror negotiated the contract with the debtor or the trustee, there were other known interested bidders that refused to be bound by a contract because they intended to bid only a little more than the initial bidder, who had diligently negotiated with the seller, so as to be the higher bidder. A Topping Fee may be justified to protect the estate from minimum bids by making such other interested parties bid substantially more for the assets in order to qualify as the higher or better offeror. However, in this case the Procedures Order provides that the minimum opening bid by any bidder other than Biokeys shall be $600,000 in excess of $20,000,000, and that subsequent bids shall be in increments of at least $100,000. With the substantial interest shown at the hearing and the representation of considerable interest by the Trustee, it appears likely that the bidding will exceed $22,000,000. The Court does not believe a Topping Fee would enhance the bidding, or result in any substantial benefit to this estate. Biokeys will be adequately protected for its position as "stalking horse" by the approval of the Break-Up Fee.
The Court finds that by virtue of the totality of the circumstances present in this case, it is in the best interests of the estate, the creditors and the equity holders that any augmented proceeds from the bidding process be used so as to effectuate the provisions of the Debtor's confirmed Plan; to pay the necessary and reasonable expenses of the *876 sale, including, if applicable, the Break-Up Fee already approved by this Court in the event that Biokeys is not the successful bidder; to pay the Trustee's professionals; all other appropriate expenses; and from the surplus, if any, to make such distribution to equity as may be appropriate and approved by the Court.
CONCLUSION
1. This matter is before the Court pursuant to Section 363(b) of the Bankruptcy Code and Fed. R. Bankr.P. 6004.
2. Jurisdiction is conferred by 28 U.S.C. § 1334, and the proceeding is "core" by virtue of 28 U.S.C. § 157(b)(2)(A), (N) and (O).
3. The Court declines to approve the Topping Fee provided for in the Purchase Agreement entered into between the Trustee and Biokeys II, Inc. under the facts and circumstances present in this Chapter 11 proceeding.
4. The Court denies that portion of the Trustee's motion seeking to have the Court approve a Topping Fee in the event that Biokeys is not the successful bidder at the sale of the assets.
IT IS SO ORDERED.
NOTES
[1] The Court notes the written material and discussion by Joseph Samet, "Use of Break-Up and Topping Fees in Asset Sales," in Commercial Law and Practice Course Handbook, 121, 131-41 (Practising Law Institute 1996). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536414/ | 223 B.R. 64 (1998)
In re Frances LIND, Debtor.
Frances LIND, Plaintiff,
v.
Martin O'CONNELL, Defendant.
Bankruptcy No. 95-50468, Adversary No. 96-5194.
United States Bankruptcy Court, D. Connecticut.
July 31, 1998.
*65 Janine M. Becker, Willinger, Shepro, Tower & Bucci, P.C., Bridgeport, CT, for Plaintiff.
Anthony E. Schwartz, Law Offices of Anthony E. Schwartz, Norwalk, CT, for Defendant.
MEMORANDUM AND ORDER ON MOTION FOR SUMMARY JUDGMENT
ALAN H.W. SHIFF, Chief Judge.
This adversary proceeding was commenced by the plaintiff/debtor to avoid an alleged preferential transfer under bankruptcy code §§ 522(g) and (h) and 547(b), and to recover and exempt funds under §§ 550, 522(i) and 522(b). The plaintiff filed the instant motion for summary judgment which is denied for the reasons that follow.
BACKGROUND
On April 3, 1995, the plaintiff commenced this chapter 7 case. On November 29, 1996, she commenced this adversary proceeding to avoid two alleged preferential transfers and to recover and exempt $7,500.00 of the transferred funds. See §§ 522(g) and (h), 547, 550, and 522(b) and (i).[1] On March 20, 1997, the plaintiff filed this motion for summary judgment.
The determinative facts are not in dispute. On June 8, 1992, a Connecticut superior court entered judgment against the plaintiff and her husband for $67,804.24.[2] Thereafter, the state court issued two writs of execution to permit the defendant to levy on the plaintiff's bank account. The first was issued on September 19, 1994 (execution 1). On December 21, a sheriff served the execution papers on Fairfield County Savings Bank ("Fairfield Bank") and Chase Manhattan Bank of Connecticut ("Chase"). Chase charged $480.00 against the plaintiff's account pursuant to the writ. Fairfield Bank charged $9,364.80 to the plaintiff's account and paid that sum to the sheriff on January 5, 1995.
The second execution was issued on February 2, 1995 and served on Fairfield Bank and Chase on February 9 (execution 2). On that date, Chase charged $219.00 to the plaintiff's account. Fairfield Bank charged $803.44 to the plaintiff's account and paid that amount to the sheriff on March 1, 1995. The defendant concedes that the transfers of $1,022.44 pursuant to execution 2 occurred within the preference period and are properly avoidable, see Defendant's Memorandum of Law at 1-2, and that amount has been paid to the plaintiff. See tr. at 3.
DISCUSSION
Rule 56(c) F.R.Civ.P., made applicable to bankruptcy by Rule 7056 F.R.Bankr.P., provides that summary judgement:
*66 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.
Rule 56(c) F.R.Civ.P. (West 1997).
There are no disputed issues of fact. The only dispute is whether the transfer of funds in connection with execution 1 was made within the preference period prescribed by § 547(b)(4). That section provides in relevant part:
(b) . . . [T]he trustee may avoid any transfer of an interest of the debtor in property
(4) made
(A) on or within 90 days before the date of the filing of the petition. . . .
11 U.S.C. § 547(b)(4)(A) (West 1997). In this case, the preference period reaches back 90 days from the April 3, 1995 petition date to January 3, 1995.
The bankruptcy code authorizes a debtor to avoid the transfer of property of the debtor under the following relevant provisions.
Section 522(h)
The debtor may avoid a transfer of property of the debtor . . . to the extent that the debtor could have exempted such property under subsection (g)(1) of this section if the trustee had avoided such transfer, if
(1) such transfer is avoidable by the trustee under section . . . 547 . . . of this title . . .; and
(2) the trustee does not attempt to avoid such transfer.
Section 522(g)
. . . [T]he debtor may exempt under subsection (b) of this section property that the trustee recovers under section . . . 550 . . . of this title, to the extent that the debtor could have exempted such property under subsection (b) of this section if such property had not been transferred, if
(1) (A) such transfer was not a voluntary transfer of such property by the debtor; and
(B) the debtor did not conceal such property. . . .
Section 522(i)
(1) If the debtor avoids a transfer . . . under subsection . . . (h) of this section, the debtor may recover in the manner prescribed by, and subject to the limitations of, section 550 of this title, the same as if the trustee had avoided such transfer, and may exempt any property so recovered under subsection (b) of this section.
Section 550(a)
. . . [T]o the extent that a transfer is avoided under section . . . 547 . . . of this title, the trustee may recover for the benefit of the estate, the property transferred . . . from
(1) the initial transferee of such transfer or the entity for whose benefit such transfer was made. . . .
See also DeMarah v. United States (In re DeMarah), 62 F.3d 1248, 1250 (9th Cir.1995). There is no dispute here that all of the conditions imposed by the foregoing provisions have been satisfied. Accordingly, the plaintiff seeks to avoid the transfers resulting from execution I to the extent of § 522(b). See Plaintiff's Motion for Summary Judgment. See also Plaintiff's Memorandum of Law at 6.
The plaintiff contends that the transfers occurred within the preference period, i.e., on January 5, 1995, the date of payment on the execution. See tr. at 3-4. The defendant argues that the transfers were outside of the preference period, i.e., on December 21, 1994, the date the writ of execution was served on the banks. Id. at 7-8. The plaintiff has the burden of proving that the transfers were within the preference period. See 11 U.S.C. § 547(g).
The Supreme Court has stated that "[w]hat constitutes a transfer and when it is complete is a matter of federal law." Barnhill v. Johnson, 503 U.S. 393, 397-98, 112 S.Ct. 1386, 118 L.Ed.2d 39 (1992) (citation and internal quotation marks omitted). The *67 code broadly defines transfer as "every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with property or with an interest in property. . . ." 11 U.S.C. § 101(54). The time of transfer for purposes of a preference analysis is governed by § 547(e). See also Meister v. State National Bank of Connecticut (In re Mailbag International, Inc.), 28 B.R. 905, 907 (Bankr.D.Conn.1983).
Section 547(e) provides in relevant part:
(e) (1) For the purposes of this section . . .
(B) a transfer of . . . property other than real property is perfected when a creditor on a simple contract cannot acquire a judicial lien that is superior to the interest of the transferee.
(2) For the purposes of this section, . . . a transfer is made
(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time . . .; [or]
(B) at the time such transfer is perfected, if such transfer is perfected after such 10 days. . . .
11 U.S.C. § 547(e) (West 1997). Under that statutory scheme, a two part analysis is employed to determine the date of the transfer. First, the date that the transfer is perfected is established, see § 547(e)(1). That date has been defined by the Supreme Court as the time when other creditors are foreclosed from obtaining a superior lien. As the Court concluded, it is "[n]ot until the secured party actually performs the final act that will perfect its interest . . . [that] other creditors [are] foreclosed conclusively from obtaining a superior lien. It is only then that they `cannot' acquire such a lien." Fidelity Financial Services, Inc. v. Fink, ___ U.S. ___, ___, 118 S.Ct. 651, 654, 139 L.Ed.2d 571 (1998). Section 547(e)(2) then provides that the transfer is made at the time it takes effect, if it is perfected at or within 10 days after it takes effect, or the transfer is made at the time of perfection if the perfection is after the 10 day period.
In this case, the court must determine whether the transfers of funds from the plaintiffs bank accounts pursuant to execution 1 were perfected when the sheriff served the writ of execution or when he was paid. That determination is made by reference to the law of Connecticut. See Barnhill v. Johnson, supra, 503 U.S. at 398, 112 S.Ct. 1386 (citations omitted) ("In the absence of any controlling federal law, `property' and `interests in property' are creatures of state law"); Butner v. United States, 440 U.S. 48, 54-55, 99 S.Ct. 914, 59 L.Ed.2d 136 (1979) ("Property interests are created and defined by state law"); Battery One-Stop Ltd. v. Atari Corp., (In re Battery One-Stop Ltd.), 36 F.3d 493, 495 (6th Cir.1994) ("A more precise definition of `perfection' is left to state law").
The procedure for executing on a judgment debtor's bank account is provided in C.G.S.A. § 52-367b.[3]See also Fleet Bank *68 Connecticut, N.A. v. Carillo, 240 Conn. 343, 348, 691 A.2d 1068 (1997). Under that provision, executions may be granted against the accounts of a judgment debtor held by a bank. After an execution is obtained from the state court, a sheriff is directed to serve the execution, an affidavit, and an exemption claim form upon the bank. After those papers have been served, the bank is required to remove the amount of the indebtedness from the judgment debtor's account by a midnight deadline, i.e., midnight on the next banking day following the date of service, see C.G.S.A. § 42a-4-104(a)(10). The bank is not required to give prior notice to the judgment debtor. See Bristol Savings Bank v. Risall, No. CV 92 509344, 1992 WL 339222, at *1 (Conn.Super. Nov. 12, 1992). The bank must then mail copies of the served documents to the judgment debtor and hold the amount of the indebtedness for 15 days from such mailing in a segregated account. The judgment debtor is given 15 days to notify the bank that an exemption will be claimed as to the segregated funds. See Fleet Bank Connecticut, N.A. v. Carillo, supra, 240 Conn. at 348, 691 A.2d 1068 ("Protection from execution is derived from certain exemption statutes . . ."). If the judgment debtor claims an exemption, a hearing is scheduled to resolve any resulting dispute. See C.G.S.A. § 52-367b(e-g, i-j); see also People's Bank v. Perkins, 22 Conn.App. 260, 262-63, 576 A.2d 1313 (1990). Failure to assert an exemption will result in the payment to the sheriff of the amount withheld. The sheriff then pays that amount, less a sheriff's fee, to the judgment creditor.
The parties have not cited and this court has not found any authority on whether a judgment creditor, referred to in § 547(e)(1)(B), can acquire a judicial lien that is superior to the interest of the defendant [judgment creditor/transferee] after the service of the defendant's writ of execution but before the sheriff/defendant is paid. There is, however, support for the defendant's argument that the time of perfection occurs at the moment service of the execution was made by the sheriff upon the bank. See, e.g., Hartford Postal Employees Credit Union, Inc. v. Rosemond, 33 Conn.App. 395, 400, 635 A.2d 876 (1994) ("[P]riority of [wage] executions [under C.G.S.A. § 52-361a] is determined by the order of their presentation to the employer").
Barnhill v. Johnson, supra, 503 U.S. at 393, 112 S.Ct. 1386, resolved the question of when a transfer by ordinary check is made, and although that authority is not dispositive here, the Supreme Court's reasoning in that case is instructive. The Court determined that the transfer was made on the date that the check was honored and not on the date it was received by the payee because "receipt of a check gives the recipient no right in the funds held by the bank on the drawer's account." Id. at 399, 112 S.Ct. 1386. Nor is the recipient granted any rights upon receipt of the check against the payor bank if it refuses to honor the check. Id. In contrast, a judgment creditor has significant rights in the bank account of a judgment debtor after a writ of execution is served on the bank.
*69 The plaintiff argues that a judgment debtor's statutory right to claim an exemption in the segregated funds inures to the benefit of an intervening judgment creditor who levies on the judgment debtor's bank account during the gap period between the service of an execution and payment to the judgment creditor. See Plaintiff's Memorandum of Law at 7-8. The argument is unavailing. A judgment debtor's right to claim an exemption might eventually defeat a levying judgment creditor to the extent of the exemption, but that right does not affect the priority of liens held by levying judgment creditors. The right of exemption merely raises a dispute between the levying creditor and the judgment debtor as to entitlement to the segregated funds.
Under Connecticut law, a judgment creditor acquires an interest in a judgment debtor's bank account when service is made on the bank and it has notice of the judgment creditor's claim. Significantly, a statutory consequence of service is that the bank is required to segregate the sum sought by the execution from the judgment debtor's account. See C.G.S.A. § 52-367b(c). It is noted that a bank may exercise its right of setoff even after a writ of execution is served. See, e.g., Normand Josef Enterprises, Inc. v. Connecticut National Bank, 230 Conn. 486, 646 A.2d 1289 (1994). The right of setoff, however, must be exercised by the midnight deadline after which the bank is required to remove the levied funds from the judgment debtor's account, see supra at 67-68. Id. at 503, 507, 646 A.2d 1289. That right of setoff in this case would have to be exercised by midnight on the next banking day after service, i.e., December 22, 1994. On the facts here, even if that date were regarded as the date on which a judgment creditor could not obtain a superior interest, it would fall outside of the preference period.
The apparent purpose of segregating the funds is to isolate them for the benefit of the judgment creditor, subject to a right of the judgment debtor/account holder to claim an exemption. The law of Connecticut recognizes that a right of setoff will trump a writ of execution if the right is exercised timely, but does not grant that superior right to any other intervening judgment creditors. In effect, the statute operates to limit an intervening creditor's reach of the segregated funds. The intent of the state statute to protect the judgment creditor's right to payment of the segregated funds during the gap period is buttressed by C.G.S.A. § 52-367b(n) which grants a cause of action to the judgment creditor against the bank for its failure or refusal to pay the amounts sought by the execution.
It is concluded that the writ of execution under C.G.S.A. § 52-367b in this case is perfected under § 547(e)(1)(B) when it is served upon the bank in accordance with that statute. At that time, a simple contract judgment creditor is foreclosed from acquiring a judicial lien that would be superior to the defendant's interest in the plaintiff's bank account. The effective date of the transfer was therefore December 21, 1994. As noted, the petition was filed on April 3, 1995. Because the service date falls outside of the preference period, the plaintiff has failed to satisfy § 547(b)(4). The transfers made pursuant to execution 1 are therefore not avoidable.
ORDER
Accordingly,
IT IS ORDERED that the plaintiff's motion for summary judgment is denied; and
IT IS FURTHER ORDERED that judgment shall enter in favor of the defendant as a matter of law.[4]
NOTES
[1] By letter dated April 11, 1997, the trustee informed the plaintiff's attorney that he would not pursue a preferential transfer action against the defendant as such an action would entail retaining counsel on a contingency fee basis and amounts recovered in such an action could properly be exempted by the debtor under § 522(g)(1). The trustee therefore indicated that he would not assert any interest on behalf of the bankruptcy estate in any amounts recovered in this adversary proceeding.
[2] The record of this case is silent as to the nature of the state court action.
[3] Section 52-367b of the Connecticut General Statutes Annotated, "Execution against debts due from banking institution. Natural person as debtor," provides in relevant part:
(a) Exempt debts. Execution may be granted pursuant to this section against any debts due from any banking institution to a judgment debtor who is a natural person, except to the extent such debts are protected from execution. . . .
(b) Issuance and service of execution. If execution is desired against any such debt, the plaintiff requesting the execution shall notify the clerk of the court. . . . If the [requisite] papers are in order, the clerk shall issue such execution containing a direction that the officer serving the same shall . . . make demand . . . upon the . . . [the] banking institution . . . for payment of any such nonexempt debt due to the judgment debtor and, after having made such demand, shall serve a true and attested copy of the execution, together with the affidavit and exemption claim form . . . with the banking institution officer upon whom such demand is made.
(c) Removal of funds from debtor's account. If any banking institution upon which such execution is served and upon which such demand is made is indebted to the judgment debtor, it shall remove from the debtor's account the amount of such indebtedness not exceeding the amount due on such execution before its midnight deadline, as defined by section 42a-4-104.
(d) Notice to debtor. Upon receipt of the execution and exemption claim form from the serving officer, the banking institution shall forthwith mail copies thereof, postage prepaid, to the judgment debtor at his last known address with respect to the affected accounts on the records of the banking institution. The institution shall hold the amount removed from the debtor's account pursuant to subsection (c) of this section for fifteen days from the date of the mailing to the judgment debtor and during such period shall not pay the serving officer.
. . .
(h) Disposition if no claim of exemption. If no claim of exemption is received by the banking institution within fifteen days of the mailing to the judgment debtor of the execution and exemption claim form pursuant to subsection (d) of this section, the banking institution shall, upon demand, forthwith pay the serving officer the amount removed from the judgment debtor's account, and the serving officer shall thereupon pay such sum, less his fees, to the judgment creditor, except to the extent otherwise ordered by a court.
. . .
(n) Liability of bank. If the banking institution fails or refuses to pay over to the serving officer the amount of such debt, not exceeding the amount due on such execution, such banking institution shall be liable in an action therefor to the judgment creditor named in such execution for the amount of the nonexempt moneys which it failed or refused to pay over, and the amount so recovered by such judgment creditor shall be applied toward the payment of the amounts due on such execution. Thereupon the rights of the banking institution shall be subrogated to the rights of the judgment creditor. . . .
C.G.S.A. § 52-367b (1998).
[4] The court may grant summary judgment to a nonmoving party. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ("[C]ourts are widely acknowledged to possess the power to enter summary judgments sua sponte, so long as the losing party was on notice that she had to come forward with all of her evidence"). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536415/ | 928 A.2d 856 (2007)
395 N.J. Super. 230
VINELAND CONSTRUCTION COMPANY, INC., Plaintiff-Appellant,
v.
TOWNSHIP OF PENNSAUKEN, Defendant-Respondent, and
Cherokee Pennsauken, LLC, Defendant/Intervenor-Respondent.
Superior Court of New Jersey, Appellate Division.
Argued March 6, 2007.
Decided July 27, 2007.
*858 Lloyd D. Levenson argued the cause for appellant (Cooper Levenson April Niedelman & Wagenheim, attorneys; Mr. Levenson, Gerard W. Quinn and William J. Hughes, Jr., Atlantic City, on the brief).
Mark P. Asselta, Westmont, and Jeffrey D. Smith, Teaneck, argued the cause for respondent Township of Pennsauken (Brown & Connery and Parker McCay, attorneys; Mr. Asselta and William M. Tambussi, Westmont, on the joint brief).
Jeffrey D. Smith argued the cause for intervenor-respondent Cherokee Pennsauken, LLC (DeCotiis, Fitzpatrick, Cole & Wisler, attorneys; Mr. Smith and Victoria A. Flynn, Teaneck, on the joint brief).
Before Judges LISA, HOLSTON, Jr. and GRALL.
The opinion of the court was delivered by
LISA, J.A.D.
Plaintiff, Vineland Construction Company, Inc., a property owner in Pennsauken Township, challenges the Township's designation of Cherokee Pennsauken, LLC (Cherokee), as master redeveloper for the Township's redevelopment plan for approximately 600 acres of waterfront property along the Delaware River, including plaintiff's 137 acres. Plaintiff does not challenge the Township's determination that the property within the redevelopment area (including plaintiff's property) is in need of redevelopment, nor does it challenge the Township's redevelopment plan.[1]
Prior to the designation of Cherokee, plaintiff had engaged in contract negotiations with the Township for the right to redevelop its own property and an adjoining property consistent with the redevelopment plan. Plaintiff contended the Township's designation of Cherokee was a result of political favoritism and that it should be permitted to redevelop its own property. Plaintiff therefore sought to enjoin Cherokee's anticipated condemnation[2]*859 and redevelopment of plaintiff's property, contending this would amount to an unconstitutional taking.[3]
Following a ten-day bench trial, Judge Orlando issued a comprehensive written decision finding no violation of statutory or constitutional law in connection with the Township's designation of Cherokee as master redeveloper and the potential condemnation of plaintiff's property. He therefore entered an order dismissing plaintiff's unconstitutional taking claim and its claim premised upon alleged political impropriety.
On appeal, plaintiff argues that the trial court erred by rejecting plaintiff's constitutional challenges to the designation of Cherokee as master redeveloper and by finding that the designation of Cherokee was neither arbitrary, capricious nor unreasonable, and therefore, entitled to deference. Plaintiff also argues that critical factual findings by the trial court were clearly erroneous. We reject these arguments. From our review of the record we are satisfied that the trial court's factual findings are supported by substantial credible evidence in the record as a whole. See Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474, 484, 323 A.2d 495 (1974). We are further satisfied that the trial court correctly applied the controlling legal principles in reaching its conclusion. Therefore, we affirm.
I
We set forth a detailed recitation of the facts, as established at trial, to provide context to the appeal issues. The Township's waterfront includes most of the Delaware River frontage between the Benjamin Franklin and Betsy Ross bridges connecting Camden and Pennsauken, respectively, to Philadelphia. Camden lies to the south of this area. Revitalization of the Township's waterfront was one of the objectives set forth in its 1998 master plan.
Plaintiff, a closely-held real estate development and construction firm, purchased 137 acres of land along the Pennsauken waterfront in 1972. It converted an existing manufacturing facility into a 300,000 square foot warehouse distribution center and leased space to various businesses. As of 2003, plaintiff's warehouse facility was occupied by two tenants; a three-story office building on the property was vacant; and another small building was being used as "a kind of shop." The property contains wetlands.
In 1990, plaintiff learned that the prior owners' manufacturing operation, which involved the application of porcelain enamel to cast iron bathtubs, had contaminated the soil. In 1996, plaintiff reached a settlement with the prior owners regarding remediation of the property, which was ongoing at the time of trial.
On June 5, 2001, following an investigation and a public hearing, the Planning Board adopted a resolution finding over 600 acres of waterfront property along the Delaware River, including plaintiff's property, in need of redevelopment pursuant to the Local Redevelopment and Housing Law, N.J.S.A. 40A:12A-1 to -73 (LRHL). *860 In particular, the Board found the existence of conditions set forth in N.J.S.A. 40A:12A-5b, c, d and e, in support of its determination.
The redevelopment area was largely comprised of four properties commonly referred to as Petty's Island, owned by CITGO; Vineland Construction, owned by plaintiff; the Acme Site, owned by the Township; and the Hess/Texaco site, which was comprised of two parcels owned by the Hess and Texaco oil companies. The redevelopment area also encompassed a number of smaller properties, including a small junkyard located adjacent to plaintiff's property, known as the Parisi site.
Petty's Island is an island in the Delaware River. It is elongated and stretches southward from the Pennsauken mainland such that its location in the river runs parallel to and is directly across from the Cramer Hill section of Camden, which fronts the river. A bridge connects the northern tip of Petty's Island with plaintiff's property on the mainland, which borders the Cramer Hill section of Camden. The Acme site is across the street from plaintiff's and Parisi's property. The Hess/Texaco site is north of the other sites. It is separated from plaintiff's property by a cove etched out in the river, such that the two sites face each other across the cove in a generally North-South direction. The two sites are not contiguous, but are connected by a road on the mainland running along the cove.
On June 6, 2001, the Township approved the resolution of the Planning Board. On June 27, 2001, the Township adopted an ordinance adopting a redevelopment plan prepared by its planning consultant, Marc R. Shuster. The objectives of the redevelopment plan included the "environmental rehabilitation of existing compromised sites" and the development of "a unique mix of land uses designed for the particular characteristics of the area." The potential uses contemplated by the plan included "marine oriented uses, general athletic fields, lodging, institutional/governmental uses, retail, educational facilities, dining, and active and passive recreational uses."
In addition, the redevelopment plan authorized the Township to enter into a contract with a redeveloper if "necessary" for the implementation of the plan. The Township was also given "the option of negotiating with private-sector developers for a payment-in-lieu-of-taxes . . . for appropriate developments under this plan."
In 2002, the Township learned that an active bald-eagle nest had been discovered on Petty's Island. As a result, the State Department of Environmental Protection (DEP) urged the Township to adopt a coordinated approach in implementing its redevelopment plan in order to manage the eagle habitat consistent with various regulations governing endangered species.
The Township retained Louis Bezich, a planning consultant, to manage the redevelopment project and to meet with potential redevelopers. Over the next few years, the Township engaged in discussions with at least four potential redevelopers and reviewed several redevelopment proposals for various sites within the redevelopment area, including proposals submitted by plaintiff. There is no dispute that plaintiff dedicated considerable resources and effort to the development of a redevelopment proposal for its property.
John Krauser, plaintiff's President and Chief Operating Officer, testified that after reviewing the Township's redevelopment plan in December 2001, he initiated discussions with the Township regarding the Township's intentions with respect to plaintiff's property. Plaintiff initially offered to sell its property to the Township. *861 However, by January 2002, Krauser had assembled a "team" to evaluate whether plaintiff should instead undertake the redevelopment of its property. In addition to Krauser, the team included an outside attorney, Catherine Ward, of the Cooper Levenson firm; a redevelopment planner, Angelo Alberto; engineers, Sadat Associates, Inc.; and a wetlands expert, Princeton Hydro.
According to Krauser, by August 2002, plaintiff had decided to undertake the redevelopment of its property. Plaintiff contemplated a mixed-use redevelopment for its property including residential, commercial and retail uses. According to Alberto, plaintiff was primarily an industrial developer and did not have expertise in redevelopment projects involving smart growth principles. Alberto was retained because of his expertise in mixed use redevelopment. Therefore, Alberto arranged for plaintiff's redevelopment team to visit various other redevelopment projects throughout the State having characteristics similar to its proposal.
Over the next two years, there were numerous meetings between plaintiff's representatives and the Township, and many written and oral communications. Until Cherokee expressed an interest in undertaking the redevelopment project, the Township continued to encourage plaintiff to refine its plan.
In March 2003, plaintiff presented to the Township concept plans for the redevelopment of its property. The Township's response was favorable and Bezich asked plaintiff to consider the possibility of developing some portion of the Acme site, which had already been acquired by the Township. This favorable response prompted plaintiff to further refine its plan and to explore the process for securing the appropriate permits from regulatory agencies. During a July 2003 meeting, plaintiff presented a revised concept plan to the Township. Again, the Township's response was favorable. There was also some discussion regarding the possible inclusion of the Parisi site in plaintiff's plan. According to Ward, the Township was eager to eliminate the Parisi "junkyard operation." However, plaintiff could not acquire the Parisi site through condemnation for inclusion in its project unless it entered into a redevelopment agreement with the Township.
Accordingly, on August 8, 2003, the Township's redevelopment counsel sent Ward a draft of a redevelopment agreement between the Township and plaintiff. The draft redevelopment agreement was not complete. The provisions pertaining to the improvements to be constructed and the acquisition costs for the Parisi property were left blank. Also, the three exhibits referred to in the draft agreement did not exist and remained to be negotiated. The exhibits were to include a "purchase and sale agreement" to be prepared by the Township and the redevelopment project plan to be prepared by plaintiff.
In September 2003, Bezich advised Ward that another redeveloper had proposed a "co-generation" facility for the Texaco-Hess site. According to Ward, plaintiff was strongly opposed to any industrial development of the other sites. Accordingly, on September 19, 2003, Ward drafted, but did not deliver, a letter to the Township withdrawing plaintiff's proposal to redevelop its property as a "mixed use development" on the basis that the proposal was "highly dependent on the entire waterfront redevelopment area being redeveloped in a similar manner," and that the Township's master plan demonstrated "no synergy and no consistency, just haphazard uses." In Ward's view, the Township did not share plaintiff's "vision" for the *862 entire waterfront and plaintiff's parcel could not "stand alone."
According to Krauser, the letter was not sent to the Township because he did not want to end negotiations and "the language was too harsh." Nonetheless, in September 2003, Krauser informed Alberto that the redevelopment project was "on hold" and that Alberto would not be paid for any additional work. Although Krauser maintained that plaintiff was always "prepared to go forward" with the project, he acknowledged that plaintiff's commitment was not unequivocal, in that it depended upon market conditions.
While there continued to be some communication between plaintiff and the Township during 2003, the frequency of their meetings slowed, plaintiff did not submit additional concept plans, and there were no further negotiations regarding the unresolved terms of the draft redevelopment agreement. Also, plaintiff and the Township had reached an impasse regarding plaintiff's plan to use dredge in carrying out the proposed redevelopment. In light of these developments, Township officials were not convinced that plaintiff was capable of, or committed to, carrying out the proposed redevelopment of its property.
Meanwhile, during 2003, Cherokee, an experienced redeveloper of brownfield sites in major urban areas, was involved in negotiations with Camden officials regarding its potential designation as master redeveloper for the "Cramer Hill Redevelopment Project." Cherokee was ultimately named master redeveloper for the Cramer Hill project. While evaluating the development potential of the Cramer Hill site, Cherokee became interested in the potential for the complementary development of Petty's Island.
In early December 2003, David Luthman, the Township attorney, was contacted by Joseph Salema, a Cherokee consultant, regarding Cherokee's interest in the Petty's Island site. Luthman acknowledged that he had known Salema for years and greatly respected him. Therefore, Luthman immediately scheduled a meeting between representatives of the Township and Cherokee for December 18, 2003. At this meeting, Cherokee expressed its interest in the complementary redevelopment of Petty's Island in conjunction with the Camden project. Cherokee described its experience in redeveloping brownfields, as well as its financial strength. The Township's representatives were impressed with Cherokee's credentials and financial capability, and asked Cherokee to consider submitting a redevelopment proposal for the entire waterfront redevelopment project. Anselm Fusco, a Cherokee senior vice president, agreed to present the Township's request to Cherokee. He indicated that the Township could anticipate a prompt response because Cherokee had already conducted related research regarding the development potential of the Delaware waterfront in conjunction with its work on the Camden project.
On December 29, 2003, Luthman reported on his discussions with Cherokee during a Township meeting. Given the difficulties posed by the discovery of the bald eagle nest on Petty's Island, as well as the lack of any other private proposals for the development of the Petty's Island site, Luthman urged the Township to negotiate a redevelopment agreement with Cherokee.
In January 2004, Cherokee advised the Township that it was interested in undertaking the entire waterfront development project on condition that it be named sole redeveloper. Cherokee stressed that it would be to the Township's advantage to have a single redeveloper. Fusco conveyed to Township officials the many benefits of working with a single redeveloper *863 such as Cherokee, including efficiencies in terms of scheduling and costs, which would make it more likely that the project would succeed and have a positive financial impact on the Township. From a fiscal perspective, the success of the project depended upon the Township being able to garner sufficient revenues from tax ratables to offset the financial impact of development, such as additional roads to maintain and more children to educate. Accordingly, Cherokee conducted a fiscal analysis projecting these variables over the ten-year period it would take to complete the project. This analysis ensured that the Township would not find itself in the position of having "10,000 kids in their school system and . . . marginal tax ratables."
Fusco also informed Township officials of the many advantages of having Cherokee coordinate different aspects of the project, such as engineering and remediation contracts, impact litigation, and infrastructure improvement. Fusco emphasized that a coordinated and coherent approach was crucial in dealing with environmental and ecological issues. Because of Cherokee's supervision of the Camden project, Fusco believed it was in an ideal position to facilitate "habitat management" or "the treatment of the ecosystem, the waterfront area and all of the areas that eagles roost and forage." Having control over two large projects enhanced Cherokee's ability to mitigate the effects of development by preserving large swaths of wetlands. Multiple developers would be less likely to allow large portions of their respective properties to be preserved for wetlands. A single developer would be in a better position to identify and commit a portion of the development area for wetlands to balance out development in another portion.
In addition, Fusco explained that Cherokee would assign case managers to deal with each regulatory agency, facilitating the permitting process. Because these case managers would be operating "under an umbrella of a single effort," there would be benefits "in terms of continuity of regulatory approach," "consistency of remedial strategy," and "the efficiency with which the regulators can operate."
According to Fusco, there were also significant advantages to having a single developer deal with infrastructure issues. For example, each site would need adequate sewage. The municipality would be responsible for maintaining the existing sewer infrastructure, while a State agency would be processing all new sewage applications. Having a single developer to coordinate sewage activity would be much more effective because "there is a single hand driving the design, driving the implementation, coordinating and controlling the schedule, being able to speak to how the project is phased in over time, so that demand is anticipated and the right improvements are made in a logical sequence."
Although Cherokee requested that it be named conditional redeveloper by January 28, 2004, the Township demurred, asking that Cherokee first submit a statement of qualifications and formal proposal for the waterfront redevelopment project.
In 2004, when Krauser became aware that the Township was involved in negotiations with another redeveloper, he sent the Township a signed copy of the draft redevelopment agreement, but he first deleted the word "draft." Krauser did not include any of the exhibits referred to in the agreement. He acknowledged that plaintiff was not prepared to complete construction before December 31, 2005, as stated in the agreement. Nonetheless, Krauser claimed that he intended that this agreement would bind the parties.
*864 Following the Township's rejection of the draft agreement, plaintiff filed this action on April 23, 2004 seeking to enjoin the Township from designating Cherokee as master redeveloper, essentially on the basis that plaintiff already had an agreement with the Township for the redevelopment of its own property.
On May 21, 2004, Cherokee submitted a formal redevelopment proposal to the Township. Cherokee and its subsidiaries were described as "the world's largest private sector investor in brownfield redevelopment projects." Since 1990, Cherokee had "invested in more than 300 properties in 40 separate transactions." In 2003, Cherokee raised $620 million in equity for investment in projects around the world. Cherokee's portfolio of projects included industrial, office, hotel and residential properties. It preferred "to invest in large brownfield sites in major urban areas where municipal and state officials and regulators are committed to brownfield redevelopment." Cherokee had "converted 17,000 acres of contaminated land into productive remediated property, . . . generat[ing] $56 million of annual property taxes and $18 million of annual sales tax revenues." In addition to the Cramer Hill project, Cherokee was the redeveloper for the Meadowlands golf redevelopment project, described as the "largest brownfield and landfill remediation project currently being undertaken in the United States." The Meadowlands project involved complex legal, regulatory and financial issues similar to those likely to arise in connection with the Township's waterfront redevelopment project.
Cherokee represented that it had carefully crafted the Camden and Pennsauken redevelopment proposals to complement one another to "ensure the coherent and coordinated restoration and redevelopment of nearly ten miles of shoreline between the Benjamin Franklin and Betsy Ross bridges." It posited that the "ecological and planning benefits of such a regional approach to brownfield redevelopment will accrue to the environment and to the people of Pennsauken and the region for generations to come." With respect to the Petty's Island site, Cherokee proposed to develop a hotel/conference center, a golf course, and low density residential housing which would be designed to protect the bald eagle habitat.
Cherokee estimated that the total cost of the waterfront redevelopment project would exceed $770 million. Cherokee and its development partners planned to provide all of the invested capital, to contribute $20 million to the construction of a municipal recreation center, parks and open space, and to assume the cost of any properties acquired by the Township through eminent domain. In return, the redevelopment proposal required the Township to implement a tax securitization financing program and to grant Cherokee various development rights for residential housing, hotels, office space, retail space, and a golf course.
Cherokee's proposal also contemplated execution of an escrow agreement, by which Cherokee would "provide all funds necessary for the preliminary acquisition of properties and other activities associated with the development of the waterfront." The escrow agreement precluded the Township from negotiating with any other party for the redevelopment of any property within the waterfront redevelopment area.
Cherokee anticipated that it would be able to complete the entire project within eight years.
Luthman urged the Township to designate Cherokee as master redeveloper because of the "tremendous benefits" of having a single redeveloper for the entire *865 waterfront. As master redeveloper, Cherokee would be able to take a "regional approach" to the bald eagle and wetlands problems. In Luthman's opinion it would be very difficult for the Township to implement a "regional approach" if different parcels were redeveloped by separate developers. For example, he observed that because some of the redevelopment area's extensive wetlands would have to be filled in, other wetlands would have to be set aside for remediation. If there were separate developers, it would be difficult to resolve wetland remediation problems as nobody would want "to give up part of their potential redevelopment parcel." Aside from these concerns, Luthman pointed out that there was no private interest in the redevelopment of Petty's Island, the only proposal for the Texaco site was for the development of an ethanol refinery, which was not consistent with the Township's vision for the waterfront, and that negotiations with plaintiff had stalled.
On May 26, 2004, the Township adopted a resolution conditionally designating Cherokee as master redeveloper. The resolution stated that the redevelopment area was comprised of "environmentally compromised properties including Brownsfields [sic] and other former industrial sites which present unique environmental and other challenges to proper redevelopment." It recited that over a period of several years, the Township had considered the proposals of various potential redevelopers and ultimately concluded that a partnership with Cherokee was in the public interest given its reputation and experience. The resolution noted that Cherokee was "a nationally recognized redeveloper of Brownsfields [sic] and other industrially contaminated sites." In addition, the Township approved of Cherokee's plans to "provide public access to the waterfront, create new recreational facilities, build new housing and commercial space, generate significant additional tax revenues, create employment opportunities, encourage the use of mass transit and ferry service and enhance the waterfront ecosystem and habitat."
Over the next year, negotiations between the Township and Cherokee regarding the terms of a final redevelopment agreement were ongoing. It was Fusco's understanding that prior to the execution of a final redevelopment agreement either party had "the right to walk away." On May 11, 2005, the Township adopted a resolution authorizing the execution of a final redevelopment agreement with Cherokee.
Members of the Township Committee who voted on Cherokee's designation testified that they were favorably impressed by Cherokee's financial capacity and its planned contribution towards the construction of a community center. They were also convinced that it would be beneficial to have a single entity in charge of the project because of the complexities of the "permitting process."
During the trial, plaintiff developed as an alternate argument to its unconstitutional taking claim that the Township's action in designating Cherokee was arbitrary, capricious and an abuse of discretion because it was motivated by improper political considerations. It presented this evidence of alleged political impropriety.
In February 2004, a Cherokee attorney, Eric Wisler, learned that the DEP had offered CITGO a "nature resource damage settlement" which required CITGO to pay for the "cleanup" and to donate Petty's Island to a land preserve trust for use as a State park. While Cherokee was not adverse to having CITGO pay for the cleanup, both Cherokee and the Township wanted Petty's Island to remain part of the redevelopment project. Cherokee's attorneys *866 wanted to reach an agreement with the DEP regarding redevelopment of Petty's Island before agreeing to undertake the project. To this end, Cherokee's attorneys arranged a meeting with then-Governor McGreevey. McGreevey allegedly assured Cherokee "that the island would not be turned into a state park and that he was in favor of the proposed development." McGreevey advised Cherokee's attorney to meet with the DEP Commissioner and to be "candid" regarding Cherokee's intentions.
Two days after meeting with the Governor, Cherokee was contacted by the Commissioner and a meeting was arranged. Following a meeting between the Commissioner and Cherokee, the Township and the DEP entered into negotiations regarding the potential redevelopment of Petty's Island. The DEP and Cherokee subsequently entered into an agreement providing, among other things, that Cherokee would give the DEP $10,000,000 to be placed in the DEP's natural resource damage account upon the Township's acquisition of Petty's Island, and the DEP would forego CITGO's offer to donate the property to the State. CITGO was not included in the Petty's Island negotiations until after Cherokee reached this agreement with the DEP.
In March 2004, Wisler sent an e-mail to Tom Darden, a principal of Cherokee, inquiring about the status of a contribution for Governor McGreevey. On April 23 and 24, 2004, Darden and another Cherokee principal made a combined $20,000 contribution to the Democratic State Committee. In addition, Luthman acknowledged that during this same time period, the Township had repeatedly tried to secure the Governor's presence for the public announcement of Cherokee's designation. In April 2004, the Township requested Cherokee's participation in a fundraising event for the performing arts. Cherokee agreed to be listed as an official sponsor of the event.
II
In his comprehensive post-trial decision, Judge Orlando described the issue to be decided as follows: "[T]his Court now must decide whether the naming of Cherokee as a master redeveloper, which will result in the acquisition of [plaintiff's] property by eminent domain, represents an unlawful taking of [plaintiff's] property." The judge noted that the parties agreed "that the naming of Cherokee as master redeveloper will result in the acquisition of [plaintiff's] property by eminent domain."
Judge Orlando concluded that the proposed condemnation of plaintiff's property comported with State and Federal constitutional requirements. In this regard, the judge noted that plaintiff had not challenged the redevelopment designation and, therefore, conceded that the planned redevelopment served a public purpose. Relying on a long line of United States Supreme Court cases culminating in Kelo v. City of New London, 545 U.S. 469, 125 S.Ct. 2655, 162 L.Ed.2d 439 (2005), as well as the decision of the New Jersey Supreme Court in Levin v. Township Committee of Bridgewater, 57 N.J. 506, 543, 274 A.2d 1, appeal dismissed, 404 U.S. 803, 92 S.Ct. 58, 30 L.Ed.2d 35 (1971), the judge stated that "once it is established that the project in question constitutes a public purpose, it is for the legislative branch of government to determine the various parcels of land which need to be condemned to achieve the project's goal."
The judge rejected plaintiff's claim that the Township did not need to condemn plaintiff's property, but planned to do so only to benefit Cherokee in return for its political contributions. He found that the *867 Township's proposed acquisition of plaintiff's property was "primarily to bring the redevelopment plan for the decayed and contaminated waterfront to fruition."
Regarding plaintiff's challenge to "the process by which Cherokee was designated as master developer," the judge found no violation of New Jersey law. He noted the absence of statutory criteria governing the selection of a redeveloper, and found no impropriety in the fact that Cherokee's political connections helped it gain ready access to local officials in its bid to obtain the waterfront redevelopment contract. Although the judge did not doubt that Cherokee used its political connections to obtain a prompt meeting with the Township's key decision makers in December 2003, he was persuaded that "[o]nce at the table, it was Cherokee's demonstrated success in completing other similar projects, its willingness to undertake the development of Pennsauken's entire waterfront and its aggressive approach to beginning work on the project that captured the attention of Pennsauken officials." The judge observed that when Cherokee presented its plan in December 2003, plaintiff's "pace on its concept plan had slowed, and it was uncertain when or if [plaintiff] would move forward with the project." Furthermore, plaintiff had "no plans" for the redevelopment of various other properties within the redevelopment area, whereas "Cherokee offered the prospect of transforming the entire waterfront in a single cohesive project developed in accordance with the master plan. . . ."
Furthermore, Judge Orlando found that the Township had "legitimate and sound reasons" for selecting Cherokee as a master redeveloper, and that the Township's actions were not irrational. In particular, the judge found that Cherokee was selected "because of the perceived environmental, ecological, processing, scheduling, planning, and fiscal benefits, which [the Township] believes will result from having a single developer coordinating the entire project."
The judge found that these reasons were not pretextual. He noted that Robert Brown, the author of the Township's master plan, concurred "that superior results can be achieved by using a global or master redeveloper." Also, plaintiff failed to present evidence that Cherokee would not produce the anticipated results.
Accordingly, the judge concluded that the Township's decision to designate Cherokee as master redeveloper was entitled to deference.
III
We first address plaintiff's argument that the Township's designation of Cherokee as master redeveloper amounted to an illegal taking. Plaintiff asserts that as the owner of the property and a long-time taxpayer it had the right to redevelop its property consistent with the redevelopment plan. According to plaintiff, the Township had encouraged plaintiff to develop plans for its own parcel, as well as two other sites, and ultimately approved of plaintiff's plans. Then, for politically motivated reasons, the Township instead determined to condemn plaintiff's property in order to turn it over to Cherokee for redevelopment. In plaintiff's view, the Township's action amounted to "the sort of conferral of an impermissible private benefit which is unconstitutional under all of the relevant case law."
In addition, plaintiff claims that the trial court erred in dismissing its constitutional challenge without addressing the threshold issue of whether the selection of Cherokee and concomitant "threatened" taking of plaintiff's property was necessary to carry out the redevelopment plan. In plaintiff's *868 view, the Township was unable to establish such necessity because plaintiff was capable of redeveloping the property on its own.
We find these arguments unpersuasive. The premise of plaintiff's constitutional taking argument is unfounded because plaintiff does not have a constitutional right to redevelop its own property. Rather, plaintiff has a right to be fairly compensated for property if it is taken by condemnation for a public purpose such as redevelopment. Plaintiff has presented no evidence or arguments to dispute that its property is in need of redevelopment and therefore cannot dispute the existence of a public purpose.
Under both the United States and New Jersey Constitutions, private property may be taken for "public use." U.S. Const. amend. V; N.J. Const. art. I, § 20. However, the Takings Clause of the Fifth Amendment, made applicable to the states through the Fourteenth Amendment, states that public property shall not "be taken for public use, without just compensation." Lingle v. Chevron USA, Inc., 544 U.S. 528, 536, 125 S.Ct. 2074, 2080, 161 L.Ed.2d 876, 886 (2005). The New Jersey Constitution contains a similar, parallel provision. N.J. Const. art. 1, ¶ 20. "As its text makes plain, the Takings Clause `does not prohibit the taking of private property, but instead places a condition on the exercise of that power.'" Lingle, supra, 544 U.S. at 536, 125 S.Ct. at 2080, 161 L.Ed.2d at 886 (quoting First English Evangelical Lutheran Church of Glendale v. County of Los Angeles, 482 U.S. 304, 314, 107 S.Ct. 2378, 2385, 96 L.Ed.2d 250, 263 (1987)).
In addition, the New Jersey Constitution specifically recognizes that "[t]he clearance, replanning, development or redevelopment of blighted areas shall be a public purpose and public use, for which private property may be taken or acquired." N.J. Const. art. VIII, § 3, ¶ 1 (emphasis added). Thus, a valid redevelopment determination satisfies the public purpose requirement.
The New Jersey Constitution also provides that "[m]unicipal, public or private corporations may be authorized by law to undertake such clearance, replanning, development or redevelopment. . . ." N.J. Const. art. VIII, § 3, ¶ 1. Accordingly, a municipality's delegation of redevelopment authority to a private corporation pursuant to statute does not negate the public purpose of such redevelopment. In keeping with these constitutional provisions, the LRHL sets forth the powers of a municipal entity to determine that an area is in need of redevelopment and to carry out a redevelopment plan.
Under the LRHL, in order to declare an area in need of redevelopment, there must be substantial evidence of the existence of at least one of seven specified conditions. N.J.S.A. 40A:12A-5. As we have stated, the Township found several to exist here. "A redevelopment area may include lands, buildings, or improvements which of themselves are not detrimental to the public health, safety or welfare, but the inclusion of which is found necessary . . . for the effective redevelopment of the area of which they are a part." N.J.S.A. 40A:12A-3. Accordingly, it is not necessary that every property within the area designated for redevelopment be substandard provided that the "area as a whole qualifies" for redevelopment. N.J.S.A. 40A:12A-3; Forbes v. Bd. of Trs. of S. Orange Vill., 312 N.J.Super. 519, 531-32, 712 A.2d 255 (App.Div.), certif. denied, 156 N.J. 411, 719 A.2d 642 (1998); see also Lyons v. City of Camden, 52 N.J. 89, 97, 243 A.2d 817 (1968).
We find unpersuasive plaintiff's argument that the sites comprising the redevelopment *869 area are not contiguous and could be redeveloped separately. The sites are in close proximity and relate to each other in material ways, involving the waterfront, wetlands, wildlife habitat, access, the need for remediation, the permit process, and the like. Further, plaintiff's property is contiguous to the Parisi property, is across the street from the Acme property, and is connected by a bridge to Petty's Island. The redevelopment area also relates in similar ways to and abuts the Cramer Hill redevelopment area in Camden. The issue before us is not whether piecemeal redevelopment is possible but whether the Township's choice of unitary redevelopment was reasonable.
The LRHL provides a mechanism for property owners to challenge a redevelopment determination and to obtain review in the Superior Court. N.J.S.A. 40A:12A-6b(4) to (7). Judicial review of a redevelopment determination is limited to whether the determination is supported by substantial credible evidence. Levin, supra, 57 N.J. at 540, 274 A.2d 1. If "supported by substantial evidence," a redevelopment determination "shall be binding and conclusive upon all persons affected by the determination." N.J.S.A. 40A:12A-6b(5). Once it is established that the redevelopment determination is binding, either because it was not challenged or was upheld following judicial review, the municipality must adopt a redevelopment plan before the redevelopment project can be undertaken. N.J.S.A. 40A:12A-7. Then the municipality is afforded broad statutory authority to "[d]o all things necessary or convenient to carry out its powers." N.J.S.A. 40A:12A-8n (emphasis added). This broad grant of authority includes the power to acquire, by condemnation, any property "necessary for the redevelopment project," N.J.S.A. 40A:12A-8c, and the right to contract with a private redeveloper if "necessary or convenient," N.J.S.A. 40A:12A-8f. The determination of necessity is a legislative, not judicial, decision, and, if reasonable, will not be judicially disturbed.
Plaintiff did not avail itself of the opportunity to challenge the redevelopment determination. Consequently, as correctly found by Judge Orlando, the public purpose of the Township's redevelopment determination was unassailable. Further, having adopted a redevelopment plan, the Township was entitled to exercise its broad statutory powers under the LRHL to designate a private developer and to condemn property in furtherance of its plan.
Nonetheless, plaintiff relies on the principle that the power of eminent domain must always be exercised in the public interest and "without favor to private interests." City of Atlantic City v. Cynwyd Invs., 148 N.J. 55, 73, 689 A.2d 712 (1997). Plaintiff argues that the Township's designation of Cherokee as master redeveloper was for the purpose of conferring a private benefit on a private party. Our Supreme Court has expressly rejected this argument, explaining:
Once a proper declaration of blight is made, there is no substance to the contention that the result of the governmental action in selecting a redeveloper is to take property from one individual and turn it over to another in violation of the due process requirements of the Federal Constitution. . . . [T]he private developer is really the instrumentality used to accomplish the public purpose.
[Levin, supra, 57 N.J. at 543, 274 A.2d 1.]
Stated otherwise, "the fact that a private party may benefit from the taking does not render the taking private and not for `public use.'" Twp. of W. Orange v. 769 *870 Assocs., 172 N.J. 564, 571, 573, 800 A.2d 86 (2002); accord Wilson v. Long Branch, 27 N.J. 360, 376, 142 A.2d 837, cert. denied, 358 U.S. 873, 79 S.Ct. 113, 3 L.Ed.2d 104 (1958).
Contrary to plaintiff's contentions, the view expressed by Levin is entirely consistent with the more recent Kelo holding. Plaintiff cites Kelo for the proposition that a municipality cannot "be allowed to take property under the mere pretext of a public purpose, when its actual purpose was to bestow a private benefit." Kelo, supra, 545 U.S. at 478, 125 S.Ct. at 2661, 162 L.Ed.2d at 450. However, the Court held in Kelo that "[o]nce the question of public purpose has been decided, the amount and character of land to be taken for the project and the need for a particular tract to complete the integrated plan rests in the discretion of the legislative branch." Id. at 489, 125 S.Ct. at 2668, 162 L.Ed.2d at 457.
Consequently, there is no merit to plaintiff's taking argument because it was established that the planned redevelopment of the waterfront served a public purpose and Cherokee was merely the instrumentality used to accomplish the public purpose.
Nor are we persuaded that reversal is required because the trial court failed to determine the "necessity" of the threatened condemnation of plaintiff's property. The trial court found that the Township's anticipated condemnation of plaintiff's property was "primarily to bring the redevelopment plan for the decayed and contaminated waterfront to fruition" and not "primarily to benefit Cherokee." A finding of necessity was implicit in this language.
That plaintiff is capable of redeveloping its own property, and perhaps one other site, through private effort is irrelevant. Our Supreme Court rejected a similar claim in Levin where the owners of 20 acres, within a 120-acre redevelopment area dubbed the "Triangle," challenged a municipal blight determination on the basis that the Triangle could be developed privately. Levin, supra, 57 N.J. at 515-16; 530-31, 274 A.2d 1. The Levin plaintiffs planned to develop a twelve-acre shopping center on their property, and to acquire additional property to expand the center to about sixty acres over a three to five year period. Id. at 530-31, 274 A.2d 1. In rejecting the plaintiffs' challenge, the Supreme Court stated
We see no reasonable basis in this case for challenging the decision of the local bodies that the Triangle should be considered as a single area and developed in a homogenous fashion with a regional shopping center as the nucleus. That developmental goal seems common to all the interested parties in the case. Such unitary development represents the maximum potential usefulness within the aim of the Blighted Area Act. . . . The recent flurry of speculative activity and the attendant attempts to assemble lots in the area do not negate the land's long standing condition of stagnation and unproductiveness. Rather, it confirms the view that although fallow so long and thus blighted, because of the combination of conditions which brought that state about, it now has a high potential for fruitful utilization. The desire of plaintiffs to use their own tract for development as a shopping center or to have the opportunity to assemble all of the land in the Triangle over a period of years for complementary development should not militate against the blight declaration. So far as plaintiffs' tract is concerned it must be considered an essential part of any comprehensive redevelopment project, if optimum community benefit is to be realized.
*871 [Id. at 539-540, 274 A.2d 1 (emphasis added).]
We reject plaintiff's additional argument that the court was required to address the "necessity" of the designation of a master redeveloper. "Necessity" does not govern a municipality's selection of a redeveloper. There are no statutory or constitutional limitations on a municipality's selection of a private developer to carry out a redevelopment plan. The discretion to contract with a private redeveloper, pursuant to N.J.S.A. 40A:12A-8f, is part of the municipality's broad authority to "[d]o all things necessary or convenient to carry out its powers." N.J.S.A. 40A:12A-8n (emphasis added). Consequently, even if plaintiff established that it was capable of redeveloping its own property, the Township nonetheless had the authority to designate a master redeveloper to execute the redevelopment plan if it reasonably found it convenient to do so in carrying out its redevelopment plan for the waterfront area.
We are satisfied the trial court did not err in holding that the Township's decision to designate Cherokee as master redeveloper did not violate constitutional requirements.
IV
We next address plaintiff's argument that the designation of Cherokee as master redeveloper was arbitrary, capricious and in bad faith, given the Township's extensive prior dealings with plaintiff and the evidence of political favoritism towards Cherokee. Plaintiff argues that Cherokee's selection was the result of political favoritism, and that any other justification proffered by the Township was pretextual. Plaintiff further argues that reversal is required because the trial court largely ignored plaintiff's evidence of pretext and made findings of fact regarding the Township's justifications for designating Cherokee that were "totally unsupported" by the record. Under these circumstances, plaintiff argues that the Township's selection of Cherokee was not entitled to the deference normally afforded such municipal actions.
As the trial court correctly observed, the LRHL does not set forth any criteria governing the selection of a private redeveloper. See Bryant v. City of Atlantic City, 309 N.J.Super. 596, 624, 707 A.2d 1072 (App.Div.1998) (no requirement that a municipality issue a request for qualifications for potential redevelopers). It merely provides that once a redevelopment plan has been adopted, the municipality "may" contract with a redeveloper to undertake the redevelopment project, or any part thereof. N.J.S.A. 40A:12A-8f.
Given the absence of any legislated selection criteria, the designation of a redeveloper, like all municipal actions, is a discretionary act, vested with a presumption of validity, that will be upheld where any state of facts may reasonably be conceived to justify the action. Quick Chek Food Stores v. Twp. of Springfield, 83 N.J. 438, 447, 416 A.2d 840 (1980); see also Concerned Citizens of Princeton, Inc. v. Mayor and Council of Princeton, 370 N.J.Super. 429, 452-53, 851 A.2d 685 (App.Div.), certif. denied, 182 N.J. 139, 861 A.2d 844 (2004) ("Redevelopment designations, like all municipal actions, are vested with a presumption of validity."); Downtown Residents for Sane Dev. v. City of Hoboken, 242 N.J.Super. 329, 332, 576 A.2d 926 (App.Div.1990) (presumption of validity applied to the adoption of a redevelopment plan). Municipal bodies "are presumed to act on the basis of adequate factual support and, absent a sufficient showing to the contrary, it will be assumed that their enactments rest upon some rational basis within their knowledge *872 and experience." Hutton Park Gardens v. Town Council of W. Orange, 68 N.J. 543, 564-65, 350 A.2d 1 (1975); see also Gallenthin, supra, 191 N.J. at 373, 924 A.2d 447 (affirming that the standard of review of a municipal redevelopment designation is that it is supported by substantial evidence, and cautioning that a "bland recitation of applicable statutory criteria and a declaration that those criteria are met" is sufficient).
The challenger of municipal action bears the "heavy burden" of overcoming this presumption of validity by showing that it is arbitrary, capricious or unreasonable. Bryant, supra, 309 N.J.Super. at 610, 707 A.2d 1072. A challenger can overcome this presumption "`only by proofs that preclude the possibility that there could have been any set of facts known to the legislative body . . . [that] would rationally support a conclusion that the enactment is in the public interest.'" Ibid. (quoting Hutton Park Gardens, supra, 68 N.J. at 565, 350 A.2d 1).
Most of the allegedly erroneous fact-findings cited by plaintiff concerned the trial court's acceptance of the Township's reasons for designating Cherokee. However, the record amply supports the court's conclusion that the selection of Cherokee was primarily based on Cherokee's outstanding credentials and the many perceived benefits of having a single redeveloper coordinate the entire project in a cohesive manner.
For example, in its May 2004 resolution conditionally designating Cherokee as the redeveloper for the project, the Township recognized Cherokee's "unique qualifications" as a nationally recognized redeveloper of brownfields and other industrially contaminated sites. The Township's stated reasons for the selection of Cherokee included Cherokee's demonstrated ability to remediate the brownfields sites and other industrially contaminated sites within the waterfront redevelopment area. The resolution also referenced the Township's favorable impression of Cherokee's redevelopment proposal which would "provide public access to the waterfront, create new recreational facilities, build new housing and commercial space, generate significant additional tax revenues, create employment opportunities, encourage the use of mass transit and ferry service and enhance the waterfront ecosystem and habitat." Cherokee's proposal also contemplated execution of an escrow agreement with the Township, by which Cherokee would "provide all funds necessary for the preliminary acquisition of properties and other activities associated with the development of the waterfront." Based upon its consideration of the foregoing factors, the Township reasonably concluded that it was
in the best interest of the citizens of the Township of Pennsauken to engage in a partnership with a private developer with the experience and reputation of [Cherokee] to bring all the resources both private and public sectors to bear to achieve the best possible results as it relates to the precious resource of lands fronting on the Delaware River.
The Township's stated reasons for selecting Cherokee were borne out by the trial testimony. The Township's witnesses uniformly testified that the designation of Cherokee was premised upon Cherokee's willingness to execute the waterfront redevelopment plan as a single cohesive project, its experience and demonstrated ability, its financial capabilities, and the many benefits of having a single redeveloper. This contrasted with plaintiff's more limited experience in the field of industrial development and the emphasis plaintiff placed on the development of its own property on its own terms. Thus, the Township's reasons for selecting Cherokee were *873 valid given the abundant evidence attesting to the clear benefits of having the area redeveloped comprehensively and in one accord.
Plaintiff maintains that the Township's decision was in bad faith because Cherokee used its political connections to obtain the redevelopment contract. However, as recognized by the trial judge, the record shows that while Cherokee's political connections facilitated a prompt audience with Township officials, it was Cherokee's qualifications, proposal and financial strength, and not political considerations, that motivated the Township's selection of Cherokee as master redeveloper. Cherokee's proposal was superior to that of plaintiff because Cherokee had the demonstrated ability to undertake the expeditious redevelopment of the entire waterfront, whereas plaintiff primarily sought an opportunity to develop its own property.
The Levin Court rejected a similar complaint of bad faith made by property owners who claimed that the Township had adopted a redevelopment determination to prevent them from developing their property as "a Two Guys type" of shopping center. Levin, supra, 57 N.J. at 542, 274 A.2d 1. The Township allegedly wanted to bring a more high quality shopping center to the community, and planned to transfer the plaintiffs' property to another private corporation for development consistent with that vision. Id. at 542-43, 274 A.2d 1. In rejecting the plaintiffs' claim of bad faith, the Court cited the Township's "honest belief" that "the public good would be served by redevelopment of the area as a unit by a private developer, selected by the Township Committee, who would assemble and develop the land with its assistance and within such reasonable conditions with regard to the manner and course of development as it might impose." Ibid. The Court found no reason to doubt the Township's view "that the community interest will be best served by integrated and compatible development of the entire 120 acre Triangle." Id. at 538, 274 A.2d 1. "If it was properly declared a blighted area, the conclusion is inescapable that the Township Committee in good faith intends to achieve that kind of development." Ibid.
Thus, as a general proposition, it is hardly debatable that the public good may be served by the integrated redevelopment of various sites as a unit by a private developer. Here, the Township determined that the public good was clearly served by the selection of Cherokee over plaintiff. Like the trial court, we find nothing unreasonable in that determination. At no time prior to the Township's selection of Cherokee did plaintiff ever state an interest in undertaking the redevelopment of the entire waterfront area. At best, plaintiff proposed to redevelop its own property and perhaps one additional site. Cherokee, on the other hand, proposed to undertake the entire project and demonstrated its ability to do so. Under these circumstances, the Township cannot be said to have acted in bad faith in designating Cherokee, because redevelopment of the entire area as a unit served the public good.
Nor are we persuaded that the Township's real motivation for designating Cherokee was Cherokee's political activities. The Township and Cherokee were in negotiations when Cherokee learned of CITGO's negotiations with the DEP. Cherokee's political maneuverings with the DEP and Governor were limited to retaining the Petty's Island site as part of the redevelopment plan, which inured to the benefit of the Township. CITGO was a party to the final agreement regarding Petty's Island and apparently had no complaint with the manner in which this agreement was reached. It does not follow that *874 the Township gave Cherokee the redevelopment contract as a result of improper considerations.
Plaintiff also challenges the trial court's findings to the effect that plaintiff was not wholly committed to the project. Although this was a hotly disputed issue at trial, there was ample evidence to support the court's findings. Plaintiff did not promptly execute the draft redevelopment agreement and its president acknowledged that it was prepared to end negotiations with the Township if market conditions changed and made the project less advantageous. In any event, the strength of plaintiff's commitment to the project was not dispositive of the determination of whether the selection of Cherokee was reasonable.[4] Even if plaintiff were totally committed to acting as redeveloper of its own property, this would not outweigh the benefit to the Township of appointing a single developer committed to redeveloping the entire waterfront.
The judicial prerogative does not allow for second guessing the decisions of legislative bodies. So long as those decisions are in accordance with law, factually supported, and not arbitrary, capricious or in bad faith, they are entitled to judicial deference. Plaintiff failed to demonstrate that the Township's decision to designate Cherokee as master redeveloper was contrary to law, was not justified by any reasonable facts, or was the result of arbitrary or capricious conduct or bad faith. Therefore, we have no occasion to disturb it.
Affirmed.
HOLSTON, J.A.D., dissenting.
The issue to be decided, in my view, is not whether Pennsauken's choice of unitary redevelopment was reasonable, but whether a municipality can use eminent domain to transfer property from the private owner of a property to a private redeveloper when the public purpose to be served by the use of eminent domain will be accomplished by the private owner without the use of eminent domain. The answer is found in the Legislature's statutory limitation of "Article VIII, Section 3, Paragraph 1, of the New Jersey Constitution, which authorizes the taking of `blighted areas' for redevelopment[,]" Gallenthin Realty Dev., Inc. v. Borough of Paulsboro, 191 N.J. 344, 355, 924 A.2d 447 (2007), by its adoption of N.J.S.A. 40A:12A-8(c). In my view, the "necessary" clause contained in that statute prevents such a use of the eminent domain power of local government.
I agree with the majority that Vineland Construction Company's (VCC) property is necessary for Pennsauken's redevelopment project. However, I disagree with the majority's conclusion that the acquiring of VCC's property by eminent domain by a master redeveloper is necessary for the successful completion of the redevelopment project.
I note that in Kelo v. City of New London, 545 U.S. 469, 489, 125 S.Ct. 2655, 2668, 162 L.Ed.2d 439, 458 (2005) the Supreme Court made clear that nothing in its decision precluded "any State from placing further restrictions on its exercise of the takings power." N.J.S.A. 40A:12A-8(c) clearly establishes a statutory limitation on the right of eminent domain in New Jersey, by requiring that before land can be acquired by condemnation that the condemning authority demonstrate that it is necessary to acquire the property in *875 order to fulfill the goals of the redevelopment project.
N.J.S.A. 40A:12A-8(c), titled "Effectuation of redevelopment plan," states in applicable part:
Upon the adoption of a redevelopment plan . . . the municipality or redevelopment entity designated by the governing body may proceed with the clearance, replanning, development and redevelopment of the area designated in that plan. In order to carry out and effectuate the purposes of this act and the terms of the redevelopment plan, the municipality or designated redevelopment entity may:
. . . .
c. Acquire, by condemnation, any land or building which is necessary for the redevelopment project, pursuant to the provisions of the "Eminent Domain Act of 1971[.]"
[(emphasis added.)]
The word necessary when involving the right of eminent domain does not mean "`absolutely necessary' or `indispensable' but [] it is sufficient if the right proposed to be acquired is reasonably necessary to secure the end in view." Lidgerwood Estates, Inc. v. Pub. Serv. Elec. and Gas Co., 113 N.J.Eq. 403, 407, 167 A. 197 (Ch.1933) (quoting Sayre v. City of Orange, 67 A. 933 (Sup.Ct.1907)). "The addition of the adverb 'reasonably' . . . does little but emphasize that absoluteness or indispensability is not to be required. It is reasonable necessity . . . in the light of all the facts and circumstances and balancing all interests." In re Application of Hackensack Water Co., 41 N.J.Super. 408, 426, 125 A.2d 281 (App.Div.1956).
As testified during the trial, VCC is ready, willing, and able to adequately fund and abide by the design of the redevelopment plan. John Krauser, president and chief operating officer of VCC testified:
The fact of the matter is that we feel that we're qualified to take our site and take it through the diverse requirements of the remediation process. We don't need Cherokee to do that for us. We've demonstrated our ability to do it. We do it all the time with our other projects. It seemed to us to be inappropriate for them to say to us as a landowner who has invested in the property, held it for development, and kept it for 30 years ready for redevelopment, and to redevelop pursuant to redevelopment plan and to work with whomever they should choose to appoint to oversee that redevelopment, to turn around and say, "But by the way, we're taking your property and yes, there's a possibility you can buy it back in the future."
Krauser added:
We've made a commitment to this project with our dollars and our time. We wouldn't have gone this far unless we were serious about it. The fact that we own the land keeps us committed to this project in a way that somebody else who has no ties monetarily to the piece doesn't have that. We're committed to this project.
. . . .
All those things that our plan contains were things that they agreed to and said were desirable. So the fact is we got to the door with them. We did everything that they asked us to do. And then without any public setting, without any plan put forward by Cherokee, by any kind of undertaking, vision, concept, plan, agreement with Cherokee whatsoever, simply said that's it. We're going with Cherokee.
Now we've done redevelopment in other areas. . . . We did nothing that would indicate that we were not capable of developing. . . .
*876 The fact of the matter is that we demonstrated to them not just through our interaction with them, but with our interaction with every agency that they knew would have an impact on this plan, that we had a tangible, viable, feasible plan. And if their worry is that well you didn't have any economic modeling, that was our risk. That was our dollars at risk. We were the ones that were saying we're willing to put our dollars up for this plan. It didn't matter to me whether or not Cherokee thought our plan was feasible in terms of economics or whether . . . somebody else does. We believed it was economically feasible and we were prepared to roll forward with it because that's how we got as big as we did.
On June 27, 2001, Pennsauken adopted an ordinance adopting a redevelopment plan prepared by its planning consultant, Marc R. Shuster. The objectives of the redevelopment plan included the "environmental rehabilitation of existing compromised sites" and the development of "a unique mix of land uses designed for the particular characteristics of the area." The potential uses contemplated by the plan included "marine oriented uses, general athletic field, lodging, institutional/governmental uses, retail, educational facilities, dining, and active and passive recreational uses." However, the land for which the redevelopment was planned consisted principally of four non-contiguous lots, one of which is owned by VCC.[5] On May 11, 2005, Pennsauken adopted a resolution authorizing the execution of a final redevelopment agreement with Cherokee, designating Cherokee the general redeveloper for the project, including the parcel owned by VCC.
I am of the view, therefore, that Pennsauken has not shown that it is necessary, under N.J.S.A. 40A:12A-8(c), for Cherokee to acquire the property through the power of eminent domain, pursuant to the Eminent Domain Act, N.J.S.A. 20:3-1 to -50, to complete the redevelopment project.
The majority relies on Levin v. Township Committee of Bridgewater, 57 N.J. 506, 274 A.2d 1, appeal dismissed, 404 U.S. 803, 92 S.Ct. 58, 30 L.Ed.2d 35 (1971), in their conclusions that reversal is not required because 1) the trial court implicitly found that VCC's property was necessary for the redevelopment plan and 2) VCC's capability of redeveloping its own site through private effort is irrelevant. In my judgment, Levin, supra, does not have any bearing on this case. The issue in Levin was whether the 120 acre land area in question was properly the subject of a declaration of blight under N.J.S.A. 40:55-21.1(e). Id. at 515, 538, 274 A.2d 1. The Court concluded that it was. That is not the challenge here.
The total redevelopment area proposed by Pennsauken in its redevelopment plan, unlike the triangular shaped contiguous area in issue in Levin, is not contiguous. The plaintiffs were not prepared to develop their portion of the parcels in accordance with the redevelopment plan proposed by Bridgewater Township but rather sought to develop their twenty acres of assembled parcels in accordance with their own visualized plan. Id. at 532-33, 542, 274 A.2d 1. Additionally, unlike VCC's parcel here, because of the contiguous nature of the parcels within the triangle, to have carved out the plaintiffs' lands from the rest of the triangle would have hindered creation of an integrated *877 and comprehensive plan, interfered with the establishment of an internal road system and created traffic access problems. Id. at 536, 274 A.2d 1.
The Court in Levin stated that once a declaration of blight is made there is no constitutional due process violation, when as a result of governmental action a redeveloper is chosen to undertake the redevelopment project according to a comprehensive plan created by the governing body. Id. at 543, 274 A.2d 1. However, Levin does not speak to the situation here, where the private owner, VCC, is able and willing to develop its separate and discrete noncontiguous parcel in accordance with Pennsauken's redevelopment plan, thereby making its acquisition by condemnation unnecessary for the completion of the redevelopment project. N.J.S.A. 40A:12-8(c).
Permitting VCC to complete redevelopment on its parcel will fulfill the municipality's redevelopment plan and its objectives for that parcel. Accordingly, VCC, through the use of private capital, is able to satisfy the redevelopment plan for that portion of the redevelopment project. Indeed, Cherokee will not itself perform any of the redevelopment services, but instead will subcontract them out to others. Additionally, there has been no showing that redevelopment cannot be performed on the other non-contiguous lots in the redevelopment area without condemning VCC's parcel. Nor is there any evidence that Cherokee is unwilling to conduct redevelopment on the other parcels without VCC's property being included.
Municipal action will be overturned "if it is arbitrary, capricious or unreasonable." Bryant v. City of Atlantic City, 309 N.J.Super. 596, 610, 707 A.2d 1072 (App. Div.1998). A determination predicated on unsupported findings is the essence of arbitrary and capricious action. Ibid. It is my view that granting to Cherokee the redevelopment rights over VCC's property, knowing full well that VCC was fully capable of developing its parcel in accordance with the redevelopment plan, where as here, plaintiffs' parcel is separate and apart from the other parcels for which a master developer is arguably necessary, constitutes arbitrary and unreasonable action.
Pennsauken's decision to permit Cherokee as general redeveloper to acquire VCC's property by condemnation constitutes, in my view, a manifest abuse of the redevelopment statute and the powers attendant thereto. The record demonstrates that the announced public purpose for the redevelopment project could be achieved without the exercise of eminent domain over the VCC property. Therefore, the taking is unnecessary and will not further a "public" purpose because the public purpose can be fully realized with the private capital and voluntary actions of the current property owner. Where, as here, the future use of the property as intended by the current property owner is identical to the future use intended by the municipality, the taking is not necessary and cannot be justified.
As stated by the Supreme Court in Berman v. Parker, 348 U.S. 26, 33, 75 S.Ct. 98, 103, 99 L.Ed. 27, 38 (1954), the "power of eminent domain is merely the means to the end." Thus, that power cannot be exercised when the end will be achieved without its invocation in the first place.
In my view Pennsauken cannot justify its conduct here by claiming that it needed to adopt an "integrated" approach to the waterfront redevelopment under a single redeveloper. Even under the present Cherokee plan, the VCC site would be developed separately and discreetly from the other parcels in the waterfront redevelopment area. Whether Cherokee *878 remediates VCC's property and sells it to someone else or back to VCC for redevelopment (at a profit to Cherokee), or whether VCC remediates it and redevelops it, the end result of the redevelopment will be the same. The crucial difference is in the identity of the party to carry out the project: the actual property owner and long-time taxpayer, or Cherokee, a private redeveloper, which was, in my view, conferred by its designation an unnecessary private benefit. See Kelo, supra, 545 U.S. at 477, 125 S.Ct. at 2661, 162 L.Ed.2d at 450 ("it has long been accepted that the sovereign may not take the property of A for the sole purpose of transferring it to another private party B, even though A is paid just compensation"); see also Kelo, supra, 545 U.S. at 493, 125 S.Ct. at 2670, 162 L.Ed.2d at 460 (Kennedy, J., concurring) ("[t]here may be private transfers in which the risk of undetected impermissible favoritism of private parties is so acute that a presumption (rebuttable or otherwise) of invalidity is warranted under the Public Use Clause.").
As a result, I respectfully dissent from the majority's opinion. I would reverse so much of the trial court's orders that validate Pennsauken's grant to Cherokee by resolution the power to acquire by eminent domain the portion of the redevelopment project owned by VCC and to redevelop VCC's property.
NOTES
[1] Because the in need of redevelopment determination is uncontested, this appeal is unaffected by the Supreme Court's recent decision in Gallenthin Realty Development, Inc. v. Borough of Paulsboro, 191 N.J. 344, 924 A.2d 447 (2007).
[2] Although no condemnation action was filed, the parties litigated to a conclusion the right to condemn issue in the trial court in anticipation of such an action. At oral argument before us all parties agreed that ripeness is not an issue and, if the right to condemn is upheld, the only remaining issue in the condemnation action, when it is filed, will be valuation.
[3] In addition to its unconstitutional taking count, plaintiff also filed counts for breach of contract and equitable estoppel. The breach of contract count was dismissed on summary judgment and the equitable estoppel count was dismissed at the end of plaintiff's case at trial. Although plaintiff's notice of appeal encompasses those dismissals, plaintiff makes no arguments pertaining to them and has thus abandoned its appeal as to those issues. See Zavodnick v. Leven, 340 N.J.Super. 94, 103, 773 A.2d 1170 (App.Div.2001).
[4] Contrary to our dissenting colleague's contention that plaintiff was ready, willing and able to perform in accordance with the Township's requirements, that fact was not established.
[5] Only one small parcel, the Parisi property, is contiguous to VCC's site. The other parcels are not contiguous to VCC's property. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536428/ | 223 B.R. 681 (1998)
In re CREST-MEX CORP.
CREST-MEX CORP.
v.
COUNTY OF DALLAS, City of Dallas, Dallas Independent School District, Dallas Central Appraisal District, and Dallas County Appraisal Review Board
Bankruptcy No. 96-40642-H2-11, Adversary No. 97-4185.
United States Bankruptcy Court, S.D. Texas, Houston Division.
June 15, 1998.
*682 Joe Klaus, Houston, TX, for Crest-Mex Corporation.
Elizabeth Weller, Linebarger, Heard, Goggan, Fort Worth, TX, for County of Dallas, City of Dallas, and Dallas ISD.
Michael M. Tabor, Clark, West, Keller, Butler & Ellis, Dallas, TX, for Dallas Central Appraisal District and Dallas Central Appraisal Review Board.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
WESLEY W. STEEN, Bankruptcy Judge.
On January 24, 1996, Crest-Mex Corp. filed for chapter 11 bankruptcy protection. Debtor's primary asset is an apartment building, known as La Sierra Apartments ("the Apartments") and personal property located at that site. The Apartments are located in an economically depressed area of Dallas. The property was assessed and taxed in the name of M. Torma until Crest-Mex acquired it in 1992.
The County of Dallas, City of Dallas, and Dallas Independent School District (collectively know as the "Taxing Authorities") filed a proof of claim for ad valorem taxes for the years 1987 to 1997.
On April 4, 1997, Debtor instituted this adversary action by filing a Complaint to Determine Ad Valorem Tax Liabilities. Debtor requests that the Court determine its tax liability under § 505 for the years 1987 through 1991 and 1995 through 1997. Debtor asserts that the valuations of the property on which the taxes are based were grossly excessive. Defendants are Dallas Central Appraisal District and the Dallas County Appraisal Review Board (the "DCAD" and "ARB"), as well as Dallas County, City of Dallas and Dallas County ISD ("Taxing Authorities").
On February 26, 1998, the DCAD and the ARB, joined in part by the Taxing Authorities, filed a Motion for Summary Judgment. On March 20, 1998, Plaintiff filed a Motion for Non-Suit against the DCAD and ARB. After reviewing the record, the Court concludes that Summary Judgment should be granted for the years 1989-1991 and for 1995. The Court also concludes that Plaintiff's Motion for Non-Suit as to ARB and DCAD should be granted with respect to the remainder of the years.
Motion for Summary Judgment
Defendants DCAD and ARB, with the Taxing Authorities joining them, deny that Debtor has the ability to challenge all tax years in question because tax liability for *683 some of the years have been previously adjudicated.
The property at issue was listed in the name of M. Torma, Trustee, for the tax years 1987 to 1991 and was listed in the name of Crest-Mex for the tax years 1992 to 1997. No protest was filed for the 1987 or 1988 appraisals. Torma challenged the 1989, 1990 and 1991 appraisals before the ARB and the values were adjudicated or resolved by settlement. Crest-Mex challenged the 1992, 1993, 1994 and 1995 appraisals before the ARB and these values were resolved by adjudication or settlement. No petition for de novo review by the state district court was filed by the Debtor for those tax years. There is no disagreement that Crest-Mex did not challenge the appraisals for the 1996 or 1997 tax years and that the Court has jurisdiction to determine the value for those tax years.
Bankruptcy Code § 505(a)(2) provides:
The court may not determine the amount or legality of a tax . . . if such amount or legality was contested before and adjudicated by a judicial or administrative tribunal of competent jurisdiction before commencement of the case.
Negotiated settlement agreements entered by the ARB are equivalent to an adjudication for purposes of § 505.[1] Therefore, this Court may not review the determination of tax for the years 1989 through 1991 and for 1995. Therefore, the Plaintiff's claims relating to those years are dismissed.
The DCAD and ARB, joined by the Taxing Authorities, argue that Debtor is precluded from challenging the valuations for the tax years of 1987 and 1988 under principles of claim preclusion. The only case cited for this proposition is Matter of Teal.[2] However, that case stands for the proposition that a judgment entered pursuant to a settlement is a final judgment for the purposes of res judicata. The materials submitted in support of the Motion for Summary Judgment with respect to these years does not establish that there is not an issue of fact with respect to these years. Therefore, summary judgment is denied for those years.
Non-Suit
On March 20, 1998, Plaintiff filed a Motion for Non-Suit pursuant to FRCP 21 with respect to DCAD and ARB. Plaintiff merely stated that it did not wish to prosecute the matter against these Defendants.
The DCAD and ARB do not oppose dismissal without prejudice, but ask that the Court include in the dismissal order a provision requiring reimbursement of their attorney's fees and costs in the event of reinstatement or refiling by Plaintiff or joinder by any other party. In support of this request, the DCAD and ARB cite Cooter & Gell v. Hartmarx Corp.[3] which they assert stands for the proposition that imposition of such conditions. However, the cited case actually holds only that Rule 11 sanctions survive voluntary dismissal of a case. The Court denies DCAD and ARB's request for an order stating that any party seeking to join the DCAD and ARB shall reimburse all attorney's fees and costs for lack of authority to grant such relief.
The Taxing Authorities oppose the dismissal of the DCAD and ARB as defendants because they assert that the DCAD and ARB are necessary parties to this action. The Taxing Authorities contend that state law requires that the appraisal board be joined in order for their decisions to be reviewed.[4] The Taxing Authorities reason that because the Plaintiff is asking the Court to review the ARB decisions, the ARB is a necessary party to this action, as determined by Texas law. Section 42.21 of the Property Tax Code once required that any petition for review brought by the property owner must join the appraisal district and the appraisal review board as defendants. However, § 42.21 has been amended to require that suit be brought against the State Comptroller.[5]*684 Therefore, it does not appear that joinder is required by Texas law.
In addition, state law procedural requirements are not binding on this Court. Rule 19 of the Federal Rules of Civil Procedure determines which parties must be joined in an action. As far as Rule 19 is concerned, state law is only relevant in determining interests affected in litigation.[6] Thus, even if the relevant state law requires joinder of the parties in cases brought in state court, that will not affect the federal court's analysis under Rule 19. Parties that are indispensable as a procedural requirement in state court are not necessarily indispensable in federal court.[7]
Rule 19 of the Federal Rules of Civil Procedure dictates what persons are to be joined in a case in federal court. The Rule provides that a person is to be joined if:
(1) in the person's absence complete relief cannot be accorded among those already parties, or
(2) the person claims an interest relating to the disposition of the subject of the action and. . . .
The relief sought in the complaint is the adjudication of claims asserted by the Taxing Authorities. No relief is sought against DCAD and ARB. The DCAD and the ARB are professionals who provide information and advice regarding the value of property. The DCAD and ARB do not assess or collect taxes. The DCAD and the ARB has no interest in this suit and complete relief can be accorded without their presence in this suit.
The Taxing Authorities apparently wish to join the DCAD and ARB for discovery benefits. The Taxing Authorities can procure all information necessary for this case through Rule 26 discovery. Therefore, Plaintiff's Motion for Non-Suit is granted.
An order implementing this relief and appropriate scheduling provisions will be entered this date.
NOTES
[1] El Tropicano, Inc. v. Garza, 128 B.R. 153, 156 (Bankr.W.D.Tex.1991).
[2] 16 F.3d 619 (5th Cir.1994).
[3] 496 U.S. 384, 397, 110 S.Ct. 2447, 2456, 110 L.Ed.2d 359, 376 (1990).
[4] Tex. Prop. Tax Code § 42.21
[5] Tex. Prop. Tax Code § 42.21(b)
[6] HB General Corp. v. Manchester Partners, L.P., 95 F.3d 1185, 1195 (3rd Cir.1996); Provident Tradesmens Bank & Trust Co. v. Patterson, 390 U.S. 102, 125 n. 22, 88 S.Ct. 733, 746, n. 22, 19 L.Ed.2d 936 (1968); Hertz v. Record Publishing Co., 219 F.2d 397, 399-400 (3rd Cir.), cert. denied, 349 U.S. 912, 75 S.Ct. 601, 99 L.Ed. 1247 (1955).
[7] HB General Corp. v. Manchester Partners, L.P., 95 F.3d 1185, 1195 (3rd Cir.1996); Hertz v. Record Publishing Co., 219 F.2d 397, 399-400 (3rd Cir.), cert. denied, 349 U.S. 912, 75 S.Ct. 601, 99 L.Ed. 1247 (1955). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536431/ | 223 B.R. 345 (1998)
In the Matter of RIMSAT, LTD., Debtor.
Bankruptcy No. 95-10120.
United States Bankruptcy Court, N.D. Indiana, Fort Wayne Division.
July 15, 1998.
*346 Mark Warsco, Fort Wayne, Indiana, for trustee.
John Sieger, Chicago, Illinois, for creditor.
DECISION ON MOTION FOR MORE DEFINITE STATEMENT
ROBERT E. GRANT, Bankruptcy Judge.
Kauthar SDN BHD filed a proof of claim in this case, seeking $115,185,714 plus fees and costs, as an unsecured, nonpriority claim. The Chapter 7 Trustee has filed both an objection and a supplemental objection to Kauthar's claim. The matter is presently before the court on the Trustee's motion for a more definite statement.[1] The Trustee contends that Kauthar's claim, which merely lists statutes and legal principles, without describing how any of it applies to the Debtor, is so vague that he cannot respond to it without more information.
The trustee's motion is based upon Rule 12(e) of the Federal Rules of Civil Procedure which, through Rule 7012(b) of the Federal Rules of Bankruptcy Procedure, is applicable to adversary proceedings. An objection to a proof of claim, however, is not an adversary proceeding; it is a contested matter.[2] It only becomes an adversary proceeding if the objection is joined with a demand for some type of additional, affirmative relief. See Fed.R.Bankr.P. 3007. Consequently, before the court can address the merits of the Trustee's motion, it must decide whether Rule 12(e) should be applied to this controversy.
Contested matters are governed by Bankruptcy Rule 9014. This rule initially makes a number of rules from the 7000 series of the Federal Rules of Bankruptcy Procedure (the Part VII rules) automatically applicable to contested matters. It then goes on to provide that "[t]he court may at any stage in a particular matter direct that one or more of the other rules in Part VII shall apply." Fed.R.Bankr.P.Rule 9014. Whether or not the court does so is a matter committed to its discretion. See In re American Reserve Corp., 840 F.2d 487, 488 (7th Cir.1988) (applying Rule 23). Given the substantial sum sought by Kauthar and the paucity of information its proof of claim provides concerning the underlying basis for the amounts claimed due, it appears that the efficient identification of the issues and facts in dispute, as well as a prompt disposition on the merits, will be greatly enhanced if the requirements of Rule 12(e) are applied to Kauthar's proof of claim.
Rule 12(e) of the Federal Rules of Civil Procedure provides that "[if] a pleading . . . is so vague or ambiguous that a party cannot reasonably be required to frame a responsive pleading, the party may move for a more definite statement."[3] Whether to *347 grant such a motion is within the sound discretion of the court. Gleichauf v. Ginsberg, 859 F.Supp. 229 (D.C.W.Va.1994); 5A Wright & Miller, Federal Practice and Procedure, Civil 2d § 1377. Admittedly, due to liberal notice pleading and the availability of extensive discovery, these motions are not favored. See, Radisson Hotels Int'l Inc. v. Westin Hotel Co., 931 F.Supp. 638, 644 (D.Minn.1996); 5A Wright & Miller, Federal Practice and Procedure, Civil 2d, §§ 1376-77. Nonetheless, a defendant must be given sufficient notice of the claim against it in order to frame a response. MTV Networks v. Curry, 867 F.Supp. 202, 207-08 (S.D.N.Y. 1994).
In Teradyne, Inc. v. Clear Communications Corp., 707 F.Supp. 353 (N.D.Ill.1989), the court discussed the standard for granting a motion for a more definite statement.
In deciding whether to order a more definite statement it is best to look at what sort of answer defendant might make to the complaint and ask if such an answer, put with the complaint, would serve to advance the course of litigation. If, after complaint and answer are filed, the court would have no clear notion of the essence of the case then a more definite statement is probably needed. 707 F.Supp. at 354.
A more definite statement of the claim may also serve to effectuate Rule 11, which requires that a pleading be well grounded in law and fact, and to reduce discovery costs. Id. at 354.
Kauthar's proof of claim purports to be based upon violations of state and federal securities laws, RICO, fraud, misrepresentation and numerous other duties imposed by state law. Despite the fact that it was prepared and signed by counsel, it gives absolutely no information concerning the factual basis for the claim and no supporting documentation, of any kind, accompanies it. See Fed.R.Bankr.P.Rule 3001(c). The only information it provides is a litany of statutory citations and legal theories of recovery.[4]
The court has grave doubts about whether Kauthar's claim qualifies as the properly executed and filed proof of claim, contemplated by Bankruptcy Rule 3001(f), *348 which constitutes prima facie evidence of its validity and amount. See, In re Weidel, 208 B.R. 848, 854 (Bankr.M.D.N.C.1997) (creditor must allege facts sufficient to support its claim; if it does so, the claim is prima facie valid); In re Hollars, 198 B.R. 270, 271 (Bankr.S.D.Ohio 1996) (same); In re Scholz, 57 B.R. 259, 261 (Bankr.N.D.Ohio 1986) ("[T]he claim must be sufficiently detailed and substantial to allow it to be considered as prima facie evidence of its validity . . ."). The same allegations in a complaint certainly could not survive a motion to dismiss for the failure to state a claim. In re Allen, 150 B.R. 21, 22 (Bankr.E.D.Va.1993) (a complaint that is only a bare recital of statutory language fails to state a claim for relief). Admittedly, a proof of claim is not subject to the same rules of pleading that govern the pleadings filed in an adversary proceeding or other civil litigation. Nonetheless, it would seem that Rule 3001(a)'s definition of a proof of claim as "a written statement setting forth a creditor's claim" contemplates that the creditor provide some kind of factual context for the origin of debtor's liability to it. Accord, Matter of Int'l Match Corp., 69 F.2d 73, 76 (2nd Cir.1934) (a proof of claim should at least allege facts from which liability on the part of the bankrupt can be seen to exist).
The structure of the official form for a proof of claim (form 10) seems to support this conclusion. Section 1 requires the creditor to identify the "basis for [its] claim" by checking the appropriate box. The available boxes include "goods sold", "services performed", "money loaned", "personal injury/wrongful death", "taxes", "retiree benefits", and "wages, salaries and compensation . . . for services performed [between specific dates]". Each of these options, together with any supporting documentation, gives some type of information (albeit sparse) concerning the factual basis-what it is that happened prior to the petition-for the debtor's liability to the creditor. Armed with this knowledge, a trustee has some information with which it can begin an investigation of the claim. See, In re Grocerland Co-op., Inc., 32 B.R. 427, 437 (Bankr.N.D.Ill.1983) ("for [the] court to approve a proof of claim, facts of sufficient particularity must be supplied to put the trustee on notice.") In light of this, the remaining option and the option that Kauthar used, "other (describe briefly)", would also seem to contemplate some type of description of the facts giving rise to debtor's liability to the claimant. Kauthar's claim merely lists various statutes and other theories of recovery and is not accompanied by any supporting documentation. It gives no factual information about what the debtor did or did not do to become liable to it. Cf. In re Bloomingdale Partners, 160 B.R. 101, 107 (Bankr.N.D.Ill.1993) (proof of claim which made reference to the facts supporting the claim, but did not specifically allege a theory of recovery, was not fatally defective and could be amended:).
Applying the standard articulated by Teradyne, 707 F.Supp. at 354, to Kauthar's claim, one must initially wonder whether Kauthar is asserting twenty separate claims, arising out of twenty separate transactions or occurrences, which together aggregate the $115 million it seeks, or twenty different theories of recovery as the result of a single transaction or occurrence. It is difficult to see how anyone could respond to such allegations with anything more precise than a general denial. Just to make certain nothing was overlooked, one could include every affirmative defense imaginable, but, without knowing more, there would be legitimate doubts about their applicability and whether any of them were well grounded in law and fact. At the end of such an exchange, the court would understand that the creditor was saying "We are owed lots of money.", to which the trustee replied, "No, you're not."; but it "would have no clear notion of the essence of the case." Id. A more definite statement is needed. Kauthar should be required to file an amended claim.
Beyond requiring a more definite statement of Kauthar's claim, it seems appropriate to provide the parties with some type of guidance concerning the precision with which it should frame any amended claim and, concomitantly, the precision that should be given to any forthcoming objection. To this end, in order to promote the prompt disposition of the merits of Kauthar's claim, the efficient identification of the issues and the facts in dispute, and to reduce the cost of discovery, *349 it seems appropriate to make further use of the discretion given by Bankruptcy Rule 9014 and apply the rules governing the form and content of pleadings to Kauthar's proof of claim and the objections thereto. Accordingly, the following rules shall apply to any amended claim Kauthar might wish to file and to any objections that might be filed in response: Bankruptcy Rule 7008-General Rules of Pleading, Bankruptcy Rule 7009-Pleading Special Matters, and Bankruptcy Rule 7010-Form of Pleadings.
The trustee's motion for a more definite statement will be granted. Kauthar shall have fourteen (14) days within which to file and serve an amended proof of claim. Any objections to this claim should be filed and served within twenty-one (21) days thereafter.
NOTES
[1] Kauthar has filed a motion to strike the Trustee's supplemental objection, arguing that it is not properly before the court. Because of the court's ruling on the Trustee's motion, Kauthar's motion is moot.
[2] "All disputes in bankruptcy are either adversary proceedings or contested matters. . . ." Matter of American Reserve Corp., 840 F.2d 487, 488 (7th Cir.1988). As "an actual dispute, other than an adversary proceeding, before the bankruptcy court", Fed.R.Bankr.P.Rule 9014, Advisory Committee Note (1983), an objection to a proof of claim qualifies as a contested matter.
[3] The court realizes that a proof of claim is not a "pleading" as described in Bankruptcy Rule 7007. Thus, a technical application of the literal language of the rule would lead to a denial of the Trustee's motion. Nonetheless, because Bankruptcy Rule 9014 allows the court to apply any of the 7000 series rules to contested matters, the drafters must have contemplated that they could be applied in an analogous, rather than a literal, technical manner. Otherwise, the opportunity to apply those rules would serve no purpose because the application of the literal language of a particular rule could automatically render its provisions inapplicable to the matter at hand.
The need to apply Rule 12(e) in an analogous, rather than a technical, manner disposes of Kauthar s argument that the Trustee is precluded from bringing the motion because he has responded to its claim, by filing an objection to it. Ordinarily, a motion for more definite statement must be made before interposing any type of response. Fed.R.Civ.P. 12(e). Yet, until a proof of claim has been objected to there is no contested matter to which Rule 12(e) or any of the other 7000 series rules (including the discovery rules) can be applied. Thus, it should come as no surprise that the Trustee filed an objection to Kauthar's claim before he filed the motion for more definite statement. That he did so does not prevent him from bringing the motion.
[4] The basis for Kauthar's claim against the debtor is described in paragraphs 3 and 4 of its proof of claim. They read:
3. The claim described herein arises from securities fraud, RICO violations and other violations more specifically described below. The Claimant is entitled to treble and punitive damages and other related fees and expenses incurred in pursuing its claim against Debtor.
4. The proof of claim is predicated on the following claims:
Federal Securities Fraud in Violation of Sections 10(b) and 20(a) of the 1934 Act, 15 U.S.C. §§ 78j(b) & 78s and § Rule 10b-5, 17 C.F.R. § 240.10b-5
Federal Securities Fraud in Violation of Sections 10(b) and 20(a) of the 1934 Act, 15 U.S.C. §§ 78j(b) & 78s and § Rule 10b-5
Federal Securities Fraud in Violation of Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77q
Federal Securities Fraud in Violation of Section 12(2) of the Securities Act of 1933, 15 U.S.C. § 771
Violation of Indiana Securities Law
Fraudulent Misrepresentation
Constructive Fraud
Using or Investing Money Derived from Racketeering Activity in Violation of 18 U.S.C. § 1962(a)
Acquisition of an Enterprise Through a Pattern of Racketeering Activity in Violation of 18 U.S.C. § 1962(b)
Conducting of an Enterprise Through a Pattern of Racketeering Activity in Violation of 18 U.S.C. § 1962(c)
Racketeering Conspiracy to Violate 18 U.S.C. § 1962(a)
Racketeering Conspiracy to Violate 18 U.S.C. § 1962(b)
Racketeering Conspiracy to Violate 18 U.S.C. § 1962(c)
Negligent Misrepresentation
Violation of the Indiana Fraudulent Conveyance Act
Indiana Treble Damages Statute Criminal Mischief
Indiana Treble Damages Statute Theft/Receiving Stolen Property
Indiana Treble Damages Statute Criminal Conversion
Indiana Treble Damages Statute Deception
Indiana Treble Damages Statute Fraud
Proof of Non-Priority Unsecured Claim of Kauthar SDN BHD, filed August 14, 1997, at pp 1-2. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536450/ | 928 A.2d 1132 (2007)
IN RE ADOPT. OF J.R.A.
No. 1279 MDA 2006.
Superior Court of Pennsylvania.
April 17, 2007.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536453/ | 928 A.2d 394 (2007)
COMMONWEALTH of Pennsylvania
v.
RST PARTNERS (Amrit Lal), Appellant.
Commonwealth Court of Pennsylvania.
Submitted February 23, 2007.
Decided June 28, 2007.
Reconsideration/Reargument Denied August 20, 2007.
*395 Timothy Knauer, West Chester, for appellant.
Andrew G. Lehr, West Chester, for appellee.
BEFORE: SMITH-RIBNER, Judge, and FRIEDMAN, Judge, and FLAHERTY, Senior Judge.
Reconsideration/Reargument Denied En Banc August 20, 2007.
OPINION BY Judge SMITH-RIBNER.
RST Partners and/or Amrit Lal (RST) appeals from an order of the Court of Common Pleas of Chester County that quashed and dismissed RST's attempted appeals from ninety-five summary convictions. It was further ordered that a hearing be held to determine whether attorney's fees should be awarded to the plaintiff as a sanction against the defendant and the amount of such an award.[1]
*396 RST owns properties in the City of Coatesville (City). On July 24, 2003, RST was convicted in the district court of multiple housing code violations. On September 8, 2003, RST filed a petition in the trial court seeking to appeal nunc pro tunc or to set aside the convictions and alleging that the district court did not timely notify RST of the convictions. After a hearing on September 24 Judge James P. MacElree, II, denied RST's request to dismiss the convictions but granted permission to appeal nunc pro tunc from 104 convictions by September 30, 2003, specifying that each docket number must be appealed individually and noting that Pa. R.Crim. P. 460, the exclusive means for appealing summary convictions, does not contain a provision for consolidation of multiple sentences on appeal. Rather than filing the appeals, RST filed on September 29, 2003 "Defendant's Motion to Amend Order of September 24, 2003 to Remove Preconditions for Filing Appeal." Reproduced Record (R.) 3. RST argued that it should be permitted to consolidate the appeals. On September 30, 2003, Judge MacElree denied that motion, and on October 1 RST filed and Judge MacElree denied a supplemental motion.[2]
On June 27, 2005, RST filed a "Motion to Waive Multiple Filing Fees in Order to Perfect Summary Appeal." Judge MacElree denied that motion. RST filed a petition for permission to appeal with this Court, which was denied by order of October 5, 2006. This Court also denied a request by the City that RST be sanctioned without prejudice to the City's right to renew such a request if RST's conduct continued to reflect a disregard of the rules governing civil and appellate procedure. Finally, on October 14, 2005, RST paid the separate fees and filed summary appeals of the 2003 convictions. The Commonwealth filed a motion to quash the summary appeals and for sanctions including attorney's fees and costs on March 17, 2006. RST filed an answer in opposition and motion for recusal. On May 3, 2006, Judge Thomas G. Gavin held a hearing on the motions. Judge Gavin declined to recuse, and he entered an order quashing and dismissing the appeals and scheduling a hearing on costs and attorney's fees.
*397 In his opinion Judge Gavin stated that Pa. R.Crim. P. 460 provides the exclusive means for appealing summary convictions to common pleas court, Rule 460(E), and that a party can perfect an appeal by filing a notice of appeal within thirty days after the conviction, Rule 460(A). A court may extend this time period only if a party shows that the delay in filing its appeal was caused by extraordinary circumstances involving fraud or a wrongful or negligent act by a court official resulting in injury to the party. Commonwealth v. Yohe, 434 Pa.Super. 81, 641 A.2d 1210 (1994). Judge MacElree granted RST a rare extension of the mandatory period for filing an appeal, but RST shunned it by filing pleadings in several courts rather than filing appeals by November 6, 2003. See n. 2. Judge Gavin determined that the appeals were untimely, and he quashed them.[3]
RST first argues that the trial court's failure to conduct a hearing to determine the merits of RST's September 29, 2003 motion to amend the order of September 24, 2003 to remove preconditions for filing an appeal denied RST due process. (RST offers no separate argument on its first stated issue.) RST asserts that denying the motion without holding a hearing denied it the right to make a record to preserve the issue for review on appeal. RST cites Pugar v. Greco, 483 Pa. 68, 394 A.2d 542 (1978), stating that it held that where an appellant has paid the required amount of costs and fees to perfect his summary appeal, his right to question the validity of the fee payment as a condition of the right to trial de novo can be raised at the termination of the trial, and an adverse ruling on the fee payment would be a ruling from which an appeal would lie.
RST quotes Pa. R.Crim. P. 453(B): "When more than one summary offense is alleged to have been committed by one person arising from the same incident, the matter shall proceed as a single case and the issuing authority shall receive only one set of costs." It asserts that there may have been merit to RST's motions and that procedural due process requires that RST be given an opportunity to be heard, citing Commonwealth v. Fahy, 558 Pa. 313, 737 A.2d 214 (1999).
The Commonwealth argues that Rule 453(B) refers to the issue of combining multiple summary offenses into a single case for purposes of trial. Rule 460(A) provides for perfecting an appeal by filing a notice of appeal within thirty days, and Rule 460(E) makes this the exclusive procedure. It notes that the appellants in Pugar refused to pay arbitration fees as required by local rule in order to appeal from an arbitration panel to a de novo hearing in common pleas court. The Superior Court quashed the appeal as interlocutory, and the Supreme Court affirmed, noting that the appellants could have preserved the issue by paying the fees and raising the question on appeal or even collaterally. The Court agrees that Pugar technically does not apply to summary convictions and that the principle that a party should pay a disputed fee and challenge it later should control here.
Second, RST contends that the decision by Judge Gavin dismissing the appeals as untimely effectively "overruled" the prior orders of Judge MacElree granting RST the right to appeal nunc pro tunc in violation of the coordinate jurisdiction *398 rule. It cites Lock v. City of Philadelphia, 895 A.2d 660 (Pa.Cmwlth.2006) (explaining that, upon transfer of a matter between trial judges of coordinate jurisdiction, the transferee court may not alter the resolution of a legal question previously decided). RST asserts that Judge MacElree's October 30, 2003 order should be deemed the basic order from which this appeal is taken. The Commonwealth responds that there is no basis for invocation of the coordinate jurisdiction rule where RST filed a subsequent summary appeal that had no colorable validity under Rule 460, which was assigned to Judge Gavin. The Commonwealth emphasizes, and the Court agrees, that Judge Gavin did not overrule or "effectively" overrule any order of Judge MacElree. Judge Gavin's order gave effect to and enforced Judge MacElree's orders.
Next RST questions whether it perfected its summary appeal within the time ordered by Judge MacElree when it filed on September 30, 2003 with the Chester County Clerk of Courts a "Notice of Appeal from Summary Criminal Conviction." RST asserts that it filed this one appeal in response to the trial court's order of September 24, 2003, listing all docket numbers and paying one filing fee. In Commonwealth v. Alaouie, 837 A.2d 1190 (Pa.Super.2003), the Superior Court stated that the Supreme Court had pronounced that a document is filed when the prothonotary receives it, and the court further cited Nagy v. Best Home Servs., Inc., 829 A.2d 1166 (Pa.Super.2003), for the rule that the prothonotary's authority to reject a document being filed is limited to notifying the proper party that the document is defective so that the defect may be corrected through amendment or addendum. Once filed, a notice of appeal is subject to being stricken for failure to cure defects on its face. RST contends that the fact that the notice of appeal did not comport with Judge MacElree's order is not fatal to timely filing and that a hearing should have been held to determine if the evidence merited consolidation.
The Commonwealth argues that RST offers no authority for the bundling of multiple convictions into a single summary appeal, and its attempt to appeal all convictions on September 30, 2003 through a single notice of appeal and payment of a single filing fee did not perfect an appeal as to any of the convictions under Rule 460. The Court agrees that RST's filing of September 30, 2003 in defiance of the trial court order did not perfect appeals as to all of the cases.
Last, RST questions whether the September 30 and October 30, 2003 orders of Judge MacElree imposed preconditions or qualifying criteria on RST's right to appeal its summary convictions. It asserts that Commonwealth v. Jarema, 404 Pa.Super. 121, 590 A.2d 310 (1991), states a proposition that there are no preconditions or qualifying criteria that must be met before the unqualified right to appeal a summary conviction attaches, and it contends that this case is controlled by Commonwealth v. Swift, 667 A.2d 477 (Pa. Cmwlth.1995). In Swift an owner was charged and convicted on two summary criminal complaints for alleged multiple violations of county health department regulations regarding a single parcel. The district court addressed charges on the two docket numbers at one hearing. The owner filed one appeal, and at the hearing de novo the trial court granted the solicitor's motion to quash because only one appeal was filed. This Court stated that generally taking one appeal from several judgments is not acceptable. It cited former Pa. R.Crim. P. 82(b), predecessor to Rule 453(B), and stated that the owner was charged in two criminal complaints *399 with offenses arising from one continuous episode, that the second included in part violations alleged in the first and that if the appeal were quashed the owner would be precluded from filing an appeal.
RST filed a single notice of appeal in regard to multiple summary convictions that had been heard by the district court at one hearing. The court-ordered requirement of separate appeals and separate filing fees imposed preconditions or qualifying criteria that adversely affected perfection of the appeal. The requirement is inconsistent with other rules, RST contends, including Pa. R.Crim. P. 101(B), which provides that the rules are to be construed to secure simplicity in procedure, fairness in administration and elimination of unjustifiable expense and delay, and Pa. R.Crim. P. 505(B), which relates to joinder of offenses and defendants under summary complaint procedures and states that where one person commits multiple offenses arising from the same incident the issuing authority shall accept only one complaint and docket the matter as a single case.
The Court concludes that Swift does not apply in the present case. The crux of the rationale in Swift was that only one property was involved with related and overlapping charges. There are six properties involved here, and charges relating to different properties do not meet the test of "arising from the same incident" under Rule 453(B). Nevertheless, RST claims a right to appeal all of the convictions under one notice of appeal and by payment of one fee. RST relies in part upon Rule 505(B), but that rule provides that when more than one offense is alleged to have been committed by one person arising from the same incident "the issuing authority shall accept only one complaint, and shall docket the matter as a single case." (Emphasis added.) The Court further observes that docket numbers for the original appeals as listed by Judge MacElree in Paragraph 1 of his order of September 24, 2003, R. 1 (even allowing for the nine deleted by the order of October 20, 2003, R. 11) are not sequential, ranging from No. 2569-02 to No. 756-03 with only a few small groups in numerical order. There is no indication that RST raised any objection to the separate docket numbers initially. In sum, the Court holds that the trial court did not err in quashing the appeals.
The Commonwealth also argues that an award of reasonable counsel fees is warranted because this appeal has no merit or likelihood of success and is counter to well-established rules of law, with no factual or legal issues in dispute. It cites Borough of Kennett Square v. Lal, 165 Pa.Cmwlth. 573, 645 A.2d 474 (1994), and Pa. R.A.P. 2744 among other authority. The trial court's order in the present matter scheduled a hearing to determine whether attorney's fees should be awarded as a sanction against RST. Because the matter of attorney's fees, if any, may be better handled in one proceeding before the trial court, the Court concludes that this issue should be returned to the trial court for disposition and that in all other respects the order of the trial court shall be affirmed by the accompanying order.
ORDER
AND NOW, this 28th day of June, 2007, the order of the Court of Common Pleas of Chester County quashing and dismissing the appeals filed October 14, 2005 is affirmed. This matter is remanded to the trial court for such further proceedings in accordance with its order of May 3, 2006 as the trial court deems proper.
Jurisdiction is relinquished.
NOTES
[1] RST states questions as follows: whether the trial court abused its discretion or erred when it quashed RST's summary appeal; whether the failure to conduct an evidentiary hearing to determine the merits of RST's September 29, 2003 motion (to amend the September 24, 2003 order to remove preconditions for filing an appeal and summary dismissal of the motion) denied RST due process of law; whether the trial court violated the coordinate jurisdiction rule; whether RST timely perfected its summary appeal by filing a "Notice of Appeal from Summary Criminal Conviction" with the Chester County Clerk of Courts Office; and whether the trial court order of October 30, 2003, stating that RST had until the close of business on November 6, 2003 to file a separate notice of appeal with separate filing fees for each docket that RST wished to appeal, imposed preconditions or qualifying criteria on RST's right to appeal.
[2] On October 10, 2003, RST filed a motion for reconsideration of the orders of September 30 and October 1. Judge MacElree granted that motion in part on October 13, 2003 and directed the Commonwealth to determine which citations had been nol prossed, non prossed, dismissed or withdrawn. On October 30, 2003, Judge MacElree entered an order striking nine docket numbers listed in the September 24 order and permitting RST the right to file separate notices of appeal, with separate filing fees, no later than the close of business on November 6, 2003. The failure to do so would result in dismissal with prejudice. Rather than file the appeals, RST on November 5, 2003 appealed to the Superior Court, which quashed the appeal on the ground that it was from an interlocutory order. The Supreme Court subsequently denied a petition for allowance of appeal and an application for reconsideration.
[3] The Court's review of a decision of the trial court on appeal from a summary conviction is limited to determining whether there has been an error of law or whether the findings of the trial court are not supported by substantial evidence. Commonwealth v. Smyers, 885 A.2d 107 (Pa.Cmwlth.2005). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1535572/ | 212 B.R. 1006 (1997)
In re MULTIMEDIA COMMUNICATIONS GROUP WIRELESS ASSOCIATES OF LIBERTY COUNTY, GEORGIA, L.C., Debtor.
George E. MILLS, Jr., Trustee, Plaintiff,
v.
William E. WEBSTER et al., Defendants.
Bankruptcy No. 95-5528-BKC-3F7, Adversary No. 96-349.
United States Bankruptcy Court, M.D. Florida, Jacksonville Division.
August 28, 1997.
*1007 Ronald Bergwerk, Jacksonville, FL, for defendants.
Stewart P. Chambers, Fort Lauderdale, FL, for plaintiff.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
JERRY A. FUNK, Bankruptcy Judge.
This Proceeding is before the Court on Trustee's Verified Complaint for Recovery of Fraudulent Transfers and Motions for Temporary Restraining Orders. (Doc. 1). Defendants filed a Motion to Dismiss. (Doc. 34). The Court entered an Order Denying the Motion to Dismiss. (Doc. 51). The Defendants filed an Answer. (Doc. 54). A trial was held on May 7 and 8, 1997. Based on the evidence presented at trial, the Court enters the following Findings of Fact and Conclusions of Law.
FINDINGS OF FACT
George E. Mills, Jr., the Trustee in this Case, filed a thirty-four count Complaint against Defendants. (Doc. 1). Defendants, William Webster and Gregory Hoenig, were principle managers of the Debtor, Multimedia Communications Group Wireless Associates of Liberty County, Georgia, L.C. ("Debtor"). (Pl.'s Ex. 2A). In the early 1990's, Hughes Communications L.C.G., in association with General Motors and Phillip & Thompson Consumer Electronics Company, developed a new technology called Direct Broadcast Satellite or DBS. This technology utilizes satellites in space in a geocentric orbit to broadcast direct programming signals to satellite dishes owned by subscribers. The National Rural Telecommunications Cooperative ("NTRC") entered into an agreement with Hughes Communications L.C.G. to provide Direct TV to rural areas throughout the country through a network of licensed members and affiliates. One such licensed member is Ocmulgee Communications, Inc. ("OCI") located in Eastman, Georgia which holds the broadcast rights from the NRTC for rural Liberty County, Georgia.
Beginning in mid-1993, Mr. Webster and Mr. Hoenig established the various MCG companies to acquire a membership license from the NRTC. Initially, commencing in 1993, Mr. Webster and Mr. Hoenig raised investment capital through the sale of stock in MCG, Inc. The sale of stock was followed in 1994 by the sale of limited liability membership units in a L.L.C. company, through an offering entitled "Summary of Limited Liability Company Joint Venture Offering." (Pl.'s Ex. 3). Mr. Webster and Mr. Hoenig raised a total of $3,794,163.12 through the sale of the stock and the membership units. (Pl.'s Ex. 4A and 4B).
Neither Mr. Webster, nor Mr. Hoenig ever acquired membership status with the NRTC. In late 1995, a committee composed of membership unit investors took control of the Debtor from Mr. Webster and Mr. Hoenig. The Debtor filed a Chapter 7 petition on November 10, 1995, and following an election conducted by the creditors pursuant to 11 U.S.C. § 702, George E. Mills, Jr. was installed as the Chapter 7 Trustee ("Trustee"). (Pl.'s Ex. 1A and 1B).
Trustee filed a Complaint against William E. Webster, Deborah S. Webster, Gregory A. Hoenig, Cynthia M. Hoenig, Multimedia Communications Group, Inc., n/k/a Satellite Communication Corporation, a foreign corporation, Multimedia Communications Group Wireless Associates, L.C., a Florida Limited Liability Company, MCG Management Company, L.L.C., L.C., a Florida Limited Liability Company, Grecyn Limited Partnership, a Florida Corporation, and Grecyn Foundation, L.L.C., a Nevada Limited Liability Company ("Defendants"). (Doc. 1). In Count I, pursuant to 28 U.S.C. § 2201, the Trustee seeks declaratory relief adjudicating the affiliates of the Debtor to be mere alter egos and instrumentalities of one another. In Counts II-XV, the Trustee, asserting standing under 11 U.S.C. § 544(b), seeks the avoidance of fraudulent transfers under Florida Statute ch. 726. Counts XVI-XXIII sought Motions for Temporary Restraining Orders as to each *1008 Defendant. Counts XXIV-XXXIII request the imposition of constructive trusts and equitable liens with respect to the real and personal property of the Defendants. And lastly, Count XXXIV sought the turnover of corporate records.
Defendants deny any actual intent to defraud investors and contend that the MCG venture, as established and operated, was legitimate. Mr. Webster and Mr. Hoenig further contend that any monies transferred to them from any MCG affiliate represented "profit" from Webster's and Hoenig's share of the sale of the Liberty County DBS market. Finally, Defendants raise an affirmative defense that the recovery, if any, should be limited to the total of the allowed unsecured claims against the Estate.
Prior to trial, Plaintiff filed Proposed Inferences of Fact Drawn from Defendants' Invocation of the Fifth Amendment Admissible at Trial. (Doc. 78). Subsequent to the trial, the Defendants filed a Traverse addressing each individual proposed inference of fact. (Doc. 99). The Court considered the Proposed Inferences and Traverse and has drawn the appropriate inferences when permissible.
In Count I, the Trustee seeks a declaratory judgment that "MCG, Inc. and MCG Associates were, in the context of the MCG Enterprise, mere alter egos of the Debtor, Multimedia Communications Group Wireless Associates of Liberty County, Georgia, L.C., and, in reality, all three MCG Enterprise entities were but mere alter egos of Mr. Webster and Mr. Hoenig." (Doc. 1 at ¶ 52). The Trustee alleges that the various MCG companies, while separate legal creations, in fact, shared considerable common elements, including: (1) Mr. Webster and Mr. Hoenig were founders, principal officers, day-to-day managers, and shareholders or limited liability membership unit owners, either directly or indirectly, of all Debtor and affiliated MCG companies; (2) Mr. Webster and Mr. Hoenig operated the entities primarily out of the same business location in Ocala, Florida; (3) the same personnel were used for all MCG related operations; (4) each of these companies shared the same computer network, office equipment, and receptionist. Additionally, the Trustee put forth evidence that the Companies disregarded certain corporate formalities, such as meetings. Furthermore, the Trustee alleged that funds were freely transferred from the bank accounts held in the various entities' names. (Pl.'s Ex. 6A-6E).
In addition to the evidence of entwined entities, the Trustee argues that Mr. Webster, Mr. Hoenig, and the MCG entities engaged in misconduct, involving the sale of unregistered securities in Hawaii, wherein Webster and Hoenig were fined $10,000 each and MCG was fined $25,000. The Trustee put on evidence to support the Hawaiian ruling showing that the NRTC never had a contractual relationship with the Debtor or any affiliate. The Trustee alleges that the "sham organizations intended to shield Mr. Webster and Mr. Hoenig from personal liability for ostensible corporate or business entity acts and were formed with the sole intent of misleading investors." (Doc. 1 at ¶ 53). The Trustee seeks a judicial declaration that no real distinction in fact or law exists between the Debtor and any of the MCG affiliates, and as such, he should be permitted to administer the affairs, as a whole, of "MCG."
Defendant, Mr. Webster, testified that MCG, Inc. was acquired to develop the wireless business, that MCG Wireless Associates was formed to fund the Liberty County, Georgia project, that the Debtor was formed to hold and to operate the Liberty County Direct TV market, and that MCG Management Co. was formed solely to operate the Blair Building. Mr. Webster further testified that separate books were kept for each entity and funds from investors for each particular entity were deposited in the separate account for that entity. Defendants argue that the only problem surrounds the premature distribution of profits. Furthermore, the Defendants contend that no one was duped into believing that the companies were one entity.
As to the fraudulent transfer counts, the Trustee argues he has produced a "qualifying unsecured creditor" in Terry Hopkins. On the claims register, there exists a proof of claim filed on behalf of Terry Hopkins. (Pl.'s *1009 Ex. 8A). The Trustee alleges that the Hopkins' proof of claim with attached documentation establishes that (i) Ms. Hopkins was solicited by an individual named Stuart Gorenstein, described by Mr. Webster as a representative of "MCG," to invest in the DBS market; (ii) Ms. Hopkins invested, on December 17, 1993, at least the sum of $35,000.00 in a business venture known as "Las Vegas DBS/Multimedia Comm"; (iii) Ms. Hopkins received a letter dated June 23, 1994 from Mr. Webster which acknowledged receipt from Mr. Gorenstein of Ms. Hopkins' investment monies and offered Ms. Hopkins investment documents pertaining to the MCG Liberty County venture which, once completed, would enable Mr. Webster to issue Ms. Hopkins an MCG certificate of ownership; (iv) Ms. Hopkins objected to having her funds invested in any market other than the Las Vegas DBS market, and she was allegedly led to believe her funds were in the Las Vegas market; (v) in approximately April of 1995, Ms. Hopkins learned for the first time that MCG had no interest in the Las Vegas market, and she demanded the return of her investment; (vi) Ms. Hopkins was informed that her funds were not available and had been invested in the Liberty County, Georgia syndication.
The Trustee further testified that the financial records of the Debtor contained a December 1993 bank statement and deposit slip, dated December 22, 1993, reflecting deposit of Ms. Hopkins' check in the amount of $35,000 made payable to "Las Vegas DBS/Multimedia Comm" into "Benbow Astronautics, Inc. dba Multimedia Communications Group, Inc." account number XXXX-XXXXXXXX (Pl.'s Ex. 8B and 8C). At the request of the Trustee, the Ocala Police Department reviewed the books and records of the Debtor and did not find an investor file on Ms. Hopkins. The Trustee also testified that he reviewed the Multimedia Communications Group, Inc. "Shareholders List" and the Multimedia Communications Group Wireless Associates, L.C. "Membership List" and could not find an investor listing for Ms. Hopkins. (Pl.'s Ex. 4A and 4B).
The Trustee argues that 11 U.S.C. § 502(a) and Federal Rule of Bankruptcy Procedure 3001(f) provide that a timely filed proof of claim is prima facie evidence of a bona fide claim unless a party in interest objects. Therefore, the Trustee draws the conclusion that Ms. Hopkins is a creditor, who is not an investor, and therefore, she constitutes a "qualifying § 544(b) unsecured creditor" necessary for standing under Florida Statute ch. 726.
Defendants argue that Terry Hopkins' claim is a recision claim for an investment in Multimedia Communications Group, Inc. Defendants contend that the investment was made long before the Debtor was even formed and that the checks are not made out to the Debtor; they are made out to "Las Vegas DBS/ Multimedia Comm." The recision demand is directed to MCG, Inc. Terry Hopkins does not appear on the member list of the Debtor. In sum, Defendants state that Terry Hopkins may be a creditor of MCG, Inc. but is not a creditor of the Debtor.
CONCLUSIONS OF LAW
First, addressing the declaratory judgment, in order to "pierce the corporate veil" in Florida, the Court must find that:
(1) the shareholder dominated and controlled the corporation to such an extent that the corporation's independent existence, was in fact nonexistent and the shareholders were in fact alter egos of the corporations; (2) the corporate form must have been used fraudulently or for an improper purpose; and (3) the fraudulent or improper use of the corporate form caused injury to the claimant.
Hillsborough Holdings Corp. v. Celotex Corp. (In re Hillsborough Holdings Corp.), 166 B.R. 461, 469 (Bankr.M.D.Fla.1994), aff'd 176 B.R. 223 (M.D.Fla.1994) (citing Dania Jai-Alai Palace, Inc. v. Sykes, 450 So. 2d 1114 (Fla.1984)). The Hillsborough court further stated that "Florida . . . courts disregard the corporate entity in only the most extraordinary cases. Those who seek to pierce the corporate veil . . . carry a very heavy burden." Id. at 468.
Clearly, the evidence demonstrates that the various entities were related. However, even with the evidence of common management, *1010 common business location, common personnel, common computer network, office equipment, and receptionist, and the absence of corporate formality, the Court cannot find that the entities were in fact alter egos of one another. Therefore, the Court finds that the entities, although similar in many aspects and related to an extent, did in fact maintain a separate and distinct existence from one another. Separate books were kept for each entity. Notwithstanding a few instances of incorrect deposits, funds from investors for each entity were deposited in the separate account for that entity, and each entity, although all were involved in the Direct TV market, was engaged in its own distinct business practice. Therefore, the Trustee has failed to meet the first element of Florida's alter ego doctrine. Furthermore, the Court is not convinced that the Trustee could meet the remaining elements of fraud and improper purpose and injury to the claimant. The Court does not believe that the evidence presented by the Trustee supports the element that the various entities were used for a fraudulent or improper purpose. The Court finds that the entities were set up to engage in the Direct TV market, which is not a fraudulent or improper purpose. Additionally, the Court finds that the Trustee has not shown that a fraudulent or improper use of the corporate form caused injury to the claimant. As stated previously, the Court does not find that there was a fraudulent or improper use of the corporate form, and secondly, the Court does not believe that the Trustee established the identity of the claimant. If the claimant is the Trustee, acting on behalf of the investors, the Court would find that the Trustee does not have standing to seek redress for their injuries.
In addition to the declaratory action, the Trustee also asserts thirteen counts of fraudulent transfer. The preliminary issue that this Court must decide involves the Trustee's standing under 11 U.S.C. § 544(b). This identical issue was the crux of the Motion to Dismiss filed by all Defendants. (Doc. 34). In the Order Denying the Motion to Dismiss, this Court stated that
Counts II-XV of the Complaint are brought under the Florida Uniform Fraudulent Transfer Act § 726.105(1)(a) and (b), made applicable by 11 U.S.C. § 544(b). Pursuant to § 544(b), the Trustee needs an actual existing creditor to proceed, unlike § 544(a) where the Trustee can step into the shoes of a "hypothetical" creditor. Defendant argues that the Trustee lacks standing because the "putative" creditors of this bankruptcy estate are the purchasers of membership units in the debtor limited liability company, and therefore hold equity security interests and are not creditors. It appears to the Court that the investors/members of the debtor limited liability company would not be creditors for the purposes of 11 U.S.C. § 544(b). See, Sender v. Johnson (In re Hedged-Investments Assoc.), 84 F.3d 1267, 1272 (10th Cir.1996); 11 U.S.C. § 101(10) (defining creditor); 11 U.S.C. § 101(5) (defining claim). . . .
In this proceeding, on the face of the Complaint, the Trustee states that creditors exist whose claims he asserts, although he never names these creditors. For the purposes of this Motion to Dismiss, the Court finds that the allegations by the Plaintiff that creditors exist whose claims he asserts makes the Complaint sufficient on its face to withstand a Motion to Dismiss.
(Doc. 51).
The Trustee argues that he has a "qualifying unsecured creditor" in Terry Hopkins; this Court does not agree. First, Ms. Hopkins, intending on becoming an investor in the Las Vegas DBS/ Multimedia Comm., made a check out to that entity. The check was deposited in the Benbow Astronautics Inc. dba Multimedia Communications Group, Inc. account. The evidence at trial demonstrated that Ms. Hopkins' investment failed to make her an investor in any of the related entities. Her name did not appear on the Share Holders list of Multimedia Communications Group, Inc., nor on any of the records or investor files of the Debtor. The Court finds that her funds were converted, as they were not used in the Las Vegas DBS/Multimedia Comm. venture, nor returned to her at her request. Therefore, she may have become a creditor of the entity or individuals that converted and/or benefited *1011 from her funds. She may have a cause of action against the corporation to whom her funds went, which as supported by the deposit slips, is Multimedia Communications Group, Inc. However, the evidence at trial did not prove that she had become a creditor of the Debtor. As previously stated, the evidence produced at trial does not support a finding that all the entities were alter egos of one another; therefore, although she may be a creditor of one of the entities, she is not a creditor of the Debtor. Her funds were not traced to the Debtor. The Debtor was not even in existence at the time she sent in her check. Furthermore, there was no direct proof that this Debtor converted her funds for its own benefit, and therefore, she fails to qualify as a creditor of this Debtor.
In addition to Ms. Hopkins not being a creditor of this Debtor, the Court would reiterate its ruling on the Motion to Dismiss that the investors in the Debtor would not be "qualifying creditors" for the purposes of § 544(b). Therefore, the Trustee failed to produce a qualified creditor as required by § 544(b), and this Proceeding should be dismissed. This Order is entered without prejudice for the equity security holders to file suit against the Defendants in an appropriate forum, and for Ms. Hopkins to file suit against the entity or individuals who converted her funds.
Furthermore, the Court notes that many of the fraudulent transfer counts include allegations against Deborah Webster and Cynthia Hoenig. Based upon the documents in evidence and the testimony of the witnesses, the Court finds that neither of these individuals had any involvement with the operation of the Debtor corporation.
Addressing the remaining Counts, the Court finds that Counts XVI-XXIII, which were Motions for Temporary Restraining Orders, were previously disposed of by this Court. Lastly, Counts XXIV-XXXIII which requested the imposition of equitable liens and constructive trusts were dependent upon the Trustee prevailing on the fraudulent transfer counts. As the Court has denied the Trustee's standing to assert the fraudulent transfer counts, the imposition of equitable liens and constructive trusts have no underlying basis. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1535579/ | 212 B.R. 178 (1997)
In re MEMORIAL PRODUCTS COMPANY, INC., Debtor.
PONCEBANK, Appellant,
v.
MEMORIAL PRODUCTS COMPANY, INC., Appellee.
BAP No. PR 96-080.
United States Bankruptcy Appellate Panel of the First Circuit.
September 8, 1997.
*179 Rafael Perez-Bachs, with whom Joan Mulet and the firm of McConnell Valdes, Hato Rey, PR, on brief for appellant.
Jose F. Cardona Jiminez, with whom the firm of Rivera Iturba & Cardona Jiminez, Hato Rey, PR, on brief for appellee.
Before VOTOLATO, KENNER, and VAUGHN, Bankruptcy Judges.
PER CURIAM
PonceBank, a secured creditor, appeals from two orders of the bankruptcy court in the chapter 11 case of Memorial Products Company, Inc. (the "debtor"). The first order granted the debtor's motion to vacate the court's earlier order dismissing the case with prejudice; and the second confirmed the debtor's plan of reorganization. PonceBank challenges the vacatur of the order of dismissal as an abuse of discretion, arguing that the debtor had not shown the "excusable neglect" required by F.R.Civ.P. 60(b)(1) (made applicable by F.R.Bankr.P. 9024) as a condition of revisiting the dismissal order. PonceBank also argues that the court erred in confirming the plan of reorganization because the evidence established that the only "impaired" classes of creditors that accepted the plan were classes the Debtor had impaired "artificially" i.e., without valid cause and therefore the requirement of an accepting impaired class was not satisfied. 11 U.S.C. § 1129(a)(10). For the reasons articulated below, we affirm as to both orders.
JURISDICTION AND STANDARDS OF REVIEW
The bankruptcy appellate panel has jurisdiction over this appeal pursuant to the provisions of 28 U.S.C. § 158(a) and (c)(1), and we review the bankruptcy judge's findings of fact only for clear error. F.R.Bankr.P. 8013 ("Findings of fact, whether based on oral or documentary evidence, shall not be set aside unless clearly erroneous."). "A finding of fact is clearly erroneous when, after reviewing the evidence, the appeals court is `left with the definite and firm conviction that a mistake has been committed.'" In re G.S.F. Corp., 938 F.2d 1467, 1474 (1st Cir.1991). We review conclusions of law de novo; and matters committed to the discretion of the bankruptcy court are reviewed for abuse of discretion only. In re DN Associates, 3 F.3d 512, 515 (1st Cir.1993) (a district court reviews a bankruptcy court's judgment in the same manner as the court of appeals reviews lower court proceedings; "applications of law are reviewed de novo and are set aside only when they are made in error or constitute an `abuse of discretion.'").
VACATUR OF DISMISSAL AND REINSTATEMENT OF THE CASE
a. Facts and Procedural History
PonceBank first challenges the order by which the bankruptcy judge vacated his earlier order of dismissal and reinstated the Chapter 11 case. The relevant facts and procedural history are as follows.
The debtor filed its petition for relief under Chapter 11 of the Bankruptcy Code on January 24, 1995, and PonceBank, a secured creditor, moved to dismiss the case as a "bad faith" filing. On September 14, 1995, at a pretrial conference on the motion, the court granted PonceBank until October 16, 1995, to file a motion for summary judgment on its request for dismissal, and required the debtor to respond to the motion for summary judgment within twenty days. PonceBank filed its motion for summary judgment on September 26, 1995. On October 19, 1995, with no opposition to the motion having been filed, the court dismissed the case with prejudice for a period of one year.[1]
On November 8, 1995, the debtor filed a motion to vacate and set aside the order of dismissal, explaining that although the motion for summary judgment was received in the office of debtor's counsel on September 27, counsel's secretary inadvertently misfiled the motion without having brought it to counsel's attention. Counsel did not respond to the motion because he did not become aware of it until after he received the order dismissing *180 the case. Counsel's secretary attested to this explanation in a supporting affidavit attached to the motion. The motion to vacate also addressed the motion to dismiss and noted that on November 1, 1995, before counsel had become aware of the motion for summary judgment, the debtor had filed an amended plan of reorganization and disclosure statement. The motion to vacate did not include a response to the motion for summary judgment but requested additional time in which to respond to that motion; and on November 20, 1995, before the court acted on the motion to vacate, the debtor filed its response to the motion for summary judgment.
On November 13, 1995, PonceBank filed an opposition to the motion to vacate, arguing that the misfiling of the motion and counsel's subsequent failure to respond, especially when he was aware of the order requiring PonceBank to file its motion for summary judgment by a date certain, was not and, as a matter of law, could not amount to excusable neglect. The opposition also noted that the debtor still had not filed a response to the motion for summary judgment, and it asserted that debtor's amended plan of reorganization could not be confirmed and therefore constituted more evidence of the debtor's bad faith.
On November 21, 1995, the day after the debtor responded to the motion for summary judgment, the court granted the motion to vacate. The endorsement order stated:
After considering PonceBank's opposition, as supplemented, the Court grants the motion to vacate dismissal. Based upon the facts and the apparent equity in the estate, the Court finds that it is in the best interest of the estate to hear the contested matter, and consider other alternatives, such as the appointment of a trustee or conversion to Chapter 7.
The order was granted without a hearing, and the court made no further findings or rulings on the motion. PonceBank did not file its notice of appeal from this order until November 25, 1996.
b. Arguments
Under Fed.R.Civ.P. 60(b)(1), made applicable in bankruptcy cases by Fed.R.Bankr.P. 9024, the court may relieve a party from a final judgment or order for excusable neglect, and it was on that basis that the court granted the motion to vacate the order of dismissal. Now, on appeal, PonceBank argues that the bankruptcy court abused its discretion because, where the debtor's default was caused by the failure of counsel's secretary to bring a timely-served motion to counsel's attention in time to file a response, the debtor had, as a matter of law, failed to demonstrate excusable neglect.
In response, the debtor does not argue excusable neglect but argues instead that for lack of a timely appeal from the order allowing the motion to vacate, this court lacks jurisdiction over the appeal from that order. While conceding that the vacatur was interlocutory, the debtor nonetheless contends that the ten-day period for appealing from the order began to run upon its entry, not from the date of the order of confirmation. Therefore, the debtor argues, PonceBank's failure to file a notice of appeal within that time requires that the appeal from that order be dismissed for lack of jurisdiction.
c. Excusable Neglect
We need not address the debtor's jurisdictional challenge where the merits of the appeal are readily dispatched. Institut Pasteur v. Cambridge Biotech Corp., 104 F.3d 489, 492 (1st Cir.1997) (appellate court need not resolve appellee's jurisdictional challenge where appeal would falter on merits even assuming jurisdiction). PonceBank argues (incorrectly) that if a party's failure to respond timely is due to carelessness or negligence, then, as a matter of law, that failure cannot constitute "excusable neglect" within the meaning of Fed.R.Civ.P. 60(b). The Supreme Court has rejected this argument. In Pioneer Inv. Servs. Co v. Brunswick Assocs. Ltd. Partnership, 507 U.S. 380, 113 S. Ct. 1489, 123 L. Ed. 2d 74 (1993), it held that relief under the "excusable neglect" standard, as used in F.R.Bankr.P. 9006(b)(1), "is not limited to situations where the failure to timely file is due to circumstances beyond *181 the control of the filer." Id., at 391, 113 S.Ct. at 1496. Rather, by employing that standard, "Congress plainly contemplated that the courts would be permitted, where appropriate, to accept late filings caused by inadvertence, mistake, or carelessness." Id., at 388, 113 S.Ct. at 1495. More to the point, the Court reached this conclusion, in part, on the strength of its observation that, "at least for purposes of Rule 60(b)," the rule at issue in this proceeding, "`excusable neglect' is understood to encompass situations in which the failure to comply with a filing deadline is attributable to negligence." Id., at 394, 113 S.Ct. at 1497. And the First Circuit has held that Pioneer's understanding of "excusable neglect" applies to that term as used in F.R.Civ.P. 60(b). Pratt v. Philbrook, 109 F.3d 18 (1st Cir.1997) (vacating order denying motion to vacate for excusable neglect under Rule 60(b)(1), and remanding for reconsideration in light of Pioneer).
Pioneer further established that the determination of whether a party's neglect is excusable "is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission." Pioneer, 507 U.S. at 395, 113 S.Ct. at 1498. On appeal, that determination is reviewed for abuse of discretion. Id., at 398, 113 S.Ct. at 1499-1500. The record shows that in failing to respond timely to the motion to dismiss, the debtor acted negligently, but not in bad faith; that the debtor moved to vacate the order of dismissal without undue delay; that there appeared to be equity in the estate; and that the bankruptcy court determined that the estate would be best served by considering options other than dismissal. In these circumstances, the vacatur was well justified and clearly not an abuse of discretion.
ARTIFICIAL IMPAIRMENT
PonceBank also contends that the court erred in confirming the amended plan of reorganization because the evidence established that the only "impaired" classes of creditors that accepted the plan were classes that the debtor had impaired "artificially" i.e., without valid cause and, therefore, the debtor had not satisfied 11 U.S.C. § 1129(a)(10), the requirement of an accepting impaired class. The bankruptcy judge overruled this objection, stating that PonceBank had not sustained its burden on the issue. PonceBank contends that the evidence required a finding that the classes in question were not validly impaired.
a. Facts and Procedural History
The debtor's amended plan of reorganization separated the creditors into seven classes, with only one class described as unimpaired:
Type of
Class Creditors in Class Claims Impaired?
-----------------------------------------------------------------------------------
1.1 PonceBank Secured Yes
1.2 Granite & Marble Monuments, Inc. Secured Yes
2 Administrative claimants entitled to priority under
§ 507(a)(1) Priority No
3 Wage claimants entitled to priority under
§ 507(a)(3) Priority Yes
4 Tax claimants entitled to priority under
§ 507(a)(7) Priority Yes
5.1 Unsecured claimants of $2,000 or less Unsecured Yes
5.2 Unsecured claimants of over $2,000 Unsecured Yes
The plan provided for payment of all claims in full, including interest from the date of the bankruptcy filing, but (except for Class 2) it did not provide for payment on the effective date of confirmation. Rather, all classes were to be paid by deferred payments. With respect to PonceBank, the plan provided for ten years of monthly payments of principal and interest according to a fifteen *182 year amortization schedule, with interest at nine percent from July 20, 1995, and a balloon payment of $721,493 at the end of that term; however, the debtor would retain the option of paying-off the claim sooner, either through refinancing or through sale of some or all of its principal asset, a cemetery, as a going concern. With respect to Granite & Marble Monuments, Inc., the plan provided for payment in fifteen equal annual installments at eight percent annual interest. Priority wage claimants were be paid in full three months after the effective date of the plan. Priority tax claimants were to be paid in installments over five years from the effective date. Class 5.1 unsecured creditors were to be paid in two equal installments, the first on May 15, 1996, or thirty days after the effective date, whichever is later, and the second six months later. Class 5.2 unsecured creditors would receive ten equal semiannual installments, commencing May 15, 1996, or thirty days after the effective date, whichever is later. The plan clearly contemplated that the debtor would continue in business after confirmation, and the debtor presented evidence that it would have to remain in operation to generate the cash needed to finance the plan.
PonceBank raised the present issue for the first time at the confirmation hearing, which was held on September 9, 1996.[2] See Transcript, pp. 55-58, 67-68, 75, 83-84. Its argument is as follows: the debtor had sufficient cash on hand to pay the claims of all classes other than PonceBank immediately on the effective date of confirmation. Consequently, deferral of payment to those classes was unnecessary and served only to create impaired classes whose acceptance would permit the debtor to satisfy § 1129(a)(10) and to obtain plan confirmation over the objection of PonceBank and without the acceptance of a truly impaired class. Without these unnecessarily impaired classes, only PonceBank's class would truly be impaired; and with PonceBank having voted to reject the plan, section 1129(a)(10) would not be satisfied, and the plan would not be confirmable.
In support of its objection to confirmation, PonceBank cited the Monthly Financial Report that the debtor submitted to the United States Trustee for the month ending July 31, 1996. The report, dated August 13, 1996, indicated that as of July 31, 1996, the debtor had a cash balance of $319,117.94. PonceBank did not specify how much cash would be necessary to pay the claims of all creditors on the effective date of confirmation, and it offered no evidence of the debtor's accrued expenses and other cash needs as of the effective date of confirmation.
Earlier in the hearing, the debtor's president, Mr. Angel Castro, testified that for the postconfirmation period, the debtor was projecting gross income of $120,000 per month, and net income after taxes of $24,000. He also stated that debt service under the plan would require $23,000 per month.
In considering its argument, Judge Lamoutte repeatedly inquired of PonceBank what facts and evidence existed to establish an artificial impairment of classes, Transcript, p. 75, and noted that the monthly operating report on which PonceBank was relying showed the debtor's cash balance and cash flow but did not reflect accrued expenses, about which there was no evidence. Transcript, pp. 58, 67, 83. When PonceBank offered nothing but the Monthly Financial Report, Judge Lamoutte stated that although he followed the case law and the rationale offered in support of the artificial impairment argument, "I don't have the facts to make the finding that the Debtor has enough cash available to pay all unsecured creditors in full and continue operations." Transcript, p. 83. He stated that, in order to sustain this objection to confirmation, "I would have to . . . be able to make a factual finding that the debtor has . . . sufficient cash to pay all creditors in *183 full and still continue with his operation." Transcript, p. 67.
At the conclusion of the hearing, the bankruptcy judge took the matter under advisement; and on November 15, 1996, he issued an order confirming the plan and an opinion in support of the order, but his opinion did not address the issue before us now.[3]
b. Arguments
PonceBank argues that the testimony and documentary evidence required a finding that the debtor had sufficient funds to pay all creditors (except PonceBank) in full upon confirmation; consequently, the argument continues, the plan lacked acceptance by a validly impaired class and, for failure to satisfy § 1129(a)(10), should not have been confirmed. The evidence to which PonceBank refers includes the testimony of the debtor's president that the debtor was operating with a healthy profit margin in excess of $40,900 per month after taxes and that the debtor's actual earnings for 1996 were "in line" with the projections it filed in November 1995 with the amended plan; and the financial projections appended to the debtor's amended disclosure statement. PonceBank also relies on the debtor's Summary of Schedules, which had been filed in the debtor's case but was not among the evidence introduced at the hearing. Lastly, PonceBank also relies or documents that did not exist at the time of the hearing: the debtor's monthly financial reports for the months of September, October, and November, 1996, which reported ending cash balances of $375,185.15, $415,963.69, and $426,499.39 respectively.[4]
c. Artificial Impairment
If a class of claims is impaired under the plan, the plan cannot be confirmed unless at least one impaired class votes to accept the plan. 11 U.S.C. § 1129(a)(10). The theory of artificial impairment, as advanced by the courts on which the appellant relies, holds that the accepting vote of an impaired class will not satisfy § 1129(a)(10) if the class is impaired without valid cause, usually an economic justification.[5] The bankruptcy court accepted this theory, but ruled that PonceBank failed to prove that the debtor had sufficient funds to pay all accepting impaired classes in full upon confirmation and still continue in operation; therefore, PonceBank had not established that these classes were artificially impaired.[6]
PonceBank challenges the bankruptcy court's findings of fact and, implicitly at least, also challenges the factors considered by the court in determining the impairment issue.
The latter question is one of law, which we review de novo. The bankruptcy judge held that the fact that the debtor had sufficient cash to pay the accepting impaired classes in full on the effective date of confirmation did *184 not, by itself, render their impairment the deferral of payment to those classes unnecessary. Rather, he held that deferral would be unjustified only if the debtor had sufficient cash to pay those classes in full and still continue operations. In other words, the bankruptcy judge held that the need to retain cash for continued operation is good cause to defer payment of creditors under a plan.
While PonceBank does not challenge this ruling expressly, the premise of its argument is that if the evidence required a finding that the debtor had sufficient cash to pay all the impaired classes in full on the effective date of confirmation, then the classes were artificially impaired, and confirmation should have been denied. If PonceBank means thereby to argue that a debtor's need of cash for continued operation of its business is not valid cause to defer payment to creditors under a plan, we disagree. Where the plan contemplates the debtor's continuation in business and the reasonable cash needs of that business to meet accrued and foreseeable expenses and to make reasonable provision for contingencies require some or all of the cash on hand that might otherwise be paid to plan creditors on confirmation, that need justifies the plan's deferment of payment to the plan creditors. A plan need not, and in fact it may not, compromise its own feasibility. See 11 U.S.C. § 1129(a)(11) (requiring a showing of "feasibility" as a condition of confirmation). PonceBank has offered no authority to the contrary. We agree with the bankruptcy judge's conclusion that a debtor's requirement of cash for continued operation is valid cause to defer payment to creditors and thereby to impair their claims.
This brings us to PonceBank's main argument on appeal: that the evidence required a finding that the debtor had sufficient funds to pay all accepting impaired classes in full upon confirmation. We review the bankruptcy judge's findings of fact only for clear error, and a review of the record reveals the following. The evidence indicated that as of July 31, 1996, the debtor had a cash balance of only $319,117.94. There is no evidence of the debtor's cash balance at any date later than July 31, 1996. Nor is there evidence, or even an offer of proof, as to the amount of the debtor's accrued expenses or its postconfirmation cash needs. The one exception is that, under the plan, the debtor would have to make payments to PonceBank of more than $14,000 per month.[7] The plan contemplated that the debtor would continue in business after confirmation, and the success of the plan depended on its continuation as a going concern. The president testified that at the time of the hearing on confirmation, the debtor was averaging net income after taxes of approximately $24,000 per month (not, as PonceBank suggests, $40,900 per month, which was a cash flow figure that did not reflect accrued expenses). PonceBank did not specify, much less establish, the amount of cash that the debtor would have needed to pay the claims of all creditors (other than itself) upon confirmation, and we find no answer to that question in the record.[8] This is the extent of the record below.
*185 PonceBank would include other evidence in the record on appeal. First, it asks us to consider the debtor's monthly financial reports for the months of September, October, and November, 1996, which reported ending cash balances of $375,185.15, $415,963.69, and $426,499.39 respectively. However, these reports were not part of the record at the confirmation hearing and did not even exist at the time of the hearing the October and November reports were produced and filed only after entry of the confirmation order. Regardless of their alleged relevance, they were not part of the record below, so we may not consider them. PonceBank also makes reference to the financial projections appended to the debtor's amended disclosure statement, but failed to include these in the record on appeal, and so they are not before us, either.
On the basis of the record properly before us, we find no clear error. The bankruptcy court had no information about the debtor's accrued expenses and postpetition cash needs, nor an offer proof as to the amount needed to pay all claims in full upon confirmation. This alone was sufficient basis for the court's finding. However, even if we were to assume that the Debtor had no accrued expenses and that, as PonceBank now suggests, the record demonstrated that the amount needed to pay all claims was $396,101.00, the bankruptcy court's finding would still prove quite sound. With cash on hand of $319,117.94 on July 31, 1996, and monthly net earnings of $24,000 per month between then and the date of confirmation, the debtor's cash on hand as of that date would have been $403,117.94. This would be insufficient to pay all claims in full ($396,101) and make the initial plan payment to PonceBank (approximately $14,000); and clearly there would be no reserve for contingencies. Moreover, it assumes that net earnings would be realized entirely in cash. In short, the evidence did not require a finding that the debtor had sufficient funds to pay all accepting impaired classes in full upon confirmation and to continue in operation; therefore, we find no clear error to have been committed by the bankruptcy judge.
Finally, we note that at oral argument, PonceBank raised for the first time a second artificial impairment issue: that Class 1.2, the class containing the secured claim of Granite & Marble Monuments, Inc., should have been included in the same class as PonceBank but was separately classified only to create an accepting impaired class. We will not entertain this argument because: (1) PonceBank did not raise it in its brief, thereby taking Memorial Products by surprise, and (2) section 1129(a)(10), the requirement of an accepting impaired class, would be satisfied even without the acceptance of Class 1.2.
CONCLUSION
For the reasons articulated above, the orders appealed from are AFFIRMED.
NOTES
[1] The order was dated October 19, 1995, but was not entered on the docket until October 30, 1995.
[2] PonceBank filed an objection to confirmation of the amended plan and articulated therein an artificial impairment argument, but that argument did not pertain to the same facts that form the basis for this appeal. (In the objection, PonceBank argued that the debtor had artificially impaired Class 5.2 by impermissibly including insiders in that class for the sole purpose of obtaining the acceptance of an impaired class. The bankruptcy court rejected that argument, and PonceBank does not now revisit it on appeal.) The objection did not raise the issue of artificial impairment that PonceBank now raises on appeal. The debtor does not argue that the artificial impairment issue that is the subject of this appeal was not timely raised below.
[3] We are satisfied that the rationale for the bankruptcy court's decision rejecting the artificial impairment argument is adequately stated on the record during the confirmation hearing as recounted above.
[4] The October and November reports were filed in the case only after the court entered the confirmation order. The September report was filed before the confirmation order, but PonceBank did not move to have it considered in support of its objection to confirmation.
[5] Windsor on the River Assocs. v. Balcor Real Estate Fin. (In re Windsor on the River Assocs.), 7 F.3d 127, 130-133 (8th Cir.1993) (for purposes of § 1129(a)(10), a claim is not impaired if the alteration of rights in question arises solely from the debtor's exercise of discretion); In re Dunes Hotel Associates, 188 B.R. 174, 184-189 (Bankr. D.S.C.1995) (where the accepting impaired class was impaired without economic justification, the court denied confirmation, either for artificial impairment, which violates § 1129(a)(10), or for lack of good faith, which violates § 1129(a)(3)); In re Fur Creations By Varriale, Ltd., 188 B.R. 754, 759-761 (Bankr.S.D.N.Y.1995) ("There must be a showing that the proposed impairment is necessary for economical or other justifiable reasons and not just to achieve `cram down'."); In re Investors Florida Aggressive Growth Fund, Ltd., 168 B.R. 760, 766-767 (Bankr.N.D.Fla. 1994); In re Daly, 167 B.R. 734, 737 (Bankr. D.Mass.1994) (where the debtor impaired a class solely to satisfy § 1129(a)(10) and thereby to force the plan on a truly impaired class that had voted to reject the plan, the impairment violated the requirement of an accepting impaired class, § 1129(a)(10), or the requirement that the plan be proposed in good faith, § 1129(a)(3), or both, and therefore prevented confirmation).
[6] PonceBank did not object to this allocation of the burden of proof and does not challenge it row on appeal.
[7] The record does not specify the amount of the monthly payment, but it does supply the information from which it can be calculated: on a debt of $1.4 million, amortized over fifteen years with annual interest at nine percent, the monthly payment is $14,199.73
[8] PonceBank now states that that amount was $396,101.00 but does not explain how it arrives at that number. More importantly, PonceBank did not present either the number or its method of calculation to the bankruptcy judge. Such arguments cannot be presented for the first time on appeal; we may not entertain arguments not presented to and argued fully before the bankruptcy judge. In re Roberts, 175 B.R. 339 (9th Cir. BAP 1994) (general rule is that appellate court will not consider issues raised for the first time on appeal).
Moreover, the only evidence before the bankruptcy court on this issue was inconclusive. It consisted of testimony by the debtor's principal that "aggregate debt was around $1.8 million, including the debt of . . . PonceBank," but this figure was only an approximation, and the testimony did not specify whether the figure included administrative claims. PonceBank also relies on the debtor's Summary of Claims. The Summary quantifies total liabilities, as of the petition date, at $1,786,276.86, but the Summary (i) was not cited at the confirmation hearing, (ii) does not indicate the allowed amount of claims, which can vary from the amount set forth in the schedules, and (iii) does not account for administrative claims, which by definition arise postpetition. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536395/ | 928 A.2d 85 (2007)
395 N.J. Super. 40
STATE of New Jersey, Plaintiff-Appellant,
v.
Tammy BUCZKOWSKI, Defendant-Respondent.
Superior Court of New Jersey, Appellate Division.
Submitted November 14, 2006.
Decided July 18, 2007.
James P. Lynch, Acting Camden County Prosecutor, for appellant (Tamika T. McKoy, Acting Assistant Prosecutor, of counsel and on the letter brief).
DiLorenzo & Rush, Florham Park, for respondent (Chris DiLorenzo, of counsel and on the letter brief).
*86 Before Judges KESTIN, PAYNE and LIHOTZ.
The opinion of the court was delivered by
KESTIN, P.J.A.D.
The State appeals from a Law Division order granting defendant's motion to dismiss the complaint charging her, under N.J.S.A. 39:4-96, with reckless driving. In the Winslow Township Municipal Court, defendant, Tammy Buczkowski, had entered a conditional guilty plea to an amended charge of failure to yield under N.J.S.A. 39:4-144. She then appealed to the Law Division. On de-novo-on-the-record review pursuant to Rule 3:23-8(a), the court granted defendant's motion and dismissed the complaint. Judge Cook expressed his rationale for the result reached in a written opinion and order. The State argues, on appeal, that "[t]he trial court erred by holding that a motor vehicle summons that was issued within 30 days must also be served upon the defendant within 30 days."
The facts as found by Judge Cook are simple and essentially uncontested.
At 11:30 p.m. on the night of October 30, 2004, a collision occurred at the intersection of Tansboro East Factory Roads in Winslow Township. Ms. Buczkowski was driving on the stop street. A police officer was driving on the through street, responding to a call. Ms. Buczkowski entered the intersection, and the two vehicles collided. One of the occupants of the two vehicles sustained fatal injuries.
On November 29, 2004, the 30th day following the accident, Lt. Mark Wilson, a member of the Camden County Prosecutor's Crash Response Incident Team, signed a sworn complaint against Tammy Buczkowski, charging her with reckless driving at the Tansboro East Factory Roads intersection in Winslow Township, on or about October 30, 2004 at 11:30 p.m. The offense section of the complaint read, "Reckless Driving (Fatal Crash) in violation of 39:4-96".
Referring to "Exhibit A . . ., a copy of the complaint-summons, and the Winslow Township Municipal Court envelope that was used to mail it to Ms. Buczkowski[,]" Judge Cook found further that
The postmark date on the envelope was March 21, 2005. Thus, 142 days elapsed from the date of the alleged offense to the date the complaint-summons was served by mail upon Ms. Buczkowski.
Exhibit B is another copy of the complaint-summons. The "Notice to Appear" section lists the "Court Date" as 1/5/05 at 8:30 a.m., with the notation that a "Court Appearance [was] Required." However, the court appearance date listed in Exhibit A, the version of the complaint-summons mailed to Ms. Buczkowski on March 21, 2005, lists the court appearance date as "4/15/05". It appears that the "1-5-05" date listed in the Exhibit A version was written over to change the court appearance date to "4/15/05". Presumably that date change was made because the Winslow Township Municipal Court did not mail or otherwise effect service of the complaint-summons until March 21, 2005 at the earliest, or some 2½ months after the original court appearance date of January 5, 2005.
Prior to the complaint-summons being mailed to Ms. Buczkowski on March 21, 2005, a notice dated "12/01/04" and titled "TRANSFER TO THE COUNTY PROSECUTOR" was mailed by the Winslow Township Municipal Court to Ms. Buczkowski at her Bayonne, N.J. address. Exhibit C. The notice listed the case name "State v. Tammy Buczkowski"; the summons no. "SC 14540"; the violation date "10/30/04"; and the violation [as], "39:4-96". . . .
*87 The latter notice, of December 1, 2004, contained no details regarding the charge beyond the foregoing, and it did not include a copy of the complaint-summons which, among other details, contained the location of the incident that gave rise to the charge, the identity of the charging officer, and the court appearance date. The December 1, 2004 notice contained the following statement, however:
Please be advised that the court matter(s) listed below has been transferred to the Camden County Prosecutor for their review & action. Questions regarding the status of your case(s) should be directed to the office of the County Prosecutor.
Judge Cook's recitation of his factual findings concluded as follows:
The complaint-summons was not included with that December 1, 2004 notice to Ms. Buczkowski. Further, while the mailing of that notice is not of record, even if it was mailed to Ms. Buczkowski on the same day as the date of the notice, December 1, 2004, it was mailed at least 31 days [sic] after the date of the alleged reckless driving offense.
On March 4, 2005, 17 days before March 21, 2005, the date the Winslow Township Municipal Court first mailed the complaint-summons to Ms. Buczkowski, the municipal court mailed to Ms. Buczkowski a notice of "Change In Court Date New Court Date . . . reschedul[ing]" the court date to March 30, 2005. Exhibit D. The complaint-summons was not included in that mailing[, either].
To recap, the November 29, 2004 complaint-summons charging Ms. Buczkowski with reckless driving on October 30, 2004 was not mailed or otherwise served on her until March 21, 2005, 142 days after the alleged offense.
On appeal, we are bound by the trial court's findings because they are supported by substantial evidence and, they are essentially undisputed. See State v. Locurto, 157 N.J. 463, 470-72, 724 A.2d 234 (1999); State v. Johnson, 42 N.J. 146, 160-162, 199 A.2d 809 (1964). This deference does not apply to rulings of law, however. See Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378, 658 A.2d 1230 (1995).
The State argues on appeal, as it did before the Law Division and the municipal court, that the notice dated December 1, 2004, sufficed to satisfy the requirements of N.J.S.A. 39:5-3a. We reject that argument, as Judge Cook did.
N.J.S.A. 39:5-3a, in terms, expressly establishes a thirty-day deadline "after the commission of [an] offense" for the issuance of process. In State v. Fisher, 180 N.J. 462, 852 A.2d 1074 (2004), the Supreme Court expressed the view, albeit in dictum, that the provisions of N.J.S.A. 39:5-3a require "service of process" within the thirty-day period provided. Id. at 474, 852 A.2d 1074 (emphasis omitted). The Court held, however, that once service of process occurs within the mandated time, i.e., "timely notice of the allegations charged" is received by the defendant, ibid., formal errors or omissions may be corrected within a reasonable time. See R. 7:14-2. See also, e.g., R. 3:3-4; 7:2-6(c). The Supreme Court stated that construing N.J.S.A. 39:5-3a to impose a deadline for service of process "ensures that a defendant receives timely notice of the allegations charged. . . ." Fisher, supra, 180 N.J. at 474, 852 A.2d 1074. It protects the accused from the hazards of defending against stale allegations. See State v. Wallace, 201 N.J.Super. 608, 610-12, 493 A.2d 645 (Law Div.1985).
In the instant matter, the date of the charged offense was October 30, 2004. The charge arose from a motor vehicle accident in which a fatality had occurred. No traffic ticket, i.e., "complaint-summons," *88 see Fisher, supra, 180 N.J. at 467-69, 852 A.2d 1074, was issued at the scene. Following investigation of the accident, the complaint-summons in the matter issued with a date of November 29, 2004, the thirtieth day following the accident. However, defendant was not notified, within the thirty-day period, either that a charge was being filed against her or what that charge entailed. Under date of December 1, the thirty-second day, a notice captioned "Transfer to the County Prosecutor," addressed to defendant in Bayonne, Hudson County, was generated in the Winslow Township Municipal Court in Camden County for mailing. Among the few details provided was the information that the matter had been transferred to the Camden County Prosecutor's office.
Manifestly, this mailed service of a document dated December 1, containing notice only that a charge had been filed, even if mailed the same day, was not within the thirty-day period required by N.J.S.A. 39:5-3a. See Fisher, supra, 180 N.J. at 474, 852 A.2d 1074. The December 1 document fell short in another way of satisfying the notice requirement of the statute. It also omitted to furnish defendant with the charge itself. The notice contained only the most general information: that a charge had been filed, the summons number, a violation date, and a statutory citation. It lacked the details that a copy of the complaint-summons would have provided.
Compounding those defects in notice, a copy of the complaint-summons itself was not mailed to defendant until March 21, 2005, 142 days after the date of the offense charged. It is of no small significance, as Judge Cook found, that the original appearance date on the summons
was written over to change the court appearance date [from January 5, 2005] to "4/15/05". Presumably that date change was made because the Winslow Township Municipal Court did not mail or otherwise effect service of the complaint-summons until March 21, 2005 at the earliest, or some 2½ months after the original court appearance date of January 5, 2005.
The service requirement of N.J.S.A. 39:5-3a, as interpreted by the Supreme Court, not only guarantees a defendant adequately prompt and essentially full notice of the charge against her, it also promotes the integrity of the process. Wholly independent of the adequate notice requirement of the statute, with its roots in due process considerations and other fundamental fairness concerns, we have no hesitancy in applying the "square corners" doctrine to the State in this matter. "The government must `turn square corners' in its dealings with the public." New Concepts for Living v. Hackensack, 376 N.J.Super. 394, 401, 870 A.2d 697 (App. Div.2005).
For the foregoing reasons, we affirm. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536384/ | 223 B.R. 715 (1998)
In re Robert and Gloria SAUER, Debtors.
In re Willard and Joyce Sauer, Debtors.
Bankruptcy Nos. 97-31715, 97-31717.
United States Bankruptcy Court, D. North Dakota.
May 27, 1998.
*716 *717 Suzanne M. Schweigert, Smith, Bakke, Hovland & Oppegard, Bismarck, ND, for Gloria and Robert Sauer.
Wayne Drewes, Fargo, ND, trustee.
MEMORANDUM & ORDER
WILLIAM A. HILL, Bankruptcy Judge.
Debtors Robert and Gloria Sauer, and Willard and Joyce Sauer, farming in partnership under the name "Sauer Brothers," each filed respective voluntary petitions for relief under Chapter 12 of the United States Bankruptcy Code ("Code") on November 12, 1997. In companion plans, they proposed claim treatment and reorganization which they believed capable of achieving confirmation. The United States of America, acting through Farm Service Agency ("FSA"), and Dakota Community Bank ("Community Bank") filed objections to the plans. Now before the Court for confirmation are the debtors' respective first modified plans ("modified plans"), filed on April 20, 1998, to which FSA and Community Bank continue in their objections.
FSA and Community Bank principally object to the modified plans on grounds of feasibility. Relatedly, FSA additionally objects to the debtors' proposed use of their anticipated Production Flexibility Contract ("PFC") and Conservation Reserve Program ("CRP") payments to fund their FSA plan disbursements, contending that the payments are subject to a right of setoff pursuant to Code § 553. In turn, Community Bank further objects to the debtors' treatment of its secured claim under their modified plans on the following bases: its secured claim is understated; the interest provision on the claim is insufficient; and the repayment term on the claim is excessive in light of the nature, age, and condition of its collateral. Lastly, Community Bank objects to the debtors' modified plans on the ground that they fail to contingently provide for the possibility that it might prevail in its adversary action against the debtors, which is currently pending before the Court. A hearing in this matter was held on April 20, 1998.
I. Facts
The Court begins by noting that aside from unsecured indebtedness, the debtors' plans are, in the main, identical, with only slight variations in secured indebtedness and projected living expenses. As the debtors farm in partnership, and have executed loan documents and security instruments in that form, all references hereinafter to "the debtors," unless otherwise indicated, shall relate to the cases of both Robert and Gloria, and Willard and Joyce. For purposes of simplification, references to "each of the debtors" shall relate to each of the debtor couples, separately.
1.
Debtors Willard and Robert Sauer are brothers. They, along with their respective wives Joyce and Gloria, reside in Carson, North Dakota. Their farming operation, conducted in partnership under the name "Sauer Brothers," consists of small grain farming, cattle ranching, and dairy production conducted on approximately 2400[1] acres *718 of farm- and ranchland in Grant County, North Dakota. The debtors currently own 54 beef cows, 34 beef calves, 56 dairy cows, and 18 dairy calves.[2] They also own a 60% interest in 40 share cows. Additionally, Willard and Joyce own as their personal property farming equipment and implements used in the debtors' combined farming operation.
The debtors have recently experienced financial difficulties over the span of at least several years. During this time they realized only minimal gains from their farming endeavors, as chronicled in their federal income tax returns for the years 1994 through 1996. The Court has compiled this data into the following tables:
Actual Gross Farm Income
1994 1995 1996
Willard and Joyce: 50,914.86 51,748.47 63,861.07
Robert and Gloria: 48,169.52 46,952.34 57,562.47
__________ __________ ___________
TOTAL $99,084.38 $98,700.81 $121,423.54
Actual Farm Expenses
1994 1995 1996
Willard and Joyce: 45,408.96 42,656.34 55,807.46
Robert and Gloria: 45,246.04 45,760.50 55,288.88
__________ __________ ___________
TOTAL $90,655.00 $88,416.84 $111,096.34
Actual Net Farm Income
1994 1995 1996
Willard and Joyce: 5,505.84 9,092.13 8,053.61
Robert and Gloria: 2,923.48 1,191.84 2,273.59
_________ __________ __________
TOTAL $8429.32 $10,283.97 $10,327.20
As a result of their difficulties, the debtors filed for protection under Chapter 12 of the Code on November 12, 1997.
2.
Since July 31, 1989, the debtors have been participants in the Conservation Reserve Program, and in 1996 entered into five Production Flexibility Contracts with Commodity Credit Corporation.[3] On December 15, *719 1997, they filed respective motions to assume their executory contracts under the CRP and PFC, which the Court granted on January 6, 1998. There are two years remaining on the debtors' contracts under the CRP and five years remaining on those under the PFC. Over the life of the contracts, the debtors anticipate receiving a minimum of $30,910.30. Over the life of the plan, they anticipate receiving $22,590.60 therefrom.
On December 19, 1997, the debtors filed a motion for authority to use cash collateral in their possession, which constituted proceeds from their sale of livestock in which they had previously granted FSA and Community Bank security interests. By their motion, the debtors sought the Court's permission to consume $8483.79 in cash proceeds for operating expenses essential to seeding, and securing the increments necessary to raising, their 1998 crop. As adequate protection, they proposed a replacement lien in the 1998 crop, together with a pledge of crop insurance. Community Bank objected to the motion on December 31, 1997. FSA filed a response to the motion on January 2, 1998, conditioning its acceptance upon the receipt of a replacement lien and adequate protection in an amount equivalent to the funds released. The debtors entered into a stipulation for release of the cash collateral with FSA on February 9, 1998, agreeing to provide it with an assignment of a cash rent payment under the AMTA program in the amount of $3,500.00, and further agreeing to incorporate the terms of the stipulation into their Chapter 12 plan. The Court approved the stipulation on February 11, 1998.
A hearing was held on the debtors' motion on March 23, 1998. At that time, the debtors made their first disclosure that the proceeds which they held from the sale of the collateral of Community Bank and FSA had increased to $11,688.54, and they then sought the release of the same. By its order of April 3, 1998, incorporating the terms of the March 23 hearing, the Court granted the debtors' motion as to the release of half as much cash collateral as had been requested, or $5,844.27. As adequate protection for the debtors' use of the funds, Community Bank was granted a replacement lien in the 1998 crop, as well as an assignment of any and all insurance covering its loss, limited to the extent of the proceeds released to the debtors.
Relatedly, Community Bank commenced an adversary proceeding against the debtors, Dakota Community Bank, f/k/a First State Bank v. Robert A. Sauer et al., Adversary Number 98-7006, which is currently pending before this Court. By this action, Community Bank contends that it has been injured by the debtors' conversion to their own use of property, or its proceeds, in which Community Bank holds a lien, including proceeds from the sale of cattle, and possibly grain and livestock as well. FSA holds an inferior lien in this property. Community Bank seeks to *720 have the debtors' indebtedness to it of $85,064.48 declared nondischargeable. A trial has been scheduled in this matter for June 23, 1998.
3.
In their schedules, the debtors list a number of priority and secured debts. In this respect, Grant County Treasurer ("Grant County") maintains a priority claim of $21,043.05 against the debtors for delinquent real estate taxes dating from 1993 through 1997. The Bank of North Dakota holds a claim in the amount of $90,023.74, secured by a first mortgage on portions of the debtors' farm real property and a second lien in various of their chattels. Clara Sauer holds a claim of $192,820.08, secured by a first mortgage on portions of their property. Community Bank possesses a claim of $85,064.48, secured by a first priority lien on the debtors' livestock, crops, inventory, machinery, and accounts. Lastly, FSA maintains a claim in the amount of $168,503.45, secured by a second mortgage in the debtors' farm real property, as well a second priority lien on their livestock, crops, inventory, and machinery.
The debtors propose to treat these priority and secured claims under their modified plans. They provide for the $21,043.05 priority claim of Grant County by proposing three annual payments of $7,014.35 due on February 15 of each year, with the first payment due in 1999. They propose to treat the $90,023.74 secured claim of the Bank of North Dakota by making payment on (1) the $8,820.09 in arrearage included therein over a three-year period, without interest, in $2,940.03 installments due on April 1 of each year, with the first payment due in 1999; and (2) the remaining $81,203.65 over a period of twenty-one years with interest at the rate of 9.25%, payments being due April 1 of each year, with the first payment due in 1999. They propose to treat the $192,820.08 secured claim of Clara Sauer by making payments over thirty years, with the first payment due on December 15, 1998 in the amount of $4,017.09, and payments of $6,427.34 due on December 15 of each year thereafter.
The debtors treat only $65,000.00 of the $85,064.48 claim of Community Bank as secured, and propose to make payments on that amount over seven years with interest at the rate of 10% with payments due January 1 of each year, beginning in 1999 in the amount of $8,900.91, and thereafter in the amount of $13,351.36 annually. Similarly, the debtors propose to treat only $94,080.10 of the $168,503.45 claim of FSA as secured, providing for payment over thirty years, with interest of 6.5%, due on January 1 of each year with the first payment in the amount of $4,802.94 due in 1999, and payments of $7,204.41 due each year thereafter. The debtors propose to reduce their annual payment to FSA by monthly milk assignment payments of $140.00 pursuant to a prepetition agreement, leaving annual payments after 1999 in the amount of $5,524.41. The debtors additionally provide that FSA shall receive up to $5,524.41 of their farm program payments, which will be applied to their annual plan payment to FSA, with any remaining government payments over and above that amount to be turned over to the debtors for their use.
Parenthetically, Norwest Bank holds a claim in the amount of $804.45 against Willard and Joyce, secured by their 1989 Dodge Caravan. Willard and Joyce propose "to reaffirm this debt pursuant to the terms of their current contract[, making] payments . . . in the amount of $209.45 each month until the debt is paid in full."
4.
Attachments to the debtors' modified plans and post-confirmation-hearing briefs include projections of their farming and total incomes, farm-related expenses, and plan disbursements and living expenses for the years 1998 through 2000. First, the debtors project total farming income of $123,269.87 in 1998, $126,600.60 in 1999, and $126,600.60 in 2000, to be divided equally among them, along with each of the debtors' total income figures, as detailed below: *721
Anticipated Farming Income
1998 1999 2000
Crop Sales 17,297.73[*] 23,142.00 23,142.00
140 acres sunflowers: $17,640.00
78.6 acres wheat: $5,502.00
Livestock 23,159.00 23,159.00 23,159.00
Raw Products 50,673.60[**] 50,673.60[**] 50,673.60[**]
Gov't Payments 8,366.00 8,366.00 6,964.00
CRP Payment or Crop Sales: 0.00 0.00 1,402.00
Cash and Pasture Rent: 16,460.00 16,460.00 16,460.00
Pasture Rent Cow/Calf Pairs: 4,800.00 4,800.00 4,800.00
1997 Livestock Proceeds 2,513.54[***] 0.00 0.00
___________ ___________ ___________
TOTAL FARM INCOME: $123,269.87 $126,600.60 $126,600.60
Each Brother's
Respective Share: 61,634.94 63,300.30 63,300.30
1998 Carryover 0.00 14,317.89 0.00
1999 Carryover 0.00 0.00 12,419.66
Each Brother's __________ __________ __________
TOTAL INCOME: $61,634.94 $77,618.19 $75,715.96
Next, the debtors project total farming expenses of $49,135.00 in 1998, $50,735.00 in 1999, and $50,335.00 in 2000, to be divided equally among them, and detailed as follows:
Anticipated Farming Expenses
1998 1999 2000
Feed 2,000.00 2,000.00 2,000.00
Fertilizer 2,500.00 2,500.00 2,500.00
Seed 1,500.00 1,500.00 1,500.00
Repairs 2,500.00 2,500.00 2,500.00
Attorney Fees 3,000.00 2,000.00 2,000.00
Trustee Fees 1,800.00 900.00 500.00
Fuel 4,500.00 4,500.00 4,500.00
Chemicals 1,800.00 1,800.00 1,800.00
Insurance 1,380.00 1,380.00 1,380.00
Utilities 3,200.00 3,200.00 3,200.00
Auto Expense 1,500.00 1,500.00 1,500.00
Machine Hire 1,200.00 1,200.00 1,200.00
Labor Hire 380.00 380.00 380.00
Supplies 1,450.00 1,450.00 1,450.00
Cash Rent 16,850.00 16,850.00 16,850.00
Cattle Expenses 1,500.00 1,500.00 1,500.00
Trucking 1,475.00 1,475.00 1,475.00
ADA 450.00 450.00 450.00
Income Tax 150.00 150.00 150.00
1998 R.E. Taxes 0.00 3,500.00 0.00
1999 R.E. Taxes 0.00 0.00 3,500.00
__________ __________ __________
TOTAL: $49,135.00 $50,735.00 $50,335.00
Each Brother's __________ __________ __________
Respective Share: $24,567.50 $25,367.50 $25,167.50
*722 Lastly, the debtors project plan distributions and living expenses. Because their respective figures vary slightly, they will be listed separately. Robert and Gloria project the following annual distributions and living expenses under their modified plan:
Anticipated Plan Disbursements
1998 1999 2000
Plan Distributions:
Grant County 0.00 3,507.18 3,507.18
Bank of North Dakota 0.00 5,920.00[*] 5,919.91[*]
Clara Sauer 2,008.55 3,213.67 3,213.67
FSA 1,741.00 2,401.47 3,602.21
Community Bank 0.00 5,788.80 8,683.21
_________ _________ __________
Plan Payments: $3,749.55 $20,831.01 $24,926.18
Living Expenses: 19,000.00 19,000.00 19,000.00
__________ __________ __________
TOTAL: $22,749.55 $39,831.01 $43,926.18
Willard and Joyce make the following annual distributions and living expenses under their modified plan:
Anticipated Plan Disbursements
1998 1999 2000
Plan Distributions:
Grant County 0.00 3,507.18 3,507.18
Bank of North Dakota 0.00 5,920.00[*] 5,919.91[*]
Clara Sauer 2,008.55 3,213.67 3,213.67
FSA 1,741.00 2,401.47 3,602.21
Community Bank 0.00 5,788.80 8,683.21
Norwest Bank 804.45 0.00 0.00
__________ __________ __________
Plan Payments: $4,554.00 $20,831.01 $24,926.18
Living Expenses: 20,000.00 20,000.00 20,000.00
__________ __________ __________
TOTAL: $24,554.00 $40,831.01 $44,926.18
The debtors have also included among their attachments a liquidation analysis demonstrating that there would be no remaining value from which to pay unsecured creditors were the debtors to convert their cases to Chapter 7 of the Code.
5.
Both Community Bank and FSA make their principal objections to the debtors' modified plans on the basis of feasibility, arguing numerous grounds thereunder. First, Community Bank and FSA object to the debtors' income and expense projections as being unrealistic and not based upon their historic yield and income data, as demonstrated in their 1994 through 1996 federal income tax returns. In this respect, Community Bank contends that the debtors' modified plans would not cash flow were they based upon the historic data.
Second, they object that the debtors' first annual installment payment to FSA, as detailed in their cash flow projections, is only a *723 partial payment totaling $3,482.00, or $1,741.00 each, whereas their modified plans state the payment shall aggregate $4,802.94, or $2,401.47 apiece. FSA contends that the debtors will have enjoyed a full production year from the filing of their petition until the time the first FSA installment payment falls due, and that they should therefore be required to make a full annual installment payment aggregating $4,802.94, on or before January 1, 1999.
Third, they object that the debtors' cash flow projections only provide that Clara Sauer and FSA are to receive any payment from the debtors' 1998 projected net farm income of $17,067.44. In contrast, Community Bank and FSA note that the modified plans provide that Community Bank is to receive its first annual aggregate payment of $4,449.89 from the debtors by January 1, 1999; Grant County is to receive its first payment of $3,507.18 by April 1, 1999; and the Bank of North Dakota is to receive its first payments of $1,470.02 and $4,449.89 by April 1, 1999. They contend that these payments can only be met from the debtors' 1998 net farm income, as they fall due before the debtors will realize any of their 1999 farm income.
Fourth, they argue that the debtors' projected 1998 net farm income is insufficient to meet all of their payment obligations to these combined creditors. They assert that after making payments to Clara Sauer and FSA, as provided under the modified plans, each of the debtors will be left with only $12,657.65 to service $13,877.55 in payments to Community Bank, Grant County, and the Bank of North Dakota. Moreover, Community Bank notes that the modified plans would only be feasible in the years 1999 and 2000 if carryover funds exist from 1998, which it contends will be lacking.
Community Bank separately objects that the modified plans improperly treat its secured claim. To begin, Community Bank argues that the debtors' collateral in which it holds a security interest, that being their machinery, equipment, and cattle, has a value in excess of $65,000.00, and that the debtors' modified plans understate its secured claim of $85,064.48 by valuing the collateral at $65,000.00. Next, Community Bank contends that plan provisions providing a repayment term of ten years for its claim are inappropriate, considering the nature, age, and condition of its collateral, and instead argues that its claim should be paid over five years. Furthermore, Community Bank asserts that the interest rate of 8.5% to be paid on its claim under the modified plans is insufficient, and instead posits that it should receive interest at the rate of 12%. Moreover, Community Bank argues, in relation to plan feasibility, that increased payments by the debtors under these terms will increase their negative cash flow situation.
Additionally, Community Bank objects to the debtors' modified plans for failing to provide for the possibility that Community Bank might prevail in its adversary proceeding against them. Community Bank contends that the debtors' plans must contemplate, and contain contingency provisions for, the treatment of Community Bank's claim should it prevail in that action.
FSA also separately objects to the debtors' modified plans. Initially, it argues that the debtors' testimony that they will earn income from share cattle is in all respects unsubstantiated. Next, it contends that the debtors have failed to explain the $5,800.00 difference between their 1998, and 1999 and 2000, crop incomes in their cash flow projection. Additionally, FSA objects that the debtors' cash flow projections fail to provide interest on their plan payments to Grant County in 1999 and 2000, whereas their modified plans, in paragraphs 5(a), allow for the delinquent real estate taxes to be paid over the life of the plan with interest to accrue as required by North Dakota state law. Finally, it objects that the debtors have failed to provide for repayment to Community Bank of the $5,844.27 in cash collateral released to them by the April 3, 1998 order of the Court, and have further failed to provide for repayment to FSA of $3,482.00, as required by the terms of their February 9, 1998 stipulation for release of cash collateral. FSA contends that the debtors are to make this repayment through an assignment of rental income which they will derive from a portion of their real property.
*724 FSA also objects to the debtors' plan provisions to use annual payments derived under their executory CRP and PFC contracts to fund their annual plan distributions on its real estate secured claim. It also objects to the debtors' plan provisions claiming for their own use any surplus remaining from these contracts. Instead, FSA claims a right of setoff against the debtors' executory contracts under the CRP and PFC, or in the alternative, a separate secured claim in that amount based upon its right of setoff.
Relatedly, FSA argues that should the Court allow it to offset the debtors' CRP and PFC proceeds, its secured real estate claim should not be reduced accordingly. FSA cites the following bases in support of its position: the debtors' appraisal of their real property makes no adjustment in value for the fact that 89.6 acres of their farm real property is enrolled in the CRP; the debtors' CRP contract expires in two years and only a slight amount remains to be realized from the contract; and a potential buyer of the real property will be able to assume these contracts, which might elicit a higher price for the land.
Before reaching the issue of the feasibility of the debtors' plans, in the context of confirmation, the Court will discuss another argument raised in opposition thereof. The Court begins by first addressing FSA's claim to a right of setoff, as this issue will potentially determine the debtors' ability to reorganize.
II. Discussion of Law
1. Setoff
"The right of setoff (also called `offset') allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding `the absurdity of making A pay B when B owes A.'" Citizens Bank of Md. v. Strumpf, 516 U.S. 16, 18, 116 S. Ct. 286, 289, 133 L. Ed. 2d 258 (1995) (quoting Studley v. Boylston Nat. Bank, 229 U.S. 523, 528, 33 S. Ct. 806, 808, 57 L. Ed. 1313 (1913)); see also Gratiot v. United States, 40 U.S. (15 Pet.) 336, 370, 10 L. Ed. 759 (1841) (Setoff is the "common right, which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due to him."). Although the Bankruptcy Code does not create a federal right of setoff, Section 553(a) preserves, with certain exceptions, any right of setoff which otherwise exists. Strumpf, 516 U.S. at 18, 116 S.Ct. at 289; accord United States v. Gerth, 991 F.2d 1428, 1430 (8th Cir.1993).
Section 553(a) provides in relevant part that:
Except as otherwise provided in this section . . ., this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case, except to the extent that
(1) the claim of such creditor against the debtors is disallowed;
(2) such claim was transferred, by an entity other than the debtor, to such creditor
(A) after the commencement of the case; or
(B) (i) after 90 days before the date of the filing of the petition; and
(ii) while the debtor was insolvent; or
(3) the debt owed to the debtor by such creditor was incurred by such creditor
(A) after 90 days before the date of the filing of the petition;
(B) while the debtor was insolvent; and
(C) for the purpose of obtaining a right of setoff against the debtor.
11 U.S.C. § 553(a). In order to establish a right of setoff under this section, the creditor must establish the following three elements:
1. A debt exists from the creditor to the debtor and that debt arose prior to the commencement of the bankruptcy case.
2. The creditor has a claim against the debtor which arose prior to the commencement of the bankruptcy case.
3. The debt and the claim are mutual obligations.
*725 Gerth, 991 F.2d at 1431; see Kalenze v. Federal Crop Ins. Corp. (In re Kalenze), 175 B.R. 35, 37 (Bankr.D.N.D.1994). Otherwise put, "it is necessary only that the debt and the claim both arose prepetition and are mutual." 991 F.2d at 1431.
It is undisputed that all three of the statutory elements necessary to setoff are satisfied in the instant matter. FSA asserts, and the debtors' concede, that the debtors' indebtedness to FSA of $168,503.45 arose prepetition; that the debtors are entitled to receive a minimum of $30,910.30 from CCC over the life of their CRP and PFC contracts, and that their claim thereunder arose prepetition[4]; and that debt and claim are mutual obligations. Thus, it would appear that FSA is entitled to a right of setoff of the debtors' forthcoming CRP and PFC payments.
Nevertheless, some case law on this subject would instruct otherwise. While most courts which have exercised discretion to limit or deny setoff have done so in response to the presence of illegal or fraudulent conduct, or a breach of fiduciary duty, see, e.g., Blanton v. Prudential-Bache Sec., Inc. (In re Blanton), 105 B.R. 321, 337-38 (Bankr. E.D.Va.1989) (and cases cited therein); others, too, hold the same where setoff would hinder or destroy a debtor's ability to reorganize, see, e.g., In re Allen, 135 B.R. 856, 870 (Bankr.N.D.Iowa) (and cases cited therein).
However, this Court must depart from the those latter decisions, on the basis that the statutory language under which the right of setoff is preserved, unhampered, does not admit to such an exception. This judicially-created shelter which has arisen exclusively for reorganizing debtors is not found within Section 553. Indeed, the only exceptions to the rule that a creditor's right to setoff shall be unaffected by bankruptcy appear within the section itself. And of the enumerated exceptions therein, no provision has been made immunizing reorganizing debtors from any otherwise valid rights of setoff asserted against them. Rather, Congress has clearly and expressly provided in Section 553 that the Bankruptcy Code "does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case. . . ." 11 U.S.C. § 553(a). Thus, the right to setoff under the statute exists equally in cases of liquidation as it does in those of reorganization. See Turner v. Small Bus. Admin. (In re Turner), 84 F.3d 1294, 1299 (10th Cir. 1996) ("Section 553, which clearly preserves existing setoff rights in the context of bankruptcy, applies to both liquidations as well as reorganizations. . . . This statutory provision simply is inconsistent with the notion that the Bankruptcy Code prohibits an administrative offset in a reorganization case."). Accordingly, there is no justification for dissimilar application of the statute between the two.
Moreover, it is not without significance that the statute preserves in eligible creditors a right of setoff. The term "right" *726 connotes entitlement. Once a creditor in a reorganization case has established the necessary preconditions for entitlement to a right of setoff, his right should ordinarily be enforced. Equitable considerations in no way absolve a court from enforcing this right, once it has been established, in cases where such enforcement jeopardizes a debtor's prospects for reorganization. The Court joins the Tenth Circuit Court of Appeals in rejecting the notion "that to allow administrative setoffs in a reorganization is inconsistent with the rehabilitative purpose of the Bankruptcy Code." In re Turner, 84 F.3d at 1299.
Lastly, in their resistance to setoff, the debtors direct the Court's attention to a pronouncement by the Court of Appeals for the Eighth Circuit that, "a bankruptcy court may disallow an otherwise proper § 553 setoff if there are compelling reasons for not allowing such a preference." Bird v. Carl's Grocery Co. (In re NWFX, Inc.), 864 F.2d 593, 595 (8th Cir.1989). The Bird Court did not elaborate on the import of its statement. While it is possible that the passage refers to the statutory exceptions to the right of setoff, as contained within Section 553, or perhaps to instances where illegal or fraudulent conduct are present, it would not seem to apply to the instant matter. This is so, for the judicially-created exception, sheltering reorganizing debtors from otherwise valid rights of setoff, has been effected by bankruptcy courts relying upon Code § 105 for such authority.[5] Yet, in Bird, the Eighth Circuit discusses at length the inherent limitations of the equitable powers of the bankruptcy court under Code § 105, as follows:
Generally, the bankruptcy court possesses only the jurisdiction and powers conferred upon it by Congress, and its broad equitable powers may only be used to further the policies and provisions of the Code.
Section 105(a) provides:
The Court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title.
Unquestionably, § 105 is comparable to the All Writs Statute, 28 U.S.C. § 1651. Its purpose is to allow the bankruptcy court to issue equitable orders such as injunctions and stays and to punish for contempt in cases where such actions are consistent with the provisions of the Code. Section 105 does not empower a bankruptcy court to create new substantive rights.
Id. (citations omitted). This discussion reinforces, rather than undercuts, this Court's previous analysis and discussion of FSA's right of setoff. Accordingly, and for all of the reasons just described, the Court will allow FSA its right of setoff against the debtors' anticipated payments under the CRP and PFC.
2. Feasibility
It is the debtors' burden to establish all of the elements essential to the confirmation of a plan, including its feasibility. See Ames v. Sundance State Bank (In re Ames), 973 F.2d 849, 851 (10th Cir.1992), cert. denied, 507 U.S. 912, 113 S. Ct. 1261, 122 L. Ed. 2d 658 (1993). The feasibility requirement pertains to all proposed Chapter 12 plans pursuant to Code § 1225(a)(6), which mandates plan confirmation if "the debtor will be able to make all payments under the plan and to comply with the plan." 11 U.S.C. § 1225(a)(6); see Abele v. Webb (In re Webb), 932 F.2d 155, 157 n. 3 (2d Cir.1991); In re Kuether, 158 B.R. 151, 153 (Bankr.D.N.D. 1993). While it is not required that debtors guarantee their plans, "they must provide `reasonable assurance that the plan can be effectuated.'" In re Ames, 973 F.2d at 851 (quoting First Nat'l Bank v. Hopwood (In re Hopwood), 124 B.R. 82, 86 (E.D.Mo.1991)). They must, accordingly, prove that their proposed plans are "both realistic and will cash flow." In re Kuether, 158 B.R. at 153; see *727 In re Dittmer, 82 B.R. 1019, 1022 (Bankr. D.N.D.1988).
In this respect, the Court must scrutinize the terms of the plan, and whether, in light of the debtors' projected income and expenses, the debtors are likely to meet their obligations thereunder. See Prudential Ins. Co. v. Monnier (In re Monnier), 755 F.2d 1336, 1341 (8th Cir.1985); In re Honeyman, 201 B.R. 533, 537 (Bankr.D.N.D.1996); In re Foertsch, 167 B.R. 555, 565 (Bankr. D.N.D.1994); see also Clarkson v. Cooke Sales & Serv. Co. (In re Clarkson), 767 F.2d 417, 420 (8th Cir.1985); In re Harper, 157 B.R. 858, 866 (Bankr.E.D.Ark.1993). Moreover, the Court must be persuaded of the ability of the plan to cash flow "based upon realistic and objective facts (as opposed to visionary or overly optimistic projections)." In re Honeyman, 201 B.R. at 537; see also In re Ames, 973 F.2d at 851 (quoting In re Novak, 102 B.R. 22, 24 (Bankr.E.D.N.Y. 1989)) ("A plan's `income projections must be based on concrete evidence and must not be speculative or conjectural.'"); In re Clarkson, 767 F.2d at 420 ("the feasibility test is firmly rooted in predictions based on objective fact."). Although it is this Court's practice to grant debtors the benefit of the doubt in matters concerning plan feasibility, see, e.g. In re Foertsch, 167 B.R. at 566; In re Konzak, 78 B.R. 990, 994 (Bankr.D.N.D. 1987), the Court will not "blindly confirm . . . a plan . . . that is incapable of cash flowing." In re Dittmer, 82 B.R. at 1022.
The debtors' cash flow projections place total future farm expenses at approximately $50,000.00 annually over the life of their modified plans. However, their historical farm expense figures, as contained within the record, exceed this sum by a range of approximately 175% to 220%. The debtors' average actual farm expenses for the years 1994 through 1996 averaged $96,722.73 per annum.
The debtors have not sufficiently explained in their modified plans, briefs to the Court, or testimony, how they will effect such a remarkable transformation in their farming expenses. Instead, in this regard the debtors assert only that they will farm fewer acres than they have in the past, renting out a portion of their acreage rather than farming it; that they will expend less money on chemical purchases, such as fertilizers and pesticides for their crops; and that they will have no need for hired help or machinery to harvest their sunflower crops. They offer no data to bolster their claims that farm expenses will so markedly decrease. Moreover, they indicate in their post-confirmation-hearing brief to the Court that under their modified plans, farm expenses might actually "stay somewhat the same."
In light of the sheer paucity of support which the debtors have offered in explanation of how they hope to effectively halve their yearly annual farm expenses, the Court must accept the debtors' historical farm expense figures as more accurate predictors of their future farm expenses than those contained in their cash flow projections. Significantly, even after eliminating all expenses for chemical products, hired help, and machinery rental from their 1994 through 1996 historical expense data, there still remains an average farm expense of $91,076.15 annually over the life of their modified plans.[6] What follows is a year by year feasibility analysis of the debtors' modified plans, incorporating their historical expense data.
The debtors project aggregate 1998 living expenses of $39,000.00, and aggregate plan payments of $7,499.10 to Clara Sauer and FSA. Assuming the debtors' will incur 1998 farm expenses in the amount of $91,076.15, then their plan expenses for 1998 will amount to $137,575.25. Assuming that the debtors in fact achieve their aggregate projected 1998 farm income of $123,269.87, they will be left with a negative cash flow of $14,305.38 for the year.[7]
*728 For 1999, the debtors project aggregate living expenses of $39,000.00, and aggregate plan payments of $41,662.02 to Clara Sauer, FSA, Grant County, the Bank of North Dakota, and Community Bank. Assuming the debtors incur 1999 farm expenses of $91,076.15, then their 1999 plan expenses will total $171,738.17. Further assuming that they will achieve their projected aggregate 1999 farm income of $126,600.60, they will be left with a negative cash flow of $45,137.57 for the year.
In the year 2000, the debtors project aggregate living expenses of $39,000.00, and aggregate plan payments of $49,852.36 to Clara Sauer, FSA, Grant County, the Bank of North Dakota, and Community Bank. Assuming the debtors incur farm expenses of $91,076.15 during that time, they will have plan expenses of $179,928.51 for the year. Applying this sum against their projected aggregate farm income of $126,600.60, the debtors will be left with a negative cash flow of $53,327.91 for the year.
However, their overall cash flow situation is even further eroded when the following additional expenses are taken into account: the amount of FSA's setoff during the three plan years, to wit, $22,590.60; their required repayment to Community Bank of $5,844.27 for use of its cash collateral; $3,500.00 to FSA, as provided under the stipulation into which the debtors entered; and any sum which might additionally be due DCB as a result of its adversary proceeding against the debtors. This analysis does not even take into consideration any additional 1998 plan disbursements to Grant County, the Bank of North Dakota, FSA, and to Community Bank, per the objections of FSA and Community Bank in this regard, which would only further increase the debtors' negative cash flow in 1998.
In sum, under an analysis based upon fact rather than fancy, the debtors are left with insufficient net farming income to meet their plan obligations. Their modified plans, as proposed, are thus unconfirmable. All other objections by the parties on this point are accordingly rendered moot.
III. Conclusion
Based upon the foregoing, confirmation of the first modified plans of the debtors, Robert and Gloria Sauer, and Willard and Joyce Sauer, is DENIED.
SO ORDERED.
NOTES
[*] The debtors' payments to Bank of North Dakota in 1999 and 2000 are comprised of payments in each year of $4,449.89 on its real estate claim and $1,470.01 in arrearage and interest.
[**] FSA has $140 per month assignment on milk, totaling $1,680.00 annually. Therefore, the debtors' actual annual income from the sale of raw products is $48,993.60.
[***] Less $9,175.00 used for cash rent.
[*] The debtors' payments to Bank of North Dakota in 1999 and 2000 are comprised of payments in each year of $4,449.89 on its real estate claim and $1,470.01 in arrearage and interest.
[**] FSA has $140 per month assignment on milk, totaling $1,680.00 annually. Therefore, the debtors' actual annual income from the sale of raw products is $48,993.60.
[***] Less $9,175.00 used for cash rent.
[*] The debtors' payments to Bank of North Dakota in 1999 and 2000 are comprised of payments in each year of $4,449.89 on its real estate claim and $1,470.01 in arrearage and interest.
[*] The debtors' payments to Bank of North Dakota in 1999 and 2000 are comprised of payments in each year of $4,449.89 on its real estate claim and $1,470.01 in arrearage and interest.
[4] The debtors do not deny that their CRP and PFC claims arose prepetition. Rather, they note that their receipt of funds under the prepetition contracts are subject to certain postpetition events, such as compliance with all terms thereunder. "Dependency on a postpetition event, however, does not prevent a debt from arising prepetition." Photo Mechanical Servs., Inc. v. E.I. Dupont De Nemours & Co., Inc. (In re Photo Mechanical Servs., Inc.), 179 B.R. 604, 615 (Bankr.D.Minn.1995). "A debt can be absolutely owing prepetition even though that debt would never have come into existence except for postpetition events." Gerth, 991 F.2d at 1434; accord Sherman v. First City Bank of Dallas (In re United Sciences of Am., Inc.), 893 F.2d 720, 724 (5th Cir.1990). For purposes of setoff, "a debt arises when all transactions necessary for liability occur, regardless of whether the claim was contingent, unliquidated, or unmatured when the petition was filed." Gerth, 991 F.2d at 1433. The crucial factor, then, is simply "whether the genesis of each debt was prepetition, that is, whether the events giving rise to the debt occurred before bankruptcy." 1 David G. Epstein et al., Bankruptcy § 6-40, at 671 (1992) (citing Braniff Airways, Inc. v. Exxon Co. U.S.A., 814 F.2d 1030, 1036 (5th Cir.1987)). Here, all parties agree that the events giving rise to the debtors' claim for CRP and PFC payments to wit, their CRP and AMTA program (or PFC) contracts arose prepetition. The debtors' claim their right to payment under the contracts came into existence when their contracts were signed and they were promised payments under the CRP and PFC. See Gerth, 991 F.2d at 1434.
[5] Code § 105 provides in pertinent part that:
The court may issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of this title. No provision of this title providing for the raising of an issue by a party in interest shall be construed to preclude the court from, sua sponte, taking any action or making any determination necessary or appropriate to enforce or implement court orders or rules, or to prevent an abuse of process. 11 U.S.C. § 105(a).
[6] After subtracting the described extraneous expenses from the debtors' total expense figures for each of the years 1994, 1995, and 1996, their remaining farm expenses aggregated $85,072.73, $79,611.34, and $108,544.37 respectively, for an average of $91,076.15 over that time.
[7] Willard and Joyce would be left with a negative cash flow of $15,109.83, in light of their indebtedness of $804.45 to Norwest Bank on their 1989 Dodge Caravan. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2452182/ | 231 F. Supp. 2d 260 (2002)
Beverly SURETTE, Plaintiff,
v.
THE ISLAMIC REPUBLIC OF IRAN, et al. Defendants.
No. CIV.A.01-0570(PLF).
United States District Court, District of Columbia.
November 1, 2002.
As Amended November 4, 2002.
*261 John Joseph McDermott, Hall, Estill, Hardwick, Gable, Golden & Nelson, Washington, DC, for plaintiff.
*262 OPINION
PAUL L. FRIEDMAN, District Judge.
On March 16, 1984, William Buckley, an American citizen and high-ranking agent of the Central Intelligence Agency, was kidnaped from the garage of his apartment building in Beirut, Lebanon. Buckley was held captive for the next 444 days over fourteen months during which he was interrogated, tortured and denied medical care, ultimately causing his death from severe illness on June 3, 1985. Plaintiff Beverly Surette, Buckley's longtime companion, brings this action on behalf of William Buckley's estate, herself and Buckley's sister, Maureen Moroney. She seeks compensatory and punitive damages for Buckley's abduction, torture and wrongful death and for loss of solatium. Defendants are the Islamic Republic of Iran, the Islamic Revolutionary Guard Corps ("RGC") and the Iranian Ministry of Information and Security ("MOIS"), all of which are alleged to be responsible for funding and directing these terrorist acts against William Buckley.[1]
The Court has jurisdiction over this case under 28 U.S.C. § 1330(b) and pursuant to a 1996 amendment to the Foreign Sovereign Immunities Act, 28 U.S.C. § 1602, et seq. ("FSIA"), which provides an exception to the general rule of sovereign immunity for foreign states, authorizing claims based on "personal injury or death that was caused by an act of torture, extrajudicial killing, aircraft sabotage, hostage taking, or the provision of material support or resources ... for such an act if such act or provision of material support is engaged in by an official, employee, or agent of such foreign state while acting within the scope of his or her office, employment or agency ...." 28 U.S.C. § 1605(a)(7) (emphasis added).
Plaintiff effected service on defendants on September 24, 2001 through diplomatic channels, in accordance with the procedures of the FSIA. See 28 U.S.C. § 1608(a)(4); Notice of Service of Process, November 13, 2001. Following defendants' failure to appear, the Clerk of the Court entered default against defendants on December 5, 2001 pursuant to Rule 55(a) of the Federal Rules of Civil Procedure. Notwithstanding the Clerk's entry of default, the Court cannot enter default judgment against a foreign state or its agencies or instrumentalities unless a plaintiff "establishes his claim or right to relief by evidence satisfactory to the court." 28 U.S.C. § 1608(e). Accordingly, the Court held an ex parte evidentiary hearing effectively a trial on September 3 and 4, 2002, at which plaintiff presented evidence on the merits of her claim. The following witnesses testified at trial: plaintiff Beverly Surette, administrator of William Buckley's estate and his longtime companion; Maureen Moroney, Buckley's sister; Chip Beck, a retired CIA officer and long-time friend and co-worker of Buckley's; David Jacobsen (by videotape), who was held hostage with Buckley; Dr. Patrick Clawson, Deputy Director of the Washington Institute for Near East Policy and an expert on Iranian sponsorship of terrorism; Dr. Bruce Tefft, a retired CIA officer and a consultant on terrorism; Norman Gardner, a former CIA agent, an investigator for the House Appropriations Committee and a long-time acquaintance and colleague of Buckley's; Dr. Richard Froede (by videotape), the medical examiner who conducted an autopsy of Buckley's remains; and John Devlin, a CPA, who performed a lost income analysis.
Based upon the evidence presented and the applicable law, the Court finds that *263 defendants are liable for the abduction, torture and wrongful death of William Buckley and for the loss of solatium asserted and will award damages to plaintiff on behalf of Buckley's estate, herself and Buckley's sister, Maureen Moroney. In support of this judgment, the Court makes the following findings of fact and conclusions of law.
I. FINDINGS OF FACT
A. Buckley's Abduction, Torture and Death
In early 1984, William Buckley was serving as station chief for the Central Intelligence Agency in Beirut, Lebanon. As the highest-ranking CIA official in Beirut his position an "open secret" within the official Lebanese government and among violent religious factions vying for power Buckley faced enormous risk to his life and safety every day. At the time, Beirut was one of the most violently turbulent places in the world, characterized by constant danger in many forms ambushes, terrorist attacks, artillery barrages, snipers, kidnapers, assassins and traitors. In the words of Chip Beck, a longtime friend and fellow CIA agent who worked with Buckley in Lebanon just before his kidnaping, life in Beirut in 1984 was "sheer insanity."
On March 16, several men seized William Buckley in the underground garage of his apartment and pushed him into a van. The details of what followed are unknown, since Buckley himself did not live to tell the story. Based on the testimony of David Jacobsen, however, another American kidnaped in Beirut in May 1985 and held captive with Buckley, it is certain that Buckley's ordeal was horrific. Buckley and other hostages were confined for months in a filthy room where they were chained to the floor almost all hours of the day, blindfolded and wearing little clothing. The hostages were directed not to talk to each other. Their captors gave them scant food and water and their diet was so poor that it induced painful stomach cramps and diarrhea. With chains holding them immobile and guards reluctant to release them even for trips to the bathroom, the hostages suffered excruciating pain. Jacobsen testified that at some point, each of the hostages lost control of his bowels and was forced to defecate on himself, enduring a dehumanizing and humiliating experience.
In addition to these inhumane living conditions, Buckley endured the constant sense of terror and uncertainty that looms over every hostage. "We lived with death 24 hours a day," Jacobsen testified, re-counting how their captors would charge into the room carrying weapons, force the hostages to line up against the wall and vow to kill them if anyone tried to rescue them. At other times, Buckley's captors would torment the hostages with promises that they were about to be released a practice that further demoralized the hostages and chipped away at their sanity.
Beverly Surette and others testified that videotapes taken by Buckley's captors and later released to the United States showed Buckley with cuts and bruises on his face from being beaten; his nose had been "smashed over on the side of his face." See Plaintiff's Exhibit 15 (photograph of Buckley while in captivity corroborating this testimony). In addition, Buckley may have been subjected to even more gruesome abuse. While Buckley's remains, recovered years after his death, were far too decomposed to reveal much about his treatment in captivity, his remains were found with a catheter and a set of intravenous tubes with a butterfly valve instruments that might have been used for torture. Both the medical examiner that performed Buckley's autopsy and Dr. Bruce Tefft, a retired CIA officer of 21 years, testified that the catheter could *264 have been used to cause extreme pain. Dr. Froede, the medical examiner, graphically explained how that could be done, and Dr. Tefft testified that such catheters are known to have been used as interrogation devices and instruments of torture by violent organizations, such as the KGB of the former Soviet Union. In addition, David Jacobsen testified that Buckley was given no medical care prior to his death, making it unlikely that the catheter was used for treatment purposes.
Under these conditions, Buckley's health deteriorated severely. Known throughout his life as a remarkably strong and healthy man, Buckley grew weak and severely ill in captivity. In the videotapes taken of him while a hostage, Buckley looked totally unlike himself witnesses testified that one video showed Buckley slumped in a chair and appearing frail, hollow and vacant, seemingly unaware of what was happening or even where he was. David Jacobsen personally witnessed Buckley's desperate condition in captivity and testified that Buckley was gravely ill by the time Jacobsen joined him in captivity in May of 1985, fourteen months after Buckley's kidnaping. In the small apartment where Jacobsen, Buckley and other hostages were held, Jacobsen could not see Buckley because he was blindfolded, but could hear him through the plywood partitions that separated them. Jacobsen was able to identify Buckley as one of the other hostages because Jacobsen had been aware of other kidnapings in Beirut prior to his own, including Buckley's; when he heard the captors refer to another hostage as "William," Jacobsen identified that hostage as Buckley. Jacobsen testified that when he heard Buckley suffering, he knew that Buckley was dying.
William Buckley died in captivity on June 3, 1985. Jacobsen was able to identify the precise date of Buckley's death because, he testified, the first thing a hostage learns is to keep track of the date, since this is the hostage's only link to reality, "your lifeline to sanity." On the day he died, Buckley had dry heaves and a steady cough. Jacobsen recalled that Buckley must have been running a high fever because he became delusional, remarking to another hostage as he was led past: "I think I'll have my hotcakes now, with blueberry syrup." Although the captors knew of Buckley's grave condition and even asked Jacobsen what they might do to help him, they did not act on Jacobsen's suggestions to give Buckley lots of water and antibiotics or to bathe him in cool water to lower his temperature. Instead, the captors did nothing. Later that night, Jacobsen heard a low gurgling noise from Buckley that he described as "the death rattles." Finally, Jacobsen heard a "tap" through the partition, followed by silence. Though he could not be sure, Jacobsen understood the "tap" to be a gun fired with a silencer, and when he later was moved into Buckley's area of the room, Jacobsen saw a bullet hole in the wall 12 to 24 inches above the floor.
Based on the extensive evidence that Buckley was unlawfully abducted and held for over fourteen months in cruel, inhumane conditions, denied sufficient food and water, subjected to constant and deliberate demoralization, physically beaten, possibly subjected to gruesome physical torture, and denied essential medical treatment, the Court concludes that Buckley was tortured within the meaning of the FSIA. See Daliberti v. Republic of Iraq, 146 F. Supp. 2d 19, 25 (D.D.C.2001) (finding that hostages had been tortured within the meaning of the FSIA where captors had held them at gunpoint, threatened to injure them if they did not confess, pointed loaded guns at them, denied them medical treatment, and incarcerated them in a room with no bed, window, light, electricity, water, toilet or adequate access to sanitary *265 facilities); Jenco v. Islamic Republic of Iran, 154 F. Supp. 2d 27, 32 (D.D.C.2001) (finding that deprivation of adequate food, light, toilet facilities and medical care for 564 days amounted to torture within the meaning of Section 1605(a)(7)).[2] Furthermore, the Court finds that these conditions caused and exacerbated Buckley's severe illness and, ultimately, caused his death.
B. The Role of Iran, the RGC and the MOIS
Responsibility for Buckley's kidnaping was claimed by a group known as "Islamic Jihad," a recognized alias of "Hizballah," which is a terrorist organization based in Lebanon and known to be dependent on the resources, training and direction of Iran, the MOIS and the RGC. See Plaintiff's Exhibit 6, Terrorist Group Profiles, United States Department of State ("State Dep't.") at 15 (November 1988).[3] The connection between Hizballah and Iran is documented in numerous United States government reports and was confirmed by plaintiff's experts at the evidentiary hearing. Dr. Patrick Clawson, Deputy Director of the Washington Institute for Near East Policy and a long-time analyst of Iran and its policies, stated that "there is no question that Hizballah was directed, formed, organized and funded by the Iranian government." Dr. Bruce Tefft testified that Iran established Hizballah and trained its members in Lebanon.
At the time of Buckley's kidnaping Hizballah was under the immediate supervision of the Iranian government, and the approval process for Hizballah operations was extremely tight. Dr. Clawson testified that Hizballah's reliance on Iran was so complete that Hizballah would not and could not have kidnaped and abused Buckley without direction from Iran. Moreover, both Dr. Clawson and Dr. Tefft noted that the United States negotiated directly with Iran to seek the release of Buckley and *266 other hostages, not with Hizballah or any other organization. Norman Gardner, a former CIA officer serving in the Office of Correctional Affairs when Buckley was kidnaped, testified that when videotapes of Buckley in captivity were released to the United States, they came from Iran. In addition, David Jacobsen testified that a man named Ali, who had "absolute authority" over the guards where Jacobsen and Buckley were held, was Iranian: "There is no doubt Ali was the Iranian representative to the kidnaping group." Based on all of this evidence, the Court finds that Iran was responsible for what happened to Buckley.
Two specific agencies of the state of Iran the Revolutionary Guard Corps and the Ministry of Information and Security also clearly played a role in Buckley's abduction, torture and death. Dr. Clawson testified that the RGC, formed in 1979 during the Iranian Revolution and charged with promoting and protecting the interests of the Islamic Republic, maintains a strong military force in Lebanon and is responsible for training and supplying weapons to Hizballah for terrorist operations. The central role of the RGC in supporting and directing Hizballah terrorism is described in numerous reports by the State Department and is understood to be a crucial element of Iran's mission to export the Islamic revolution and drive Western influence out of the Middle East. See Patterns of Global Terrorism 1986 at 22; Plaintiff's Exhibit 7, Iran's Use of International Terrorism, State Dep't. at 1 (October 1987); see also Higgins v. Islamic Republic of Iran, Civ. No. 99-0377, 2000 WL 33674311, *7 (D.D.C.2000).
The Iranian Ministry of Information and Security also is well known in its support of Hizballah, as Dr. Clawson confirmed in his testimony. Essentially the continuation of the secret police force under the Shah (SAVAK), the MOIS was renamed after the revolution but continued as a formal part of the new government to oversee massive spy operations both internally and abroad. See Global Patterns of Terrorism 1986 at 22. Continuing through the present, the MOIS and the RGC work in conjunction to oversee and direct terrorist activities throughout the Middle East, including the operations of Hizballah in Lebanon. Around the time that Buckley was kidnaped, Dr. Clawson testified, Iran provided between $50 million and $200 million each year to Hizballah for terrorist activities and the evidence is clear that the RGC and the MOIS were the agencies that directed and applied those funds.[4]
As other judges of this Court have found in similar cases brought under the FSIA, the Court finds the evidence conclusive that the Islamic Republic of Iran and its agencies, the RGC and the MOIS, are ultimately responsible for the kidnaping, abuse and wrongful death of William Buckley. See, e.g., Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 33 (finding that Iran and the MOIS provided "material support or resources" to Hizballah for kidnaping of Father Lawrence Jenco in Beirut, Lebanon in 1985); Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *7 (holding Iran and its "Islamic Revolutionary Guard" liable for funding, training and providing equipment for Hizballah and noting that in 1988, Iran "virtually directed the terms and conditions under which hostages would be held or released."); see also Anderson v. Islamic Republic of Iran, 90 F. Supp. 2d 107, 112-13 (D.D.C.2000); Cicippio v. Islamic Republic *267 of Iran, 18 F. Supp. 2d 62, 68 (D.D.C. 1998).
II. CONCLUSIONS OF LAW
A. Liability
Based on this evidence, the Court finds that defendants are liable under Section 1605(a)(7) of the FSIA, because all the requisites of that section have been satisfied. It is undisputed that William Buckley suffered both personal injury and death as a result of being taken hostage and tortured. The Court is without doubt that Iran, the RGC and the MOIS provided "material support" and "resources" for Hizballah's kidnaping, torture and wrongful killing of Buckley, depriving them of the immunity normally accorded foreign states and their agencies or instrumentalities under the FSIA. See 28 U.S.C. § 1605(a)(7). In addition, as required by the FSIA, Iran was designated as a state sponsor of terrorism at the time of Buckley's kidnaping and torture (as it has been ever since), and Buckley was a United States citizen. See 28 U.S.C. §§ 1605(a)(7)(A), (B)(ii); Flatow v. Islamic Republic of Iran, 999 F. Supp. 1, 14 (D.D.C.1998). Finding that all requirements of Section 1605(a)(7)have been met, the Court holds that defendants are liable for the abduction, torture and wrongful death of William Buckley.
B. Damages
The FSIA, as amended, specifically authorizes the award of damages under Section 1605(a)(7) in the form of "economic damages, solatium, pain, and suffering." 28 U.S.C. § 1605 note. In conformity with previous cases decided in this district, the Court will apply federal common law to calculate damages on plaintiff's claims. See Flatow v. Islamic Republic of Iran, 999 F.Supp. at 14-15 (applying federal common law to calculate relief after engaging in choice of law analysis); see also Stethem v. Islamic Republic of Iran, 201 F. Supp. 2d 78, 87 (D.D.C.2002); Wagner v. Islamic Republic of Iran 172 F. Supp. 2d 128, 134 (D.D.C.2001); Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 33.
Here, plaintiff seeks compensatory damages on behalf of Buckley's estate for Buckley's wrongful death and ante-mortem pain and suffering while in captivity and before death. In addition, plaintiff seeks to recover solatium damages for the emotional anguish suffered by herself and Maureen Moroney as a result of Buckley's abduction, torture and death.[5] Plaintiff also asks the Court to award punitive damages against the RGC and the MOIS for their material support of Hizballah.[6] Based on the applicable law and the evidence presented, the Court will award the following damages.
1. Wrongful Death
To recover on her claim for wrongful death, plaintiff must demonstrate that defendants caused Buckley's death and that the killing was wrongful. See Flatow v. Islamic Republic of Iran, 999 F.Supp. at 27 (adopting elements of the District of Columbia's wrongful death statute, D.C.Code Ann. § 16-2701). As discussed above, the evidence is conclusive that defendants *268 caused Buckley's death by providing material support and resources for Hizballah to abduct Buckley, torture him and deny him essential medical care. Furthermore, Buckley's death was undeniably wrongful, in that his captors had no legal basis for taking his life.
a. Lost Income
Under a claim for wrongful death, Buckley's estate is entitled to recover for the economic loss that resulted from his killing, in particular damages for loss of prospective income. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 87; Flatow v. Islamic Republic of Iran, 999 F.Supp. at 27.[7] In support of this claim, plaintiff presented the expert testimony of John Devlin, a CPA, who employed standard methods to calculate the approximate amount of income that Buckley would have earned had he not been killed. See Plaintiff's Exhibit 10, Letter from John Devlin to John McDermott, August 29, 2002, and attached report. Devlin began with Buckley's reported compensation on his federal income tax returns for the years 1984, 1985 and 1986, and assumed that Buckley would have continued to work until the age of 70. Devlin calculated an annual salary increase of 2.2% until the year that Buckley would have reached age 65, the government service retirement age. For the subsequent five years, Devlin assumed that Buckley would have worked in the private sector at a salary commensurate with that of others in similar positions from a similar background. From this amount Devlin deducted Buckley's estimated yearly expenses for personal consumption and payment of federal and state taxes. Based on these calculations, Devlin estimated the present value of Buckley's lost income to be $1,021,284, stating that this amount represented a very conservative approximation. Buckley's income in the private sector could have been a great deal higher based on his experience as station chief in Beirut, but Devlin did not have the information necessary to calculate that increase and chose to underestimate rather than overestimate. Finding Devlin's methods and computations eminently reasonable, the Court will award lost income damages to plaintiff, on behalf of Buckley's estate, in the amount of $1,021,284.
b. Buckley's Ante-Mortem Pain and Suffering
Plaintiff also is entitled to recover damages on behalf of Buckley's estate for the great pain and suffering that Buckley undoubtedly endured before he died. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 88; Flatow v. Islamic Republic of Iran, 999 F.Supp. at 27. It is, of course, impossible to place a monetary value on the physical and psychological suffering that Buckley endured. The damages awarded by judges of this Court in similar cases, however, provide the Court with a benchmark for its calculation. This district has developed a formula for awarding damages in cases where victims were held hostage by terrorist organizations and experienced the kind of pain and suffering that Buckley did. Subject to adjustment for cases deviating from the more common experience of victims, this Court typically has awarded former hostages or their estates roughly $10,000 for each day of captivity. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 88-89; Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 37; Anderson v. Islamic Republic of Iran, *269 90 F.Supp.2d at 113. The Court finds this formula to be reasonable and notes that this was the analysis used to compensate other hostages held in the same facility as Buckley, including David Jacobsen, who lay near Buckley during the final moments of Buckley's life. See Cicippio v. Islamic Republic of Iran, 18 F.Supp.2d at 70.
Although many of the details of Buckley's experience are unknown, the evidence reliably suggests that Buckley suffered the same physical torture and moral degradation that his counterparts lived to describe insufficient food and water; primitive conditions; constant shackling to a dirty floor; a poor diet inducing severe digestive problems that led to excruciating pain and humiliation; physical beatings; repeated interrogation; denial of urgent medical care; torturous threats of execution and promises of imminent release; and, perhaps worst of all, the constant uncertainty that looms over all hostages the fear of death and the hope of rescue.
In addition to these hardships of captivity, Buckley suffered a second anguish, that of enduring his final moments alone physically and psychologically. As he lay shackled on a cold, dirty floor without comfort or care, feeling his characteristic strength leave him, Buckley must have known that he was about to die. Before he was kidnaped, Buckley foresaw such an experience and spoke of it with his long-time friend, Chip Beck. As Beck testified in Court, Buckley knew the dangers of his position in Beirut and feared that he would be kidnaped and tortured as had been his old mentor, Tucker Gougelmann, in Vietnam. Speaking with Beck just two weeks before his kidnaping, Buckley expressed his horror at the thought of dying in captivity: "I'd rather die in a botched rescue attempt than waste away or die like Tucker did in Vietnam. Try as hard as you can to push the bureaucracy to get me out of here." Buckley's nightmare came true, and despite his government's efforts to get him out, Buckley died slowly, painfully and alone, shackled to the floor of an apartment somewhere in Lebanon.
Taking into account the evidence of Buckley's suffering in captivity and just before his death, the Court awards $5,440,000 to his estate. This award is based on a calculation of $10,000 for each day that he was held hostage, amounting to $4,440,000, with additional compensation in the amount of $1,000,000 for the portion of that time that Buckley faced certain death alone. The Court finds this amount appropriate and consistent with previous awards for victims who endured the anguish of facing imminent death in captivity alone. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89 (awarding $1,000,000 to victim's estate for the several minutes after victim was shot and before he died); Eisenfeld v. Islamic Republic of Iran, 172 F. Supp. 2d 1, 8 (D.D.C.2000) (awarding $1,000,000 each to two victims of suicide bombing who died quickly but not immediately after explosion). The length of Buckley's illness and his slow decline into death justify this award.
2. Solatium[8]
With respect to plaintiff's claims for solatium (on behalf of herself and Maureen Moroney), the Court again will follow *270 the precedent set by other judges of this Court who have awarded such damages based on a showing of extreme and outrageous conduct that causes severe emotional distress to those close to a victim of terrorism. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89; Wagner v. Islamic Republic of Iran, 172 F.Supp.2d at 136, n. 11; Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 35-36. Because defendants' conduct was patently outrageous and the emotional distress caused to Beverly Surette and Maureen Moroney is undeniable, the Court finds that plaintiff is entitled to damages for solatium.
a. Beverly Surette
As a threshold matter, the Court holds that Beverly Surette is eligible to recover damages for solatium despite the fact that she was never legally married to William Buckley. In similar cases brought under the FSIA, judges typically have awarded damages for solatium to members of a victim's immediate family, including not only a spouse but also parents, children and siblings, and have looked at the closeness of the relationship between the victim and the person seeking to recover. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89; Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 36, n. 8 (defining immediate family as spouses, parents, siblings and children); Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *7-8; Flatow v. Islamic Republic of Iran, 999 F.Supp. at 29-32 (enumerating factors for evaluating claim for solatium under FSIA). Although the Court is not aware of any case brought under the FSIA in which a court has awarded solatium damages to a victim's partner to whom he or she is not legally married, the Court nonetheless concludes that such an award is appropriate in this case. This result is justified by the nature and closeness of the relationship between Beverly Surette and William Buckley for over twenty years, a bond that was the functional equivalent of a legal marriage. The strength of their "close emotional relationship," Flatow v. Islamic Republic of Iran, 999 F.Supp. at 30, was recognized by Buckley's family, his colleagues and his employer, and it merits recognition by this Court. For these reasons, the Court will treat Ms. Surette as if she were the legal spouse of William Buckley. Moreover, with respect to the merits of her claim for solatium, the Court finds ample evidence that Ms. Surette is entitled to an award.
Beverly Surette met William Buckley in 1961 at a Memorial Day parade in Lexington, Massachusetts. From the early 1960s until Buckley's death, he and Ms. Surette shared a home, first in Lexington and then in Concord, Massachusetts. After Buckley joined the CIA in 1965, his work required him to travel for substantial periods of time, but their time apart never interfered with the close relationship that Mr. Buckley and Ms. Surette enjoyed. Ms. Surette testified to the close bond that they shared, describing the letters, post cards, weekly or bi-weekly phone calls and audio tapes that kept them in touch whenever Buckley traveled. While Buckley was away, Ms. Surette lived in the house that Buckley owned, assuming the responsibilities of running the household while caring for her daughter from a previous marriage, Geraldine. Ms. Surette spoke of *271 Buckley's love and devotion to Geraldine, recalling that he treated Geraldine as if she were his own daughter, always sending money when there was a need, checks for her birthday and contributions to her college tuition. Similarly, Buckley's family welcomed Ms. Surette into their midst, always inviting her to family gatherings over the years. The closeness between Beverly Surette and William Buckley was evident throughout the more than twenty years that they were together, in a relationship that Buckley's sister described as "longstanding, loving, loyal and trusting."
When the CIA called on March 16, 1984 with news of Buckley's abduction, it was Beverly Surette whom they called. In that 2:30 a.m. telephone call that would change her life forever, Ms. Surette learned that Buckley had been seized near his apartment in Beirut and that the CIA did not know where he was. From then on, Ms. Surette was in constant contact with the CIA, flying frequently to Washington and speaking to the agency daily, but there was little information on Buckley's location or condition. When videotapes of Buckley were obtained, Ms. Surette viewed them at the CIA. Testifying in court years later, she recalled the sadness of seeing Buckley's face cut and disfigured, his eyes hollow and unfocused, his body weak. Of this image she said simply: "It was not my Bill, that's all."
The government arranged two services in Buckley's memory, one in 1988 when he was known to be dead but his remains had not been recovered and one in 1991 when his body was returned to the United States. Ms. Surette remembers the shock of seeing Buckley's casket removed from the military plane, realizing that she had always thought he would come home, that because Buckley was such a strong man, she had always believed that he would escape somehow. Ms. Surette told herself over the years that she had to be strong and get through it. But as she testified to the Court, she will never forget what Buckley went through it never leaves her. She testified that whenever there is a story on hostages on television or in the movies, it all comes back to her. She tries to remember the happy things, but to this day she still asks: "Why did they do this to him? He did not deserve it."
It is apparent from Ms. Surette's account of the intimacy she shared with William Buckley that she suffered a great loss during and after his abduction, torture and death. Based on the evidence before it, the Court finds that Ms. Surette is entitled to recover damages for solatium in the amount of $10,000,000. While no amount of money could ever truly compensate Ms. Surette for the agony she has suffered, the Court finds this to be a fair award, consistent with the relief awarded in similar cases by other judges of this Court. See Anderson v. Islamic Republic of Iran, 90 F.Supp.2d at 113 (awarding $10,000,000 in damages for solatium to spouse of journalist held hostage and tortured for 2,454 days); Cicippio v. Islamic Republic of Iran, 18 F.Supp.2d at 70 (awarding $10,000,000 each to two spouses of victims held hostage and tortured for 63 and 44 months, respectively); Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *7-8 (awarding $12,000,000 to spouse of victim held hostage, brutally tortured and murdered in captivity, based on "barbaric treatment" of victim that surpassed that of other hostages).
b. Maureen Moroney[9]
Maureen Moroney and her older brother, William Buckley, were remarkably *272 close, far closer to each other than either of them was to their other siblings. Ms. Moroney described their closeness not only as children but as adults, recalling a period after Bill's service in the Korean war when both lived in their parents' house and took pains to take a long walk together every day, despite their differences in age and interests. As he had with Ms. Surette's daughter, Buckley formed a strong relationship with Ms. Moroney's two daughters, whose own father had died years earlier. Ms. Moroney testified that her daughters came to rely on Buckley like a father and that Buckley had told them that he would always be there for them, in which they took great comfort. In one example of his connection to Ms. Moroney and her daughters, Buckley called them from Lebanon on February 11, 1984, roughly a month before he was kidnaped, to wish one daughter a happy birthday. This was the last time that Ms. Moroney would ever hear her brother's voice.
After she learned of her brother's kidnaping, Ms. Moroney, like Ms. Surette, traveled frequently to Washington to be briefed by CIA officials. She, too, viewed the videotapes of Buckley in captivity and was struck by Buckley's uncharacteristic weakness and disorientation, disturbed by the visible evidence of his abuse. In addition to the anguish of endless waiting and uncertainty, Ms. Moroney suffered the additional hardship of being harassed by the press, who had identified her as Buckley's sister while they had not been able to identify Ms. Surette as Buckley's spouse. The morning that she received word of her brother's abduction, Ms. Moroney was accosted at her doorstep and surrounded by reporters who bombarded her with questions, probed her for information and even asked her to view a videotape with them and share her response. The press approached her at home, at work and at funeral masses held for her brother. She described the seemingly endless media frenzy as a terrible invasion, so intrusive that she sometimes had to leave the house with her daughter and stay at a motel. Ms. Moroney was exhausted by trying to avoid the press, which only added to the stress of knowing that her brother was being held hostage by terrorists and that she might never see him alive again.
As time went by without news of Buckley's condition, Ms. Moroney continued to suffer the agony of the intrusive media. In a bookstore at one point, Ms. Moroney turned to see her brother's face on the cover of a book, which shook her completely. Ms. Moroney testified that the image made her want to vomit and faint. Yet she had no one to yell at, no one to blame *273 for the invasion. By the time she and Ms. Surette got word that Buckley was dead David Jacobsen pulled them aside at a gathering in November of 1986, just after his release, and told them that he personally had witnessed Buckley's death in captivity both women found that they were relieved.
In speaking of the years that have passed since her brother's abduction and killing, as well as those that remain ahead, Ms. Moroney made clear that she will never escape the horror of this experience. She spoke of her children, who no longer have an uncle, and testified that the patriarch of her entire family now is gone. Like Ms. Surette, Ms. Moroney reports being constantly reminded of what happened. Whenever she sees anything on television that relates to hostages, she said, they invariably show a picture of her brother. It never stops.
Based on Ms. Moroney's testimony, it is apparent to the Court that she and her brother enjoyed a strong and lasting friendship as siblings. Accordingly, the Court will award damages for solatium on behalf of Ms. Moroney in the amount of $2,500,000, an amount supported by awards granted to siblings in similar cases in this district. See Flatow v. Islamic Republic of Iran, 999 F.Supp. at 32 (awarding $2,500,000 each to siblings of victim of suicide bombing); Eisenfeld v. Islamic Republic of Iran, et al., 172 F. Supp. 2d 1, 10-11 (D.D.C.2000) (same).
3. Punitive Damages
Plaintiff also seeks punitive damages against the RGC and the MOIS. As noted above, see supra at 12, n. 6, the FSIA expressly exempts a foreign state from liability for punitive damages, but permits punitive damages to be assessed against an "agency or instrumentality" of a foreign state. 28 U.S.C. §§ 1606; 1603(b).
As other judges of this Court have in the past, the Court concludes that punitive damages are warranted against the RGC and the MOIS in order to punish them for their role in the perpetration of these acts and to deter future terrorist activities to whatever extent possible. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 92-93; Anderson v. Islamic Republic of Iran, 90 F.Supp.2d at 113-14; Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *8-9. Based on the evidence before the Court, it is beyond question that the RGC and the MOIS have instigated and supported terrorist activity for many years and continue to do so. See Patterns of Global Terrorism: 1984 at 4, 11; Patterns of Global Terrorism: 1985 at 7, 18; Patterns of Global Terrorism: 1986 at 9-10, 22; see generally Iran's Use of International Terrorism; see also Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 92. While the Court cannot hope to end their unconscionable acts by the entry of a single judgment, the award of punitive damages in a case such as this is both appropriate and necessary to punish defendants, if not to deter similar conduct in the future. The conduct of the RGC and the MOIS in relation to the abduction, torture and killing of William Buckley was cruel and depraved by any standard. No human being should have to endure what Buckley did for the last 444 days of his life, and none should have to die as he did alone, in pain and deprived of his freedom. For these reasons, the Court concludes that the acts performed by these defendants merit an award of punitive damages.
Following the method used by several judges of this Court in similar cases, the Court will award punitive damages in an amount equal to roughly three times defendants' estimated annual budget for their support of terrorism. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 92-93; Anderson v. Islamic Republic of *274 Iran, 90 F.Supp.2d at 113-14; Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *8-9. From the testimony of Dr. Clawson and Dr. Tefft it is apparent that the RGC and the MOIS spend approximately $100 million each year in support of the operations of Hizballah and its terrorist activities. Based on this estimate, the Court will assess punitive damages against defendants the Islamic Revolutionary Guard Corps and the Ministry of Information and Security, jointly and severally, in the amount of $300,000,000, to be awarded to plaintiff.
A Judgment and Order consistent with this Opinion will be issued this same day.
SO ORDERED.
JUDGMENT AND ORDER
For the reasons stated in the Opinion issued this same day, it is hereby
ORDERED that judgment be entered in favor of plaintiff Beverly Surette against the Islamic Republic of Iran and its Ministry of Information and Security and the Islamic Revolutionary Guard Corps, jointly and severally, for compensatory damages in the following amounts:
Estate of William Buckley (lost income): $ 1,021,284
Estate of William Buckley (pain and suffering): $ 5,440,000
Beverly Surette (solatium): $10,000,000
Maureen Moroney (solatium): $ 2,500,000
It is FURTHER ORDERED that judgment be entered in favor of plaintiff Beverly Surette against the Iranian Ministry of Information and Security and the Islamic Revolutionary Guard Corps, jointly and severally, for punitive damages in the amount of $300,000,000; and it is
FURTHER ORDERED that plaintiff may, at her own expense, arrange for the Opinion issued this same day and this Judgment and Order to be translated into Farsi and cause copies of the translated Opinion and Judgment and Order to be transmitted to the United States Department of State for service upon defendants through diplomatic channels, pursuant to 28 U.S.C. § 1608(a)(4).
SO ORDERED.
NOTES
[1] While additional defendants were named in the initial complaint, service was effected on only three defendants, and thus only these three remain.
[2] The FSIA adopts the following definition of "torture" from the Torture Victim Protection Act of 1991:
any act, directed against an individual in the offender's custody or physical control, by which severe pain or suffering (other than pain or suffering arising only from or inherent in, or incidental to, lawful sanctions), whether physical or mental, is intentionally inflicted on that individual for such purposes as obtaining from that individual or a third person information or a confession, punishing that individual for an act that individual or a third person has committed or is suspected of having committed, intimidating or coercing that individual or a third person, or for any reason based on discrimination of any kind.
Pub.L. No. 102-256, 106 Stat. 73, § 3(b)(1) (1992) (codified at 28 U.S.C. § 1350 note § 3(b)); see 28 U.S.C. § 1605(e)(1) ("[T]he terms `torture' and `extrajudicial killing' have the meaning given those terms in section 3 of the Torture Victim Protection Act of 1991."). Similarly, the FSIA adopts by reference the following definition for "hostage taking" from the International Convention Against the Taking of Hostages:
Any person who seizes or detains and threatens to kill, to injure or to continue to detain another person (hereinafter referred to as the "hostage") in order to compel a third party, namely, a State, an international intergovernmental organization, a natural or juridical person, or a group of persons, to do or abstain from doing any act as an explicit or implicit condition for the release of the hostage commits the offense of taking of hostages ("hostage taking") within the meaning of this Convention.
International Convention Against the Taking of Hostages, Dec. 17, 1979, art. 1, T.I.A.S. No. 11, 081; see 28 U.S.C. § 1605(e)(2) ("[T]he term `hostage taking' has the meaning given that term in Article 1 of the International Convention Against the Taking of Hostages.").
[3] As other courts have noted, the name "Hizballah" has multiple spellings. For purposes of this opinion, this Court adopts the spelling used by plaintiff and the United States Department of State. See Plaintiff's Exhibits 3-5, Patterns of Global Terrorism 1984-86, State Dep't.
[4] Dr. Bruce Tefft in his testimony put the figure that was regularly provided by Iran to Hizballah at $100 million per year.
[5] "Solatium" is defined as compensation "for hurt feelings or grief." BLACK'S LAW DICTIONARY 1397 (7th Ed.1999). In the context of FSIA cases, this Court has recognized the claim of solatium as recoverable under federal common law and "indistinguishable" from the claim of intentional infliction of emotional distress. Wagner v. Islamic Republic of Iran, 172 F.Supp.2d at 135, n. 11.
[6] Under the FSIA, punitive damages may not be assessed against a foreign state such as Iran, but may be assessed against agencies or instrumentalities of a foreign state such as the RGC and the MOIS. See Anderson v. Islamic Republic of Iran, 90 F.Supp.2d at 114.
[7] In recovering for wrongful death, Buckley's estate also is entitled to monetary damages for funeral expenses. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 87 Since the government appropriately arranged for memorial services in Buckley's honor and a burial in Arlington National Cemetery, however, plaintiff does not seek to recover funeral expenses.
[8] Although the claim of "solatium" is not recognized as such under D.C. law, such damages may be awarded under federal common law for mental anguish resulting from the loss of a decedent's society and companionship. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89; Wagner v. Islamic Republic of Iran, 172 F.Supp.2d at 135, n. 11 (noting that "[i]n an intentional homicide case" such as [a terrorist killing], "solatium appears in any event to be indistinguishable from the intentional infliction of emotional distress for which the District of Columbia does generally allow recovery in tort."). By relying on the Second Restatement of Torts, which provides for damages against "one who by extreme or outrageous conduct intentionally or recklessly causes severe emotional distress to another," RESTATEMENT (SECOND) OF TORTS § 3 (1986), this Court has awarded damages for solatium to numerous plaintiffs in similar cases brought under the FSIA. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89; Wagner v. Islamic Republic of Iran, 172 F.Supp.2d at 136-37; Jenco v. Islamic Republic of Iran, 154 F.Supp.2d at 37; Anderson v. Islamic Republic of Iran, 90 F.Supp.2d at 113.
[9] Although Maureen Moroney is not a named plaintiff in this action, plaintiff Beverly Surette nonetheless seeks to recover damages for solatium on behalf of Ms. Moroney. While the Court ordinarily will not award damages to a non-plaintiff, the specific circumstances of this action permit such an award to plaintiff on behalf of Ms. Moroney. In similar cases brought in this district, judges have awarded damages to non-plaintiffs who demonstrated a sufficiently close connection to the victim of a terrorist act. See Stethem v. Islamic Republic of Iran, 201 F.Supp.2d at 89, n. 18 (awarding damages to siblings of decedent even though only named plaintiffs were decedent's parents); Higgins v. Islamic Republic of Iran, 2000 WL 33674311 at *8 (awarding solatium to victim's daughter though not a named a plaintiff); Flatow v. Islamic Republic of Iran, 999 F.Supp. at 30 ("The testimony of sisters or brothers is ordinarily sufficient to sustain their claims for solatium."). In conformity with this practice, and in recognition of the unique circumstances of this action, the Court finds that plaintiff Beverly Surette may raise a claim for solatium on behalf of Ms. Moroney. For clarity on this point, plaintiff moved to amend the second sentence of paragraph 47 of the complaint, and the Court granted the motion, so that it now reads: "This action is brought by plaintiff Beverly Surette, Conservator of the Estate of William Buckley, deceased, on behalf of herself and the decedent's heirs-at-law, including Maureen Moroney." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/715748/ | 80 F.3d 539
317 U.S.App.D.C. 63
UNITED STATES of America, Appelleev.Patrick BAUCUM, Appellant.
No. 94-3040.
United States Court of Appeals,District of Columbia Circuit.
April 9, 1996.
Thomas G. Corcoran, Jr., appointed by the court, Washington, DC, argued the cause and filed the briefs for appellant.
Molly A. Meegan, Assistant United States Attorney, argued the cause for appellee, with whom Eric H. Holder, Jr., United States Attorney, John R. Fisher and Steven J. McCool, Assistant United States Attorneys, were on the brief. Roy W. McLeese, III, Assistant United States Attorney, entered an appearance.
Before: WALD, SILBERMAN and ROGERS, Circuit Judges.
Opinion for the Court filed PER CURIAM.
ON PETITION FOR REHEARING
PER CURIAM:
1
In his petition for rehearing, Patrick Baucum for the first time argues that his commerce clause challenge to the constitutionality of the "schoolyard statute"1 goes to the court's subject matter jurisdiction and therefore cannot be deemed to have been waived by his failure to raise it in the trial court. On direct appeal we rejected his argument that the Supreme Court's supervening decision in United States v. Lopez, --- U.S. ----, 115 S. Ct. 1624, 131 L. Ed. 2d 626 (1995), made it necessary for this court to address the constitutional claim he had failed to preserve at trial.
2
The district court in this case exercised subject matter jurisdiction pursuant to 18 U.S.C. § 3231, which gives the federal courts original jurisdiction "of all offenses against the laws of the United States." Baucum claims, however, that if the statute under which he was convicted and sentenced is unconstitutional, then there is no valid "law of the United States" authorizing his prosecution.
3
Our research surprisingly finds no universally accepted answer to the question his petition poses: Is a facial challenge to the constitutionality of a criminal statute a jurisdictional question which can be raised at any time? There appears to be precedent on both sides of the issue, compare Glasgow v. Moyer, 225 U.S. 420, 429, 32 S. Ct. 753, 756, 56 L. Ed. 1147 (1912) ("The principle [that habeas corpus addresses only the power and authority of the court to act] is not the less applicable because the law which was the foundation of the indictment and trial is asserted to be unconstitutional.... Th[at] question[ ], like others, the court is invested with jurisdiction to try if raised....") and United States v. Ryan, 41 F.3d 361, 363 (8th Cir.1994) ("The interstate commerce aspect of this case arises merely as an element of the section 844(i) offense. If that element is not satisfied, then Ryan is not guilty; but the court is not by the failure of proof on that element deprived of judicial jurisdiction.") with Ex parte Yarbrough, 110 U.S. 651, 654, 4 S. Ct. 152, 153, 28 L. Ed. 274 (1884) ("If the law which defines the offense and prescribes its punishment is void, the court was without jurisdiction and the prisoner must be discharged."). On balance, however, we find that the weight of the precedent, as well as prudential considerations, counsel toward treating facial constitutional challenges to presumptively valid statutes as nonjurisdictional.
4
Subject-matter jurisdiction presents a threshold question in any federal prosecution. Federal courts of limited jurisdiction have only the power to hear those cases over which Congress has conferred subject-matter jurisdiction upon them. In this case, the district court had jurisdiction pursuant to 18 U.S.C. § 3231. At the time of Baucum's indictment (and still today), the federal law he was charged with violating, having never been declared unconstitutional, enjoyed a presumption of validity. When a federal court exercises its power under a presumptively valid federal statute, it acts within its subject-matter jurisdiction pursuant to § 3231. It is true that once a statute has been declared unconstitutional, the federal courts thereafter have no jurisdiction over alleged violations (since there is no valid "law of the United States" to enforce), but Baucum's belated assertion of a constitutional defect does not work to divest that court of its original jurisdiction to try him for a violation of the law at issue.
5
The contrary rule, which Baucum advocates, does not seem to us in keeping with Supreme Court precedent. If a challenge to the constitutionality of an underlying criminal statute always implicated subject-matter jurisdiction, then federal courts, having an obligation to address jurisdictional questions sua sponte, would have to assure themselves of a statute's validity as a threshold matter in any case. This requirement would run afoul of established Supreme Court precedent declining to address constitutional questions not put in issue by the parties. See, e.g., Mazer v. Stein, 347 U.S. 201, 206 n. 5, 74 S. Ct. 460, 464 n. 5, 98 L. Ed. 630 (1954) ("We do not reach for constitutional questions not raised by the parties."); see also Andrews v. Louisville & Nashville Railroad Co., 406 U.S. 320, 324-25, 92 S. Ct. 1562, 1565, 32 L. Ed. 2d 95 (1972) ("The constitutional issue discussed in the dissent was not set forth as a 'question presented for review' in the petition for certiorari, and therefore our [rule] precludes our consideration of it."); Ker v. California, 374 U.S. 23, 43, 83 S. Ct. 1623, 1635, 10 L. Ed. 2d 726 (1963) (citing Mazer); New York v. Kleinert, 268 U.S. 646, 650-51, 45 S. Ct. 618, 619, 69 L. Ed. 1135 (1925) ("The writ of error in the present case ... does not bring up for our determination the question as to the constitutionality of the substantive provision of [the Act].").
6
Baucum's argument is premised on the theory that if an Act of Congress is unconstitutional, it is void ab initio, and any action taken pursuant to it is thus invalid. The Supreme Court, however, has rejected such a broad-sweeping proposition, in a case holding that a district court decree enjoyed res judicata effect even after the jurisdictional statute under which the court had acted was subsequently declared unconstitutional. Chicot Cty. Drainage Dist. v. Baxter State Bank, 308 U.S. 371, 60 S. Ct. 317, 84 L. Ed. 329 (1940). In Chicot, the Court wrote:
7
The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such a determination, is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration.
8
Id. at 374, 60 S.Ct. at 318 (citations omitted); see also Rooker v. Fidelity Trust Co., 263 U.S. 413, 415, 44 S. Ct. 149, 150, 68 L. Ed. 362 (1923) ("Unless and until ... reversed or modified" on appeal, an erroneous constitutional decision is "an effective and conclusive adjudication.").
9
The weight of the caselaw in the courts of appeals also undermines the approach advocated by Baucum. Although a jurisdictional claim can never be waived (through forfeiture or even through purposeful waiver), virtually all circuits in recent years have addressed constitutional challenges to criminal statutes and have either refused to address them because the defendants had neglected to raise them below, or decided to reach them only upon determining that the lower court's failure to address them constituted "plain error."2
10
We also find support for our position in Walker v. Birmingham, 388 U.S. 307, 315, 87 S. Ct. 1824, 1829, 18 L. Ed. 2d 1210 (1967), in which the Supreme Court affirmed a state court's refusal to consider a challenge to a conviction based on the violation of an injunction of concededly questionable constitutionality. Even though both the injunction and the underlying ordinance were "subject to substantial constitutional question," id. at 317, 87 S.Ct. at 1830, the Court held that "[w]ithout question the state court that issued the injunction had, as a court of equity, jurisdiction over the petitioners and over the subject matter of the controversy. And this is not a case where the injunction was transparently invalid or had only a frivolous pretense to validity." Id. at 315, 87 S.Ct. at 1829 (emphasis added). Similarly, in this case, the district court, as a federal court empowered by Congress to hear questions of federal law, unquestionably had subject-matter jurisdiction over a controversy stemming from a violation of a federal law that was presumptively valid. See United States v. Lopez, 2 F.3d at 1366 n. 50 (5th Cir.1993) (distinguishing the unconstitutional gun law from the constitutional "schoolyard statute").
11
Although we ultimately reject Baucum's argument that his claim is jurisdictional and nonwaivable, we recognize that his approach has some support in the caselaw. Several courts have referred to facial constitutional claims as jurisdictional, see, e.g., United States v. Walker, 59 F.3d 1196, 1198 (11th Cir.1995), and the Supreme Court has decided cases in the guilty plea context which arguably lend support to his view.
12
In Blackledge v. Perry, 417 U.S. 21, 94 S. Ct. 2098, 40 L. Ed. 2d 628 (1974) and Menna v. New York, 423 U.S. 61, 96 S. Ct. 241, 46 L. Ed. 2d 195 (1975), the Court held that the defendants' guilty pleas did not bar their subsequent collateral attacks against their convictions on double jeopardy grounds. In both cases, the Court found that the defendants had not waived their double jeopardy claims, because "[w]here the State is precluded by the United States Constitution from haling a defendant into court on a charge, federal law requires that a conviction on that charge be set aside even if the conviction was entered pursuant to a counseled plea of guilty." Menna, 423 U.S. at 62, 96 S.Ct. at 242 (citing Blackledge ).
13
If a knowing and voluntary guilty plea fails to waive some kinds of double jeopardy claims,3 the argument goes, then it must be because "the power of the government to hale a defendant into court" relates to subject-matter jurisdiction. We think this reading of the Blackledge/ Menna rule goes too far. First, we are not fully convinced that the Blackledge/ Menna exception to the general rule of waiver is about subject-matter jurisdiction, since the Court has since clarified that a double jeopardy claim can, under certain circumstances, be waived voluntarily. Ricketts v. Adamson, 483 U.S. 1, 9-10, 107 S. Ct. 2680, 2685-86, 97 L. Ed. 2d 1 (1987) (holding that a defendant's guilty plea waived his double jeopardy claim). But even if "the power to hale a defendant into court" does involve a question of jurisdiction, it does not follow that any facial constitutional challenge is also jurisdictional.
14
The Supreme Court has often reiterated its requirement that a defendant seeking collateral relief from a conviction show cause and prejudice for failing to raise her claim in the first go-around. See, e.g., Wainwright v. Sykes, 433 U.S. 72, 87-91, 97 S. Ct. 2497, 2506-09, 53 L. Ed. 2d 594 (1977); Francis v. Henderson, 425 U.S. 536, 542, 96 S. Ct. 1708, 1711, 48 L. Ed. 2d 149 (1976). Although we are unaware of a case specifically applying this rule to a facial constitutional challenge, the Court has stated generally that "any prisoner bringing a constitutional claim to the federal courthouse ... must demonstrate cause and actual prejudice before obtaining relief." Engle v. Isaac, 456 U.S. 107, 129, 102 S. Ct. 1558, 1572-73, 71 L. Ed. 2d 783 (1982). In the same case, the Court denied that application of the cause and prejudice standard depended on the type of claim raised by the prisoner: "The costs [of nonfinal adjudications] do not depend upon the type of claim raised by the prisoner. While the nature of a constitutional claim may affect the calculation of cause and actual prejudice, it does not alter the need to make that threshold showing." Id. See also Tollett v. Henderson, 411 U.S. 258, 267, 93 S. Ct. 1602, 1608, 36 L. Ed. 2d 235 (1973) (holding that defendants who have pled guilty may not later seek habeas relief on the basis of constitutional claims antecedent to and independent of the guilty pleas). These cases suggest that a collateral attack to the facial constitutionality of a statute can be waived if the defendant cannot show good cause for having failed to raise it earlier.
15
We were able to find only one relevant case involving a post-conviction facial attack on the constitutionality of a criminal statute. In Ellis v. Dyson, 421 U.S. 426, 95 S. Ct. 1691, 44 L. Ed. 2d 274 (1975), the petitioners collaterally attacked the constitutionality of a misdemeanor loitering statute under which they had pled nolo contendere. Although the majority did not address the question of waiver (remanding for a determination of whether the petitioners faced a continuing risk of liability under the statute, and thus could demonstrate existence of a case or controversy), Justice Powell opined in dissent that the petitioners' nolo pleas had waived their collateral attack. Distinguishing Blackledge, in which the collateral attack was not waived by a plea, Powell wrote:
16
Nor is this a case like [Blackledge ].... In this case ... petitioners' claim is that the ordinance under which they have been charged is unconstitutional. The alleged constitutional infirmity thus lies not in the "initiation of the proceedings" but in the eventual imposition of punishment that, assertedly, the State cannot constitutionally exact.
17
Id. at 441 n. 7, 95 S. Ct. at 1699 n. 7.
18
There is, moreover, an additional reason why we do not think Baucum's allegation fits within the rule laid out in Blackledge and Menna, even if that rule is deemed "jurisdictional." The statute which he challenges as unconstitutional, 21 U.S.C. § 860(a), does not involve the power of the government "to hale into court"; rather, it simply increases the penalty for certain violations of § 841(a), a drug distribution statute which he does not challenge. Section 860(a) reads:
19
"Any person who violates section 841(a)(1) of this title ... by distributing, possessing with intent to distribute, or manufacturing a controlled substance in or on, or within one thousand feet of, [a school] ... [is] subject to (1) twice the maximum punishment authorized by section 841(b) of this title...."
20
Count 2 of Baucum's indictment charged him with acting "in violation of Title 21, United States Code, Section 841(a)(1), within one thousand feet of [a school]. (In violation of Title 21 United States Code, Section 860(a))." Indictment, U.S. v. Baucum, 92-cr-423 (D.D.C. Feb. 25, 1993) 1-2. Thus, § 841(a)(1), rather than § 860(a), provides the basis for initiating the prosecution. There is precedent establishing that constitutional defects that do not reflect upon the power of the prosecution to initiate proceedings can be waived (and thus do not affect the court's subject-matter jurisdiction). See, e.g., Blackledge, 417 U.S. at 30-31, 94 S.Ct. at 2103-04 ("Although the underlying claims presented in Tollett and the Brady trilogy were of constitutional dimensions, none went to the very power of the State to bring the defendant into court to answer the charge brought against him.... In the case at hand, by contrast, the nature of the underlying constitutional infirmity is markedly different.... The very initiation of the proceedings against [Perry] operated to deny him due process of law."); see also Amadeo v. Zant, 486 U.S. 214, 221, 108 S. Ct. 1771, 1776, 100 L. Ed. 2d 249 (1988) (assuming that the cause and prejudice standard applies to a defendant's failure to challenge the constitutionality of "the juries that indicted him, convicted him, and sentenced him to death.") Id. at 216-17, 108 S.Ct. at 1774; see also Teague v. Lane, 489 U.S. 288, 109 S. Ct. 1060, 103 L. Ed. 2d 334 (1989) (refusing to apply Batson rule [that prosecutors may not use peremptory challenges on basis of race] retroactively to habeas petitioner's challenge to the constitutionality of his jury).
21
Finally, we note important prudential considerations that militate in favor of our ruling today. There may well be appropriate circumstances when, in the exercise of its discretion, the appellate court may choose to hear constitutional claims not raised at trial. But were we to follow the petitioner's suggestion to treat all facial constitutional challenges as jurisdictional, we would place a burden on trial courts to make threshold constitutional determinations without the benefit of briefing and argument, and invite "wait and see" tactics throughout the entire duration of the criminal proceedings. The Supreme Court has recognized the importance of finality in criminal rulings, calling it "essential to the operation of our criminal justice system. Without finality, the criminal law is deprived of much of its deterrent effect." Teague v. Lane, 489 U.S. at 309, 109 S.Ct. at 1074. Perhaps Justice Harlan said it best when he noted that "No one, not criminal defendants, not the judicial system, not society as a whole is benefited by a judgment providing a man shall tentatively go to jail today, but tomorrow and every day thereafter his continued incarceration shall be subject to fresh litigation." Mackey v. United States, 401 U.S. 667, 691, 91 S. Ct. 1171, 1179, 28 L. Ed. 2d 388 (1971) (Harlan, J., concurring in judgment in part and dissenting in part).
22
For these reasons, Baucum's petition for rehearing is
23
Denied.
1
The "schoolyard statute," 21 U.S.C. § 860(a), doubles the maximum penalty for a drug sale which occurs within 1,000 feet of a school
2
For a sampling of these cases, see United States v. Becker, 892 F.2d 265, 267 (3d Cir.1989) (double jeopardy is an affirmative defense which is waived if not raised at trial); United States v. $184,505 in Currency, 72 F.3d 1160, 1165 n. 2 (3d Cir.1995) (double jeopardy claim not raised below, so reviewable only for plain error); Virgin Islands v. Smith, 949 F.2d 677, 682 (3d Cir.1991) ("When no objection is made at trial, however, we may affirm a conviction even when a constitutional error does not meet [the harmless error] standard."); United States v. Mebane, 839 F.2d 230, 232 (4th Cir.1988) (vagueness challenge waived); United States v. Layne, 43 F.3d 127, 135 (5th Cir.), cert. denied, --- U.S. ----, 115 S. Ct. 1722, 131 L. Ed. 2d 580 (1995) (same); United States v. Dupaquier, 74 F.3d 615 (5th Cir.1996) (commerce clause challenge waived because not plain error); United States v. Knowles, 29 F.3d 947, 951 (5th Cir.1994) (reaching commerce clause challenge under the plain error rule); United States v. Snelenberger, 24 F.3d 799, 803 (6th Cir.), cert. denied, --- U.S. ----, 115 S. Ct. 433, 130 L. Ed. 2d 346 (1994) (overbreadth challenge waived); Chandler v. Jones, 813 F.2d 773, 777 (6th Cir.1987) (facial equal protection claim waived); United States v. Cole, 41 F.3d 303, 308 (7th Cir.1994), cert. denied, --- U.S. ----, 116 S. Ct. 94, 133 L. Ed. 2d 49 (1995) (vagueness claim reviewed for plain error); United States v. Cherry, 938 F.2d 748, 753 (7th Cir.1991) (same); United States v. Walton, 36 F.3d 32, 34 (7th Cir.1994) (same); United States v. DePuew, 889 F.2d 791, 794 (8th Cir.1989) (origination clause challenge waived); United States v. Ferguson, 776 F.2d 217, 223 (8th Cir.1985), cert. denied, 475 U.S. 1020, 106 S. Ct. 1207, 89 L. Ed. 2d 320 (1986) (vagueness challenge reviewed for plain error); United States v. Shephard, 4 F.3d 647, 650 (8th Cir.1993), cert. denied, --- U.S. ----, 114 S. Ct. 1322, 127 L. Ed. 2d 671 (1994) (holding that FED.R.CRIM.P. 12(b)(2) requires defendant to raise double jeopardy claim below); United States v. Martin, 933 F.2d 609, 611 (8th Cir.1991) (double jeopardy claim waived); United States v. Cupa-Guillen, 34 F.3d 860, 863 (9th Cir.1994), cert. denied, --- U.S. ----, 115 S. Ct. 921, 130 L. Ed. 2d 801 (1995) (facial equal protection challenge waived); United States v. Easter, 981 F.2d 1549, 1557 (10th Cir.1992), cert. denied, 508 U.S. 953, 113 S. Ct. 2448, 124 L. Ed. 2d 665 (1993) (vagueness challenge reviewed for plain error); Cavanaugh v. District of Columbia, 441 F.2d 1039, 1041 (D.C.Cir.1971) (facial equal protection claim waived); but see United States v. Walker, 59 F.3d 1196, 1198 (11th Cir.), cert. denied, --- U.S. ----, 116 S. Ct. 547, 133 L. Ed. 2d 450 (1995) (reviewing commerce clause challenge for plain error, but also noting jurisdictional possibility: "We can think of no plainer error than to allow a conviction to stand under a statute which Congress was without power to enact. In essence, the statute was void ab initio, and consequently, the district court below lacked subject matter jurisdiction with respect to that charge.")
3
The Blackledge/ Menna rule does not apply to all double jeopardy claims; in United States v. Broce, 488 U.S. 563, 109 S. Ct. 757, 102 L. Ed. 2d 927 (1989), the Supreme Court held that a guilty plea barred a later double jeopardy claim where the violation was not clear on the face of the indictment. Id. at 574-76, 109 S.Ct. at 764-66 (distinguishing Blackledge and Menna ) | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1535562/ | 212 B.R. 894 (1997)
In re MADISON MANAGEMENT GROUP, INC., a Delaware corporation, as successor in interest to Clevepak Corporation and as successor in interest to Interpace Corporation, Debtor.
Richard M. FOGEL, as Chapter 7 Trustee for Madison Management Group, Inc., Plaintiff,
v.
Samuel ZELL, the Estate of Robert Lurie, Great American Management And Investment, Inc. and Great American Financial Group, Inc., Defendants.
Bankruptcy No. 91 B 23969, Adversary No. 92 A 1708.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
June 25, 1997.
*895 Glen H. Kanwit, Hopkins & Sutter, Chicago, IL, for Plaintiff.
James A. White, Jones Day Reavis & Pogue, Chicago, IL, for Defendant.
Richard M. Fogel, trustee.
MEMORANDUM OPINION
SUSAN PIERSON SONDERBY, Bankruptcy Judge.
This matter comes before the Court on the motion of Richard M. Fogel, Chapter 7 Trustee ("Trustee") for Madison Management Group, Inc. ("Debtor") to lift protective orders as to documents withheld by Samuel Zell, The Estate of Robert Lurie, Great American Management and Investment, Inc. ("GAMI") and Great American Financial Group, Inc. f/k/a Great American Industrial Group, Inc. ("GAFGI") (collectively, "Defendants") on the basis of privilege. The question of whether the protective orders should be lifted or modified was set for oral argument. Having reviewed the papers and heard the arguments of the parties, the Court denies the Trustee's motion to lift the protective orders.
BACKGROUND
The history of the underlying bankruptcy case and the appointment of a trustee are discussed at length in this Court's Findings of Fact and Conclusions of Law dated January 24, 1992 and published at In re Madison Management Group, Inc., 137 B.R. 275 (Bankr.N.D.Ill.1992)("1992 Opinion"). Pursuant to the 1992 Opinion, the Court found that "it is in the best interest of the creditors and the estate to appoint a trustee with limited powers to investigate any and all potential causes of action against GAMI and GAFGI, including, but not limited to, alter ego causes of action, preferences and fraudulent conveyances. . . .". 137 B.R. at 282.
Pursuant to the 1992 Opinion and an accompanying order, Richard M. Fogel was appointed Trustee for the limited purposes set forth above. Pursuant to the powers granted by his appointment, the Trustee brought the instant adversary proceeding seeking to set aside a group of allegedly fraudulent conveyances.
During the pendency of this adversary, the Trustee has sought access to certain documents that Defendants withheld on the basis of the attorney/client privilege and the work product doctrine. The Court held a hearing on February 15, 1996 and examined approximately 40 of those documents in camera. Following the hearing, the Court ordered Defendants to produce all but two of the documents to the Trustee.
By agreement of the parties, the documents were also produced to the attorneys for certain contingent creditors. Wright-Howard-Smith Joint Venture ("WHS"), one of these creditors, had requested permission to attend certain depositions. By order dated January 2, 1996, creditors WHS, Camp Dresser McKee ("CDM") and the Retirees' Committee (the "Retirees") were granted permission to attend these depositions, but not to participate. Therefore, the parties agreed that the documents covered by the protective orders would be labelled "for attorneys' eyes only" so that attorneys for these creditors could attend the depositions where those documents were used.
The Trustee has now moved for modification of the protective orders so that he may show these documents to third parties, not just their attorneys. This motion raised two questions left open by the Court's earlier ruling; whether any privilege attaches preventing disclosure of the documents to third parties, and whether, if there is such a privilege, *896 the Trustee has the power to waive it unilaterally.
DISCUSSION
At the time that the documents at issue were prepared, defendants GAMI and GAFGI were the parent corporations of the Debtor and defendants Zell and Lurie were officers and directors of the parent corporations. The Defendants argue that the documents are privileged as to third parties because at the time of their preparation the Defendants had a valid expectation of confidentiality as to third parties, even if they did not have such an expectation as to the Debtor.
In ordering the Defendants to produce the documents to the Trustee, this Court relied on In re Santa Fe Trail Transportation Co., 121 B.R. 794 (Bankr.N.D.Ill.1990). In Santa Fe, the trustee of an insolvent former subsidiary of Santa Fe Industries ("Santa Fe") successfully sought from Santa Fe its inside counsel's files on the transaction by which Santa Fe divested the subsidiary. Santa Fe, 121 B.R. at 796-797. The inside counsel had provided legal services to both Santa Fe and its subsidiary. Chief Judge Schwartz of this District held that the trustee, standing in the shoes of the former subsidiary/debtor, was entitled to know all that Santa Fe knew with regard to the transaction. Judge Schwartz did not have to decide whether the privilege protected the documents from third parties. But he did comment that "[t]he claim of privilege as to those outside the family is a totally different problem." Id. at 799.
Following the Santa Fe precedent, this Court resolved the question of whether the Defendants could keep the documents in question from the Trustee. Having found that no privilege exists as to the Trustee, however, the Court must now turn to the uncharted waters surrounding the question of disclosure to third parties. Neither the Santa Fe Court nor this Court decided the issue of whether there is a privilege as to third parties once the parent and subsidiary have become adversaries. The parties presented no authority on this point, and the Court could find no published precedent on the issue.
Nevertheless, there is guidance to be found in the reasoning of Santa Fe which suggests that third parties should not be able to discover the privileged communications. The Santa Fe Court offered three reasons for its holding that there is no privilege among a parent corporation, its subsidiary and the trustee who steps into one of their shoes. None of these reasons should apply to third parties. First, the Court opined that the parent company had no expectation of confidentiality as against the subsidiary. Here, however, the Debtor would expect its communications to its counsel to be kept confidential from third parties, even if not from its parent corporations. Second, the Court found that the parent-subsidiary relationship is like a joint representation. When joint defendants become adverse to each other, however, there is still a reasonable expectation of confidentiality as to third parties. See Ohio-Sealy Mattress Mfrg. v. Kaplan, 90 F.R.D. 21, 32 (N.D.Ill.1980); Matter of Grand Jury Subpoena Duces Tecum, 406 F. Supp. 381 (S.D.N.Y.1975). Third, the Court reasoned that there is no privilege between a parent and its subsidiary because the parent's lawyers have knowledge about the subsidiary and therefore the subsidiary's lawyers are entitled to privileged information about the parent. It does not follow that anyone outside the corporations and their counsel should be privy to communications between or among them. In fact, the purpose of the attorney-client privilege is to prevent anyone else from having access. Applying the reasoning in the Santa Fe decision to the issue before this Court leads this Court to the conclusion that the documents at issue should not be released to a third party.
A similar conclusion was reached in Ohio-Sealy Mattress. "The subsequent litigation exception is based on the view that a joint defendant who later becomes adverse cannot `reasonably be allowed to deny [the] other [defendant] the use of information which he already has by virtue of the former's own disclosure.' [Citation omitted]. It is quite another matter, however, to make this information available to an adverse party who never participated in a joint defense." 90 F.R.D. at 32.
*897 Finally, it is instructive to examine Matter of Grand Jury Subpoena Duces Tecum, 406 F. Supp. 381 where the Court considered whether attorneys had to produce to a grand jury memoranda prepared in furtherance of the joint defense of their clients in an earlier Securities and Exchange Commission investigation. The Court found that the rationale for finding that there is no privilege between joint defendants who become adversarial does not apply to third-party proceedings.
This restructuring of the parties' rights is a logical incident of their later posture: when they face one another in litigation, neither can reasonably be allowed to deny to the other the use of information which he already has by virtues of the former's own disclosure.
There is no similar justification for requiring the disclosure of a former co-defendant's confidences for use in a third-party proceeding. Indeed, to allow such disclosure would so further erode the privilege's protection as to reduce joint defense to an improbable alternative.
Id. at 394.
The Trustee in the instant case argues simply that the joint privilege is lost when parties become adverse, citing Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 689 F. Supp. 841, 844-845 (N.D.Ill. 1988). While this is generally true, the adversity or subsequent litigation exception has only been applied between the parties whose interests were originally joined. In those situations, as the Court notes above, there is no longer any purpose for containing information to which both parties have already had access. They are now using it against each other. It is quite a different matter, however, to reveal the information to a third party unless both of the parties whom the privilege is protecting consent to waive it.
Whether the Trustee may unilaterally waive the privilege is the second issue before the Court. There is no doubt that the Trustee holds the Debtor's attorney-client privilege. Commodity Futures Trading Commission v. Weintraub, 471 U.S. 343, 105 S. Ct. 1986, 85 L. Ed. 2d 372 (1985)("the trustee of a corporation in bankruptcy has the power to waive the corporation's attorney-client privilege with respect to prebankruptcy communications."). However, a former joint defendant generally cannot unilaterally waive the privilege as to third parties. See Medcom Holding Co. v. Baxter Travenol Laboratories, Inc., 689 F. Supp. 841, 845 (N.D.Ill.1988)("To allow either party to disclose a former co-defendant's confidences in a third-party proceeding would erode the privilege's protection and render a joint defense unfeasible."); In re Sealed Case, 120 F.R.D. 66, 71 (N.D.Ill.1988)("the privilege cannot be waived by one former joint defendant in favor of a third party where the former joint defendants have merely developed ill feeling or a divergence of interest."); Ohio-Sealy Mattress, 90 F.R.D. at 29 (settling defendants not permitted to unilaterally waive the attorney-client privilege).
In Medcom Holding, Medcom Holding sued Baxter, which had sold its subsidiary, Medcom Inc., to Medcom Holding. Medcom Holding alleged fraud in the transaction. Medcom Holding sought to waive the attorney-client privilege belonging to Medcom Inc. because it controlled Medcom Inc.'s privilege rights and because Medcom Inc.'s interest was adverse to Baxter's in that litigation. The documents at issue related to earlier litigation in which Baxter and Medcom Inc. had been sued by third parties, Fuisz and Al-Inizi. Baxter refused to waive its privilege with respect to materials prepared in joint defense of the Fuisz and Al-Inizi cases. The Court adopted the magistrate judge's finding that Medcom Inc. could not waive the privilege that attached to the joint defense material created in the Fuisz and Al-Inizi cases in favor of Medcom Holding without Baxter's consent. The Court determined that because Medcom Inc. itself had not become Baxter's adversary in the fraud case, the privilege could not be waived by Medcom Holding.
Medcom Holding does not deal directly with the question presented here. It does, however, persuasively narrow the circumstances under which a party holding a joint defense privilege may waive such privilege as to the party to whom the privilege originally belonged and specifically refuses to extend it to one who steps into that party's shoes at a *898 later date. The Court determined that "[t]o allow either party to disclose a former codefendant's confidences in a third-party proceeding would erode the privilege's protection and render a joint defense unfeasible." Id. at 845.
In Sealed Case, 120 F.R.D. 66 and Ohio-Sealy Mattress, 90 F.R.D. 21, neither Court was directly confronted with the situation presented here of a trustee seeking to waive a joint defense privilege in favor of a third party over the objections of the codefendants and former parent corporations. Each of these cases contains dicta stating that the adversity of the parties might permit a unilateral waiver of the privilege. But neither of these Courts was called upon to resolve the question. It is this Court's opinion that the joint defense privilege would be stripped of its purpose and effectiveness if one party could unilaterally waive the privilege in favor of a third party, even if the original defendants have become adverse. Allowing such unilateral waiver would only encourage the creation of adversity to suit the purposes of one of the original parties. Therefore, the Trustee's motion is denied.
CONCLUSION
For the reasons stated above, the Trustee's motion to lift the protective orders as to documents withheld by Samuel Zell, The Estate of Robert Lurie, Great American Management and Investment, Inc. and Great American Financial Group, Inc. f/k/a Great American Industrial Group, Inc. on the basis of privilege is denied and the Trustee may not unilaterally waive the attorney-client privilege with respect to the documents that are the subject of the Trustee's motion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/740532/ | 113 F.3d 738
65 USLW 2799, Fed. Sec. L. Rep. P 99,458
Herbert EISENSTADT, Joseph Meyer, and Harvey Meyer, onbehalf of themselves and all others similarlysituated, Plaintiffs-Appellants,v.CENTEL CORPORATION, John P. Frazee, Jr., and J. StephenVanderwoude, Defendants-Appellees.
Nos. 96-2870, 96-3028.
United States Court of Appeals,Seventh Circuit.
Argued Feb. 24, 1997.Decided May 12, 1997.Rehearing and Suggestion for Rehearing En Banc Denied June 19, 1997.
Michael J. Freed, Michael B. Hyman, Ellyn M. Lansing, Much, Shelist, Freed, Denenberg & Ament, Chicago, IL, Patricia M. Hynes (argued), Deborah Clark-Weintraub, Kenneth J. Vianale, Milberg Weiss, Bershad, Hynes & Lerach, New York City, Arthur N. Abbey, Judith L. Spanier, Abbey & Ellis, New York City, Michael D. Craig, Schiffrin & Craig, Buffalo Grove, IL, for Herbert Eisenstadt, Joseph Meyer, Harvey Meyer and Brenda Drucker in No. 96-2870.
Michael J. Freed, Michael B. Hyman, Ellyn M. Lansing, Much, Shelist, Freed, Denenberg & Ament, Chicago, IL, Patricia M. Hynes (argued), Deborah Clark-Weintraub, Kenneth J. Vianale, Milberg Weiss, Bershad, Hynes & Lerach, New York City, Marvin A. Miller, Patrick E. Cafferty, Kenneth A. Wexler, Miller, Faucher, Cherlow, Cafferty & Wexler, Chicago, IL, Arthur N. Abbey, Judith L. Spanier, Abbey & Ellis, New York City, Michael D. Craig, Schiffrin & Craig, Buffalo Grove, IL, for Herbert Eisenstadt, Joseph Meyer, Harvey Myer and Paul Schmergel in No. 96-3028.
Susan Getzendanner, Matthew R. Kipp (argued), Christina M. Tchen, Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, IL, for John P. Frazee, Jr. and J. Stephen Vanderwoude in No. 96-2870.
Susan Getzendanner, Matthew R. Kipp (argued), Christina M. Tchen, Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago, IL, for Centel Corporation, John P. Frazee, Jr. and J. Stephen Vanderwoude in No. 96-3028.
Before POSNER, Chief Judge, and FLAUM and EVANS, Circuit Judges.
POSNER, Chief Judge.
1
The plaintiffs in this class action under sections 10(b) and 20(a) of the Securities Exchange Act, 15 U.S.C. §§ 78j(b), 78t(a), and the SEC's Rule 10b-5, 17 C.F.R. § 240.10b-5, seek to recover the damages they claim to have suffered as a consequence of buying stock in Centel Corporation during a period in which, according to the complaint, the defendants (Centel and two of its officers) were exaggerating the prospects for a planned auction of the company. The district judge granted summary judgment for the defendants on the ground that there had been no actionable misrepresentations.
2
Centel comprised local telephone companies and cellular phone systems. The cellular-phone business was hot, and the local-telephone business cool, and Centel's board believed that the combination was unlovely to investors and that the firm's assets would be worth more if the company were sold either as a unit (presumably to a telecommunications firm whose assets would make a good fit with Centel's assets) or in pieces. The disadvantage of a sale in pieces was that Centel might owe corporate income tax on the difference between the sale price of its assets and its basis in the assets, which was low, whereas a merger of the entire firm into another firm would avoid corporate income tax. See Boris I. Bittker & James S. Eustice, Federal Income Taxation of Corporations and Shareholders pp 12.42, 12.62 (6th ed.1994); 1 Mart. D. Ginsburg & Jack S. Levin, Mergers, Acquisitions, and Buyouts: A Transactional Analysis of the Governing Tax, Legal, and Accounting Considerations §§ 302, 603 (1997).
3
Rather than just seek out possible purchasers and negotiate privately with them, Centel decided to organize an auction at which bidders could bid on the whole company or on parts of it as they wished. The auction was intimated in a public announcement by Centel on January 23, 1992, that it had hired two prominent investment banks to "explore strategic alternatives to maximize shareholder value, including the possible sale of the company." On the day of the announcement, the price of Centel's shares rose from $37 to almost $48. Centel's investment bankers explored the possibility of a sale of part or all of the company to one or more of the seven Baby Bells or GTE, but all eight of these companies were noncommittal. Either despite or because of its failure to extract a quick commitment, Centel on February 17 confirmed its intention to conduct an auction, announcing that its board of directors had "decided to solicit proposals for the purchase of all or part of the company as a result of the indications of interest received since the company's January 23 announcement." Two weeks later, on March 5, GTE announced that it would not participate in the auction. Although Centel responded by bravely claiming that "[w]e believe that this [GTE's statement] has no impact on our process [and w]e continue to move along," a week later it met with its investment bankers in private to consider the viability of a "survivor entity" consisting of those assets of Centel that would not fetch an attractive price at the auction. The conclusion (not publicly announced) of the participants in the meeting was that any such entity would "very clearly bear the taint of a nonsaleable telco property which has been aggressively (and publicly) marketed to 'the world.' "
4
The countdown to the auction continued. On March 25, Pacific Telesis, one of the Baby Bells and a potential bidder for Centel's Nevada properties, a major asset, announced that it wouldn't bid for them after all. Centel reacted with a public statement that "the bidding process continues to go very well" and "very smoothly." By this time, several other large potential purchasers had expressed a lack of interest as well, and Centel was beginning to suspect that it would receive fewer bids than it had expected. The price of its stock had drifted lower than its peak on January 23, but it was still above $40.
5
April 16 was the deadline for the submission of bids. As the day approached, Centel's investment bankers visited several potential purchasers in an effort to stimulate bids. On April 13, Centel's chief executive officer announced publicly that there was "widespread interest almost down to every [Centel telecommunications] exchange," and the next day the Chicago Tribune reported that "people involved in the auction of Centel Corp. said Monday [April 12] that as many as 35 to 40 parties have explored submitting bids for the Chicago company or its pieces by Thursday's deadline. An investment banker for Centel provided the number of parties that have conducted so called due-diligence reviews of the company's books."
6
We must pause here to explain the term "due-diligence reviews." "Due diligence" is used in the corporate context in two senses. The first, which is irrelevant to this case, is as a defense to liability for a false registration statement. See 1 William E. Knepper & Dan A. Bailey, Liability of Corporate Officers and Directors § 13-4, p. 521 (5th ed.1993). The second sense of the term (which one encounters in a variety of legal contexts besides corporate law; see, e.g., Clark v. Robert Young & Co., 5 U.S. (1 Cranch) 181, 192-93, 2 L. Ed. 74 (1803)) is simply the exercise of due care. In re Integrated Resources, Inc., 3 F.3d 49, 51 (2d Cir.1993). Boards of directors have to be careful before committing themselves to major transactions, lest they be sued by disgruntled shareholders if the transaction is a bust. Right after announcing the auction, Centel had designated a room in which potential bidders could inspect confidential data concerning Centel's operations and finances. In order to be admitted to the data room, they had to sign an agreement promising not to use the data for any purpose other than formulating a bid. Visiting the data room was an appropriate step in conducting a due-diligence review of a contemplated purchase of some or all of Centel's assets. Whether it was a necessary step is another question. Centel was a publicly regulated company, so a great deal of information about it was available without a visit to the data room; its "books" were largely a matter of public record. A prospective purchaser might deem the incremental value of the data in the data room offset by the potential liability if he signed, and was later accused of violating, the confidentiality agreement. Signing the agreement might thus inhibit the signer's ability to compete with Centel, should Centel survive the auction.
7
We don't know exactly what the term "due-diligence reviews of the company's books" as it appeared in the Tribune article means, because the reporter who wrote the article was not deposed. What we do know is that only 16 firms visited the data room (and two of those announced before the interview with the Tribune's reporter that they had lost interest in bidding), although at least two dozen had expressed a serious interest in submitting bids and perhaps a dozen others had expressed some interest, which would bring the total number of firms that had explored the possibility of submitting a bid into the 35 to 40 range. Three of the Baby Bells were among the seriously interested.
8
The auction was held on April 16 as scheduled, but it was a bust. Only seven bids were submitted, none for the whole company. Although Centel kept mum, it accepted none of the bids. Instead it approached Sprint hat in hand and quickly negotiated a sale of the entire company to Sprint at a price equivalent to only $33.50 a share, which was $9 below the then-current market price and roughly 10 percent below the market price before the auction was first intimated. As soon as the deal with Sprint was announced, on May 27, 1992, the value of Centel's shares plummeted, from $42.50 a share to $32. The plaintiff class consists of investors who bought Centel stock between the formal announcement of the auction on February 17 and just before the announcement of the purchase of the company by Sprint. Some of these investors lost as much as $15 a share, almost a third of the price they had paid.
9
The ultimate issue is whether Centel made false representations about the progress of the auction and if so whether any of those representations were material, meaning that a reasonable investor would have considered them a reason to buy (or not sell, if he already owned) stock in Centel. See Basic Inc. v. Levinson, 485 U.S. 224, 231-32, 108 S. Ct. 978, 108 S.Ct. at 983-84, 99 L. Ed. 2d 194 (1988); Searls v. Glasser, 64 F.3d 1061, 1066 (7th Cir.1995); Pommer v. Medtest Corp., 961 F.2d 620, 623 (7th Cir.1992); In re Time Warner Inc. Securities Litigation, 9 F.3d 259, 267-68 (2d Cir.1993). The best candidate for a material misrepresentation is the one reported in the Tribune article, which the plaintiffs not implausibly interpret to mean that Centel was telling the investing public that 35 to 40 companies had visited the data room; this would indicate a very high level of interest because, as we said, visitors to the data room were only a subset of serious potential bidders. The article, however, is hearsay: an out-of-court statement offered to prove the truth of its contents--to prove, that is, that Centel or its investment bankers made the comments attributed to them. And hearsay is inadmissible in summary judgment proceedings to the same extent that it is inadmissible in a trial, Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir.1996); Evans v. Technologies Applications & Service Co., 80 F.3d 954, 962 (4th Cir.1996); Schwimmer v. Sony Corp. of America, 637 F.2d 41, 45 n. 9 (2d Cir.1980), except that affidavits and depositions, which (especially affidavits) are not generally admissible at trial, are admissible in summary judgment proceedings to establish the truth of what is attested or deposed, Fed.R. Civ. P. 56(c), (e); Waldridge v. American Hoechst Corp., 24 F.3d 918, 921 (7th Cir.1994); Winskunas v. Birnbaum, 23 F.3d 1264, 1267-68 (7th Cir.1994), provided, of course, that the affiant's or deponent's testimony would be admissible if he were testifying live. There is no similar dispensation for newspaper or magazine articles, which not being attested are considered less reliable than affidavits or depositions.
10
Some courts have, it is true, allowed letters, articles, and other unattested hearsay documents to be used as evidence in opposition to summary judgment, Church of Scientology Flag Service Organization, Inc. v. City of Clearwater, 2 F.3d 1514, 1530 and n. 11 (11th Cir.1993); Pennington v. Vistron Corp., 876 F.2d 414, 426 n. 15 (5th Cir.1989)-provided some showing is made (or it is obvious) that they can be replaced by proper evidence at trial. Pritchard v. Southern Co. Services, 92 F.3d 1130, 1135, amended on rehearing on other grounds, 102 F.3d 1118 (11th Cir.1996); Williams v. Borough of West Chester, 891 F.2d 458, 465 n. 12 (3d Cir.1989); Catrett v. Johns-Manville Sales Corp., 826 F.2d 33, 38 (D.C.Cir.1987); Edward J. Brunet, Martin H. Redish & Michael A. Reiter, Summary Judgment: Federal Law and Practice § 5.06, p. 120 (1994). An example would be a letter inadmissible only because the signature on it had not been verified and there was no doubt that it could and would be. Any broader dispensation to disregard the rules of evidence in summary judgment proceedings would make it impossible ever to grant summary judgment, and, as pointed out by Brunet et al., id. at 119, is not supported by the Supreme Court's statement in Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986), that a party opposing summary judgment need not do so with evidence that is in a form that would make it admissible at trial. In context, the reference is to affidavits and depositions. Duplantis v. Shell Offshore, Inc., 948 F.2d 187, 191-92 (5th Cir.1991); Canada v. Blain's Helicopters, Inc., 831 F.2d 920, 925 (9th Cir.1987).
11
There are many exceptions to the rule that makes hearsay evidence inadmissible at a trial; if none of them is applicable, the "evidence" submitted in opposition to summary judgment is likely to be pretty worthless. No doubt there should be an exception for the cases just mentioned in which it hasn't been feasible to obtain better evidence but it is reasonably clear that such evidence will be available at trial. That exception (possibly implicit in the Federal Rules of Evidence, as we are about to see, as well as in the case law) isn't applicable here. Although the plaintiffs' lawyer told us at argument that she had been unable to depose the Tribune's reporter because of the discovery deadline set by the district judge, this contention does not appear in her briefs and we treat it as waived.
12
In these circumstances, the article cannot be treated as if it were attested. It was therefore admissible in summary judgment proceedings only if it fit into one of the exceptions permitting the use of hearsay evidence at trial. The only exception claimed to be applicable is the catchall exception for cases in which the out-of-court declarant, though available to testify, is not called. This exception requires that the statement be "more probative on the point for which it is offered than any other evidence which the proponent can procure through reasonable efforts" and have "circumstantial guarantees of trustworthiness" equivalent to those of the enumerated exceptions. Fed.R.Evid. 803(24). Neither condition is met, the first because the plaintiffs could easily have obtained the reporter's affidavit even if it was for some reason infeasible to depose him.
13
The problem concerning satisfaction of the second condition is not so much doubt as to whether the reporter was telling the truth--he had no motive to lie--but uncertainty about what he meant in the passage that we quoted. He could have meant that Centel had told him that 35 to 40 firms had expressed interest in bidding; but this was true, as we have seen. The intensity of their interest is another matter, but would be difficult to gauge in advance, so "interest" cannot reasonably be interpreted as greatly interested. Prospective buyers do not go out of their way to trumpet interest in the property that they want to buy, lest they induce the seller to raise his price or, in the case of an auction, induce other bidders to raise their bids because they think that the property is worth more than they thought or that they must in any event pay more to get it because they're competing with someone who sets a very high value on it. To avoid jacking up the bidding in this way, prospective bidders will want to avoid seeming too eager. So it is entirely reasonable for the seller to think that there are more really interested bidders than have actually indicated a determination to bid.
14
Alternatively, the reporter may well have meant that Centel had told him that 35 to 40 firms had visited the data room. This would be false, since only 16 had done so. Would it have been a material falsehood? We do not know what investors would have assumed if Centel had kept mum throughout the entire process; and number of potential bidders is an inherently ambiguous indicator of the likely outcome of an auction--a large number of potential bidders could mean that Centel was expected to sell off its properties at bargain-basement prices; a lion's carcass will attract a lot of hyenas. We need not decide. We may assume that the precise number of visitors to the data room would have been material to investors. But it is unclear from the grammar of the quoted passage whether "the number of parties that have conducted socalled due-diligence reviews of the company's books" is the same number as the number of parties (35 to 40) who had "explored submitting bids." One wouldn't think exploration a synonym for due diligence, but who knows? The number of explorers (35 to 40) appears in the sentence just before the sentence discussing due-diligence reviews, and the second sentence could be understood to be an elaboration of the first.
15
We cannot even be certain, though it seems likely, that the reporter meant by "due-diligence reviews of the company's books" visits to the data room. Centel or its investment bankers may have told him the number of potential bidders and mentioned that a number of firms had reviewed data in the data room, but without specifying that number, and the reporter--or an editor at the Tribune--may have conflated the two classes of potential bidder. For that matter it is possible that the reporter didn't intend to conflate them, but merely wrote clumsily or was edited clumsily. The record contains no information about the editing process at the Tribune or the reporter's sophistication in financial reporting.
16
We acknowledge the possibility that even if statements by Centel or its investment bankers were garbled by the press, Centel would not be privileged to sit by and allow investors to be misled by the garble. While it is true, as we shall see, that in this circuit, and maybe now in all circuits (as a result of the recent amendments to the securities laws), there is no duty to correct a prediction falsified by subsequent events, it needn't follow that a corporation or its advisors can as it were "adopt" a misleading press account of an interview that they gave, in order to influence the markets. (Obviously a corporation has no duty to correct rumors planted by third parties. Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937, 949 (2d Cir.1969) (Friendly, J.); see also In re Time Warner Inc. Securities Litigation, supra, 9 F.3d at 265; State Teachers Retirement Board v. Fluor Corp., 654 F.2d 843, 850 (2d Cir.1981). The rumor might be planted by the target of a hostile takeover and be designed to elicit, if there is a legal duty to correct inaccurate rumors, a premature disclosure of the takeover firm's intentions.) But we need not decide this; it is not argued by the plaintiffs; their argument is that the Tribune article was an accurate report of what Centel's investment banker told the writer of the article, and this we simply cannot know because of the plaintiffs' failure to authenticate it.
17
Issues of the admissibility of evidence are for the district judge to resolve in the first instance, subject to the light appellate touch signified by the "abuse of discretion" formula. E.g., Whitted v. General Motors Corp., 58 F.3d 1200, 1204 (7th Cir.1995); Cavallo v. Star Enterprise, 100 F.3d 1150, 1153-54 (4th Cir.1996); Daubert v. Merrell Dow Pharmaceuticals, Inc., 43 F.3d 1311, 1315 (9th Cir.1995). The district judge discussed the Tribune article as a source of possible misrepresentation, which means he didn't exclude it from evidence. But because he didn't discuss the question of admissibility, though it had been raised, we cannot be certain that he even considered it. He didn't think he had to consider it, because he believed that even if Centel had lied about the number of visitors to the data room, this was not a material misrepresentation.
18
When the district judge has not addressed the admissibility of possibly critical evidence in summary judgment proceedings, the appellate court must decide whether the judge would have abused his discretion had he admitted it. If the judge would have abused his discretion to admit the evidence, then of course the appellate court will not consider it in deciding whether to uphold summary judgment. If the judge would not have abused his discretion to admit the evidence, then the appellate court will consider it and if, with it considered, there is enough evidence to defeat summary judgment, the appellate court will vacate the grant of summary judgment to give the judge a chance to exercise his discretion. If on remand the judge decides to exclude the evidence in the proper exercise of his discretion, and the evidence was crucial to the appellate court's determination that summary judgment should not have been granted, the district judge should reinstate the summary judgment. Id. at 1315. For his action on remand in properly excluding the evidence would have eliminated the evidentiary basis for a denial of summary judgment.
19
We are more certain that the Tribune article is inadmissible--that a district judge would be abusing his discretion to admit it and thus that it is not available in opposition to summary judgment for the defendants--than that the representation--if that is what it was--that 35 to 40 firms had visited the data room, when only 16 had done so, was not material. It would be an abuse of discretion to admit the article as evidence because of the doubt about what it means and about whether it is an accurate report of what Centel said and because the author was available to be deposed, or give an affidavit, and clear up these questions. So we set the article to one side and consider the other representations on which the suit is based. They amount to repeated claims that the auction process was going well, implying that lots of firms were interested in making attractive bids. These would not have had to be bids that when aggregated across the company's different assets (assuming that no one submitted an attractive bid for the whole company) would have yielded a price for the company in the range, roughly $41 to $46, at which its stock traded during the period between the announcement of the auction on February 17 and the announcement of the sale to Sprint on May 27. Those were prices far above the price of Centel's shares before the auction was announced. An auction that yielded a price for Centel's assets that exceeded the market value of the company before the auction process began would be a good auction--better than doing nothing--albeit not so good as the stock market might have hoped and expected. The auction failed, but the ensuing sale to Sprint yielded a price equal to roughly 90 percent of the market value of Centel before the auction process began.
20
We doubt that nonspecific representations that an auction process is going well or going smoothly could, in the circumstances of this case (the significance of this qualification will become clear shortly), influence a reasonable investor to pay more for a stock than he otherwise would. Everybody knows that someone trying to sell something is going to look and talk on the bright side. You don't sell a product by bad mouthing it. And everybody knows that auctions can be disappointing. It would be unreasonable for investors to attach significance to general expressions of satisfaction with the progress of the seller's efforts to sell, just as it would be unreasonable for them to infer from a potential bidder's apparent lack of enthusiasm that the bidder was uninterested rather than just was jockeying for a better price. The heart of a reasonable investor does not begin to flutter when a firm announces that some project or process is proceeding smoothly, and so the announcement will not drive up the price of the firm's shares to an unsustainable level--
21
Unless (the qualification we alluded to) the announcement is concealing a disaster. Suppose that on February 18 Centel's lawyers had told Centel that it couldn't legally sell any of its assets because they were encumbered and the lienors would not give their consent to a sale. In these circumstances to have announced that the auction process was going smoothly would have been materially deceptive. "Going smoothly" may mean nothing more than--going; but it means at least that; if the process has been stopped, a representation that it is continuing may well induce purchases of the stock at a price that reflects the prospect that the process will continue to its end.
22
It would not be a defense in such a case that it was in the interest of the investors as a whole, though contrary to the interest of the hapless investors who bought as a result of the concealment, to drum up interest in the sale by whatever means, in the hope that some sucker would buy. All that that would mean is that the winners from the fraud would outnumber the losers among the seller's investors. There would be another set of losers, the owners of the deceived buyer. The cases do not try to net out the gains from fraud in deciding how much if any damages to award the victims of the fraud. The losers get back what they lost; most of the winners get to keep what they gained (anyone who bought stock in Centel on January 22 and sold it on or before May 26 was a winner); no effort is made to compute the net social cost. See, e.g., Hoxworth v. Blinder, Robinson & Co., 903 F.2d 186, 203 n. 25 (3d Cir.1990); Wool v. Tandem Computers Inc., 818 F.2d 1433, 1437 (9th Cir.1987); Donald C. Langevoort, "Capping Damages for Open-Market Securities Fraud," 38 Ariz.L.Rev. 639, 640 n. 4 (1996). Maybe the effort should be made, see, e.g., Ackerman v. Schwartz, 947 F.2d 841, 846-47 (7th Cir.1991), but that is hardly an issue we need pursue here. Centel was not, by its talk of smooth sailing, covering up a disaster, whether to protect its investors as a group at the expense of investors in an acquiring firm or to achieve some other objective. The auction process was not interrupted. The results were disappointing, but that is a frequent outcome of auctions; they involve a high degree of uncertainty because there has been no previous negotiation between buyer and seller. That is no doubt why Centel did not commit itself to accept the highest bids, however low, for the various properties on the auction block. There were bumps in the road to the auction, as when GTE and then Pacific Telesis bowed out. Yet "bowed out" is not quite the right term. No one knew until the auction was held who would bid. GTE and Pacific Telesis might have bowed out strategically only to reappear at the last moment, hoping that their earlier expressions of a lack of interest would have depressed the bids of other potential purchasers.
23
Procedurally, the auction process went as smoothly as could be desired; no legal or other glitches derailed it. Substantively, the process did not generate as much interest as Centel would have liked--but how much interest is that? The company was sold to Sprint for $4 billion. Centel would have been delighted if the auction had yielded $8 billion. Even if it had made a public prediction of such a result, it would have had no legal duty, in this circuit anyway and perhaps in no circuit after the Private Securities Litigation Reform Act of 1995, Pub.L. No. 104-67, § 102(b), 109 Stat. 737, 755 (codified at 15 U.S.C. § 78u-5(d)), to make a public revision of the prediction when it became clear that no such bonanza was in the offing. Grassi v. Information Resources, Inc., 63 F.3d 596, 599 (7th Cir.1995); Stransky v. Cummins Engine Co., 51 F.3d 1329, 1331-32 (7th Cir.1995). It made no prediction. It never even predicted that there would be a purchaser for the whole caboodle. The plaintiffs' briefs actually emphasize (presumably because they don't want to get tripped up by Grassi and Stransky) that this is not a case about predictions. Centel's chief executive officer stated repeatedly to the investment community that he did not know how many bids would be received. He even stated that the auction might not obtain adequate value for the shareholders, in which event the company would explore other possibilities, of which the "survivor entity" was one and sale outside the auction process another.
24
An utterly candid statement of the company's hopes and fears, with emphasis on the fears, might well have pushed the company's stock below $40, but perhaps only because, given the expectation of puffing, such a statement would be taken to indicate that the prospects for the auction were much grimmer than they were. Where puffing is the order of the day, literal truth can be profoundly misleading, as senders and recipients of letters of recommendation well know. Mere sales puffery is not actionable under Rule 10b-5. Searls v. Glasser, supra, 64 F.3d at 1066; Shaw v. Digital Equipment Corp., 82 F.3d 1194, 1217-18 (1st Cir.1996); San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., 75 F.3d 801, 811 (2d Cir.1996); Raab v. General Physics Corp., 4 F.3d 286, 289 (4th Cir.1993).
25
Centel cannot be faulted for having failed to tell the stock market that there would be only seven bidders and their bids would be no good. Had it known this from the start it wouldn't have announced an auction. Hindsight is not the test for securities fraud. Pommer v. Medtest Corp., supra, 961 F.2d at 625; DiLeo v. Ernst & Young, 901 F.2d 624, 628 (7th Cir.1990); San Leandro Emergency Medical Group Profit Sharing Plan v. Philip Morris Cos., supra, 75 F.3d at 812; Denny v. Barber, 576 F.2d 465, 470 (2d Cir.1978) (Friendly, J.). The question is whether Centel said things that were so discordant with reality that they would induce a reasonable investor to buy the stock at a higher price than it was worth ex ante. The answer, if we limit our consideration to the admissible evidence, as we must, is no. Centel put a rosy face on an inherently uncertain process; investors would have expected no less; the price they paid for the stock during the complaint period was reasonable at the time they bought; only in hindsight could it be said that they had made a mistake. So clear is this on the basis of the undisputed admissible evidence that summary judgment was properly granted for the defendants.
26
AFFIRMED.
27
FLAUM, Circuit Judge, concurring.
28
While I agree that the Chicago Tribune article is inadmissible hearsay for the reasons stated in the majority opinion and therefore join the decision, I write separately to express my concern with the potential ramifications of the alleged corporate conduct in this case. The court accepts that even if the representation as to the number of companies who had conducted due-diligence reviews of Centel's books was materially misleading--and I believe that it was--no liability can result in this case. Left open is the question of whether a corporation has a duty to monitor the accuracy with which its oral statements are reported by the media. In my judgment, this is an area of inquiry warranting examination.
29
As Congress recognized in passing the Exchange Act, "[t]here cannot be honest markets without honest publicity." See Basic Inc. v. Levinson, 485 U.S. 224, 230, 108 S. Ct. 978, 982, 99 L. Ed. 2d 194 (1988) (quoting H.R.Rep. No. 1383, 73d Cong., 2d Sess. 11 (1934)). Some of the burden of ensuring the honesty of a company's publicity is properly placed on the company. In the instant case, it would appear that Centel, at the very least, made vague, possibly even confusing, oral representations to the press concerning the state of the bidding process. In order to convey the desired impression that interest in the company was widespread, the company's spokespersons would have had to walk a very thin line. Given that Centel had begun to suspect that it would not receive a large number of bids,1 any statement beyond a vague reassurance that many companies had expressed some level of interest would run the risk of misleading investors. In this situation, the decision to make oral, extemporaneous comments, which were likely to be taken out of context or paraphrased, was an imprudent one that the law should not rush to insulate. While the majority recognizes the possibility that Centel may have had an independent duty to correct any materially misleading statements under these circumstances, it reserves the question since it is not directly before the court. However, due to the potential significance of the issue to future litigation, I believe the general rule that a corporation has no duty to correct misstatements attributed to it by the press is deserving of reexamination in the context of this case.
30
As the majority notes, underlying the general rule that a corporation has no duty to correct misinformation reported in the press that is not attributable to the corporation is the concern that persons outside a corporation, by planting misinformation in the press, could force the corporation to disclose prematurely information it would otherwise choose to keep secret, thereby foisting on the corporation a duty to correct the statement. See Electronic Specialty Co. v. International Controls Corp., 409 F.2d 937, 949 (2d Cir.1969) (recognizing that misleading news report may have been effort by target company to obtain information regarding possible tender offer prior to time required by Exchange Act); see also In re Time Warner Inc. Securities Litig., 9 F.3d 259, 265 (2d Cir.1993) (holding that dismissal under FRCP 9(b) was proper when complaint failed to allege source of unattributed statements); State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 850 (2d Cir.1981) (stating that corporation has no duty to correct rumors in marketplace unless rumors can be attributed to corporation). This rule recognizes that there are often valid reasons a corporation would choose not to disclose certain information, such as in the context of pending merger negotiations. See In re Time Warner, 9 F.3d at 267 ("[A] corporation is not under a duty to disclose a fact merely because a reasonable investor would very much like to know that fact."); Flamm v. Eberstadt, 814 F.2d 1169, 1177 (7th Cir.1987) (recognizing that corporation's silence as to pending merger negotiations is beneficial to investors). This is a concern that is clearly not implicated in the present case. While a corporation has an interest in the timing of its disclosures, it has far less interest in remaining silent with respect to matters on which it has already chosen to comment. Apparently, Centel's Chairman and its investment banker voluntarily commented on the level of interest in the company's assets and they were undoubtedly aware that they might be quoted as having done so. It is therefore appropriate to ask whether Centel should bear some responsibility for the accuracy of the reported statements, which stemmed from its publicity efforts and which were attributed to named corporate insiders, not anonymous sources.
31
A factor weighing in favor of holding Centel accountable for the misinformation is that Centel chose the means by which it would convey information to the public. Companies speak to the public in a variety of ways: issuing press releases, holding press conferences, and granting interviews to analysts or member of the press, to name a few. Some of these methods are more likely than others to ensure that a corporation's statements are accurately reported by the media. What makes the instant case difficult is that it is unclear whether the Tribune's story is in fact an accurate account of Frazee's and Paulson's statements. This type of ambiguity is most likely to arise in those cases in which corporate officers and agents make oral, extemporaneous statements in response to questions posed by the press. Because corporations and their attorneys are well aware that speaking to the press entails some risk that the company's statements may be misquoted or taken out of context, corporations often wisely choose to speak through prepared press releases or to have company spokespersons read prepared statements that have been reviewed by the company's attorneys. These methods of communication reduce the likelihood that there will be confusion as to what has been said and enable corporations to control the exact content of their disclosures. Because corporations that avail themselves of forms of publicity devoid of similar safeguards share some degree of responsibility for the accuracy of what is subsequently reported, it is appropriate to ask whether these corporations should bear the concomitant duty to correct any materially misleading information attributed to them. See John M. Sheffey, Securities Law Responsibilities of Issuers to Respond to Rumors and Other Publicity: Reexamination of a Continuing Problem, 57 NOTRE DAME LAW. 755, 784 (1982) (arguing that oral and extemporaneous nature of interviews make it likely that company is contributing cause to inaccurate report and suggesting duty to correct is therefore appropriate).
32
Admittedly, any rule that imposes on corporations the duty to correct information attributed to them would cause corporations to be more cautious in dealing with the press. However, encouraging corporations to speak with precision when making oral statements to the press is hardly an undesirable result. As the majority recognizes, in the instant case we do not know what Frazee and Paulson told the Tribune concerning the number of corporations that expressed interest in bidding on Centel and what form these indications of interest took. It seems likely that certain phrases, e.g. "due diligence," "exploring submitting bids," as well as certain numbers, "35 to 40," were used. What is clear is that the article implies that the number "35 to 40" was the number confirmed by Centel's Chairman as the number of companies that conducted due diligence review of Centel's books.2 A rule that does not require a corporation to correct misleading statements that are to the corporation's benefit creates an incentive for corporations to be vague in responding to inquiries by the press. For example, in the instant case, Centel was less than optimistic about the quantity of bids it would receive. Nevertheless, it was in Centel's interest to convey the opposite impression--that it was a desirable company with many suitors--in the hopes of drumming up last-minute interest. One way to do this would be to throw out some high numbers, but to be vague as to what those numbers refer to. Paulson's deposition testimony states that while he does not deny having given the number "35 to 40," he cannot remember to what class of bidders he would have attached that number, and it does not appear that he had tallied this number in advance of the interview.3
33
The significance of the information imparted by the Tribune article only exacerbates my unease. Unlike the majority, I harbor little doubt as to the materiality of the statement at issue here, which included a concrete estimate of the number of potential bidders who had conducted "due-diligence reviews of the company's books." The exact wording of this statement is relevant: determinations of materiality depend on a "delicate assessment of the inferences a 'reasonable shareholder' would draw from a given set of facts and the significance of those inferences to him...." See TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438, 450, 96 S. Ct. 2126, 2133, 48 L. Ed. 2d 757 (1976). The inferences an investor would draw from the "35 to 40" statement are different than the inferences an investor would draw from the statement that a potential bidder "expressed interest" in the company or that it "had explored submitting a bid." Statements that a company has "expressed interest" or "explored submitting a bid" tell the investor nothing about the extent of the acquiring company's interest or how deeply it has explored submitting a bid. The instant case therefore provides a good example of why corporations should speak with specificity and choose their words carefully when providing factual information to the press.
34
An investor would understand conducting a due-diligence review of a target's books to be a significant indication of interest, because, in order to have received access to Centel's non-public information, a bidder would have had to sign a "confidentiality statement." Such a commitment, in the words of Centel's Chairman, was a "pain": bidders had to agree to not use the information for any purpose other than submitting a bid, not to trade Centel's stock for a certain period of time, and not to discuss the transaction with any other bidders. The willingness or unwillingness of a company to sign the confidentiality agreement was therefore some indication of where a potential bidder was in its decision process. As the majority correctly notes, there was a substantial amount of information available about Centel as a matter of public record from which a potential bidder could make an assessment of Centel's attractiveness as a target. Because signing the confidentiality agreement was not without its own costs, it is unlikely that a company would sign the agreement unless its initial review of the publicly available information suggested that Centel might be a desirable target. The opposite is also true: an investor whose initial assessment was unfavorable would put a lower value on obtaining additional information. In the context of a closed-bid auction, these actions would have spoken louder than the bidders' words, which were unlikely to reveal much about their true intentions.4
35
What investors would have taken from the Tribune article then is not that many companies had expressed some interest in bidding, but that thirty-five to forty companies were actively pursuing the possibility of placing a bid for Centel's assets. Although it is not clear from the record, it may very well be that this number represents a significant percentage of the total class of potential purchasers. One would assume that the list of telecommunications companies with a need for Centel's assets and the resources to purchase them is not a long one. The reality, of course, was much different. As of April 14, 1992, twenty-three companies had signed confidentiality agreements, only nineteen of which had acted on the agreement and obtained any information from Centel,5 and at least two of these had publicly announced that they would not bid. While it is at least possible, as the majority observes, that a company would place a bid without having undertaken some review of Centel's books, the point is that a company would be far less likely to do. The facts of this case illustrate this point: all seven of the bids received by Centel were made by companies that had signed confidentiality agreements and received some confidential information from the company. It may be true that a large number of bids does not guarantee an auction's success, but a lack of interested bidders hardly bodes well. This is especially true given that it had become clear that it was unlikely Centel would be sold in its entirety; what the company was counting on (by its own admission) was "widespread interest" in the "various pieces" of the company. The fact that nineteen companies at most, not "35 to 40," were actively considering bidding is a fact that would have been viewed by investors as significantly altering the mix of available information.
36
In short, I would not hesitate to conclude, had it been established by the plaintiffs that Centel's officials directly made the statements attributed to them, that such statements could be actionable under Rule 10b-5. Given the capacity of statements attributed to named corporate insiders to mislead investors, it is also worth considering whether, under certain limited circumstances, the securities laws impose a duty to correct any materially misleading statements so attributed, even in the absence of proof as to whether the attributed statements were actually made. Of course, further exploration of this issue must await another day and case.
1
Frazee himself admitted that, by the latter part of March, he "began to suspect ... that maybe [the company] wouldn't get as many bids as we thought we were going to get...."
2
I agree with plaintiffs that a fair reading of the article suggests that 35 to 40 was the number provided by Centel's investment banker of the firms that had conducted due diligence reviews of the company's books. Given that the number "35 to 40" is the only number mentioned in the article, the reporter's reference in the second sentence to "the number" would logically be understood to refer to the number "35 to 40" mentioned in the preceding sentence. Defendants, in their brief, admit that the article "suggests that this number of companies had conducted due diligence."
Additionally, I do not believe that a reasonable investor would understand the number of parties who had conducted "due-diligence reviews of the company's books" to include those companies who had done nothing more than examine the information about Centel that was available as a matter of public record. While I agree with the majority that the term due diligence is an amorphous concept, this is not to say that the term is without meaning in a given context. In the instant case, Centel placed itself on the auction block and opened its books to potential bidders. "Due diligence" in this context would therefore likely involve a review of these materials, in contrast to "due diligence" in connection with an unsolicited offer to acquire a company, which necessarily would be limited to a review of information in the public domain. The exercise of due care in the instant case would likely include some examination of Centel's internal records to ensure that its public financial statements were an accurate reflection of its true earnings and assets and that there were no undisclosed liabilities lurking beneath the publicly available numbers. The majority acknowledges that this would be an "appropriate step" in conducting a due diligence review. In any event, even if the term "due diligence" could be understood to include an examination limited to the information available in the public domain, the modifier "of the company's books" belies the reasonableness of such an interpretation in this case.
3
In addition, Cody Smith, a partner at Goldman Sachs, testified that he spoke with Paulson after the article came out and that Paulson said that the number of parties who might bid was something that he would have liked to ask Smith before the interview
4
Frazee's own testimony indicates that he considered the signing of a confidentiality agreement to be a significant indication of interest. In his deposition testimony before the SEC, Frazee states:
If you can get somebody to sign one of these things, you know they're really interested in doing it because it's a pain ... [Y]ou have to agree not to disclose anything. You have to agree not to trade the stock for ... two years.... And we also had a provision in our confidentiality agreement that they couldn't team up and bid, you know.
Paul Taubman, one of Centel's investment bankers likewise testified:
If somebody says, I want lots of information, and how can I start due diligence, they're still not giving you a value, but on [a] continuum, they're going to be more likely to be interested.
5
The majority correctly notes that the company's records suggest that sixteen companies visited the data room. In addition, the log kept by the Centel employee in charge of the data room suggests that materials were provided to nineteen companies | 01-03-2023 | 04-17-2012 |
https://www.courtlistener.com/api/rest/v3/opinions/1536603/ | 928 A.2d 1234 (2007)
103 Conn.App. 369
Leo GOLD et al.
v.
TOWN OF EAST HADDAM.
No. 27952.
Appellate Court of Connecticut.
Argued June 4, 2007.
Decided August 21, 2007.
Leo Gold, Stamford, for the appellants (plaintiffs).
John S. Bennet, Essex, for the appellee (defendant).
BISHOP, GRUENDEL and MIHALAKOS, Js.
BISHOP, J.
The plaintiffs, Leo Gold, Joan S. Levy and Harold Bernstein and Joseph Lieberman, executors of the estate of Bernard Manger, filed this action seeking to enjoin the defendant, the town of East Haddam, from acquiring their property by eminent domain on the ground that the defendant did not timely file its statement of compensation with the trial court. The plaintiffs appeal from the summary judgment the trial court rendered in favor of the defendant. On appeal, the plaintiffs contend *1235 that the court improperly found that the defendant sought to take their property for solely school purposes and, therefore, was not bound by the time limitation for the acquisition of property as set forth in General Statutes § 48-6. Because an issue of fact exists as to the purpose of the taking, we conclude that the court improperly rendered summary judgment.
The court found the following undisputed facts. "[The plaintiffs] were . . . the owners of real property in the town of East Haddam. On June 17, 2004, the [defendant] held a special meeting for the purpose of considering and discussing the acquisition by purchase or eminent domain of the plaintiffs' property. On June 24, 2004, the governing body of the condemner by town meeting voted to acquire the plaintiffs' property. The referendum vote was, in relevant part, on the question of: `1. Shall the Town of East Haddam appropriate $24,500,000 for the New Middle School Project including, but not limited to, (a) the acquisition by purchase or eminent domain of approximately 226 ± acres of real property located off Clark Gates Road, East Haddam on the following parcels: Map # 74, Lot 3, Map # 73, Lot 20-1, Map # 74, Lot 009A, provided, however approximately 30 ± acres be used for the New Middle School Project, approximately 50 ± acres be used for general purposes and the remaining real property of approximately 146 ± acres be designated as open space, (b) the construction of a new middle school of approximately 96,000 square feet to house grades 4-8, (c) the construction of parking areas and drives, ball fields and soccer fields, (d) site improvements and (e) all alterations, repairs and improvements in connection therewith . . . and authorize the Board of Selectmen to acquire such real property.' On or about January 6, 2006, the [defendant] filed a statement of compensation in the Superior Court . . . by which it seeks to take by condemnation the plaintiffs' real property."
By complaint dated February 6, 2006, the plaintiffs filed this action, claiming that the defendant failed to commence the condemnation proceeding within six months after the vote authorizing the acquisition of the property as required by § 48-6 and that the vote, therefore, was void.[1] The defendant subsequently filed a motion for summary judgment, claiming that General Statutes § 10-241a,[2] which does not have a time limitation, governs the acquisition of property by condemnation for school purposes, and, because the defendant was taking the plaintiffs' property to *1236 build a school, the six month time limitation did not apply. The plaintiff filed a cross motion for summary judgment, claiming that, because the voters approved the land acquisition not only for school purposes but also for other municipal and open space purposes, § 48-6, and not § 10-241a, applied. The court found that the plaintiffs' property was being acquired solely for school purposes and that the time limitation of § 48-6 therefore did not apply. Accordingly, the court granted the defendant's motion for summary judgment and denied the plaintiffs' motion for summary judgment. This appeal followed.
As an initial matter, we set forth the applicable standard of review. "Because the court's decision on a motion for summary judgment is a legal determination, our review on appeal is plenary. . . . The law governing summary judgment and the accompanying standard of review are well settled. Practice Book § [17-49] requires that judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. A material fact is a fact that will make a difference in the result of the case. . . . The facts at issue are those alleged in the pleadings. . . .
"In seeking summary judgment, it is the movant who has the burden of showing the nonexistence of any issue of fact. The courts are in entire agreement that the moving party for summary judgment has the burden of showing the absence of any genuine issue as to all the material facts, which, under applicable principles of substantive law, entitle him to a judgment as a matter of law. The courts hold the movant to a strict standard. To satisfy his burden the movant must make a showing that it is quite clear what the truth is, and that excludes any real doubt as to the existence of any genuine issue of material fact. . . . As the burden of proof is on the movant, the evidence must be viewed in the light most favorable to the opponent." (Citation omitted; internal quotation marks omitted.) DaGraca v. Kowalsky Bros., Inc., 100 Conn.App. 781, 785, 919 A.2d 525, cert. denied, 283 Conn. 904, 927 A.2d 917 (2007). "In ruling on a motion for summary judgment, the court is not to decide issues of fact; its function is to determine whether there are genuine issues of material fact." Vaillancourt v. Latifi, 81 Conn.App. 541, 544 n. 4, 840 A.2d 1209 (2004).
Here, the defendant claims that it sought to take the plaintiffs' property solely for the school project. In opposition to the defendant's motion for summary judgment, the plaintiffs submitted the referendum question put before the voters that stated that part of the plaintiffs' property would be used for the school project, a larger part would be used for general municipal purposes and the majority would be designated as open space. In support of its motion for summary judgment, the defendant presented affidavits from James Ventres, the defendant's land use administrator, and Bradley Parker, the first selectman. In his affidavit, Ventres stated that the plaintiffs' property was sought for "the sole purpose of development of the middle school facility project and accessories thereto." He stated that the project, as currently planned, would consume approximately sixty-one acres, including building location, access roadways, necessary sloping and fill along the access ways at the school site, and for septic fields and playing fields. He stated that another approximately twenty-two acres constituted land that might be developed into additional playing fields or related school facilities in the future. Ventres stated that "the entire balance of the site is either not subject to development or is substantially *1237 constrained by the location of wetlands, ponds, steep slopes and other similar constraints."
In his affidavit, Parker reiterated that the only planned use for the plaintiffs' property was the school project. Parker explained that "[t]he [r]esolution put before the voters . . . by [r]eferendum describes three elements of the property to be acquired for purposes of the school project simply as a way to inform the voters . . . of how the property acquired would be adapted to the use for the public school project and future expansion and buffer of adjacent neighborhoods." Although the affidavits submitted by the defendant support the claim that it sought the plaintiffs' property solely for the school project, the language of the referendum question submitted to the voters, when viewed in a light most favorable to the plaintiffs, suggests that only a portion of the property was being taken for school purposes and other portions were being taken for general purposes or designated as open space. The affidavits, read together with the referendum notice, create a factual question as to whether the taking was intended solely for school purposes or also included general municipal purposes. In the face of this unresolved issue, we conclude that there was a question of material fact and that summary judgment was, therefore, inappropriate.
The judgment is reversed and the case is remanded for further proceedings in accordance with law.
In this opinion the other judges concurred.
NOTES
[1] General Statutes § 48-6(a) provides: "Any municipal corporation having the right to purchase real property for its municipal purposes which has, in accordance with its charter or the general statutes, voted to purchase the same shall have power to take or acquire such real property, within the corporate limits of such municipal corporation, and if such municipal corporation cannot agree with any owner upon the amount to be paid for any real property thus taken, it shall proceed in the manner provided by section 48-12 within six months after such vote or such vote shall be void." (Emphasis added.)
[2] General Statutes § 10-241a provides in relevant part: "Any local or regional school district may take, by eminent domain, land which has been fixed upon as a site, or addition to a site, of a public school building, and which is necessary for such purpose or for outbuildings or convenient accommodations for its schools, upon paying to the owner just compensation, provided such taking is with the approval of the legislative body of the town, and in the case of regional school districts, subject to the provisions of section 10-49a, and in each case in accordance with the provisions of sections 8-129 to 8-133, inclusive. The board, committee or public officer empowered to acquire school sites in such school district shall perform all duties and have all rights prescribed for the redevelopment agency in said sections with respect to such taking. . . ." | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536512/ | 928 A.2d 1116 (2007)
ALBERT EINSTEIN
v.
GARDNER.
No. 2183 EDA 2006.
Superior Court of Pennsylvania.
April 19, 2007.
Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536435/ | 223 B.R. 167 (1998)
In re Lawrence PERRY, Debtor.
Lawrence PERRY, Appellant,
v.
SECRETARY OF HOUSING AND URBAN DEVELOPMENT, Appellee.
No. 98-6053EM.
United States Bankruptcy Appellate Panel of the Eighth Circuit.
Submitted July 8, 1998.
Decided August 6, 1998.
*168 Lawrence Perry, St. Louis, MO, pro se.
Vernon D. Singer, St. Louis, MO, for appellee.
PER CURIAM.
The matter presently before the court arises in an appeal from the bankruptcy court's order terminating the automatic stay and barring Debtor from filing another bankruptcy case for 180 days. By order dated June 1, 1998, the bankruptcy court terminated the automatic stay under 11 U.S.C. § 362 to allow the Secretary of Housing and Urban Development, Appellee, to foreclose on the Appellant's real property. In his notice of appeal filed with the bankruptcy court, the Appellant requested a stay of the foreclosure sale, waiver of costs, appointment of counsel, and reconsideration of the bankruptcy court's order. By order dated June 16, 1998, the bankruptcy court denied each of these motions. The Appellant has now filed an "emergency motion" with this court, requesting that we enter an order staying the sale of his property and/or staying his eviction from the property pending appeal; granting him leave to proceed in forma pauperis on appeal; and, appointing counsel to represent him throughout the appeal.
We first consider appellant's request for leave to proceed in forma pauperis and for the appointment of counsel. Appellant has filed two separate unsworn affidavits in which he avers generally that he is without funds to pay or assets to secure the filing fee or to obtain counsel on appeal. He cites to no statute or precept of constitutional law which would provide him such relief. Section 1915(a) of Title 28 permits, but does not require, a court of the United States[1] to waive a filing fee and to request that an attorney represent any person who is actually impoverished and indigent. This statute *169 applies to nonprisoner[2] and to civil cases, although its most common use has been by prisoners who claim indigence and prison abuse. See Lefkowitz v. Citi-Equity Group, Inc., 146 F.3d 609, 611-12 (8th Cir.1998); Roller v. Gunn, 107 F.3d 227, 230 (4th Cir. 1997). Indeed, it was the abuse by prisoners who flooded the courts with prisoners' rights litigation that caused Congress to pass the Prison Litigation Reform Act, thereby amending § 1915 so as to require prisoners to pay some portion of the costs of pursuit of these appeals. Lefkowitz, 146 F.3d 609, 611-12; Roller, 107 F.3d at 230-31.
Ordinarily, however, a request for leave to proceed in forma pauperis must first be made to the trial court and an appeal may not be taken if the trial court certifies in writing that the appeal is not taken in good faith. 28 U.S.C. § 1915(a)(3); Adams v. Inman, 218 B.R. 458, 459 (8th Cir. BAP 1998). Further, § 1915(e)(2) allows the court to dismiss the case at any time, sua sponte and notwithstanding the payment of fees or portions thereof, if the court determines that the allegation of poverty is untrue or that an appeal is frivolous. 28 U.S.C. § 1915(e)(2); Williams v. Willits, 853 F.2d 586, 588 (8th Cir.1988). In this case, the bankruptcy court was not asked to and did not certify that the Debtor's appeal was taken in bad faith under 28 U.S.C. § 1915(a)(3). In the order granting relief from stay upon which this appeal is based, however, the bankruptcy court did find that Appellant's Chapter 13 case was filed "solely to hinder, delay, and facilitate [the appellant] creditors in bad faith." This finding was based on the fact that Appellant has filed seven bankruptcy cases since March 17, 1994; one Chapter 7 and six Chapter 13 cases. Five of the seven cases were dismissed by the bankruptcy court within six months of their inception. During that time, the Appellee has had three foreclosure attempts against the Appellant's property. The Appellant's fourth case was filed two days before the Appellee's first scheduled foreclosure sale. His fifth case was filed twenty-one days prior to the second scheduled foreclosure sale. This current case was filed one day before the Appellee's third scheduled foreclosure sale.
We conclude, therefore, that if § 1915(a) applies at all, this appeal is taken in bad faith and the request for leave to proceed in forma pauperis and for the appointment of counsel should be denied. Because the record in this case demonstrates that the appeal is frivolous, we need not remand to allow the bankruptcy court to make such a finding. See Boatmen's First Nat'l Bank v. Kansas Pub. Employees Retirement Sys., 57 F.3d 638, 640 n. 5 (8th Cir.1995); Finney v. Arkansas Bd. of Correction, 505 F.2d 194, 212 n. 15 (8th Cir.1974) (stating that appellate review absent specific findings and conclusions from the trial court may proceed when the record itself sufficiently informs the court of the basis for the trial court's decision on the material issues).
Finally, Appellant's motion for a stay pending appeal should be denied. A party seeking a stay pending appeal must demonstrate that it is likely to succeed on the merits, that it will suffer irreparable injury unless the stay is granted, that no substantive harm will come to other interested parties, and that the stay will do no harm to the public interest. Fargo Women's Health Organization, et al., v. Schafer, 18 F.3d 526, 538 (8th Cir.1994); James River Flood Control Assoc. v. Watt, 680 F.2d 543, 544 (8th Cir. 1982). As previously noted, the appeal has little likelihood of success on the merits. Moreover, the record indicates that the sale may already have occurred, in which case the appeal would be moot, as we would be unable *170 to grant effective relief. United States v. Fitzgerald, 109 F.3d 1339, 1341 (8th Cir. 1997); Van Iperen v. Production Credit Assoc., 819 F.2d 189, 190 (8th Cir.1987). Finally, in a case such as this where the debtor has used the bankruptcy court to repeatedly frustrate a creditor's foreclosure remedies through serial filings which were not pursued, any harm to the debtor is outweighed by the harm from granting such stay to the creditor, and public policy weighs against a grant of such stay.
Accordingly, it is hereby ordered that the motion is in all respects DENIED.
NOTES
[1] In Adams v. Inman, 218 B.R. 458, 459 (8th Cir. BAP 1998) we recognized the split of authority on the question of whether 28 U.S.C. § 1915 applies in bankruptcy proceedings at all. As we did in Adams, however, because of our disposition on this case, we also decline to resolve the issue in this case.
[2] In spite of its rather awkward wording, "any court of the United States may authorize the commencement, prosecution, or defense of any suit, action or proceeding, civil or criminal, or appeal therein, without prepayment of fees or security therefor, by a person who submits an affidavit that includes a statement of all assets such prisoner possesses . . .," § 1915(a) is not limited to prisoner cases. See Floyd v. U.S. Postal Service, 105 F.3d 274, 275-77 (6th Cir.1997); Kane v. Lancaster County Dep't of Corrections, 960 F.Supp. 219, 220 n. 1 (D.Neb.1997) ("[T]o the extent this language literally means that in forma pauperis status can be granted only to prisoners, I reject that interpretation as absurd"); In re Woodman, 213 B.R. 53, 54 n. 5 (Bankr.D.Conn.1997) ("[I]t is apparent that the term `prisoner' in section 1915(a)(1) is a typographical error and that Congress actually intended the term to be `person.'") | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536438/ | 223 B.R. 481 (1998)
In re Arthur E. AULTMAN and Dorothy Aultman, Debtors.
ELECTRIC M & R, INC., Movant,
v.
Arthur E. AULTMAN, Dorothy Aultman, and K. Lawrence Kemp, Trustee, Respondents.
Bankruptcy No. 98-24822-MBM, No. 98-2901M.
United States Bankruptcy Court, W.D. Pennsylvania, Pittsburgh Division.
August 12, 1998.
*482 Martha E. Bailor, Pittsburgh, PA, for Electric M & R, Inc.
Robert H. Slone, Greensburg, PA, for Dorothy M. and Arthur E. Aultman.
K. Lawrence Kemp, North West Kensington, PA, trustee.
MEMORANDUM OPINION
M. BRUCE MCCULLOUGH, Bankruptcy Judge.
Electric M & R, Inc. (hereafter "Electric M & R") moved for relief from the automatic stay in the above-captioned bankruptcy case so that it could proceed to execute upon realty owned by the debtors, Arthur E. Aultman and Dorothy Aultman. This Court granted Electric M & R's motion on July 21, 1998, after a hearing on the same date. This memorandum opinion sets forth in detail the basis for this Court's decision.
STATEMENT OF FACTS
Electric M & R asserts that it is entitled to relief from the automatic stay in the instant bankruptcy case because, according to Electric M & R, the equitable interest in the debtors' realty is not property of the debtors' bankruptcy estate since the debtors held legal title to, but not an equitable interest in, said realty as of the date upon which they filed their bankruptcy petition. Electric M & R contends that it owned the equitable interest in the debtors' realty because the Pennsylvania Court of Common Pleas, Westmoreland County (hereafter "the Pennsylvania court"), impressed a constructive trust upon said realty in Electric M & R's favor at the conclusion of litigation instituted by Electric M & R against the debtors, as evidenced in paragraph 5 of that court's order dated May 22, 1998. The Pennsylvania court, in paragraph 1 of its May 22, 1998 order, also held that Electric M & R is entitled to judgment against both debtors in the amount of $451,214.00, which amount apparently represents the value of that property which the Pennsylvania court determined Mr. Aultman had fraudulently conveyed to himself and Mrs. Aultman at the expense of Electric M & R. The state court action by Electric M & R that culminated in the state court decision of May 22, 1998 was commenced on February 2, 1987, and was also filed and indexed as a lis pendens on the debtors' realty at or about the same time. See Electric M & R, Inc. v. *483 Arthur Aultman and Dorothy Aultman, No. 1190 of 1987 at 4 (Pa.Com.Pl.1998). The Pennsylvania court appears to have determined that the fraudulent conveyances by Mr. Aultman at Electric M & R's expense occurred between 1983 and 1986 but, in any event, most certainly occurred many years prior to May 22, 1998. See Id. at 11 and n. 9.
The debtors defend against stay relief in Electric M & R's favor by pointing out that the May 22, 1998 state court decision was not entered as a judgment upon the state court docket until June 24, 1998, which, of course, was subsequent to commencement of the instant bankruptcy case. Because of this, the debtors implicitly contend that said state court decision, and the constructive trust which was imposed pursuant to that decision, is deprived of any legal effect within the context of the instant bankruptcy case. The debtors argue alternatively that, if a constructive trust was impressed upon their realty via the May 22, 1998 state court decision, said constructive trust constitutes a voidable preference in this Court pursuant to 11 U.S.C. § 547 since said decision was rendered within thirty days of June 18, 1998, which is the date upon which the instant bankruptcy case was commenced. As evidenced by the debtors Bankruptcy Schedule C, the debtors propose to take an exemption of $33,880.00 in their residence, as well as $1.00 exemptions in the other three additional pieces of realty that they owned pre-petition.
DISCUSSION
Before directly addressing the precise issues raised in the instant matter, the Court deems it essential to set forth pertinent law regarding constructive trusts in Pennsylvania, without which the instant matter cannot effectively be resolved. First, a constructive trust describes the relationship wherein the one holding legal title to property labors under an equitable duty to convey it to another. See, e.g., 38 Pennsylvania Law Encyclopedia Trusts § 101 at 617-18 (West 1961) (citing City of Philadelphia v. Heinel Motors, 142 Pa.Super. 493, 16 A.2d 761 (1941)). Second, and most importantly for resolution of the instant matter, Pennsylvania adheres to the majority view that constructive trusts arise when the facts giving rise to the fraud or wrong occur, which fraud or wrong constitutes the basis for impression of the constructive trust. See Turney v. McKown, 242 Pa. 565, 89 A. 797 (1914) ("a trust ex maleficio [ (ie., constructive trust)][1] can arise only at the inception of the [legal] title, from fraud when practiced in obtaining it"); Grubbs v. Dembec, 274 Pa.Super. 362, 418 A.2d 447, 451 note 1 (1980) ("Although a constructive trust may not be judicially decreed until many years subsequent to the transaction giving rise to the trust, the accepted theory is that the constructive trust is in existence at the inception of the transaction, . . . and the beneficiary is possessed with an equitable interest in the trust property prior to the declaration of the constructive trust."); see also In re General Coffee Corp., 828 F.2d 699, 702-03 (11th Cir.1987) (holding that Florida adheres to the majority view that constructive trusts exist from the moment that fraudulent transactions giving rise to them occur, and that constructive trusts generally exist long before a court grants equitable relief in such form).
Applying the above rule to the instant matter absent the debtors' bankruptcy case, the constructive trust impressed by the Pennsylvania court upon the debtors' realty arose in Electric M & R's favor as of the date upon which Mr. Aultman fraudulently conveyed property to himself and Mrs. Aultman at Electric M & R's expense. These fraudulent conveyances appear to have occurred between 1983 and 1986 but, in any event, most certainly occurred many years prior to May 22, 1998. Therefore, the constructive trust upon the debtors' realty arose in Electric M & R's favor many years prior to May 22, 1998. Furthermore, Electric M & R, as a result of the constructive trust in its favor, presently owns, and is deemed to have owned since the mid-1980's when the constructive *484 trust arose in its favor, the equitable interest in the debtors' realty.
This Court concludes that, despite the advent of the instant bankruptcy case, the analysis in the preceding paragraph will not change. First, this Court disagrees with the debtors that the state court-imposed constructive trust upon the debtors' realty is null and void in the instant bankruptcy case merely because a judgment was not entered upon the state court docket until after the commencement of said case. Instead, this Court concludes that (a) the judgment entered upon the state court docket post-petition is neither null nor void, (b) the constructive trust at issue is thus also neither null nor void, and (c) the constructive trust, even though perhaps legally impressed post-petition, arose and existed pre-petition, or between 1983 and 1986 when Mr. Aultman fraudulently conveyed property to himself and Mrs. Aultman at Electric M & R's expense. See infra pp. 484-485. Second, and after a detailed analysis involving several Bankruptcy Code sections, this Court concludes that neither the debtors nor the Chapter 7 trustee can avoid the constructive trust in Electric M & R's favor. See infra pp. 485-486.
As a consequence, this Court holds that Electric M & R possessed the equitable interest in the debtors' realty via an unavoidable constructive trust prior to, as well as at the time of, the commencement of the instant bankruptcy case and, thus, said equitable interest does not constitute property of the debtors' bankruptcy estate. See 11 U.S.C.A. § 541(d) (West 1993) ("Property in which the debtor holds, as of the commencement of the case, only legal title and not an equitable interest . . . becomes property of the estate . . . but only to the extent of the debtor's legal title to such property, but not to the extent of any equitable interest in such property that the debtor does not hold"); In re Columbia Gas Systems, Inc., 997 F.2d 1039, 1059 (3rd Cir.1993) ("Congress clearly intended the exclusion created by section 541(d) to include not only funds held in express trust, but also funds held in constructive trust"); City of Farrell v. Sharon Steel Corporation, 41 F.3d 92, 95 & 98-99 (3rd Cir.1994) ("the distinction between a direct trust (ie., one expressly created by the parties) and a constructive trust (ie., one imposed by law) has no relevance to the operation of § 541(d)"). Furthermore, Electric M & R is entitled to relief from the automatic stay at this time because (a) only bare legal title to, and not the equitable interest in, the debtors' realty constitutes property of the debtors' bankruptcy estate, and (b) legal title in the realty is worthless to the bankruptcy estate since the estate, as legal titleholder, has but one duty with respect to that title, which duty is to convey it to Electric M & R as beneficiary of the constructive trust.
Detailed analysis of the issues raised by the debtors, the resolution of which was alluded to above, follows.
I. Whether the constructive trust in favor of Electric M & R is null and void since a judgment was not entered upon the state court docket until after the commencement of the instant bankruptcy case?
The debtors appear to argue that (a) the constructive trust in Electric M & R's favor was not impressed upon their realty unless, and then not until, the Pennsylvania court entered a judgment on the state court docket in Electric M & R's favor based upon the May 22, 1998 order, and (b) since said judgment was ultimately so entered by the Pennsylvania court but not until six days after the commencement of the instant bankruptcy case, said judgment, as well as the constructive trust, is null and void. As an initial matter, this Court, because it is aware of at least some case and treatise authority to the contrary, questions the accuracy of the debtors' contention that the May 22, 1998 decision of the Pennsylvania court was without legal effect until a corresponding judgment was entered upon the state court docket. See Lansdowne by Lansdowne v. G.C. Murphy, 358 Pa.Super. 448, 517 A.2d 1318, 1322 (1986) (citing 49 C.J.S. Judgments, §§ 106, 107 & 109 n. 97) ("As between the parties, a judgment duly rendered [by a court] may be valid and effective, although not entered . . . The enforcement of a judgment does not depend on its entry, or docketing"). *485 However, the Court need not concern itself with a precise resolution of that issue because the corresponding judgment in Electric M & R's favor, which was entered on the docket six days after commencement of the instant bankruptcy case, is nevertheless neither null nor void.
The debtors argue that said judgment, because it was entered upon the state court docket post-petition, must be null and void since it constitutes a violation of the automatic stay imposed as a result of the debtors' bankruptcy petition filing. However, the debtors are incorrect because (a) in Pennsylvania, the mere entry of a judgment upon a state court docket by the state court prothonotary is a purely ministerial act, see Lansdowne, 517 A.2d at 1321; Gotwalt v. Dellinger, 395 Pa.Super. 439, 577 A.2d 623, 625 (1990), and (b) performance of a purely ministerial act post-petition will not constitute a continuation of a judicial action or proceeding against the debtors in violation of 11 U.S.C. § 362(a)(1). See, e.g., In re Soares, 107 F.3d 969, 973-74 (1st Cir.1997); Chase Manhattan Bank v. Celotex Corporation, 852 F.Supp. 226, 227 (S.D.N.Y.1994); In re Knightsbridge Development Co., 884 F.2d 145, 148 (4th Cir. 1989); Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 527-28 (2nd Cir.1994); In re Papatones, 143 F.3d 623, 626 (1st Cir. 1998); Bonilla v. Trebol Motors Corp., 150 F.3d 77, 86-87 (1st Cir.1998). As a consequence, neither the judgment in Electric M & R's favor, nor the constructive trust impressed upon the debtors' realty, is null and void for violation of the automatic stay.[2]
Furthermore, consistent with the holdings in Turney v. McKown and Grubbs v. Dembec, the constructive trust impressed on the debtors' realty, even though perhaps legally so impressed post-petition, arose and existed pre-petition, or between 1983 and 1986 when Mr. Aultman fraudulently conveyed property to himself and Mrs. Aultman at Electric M & R's expense. See supra p. 483.
II. Whether the constructive trust impressed upon the debtors' realty in Electric M & R's favor is unavoidable in the instant bankruptcy case?
The debtors contend alternatively that, if a constructive trust was impressed upon their realty via the May 22, 1998 state court decision, said constructive trust constitutes a voidable preference in this Court pursuant to 11 U.S.C. § 547 since said decision was rendered within thirty days of the June 18, 1998 petition filing date. Although the debtors have technically only raised the issue of avoidability under § 547, the Chapter 7 trustee also appeared at the hearing on the stay relief motion, at which time he too raised tentative concerns as to whether Electric M & R's constructive trust could be avoided. Because he did not divulge precisely which Code sections he had in mind, the Court deems it necessary and appropriate, as well as efficient, to address at this time issues of avoidability vis-a-vis the Chapter 7 trustee's strong-arm powers under 11 U.S.C. § 544(a)(1) and (3).[3]
A. Whether the constructive trust impressed upon the debtors' realty constitutes a voidable preference?
First, this Court notes that it does not need to determine whether the constructive trust in question was legally impressed upon the debtors' realty on May 22, 1998, since, even if it was legally so impressed post-petition, it nevertheless clearly arose and existed pre-petition. See supra p. 485. However, for two reasons, § 547(b) is of little use to the debtors or the trustee even if the constructive trust was legally impressed as of May 22, 1998, which is within thirty days of the commencement of the instant bankruptcy case.
First, because the constructive trust arose in Electric M & R's favor as of the date upon which Mr. Aultman fraudulently conveyed *486 property to himself and Mrs. Aultman at Electric M & R's expense, Electric M & R owned the equitable interest in said realty from the date of said fraudulent conveyances. That being the case, the debtors never legally transferred the equitable interest in their realty to Electric M & R, which means that there does not exist a transfer of said equitable interest which this Court could now avoid as preferential pursuant to § 547(b). Furthermore, even if this Court can discern a legal transfer of the equitable interest in the debtors' realty to Electric M & R via said constructive trust, said transfer would not be "of an interest of the debtor in [such] property." See, e.g., In re Winkle, 128 B.R. 529, 532-33 (Bankr.S.D.Ohio 1991); In re Unicom Computer Corp., 13 F.3d 321, 324 (9th Cir. 1994). As a consequence, the constructive trust upon the debtors' realty in Electric M & R's favor could not have been avoided as a preference under § 547(b) in any event.
B. Whether Electric M & R's constructive trust can be avoided pursuant to § 544(a)(1)?
11 U.S.C. § 544(a)(1) permits a trustee to
avoid any transfer of property of the debtor or any obligation incurred by the debtor that is voidable by . . . a creditor that extends credit to the debtor at the time of the commencement of the case, and that obtains, at such time and with respect to such credit, a judicial lien on all property on which a creditor on a simple contract could have obtained such a judicial lien.
11 U.S.C.A. § 544(a)(1) (West 1993). This Court concludes that this power also cannot be utilized to avoid Electric M & R's constructive trust. First, and for the reasons set forth in the immediately preceding part of this opinion, the impression by the Pennsylvania court of the constructive trust upon the debtors' realty never effected a "transfer of property of the debtor;" this conclusion is as applicable to § 544(a)(1) as it is to § 547(b).
Furthermore, and perhaps more importantly for purposes of § 544(a)(1), a judgment creditor (ie., a creditor obtaining a judicial lien), such as is the trustee for purposes of § 544(a)(1), will not stand in priority as against one who possesses an earlier unrecorded equitable interest in realty via a constructive trust, such as is Electric M & R herein. This is because "[a] judgment creditor is not a purchaser and has no equity as such; he stands in the shoes of his debtor and is not entitled to the protection of a purchaser of the legal title as against an equitable owner or his creditors." 20A Pennsylvania Law Encyclopedia Judgments § 353 at 278 (West 1990); see also Id. at § 354 at 280-81 ("It has been held that judgment creditors do not come within the recording acts, and an actual conveyance of land, though unrecorded, is binding as against a judgment entered subsequent to the date and delivery of the deed."); Restatement (First) of Restitutions §§ 160, 173 (1936); General Coffee Corp., 828 F.2d at 706-07.
Therefore, § 544(a)(1) is of no use to the debtors or the Chapter 7 trustee in avoiding the constructive trust impressed upon the debtors' realty in Electric M & R's favor.
C. Whether Electric M & R's constructive trust can be avoided pursuant to § 544(a)(3)?
11 U.S.C. § 544(a)(3) provides that a trustee has, as of the commencement of a bankruptcy case,
the rights and powers of . . . a bona fide purchaser of real property, other than fixtures, from the debtor, against whom applicable law permits such transfer to be perfected, that obtains the status of a bona fide purchaser and has perfected such transfer at the time of the commencement of the case, whether or not such a purchaser exists.
11 U.S.C.A. § 544(a)(3) (West 1993). This Court concludes that this power cannot be utilized by the debtors or the Chapter 7 trustee to avoid Electric M & R's constructive trust despite the fact that, as noted above, a bona fide purchaser, as opposed to a judgment creditor, is entitled to the protection of the recording acts. Section 544(a)(3) is of no use here because Electric M & R's state cause of action against the debtors from which action the debtors received, inter *487 alia, the remedy of a constructive trust was filed and indexed as a lis pendens against the debtors' realty on or about February 2, 1987. As a result, said lis pendens filing/indexing would have placed any bona fide purchaser of the debtors' realty on constructive notice that Electric M & R might have an equitable interest in said realty via a constructive trust pending the outcome of the state court litigation between Electric M & R and the debtors. See In re Cole, 60 B.R. 325, 327 (Bankr. E.D.Pa.1986); In re W & L Associates, Inc., 1988 WL 47598 (Bankr.E.D.Pa.1988). Because of this constructive notice, § 544(a)(3) is rendered inoperative in this matter.
CONCLUSION
In accordance with the above analysis, this Court holds that Electric M & R possessed the equitable interest in the debtors' realty via an unavoidable constructive trust prior to, as well as at the time of, the commencement of the instant bankruptcy case and, thus, said equitable interest does not constitute property of the debtors' bankruptcy estate. Furthermore, Electric M & R is entitled to relief from the automatic stay at this time because (a) only bare legal title to, and not the equitable interest in, the debtors' realty constitutes property of the debtors' bankruptcy estate, and (b) legal title in the realty is worthless to the bankruptcy estate since the estate, as legal titleholder, has but one duty with respect to that title, which duty is to convey it to Electric M & R as beneficiary of the constructive trust. Therefore, the Court granted Electric M & R's motion for relief from the automatic stay for the purpose of executing upon the debtors' realty which comprises the corpus of the constructive trust impressed in Electric M & R's favor.
NOTES
[1] "A constructive trust has been often referred to as a trust `ex maleficio.'" 38 Pennsylvania Law Encyclopedia Trusts § 101 at 618.
[2] This Court, simultaneous with its grant of stay relief to Electric M & R, orally directed Electric M & R to have the May 22, 1998 state court decision reentered as a judgment on the state court docket before Electric M & R pursued execution upon the debtors' realty. As it turns out, that oral direction was unnecessary.
[3] The debtors technically have standing to raise avoidability issues under §§ 544(a) and 547(b) pursuant to 11 U.S.C. § 522(h). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536685/ | 928 A.2d 147 (2007)
395 N.J. Super. 143
Vincent L. GAMBA, Plaintiff-Appellant,
v.
TOWNSHIP OF BRICK, Defendant-Respondent.
Superior Court of New Jersey, Appellate Division.
Argued May 30, 2007.
Decided July 26, 2007.
*148 Kenneth L. Thomson, Freehold, argued the cause for appellant (Manning, Caliendo & Thomson, attorneys; Mr. Thomson, on the brief).
Scott W. Kenneally, Brick, argued the cause for respondent (Starkey, Kelly, Bauer, Kenneally & Cunningham, attorneys; Mr. Kenneally, of counsel; Dina R. Khajezadeh, on the brief).
*149 Before Judges SKILLMAN, LISA and GRALL.
The opinion of the court was delivered by
GRALL, J.A.D.
Plaintiff Vincent L. Gamba appeals from an order dismissing his complaint following a jury trial. Gamba alleged that defendant Township of Brick demolished a house on his property and imposed a lien for demolition costs without affording the prior notice and hearing required by N.J.S.A. 40:48-2.5 and N.J.S.A. 40:48-2.7. He sought damages for Brick's unlawful actions and for violation of his constitutional right to procedural due process. This case was previously before us on Gamba's appeal from a grant of summary judgment in favor of Brick and denial of his cross-motion for summary judgment on liability. In an unpublished decision, we reversed both orders and remanded for further proceedings, including consideration of Brick's failure to follow statutory procedures for demolition. Gamba v. Twp. of Brick, No. A-2313-01 (App. Div. April 8, 2003). That question had not been addressed by the motion judge.[1]
On remand the trial court determined that Brick did not follow the statutory procedures. Nonetheless, the court instructed the jurors that Gamba could not prevail if he had actual notice that his house would be subject to demolition if he did not make the repairs required by Brick. We conclude that actual notice of the potential for demolition of one's property at an unspecified future date neither satisfies nor substantially complies with the municipality's statutory obligations to provide the property owner with prior notice and a hearing. Accordingly, we reverse and remand.
The property at issue is located in the Township of Brick and owned by Gamba. It includes a house, which had not been occupied for several years when Brick first invoked its authority to demolish it pursuant to N.J.S.A. 40:48-2.3 to -2.12.
The Legislature has conferred on municipalities the authority to exercise "police powers to repair, close or demolish, or cause or require the repairing, closing or demolition of" buildings that are "unsafe or insanitary, or dangerous or detrimental to the health or safety or otherwise inimical to the welfare of the residents of said municipality. . . ." N.J.S.A. 40:48-2.3. A municipality, however, must exercise that authority "in the manner" provided in the statutes. Ibid.
It is well-settled that strict compliance with procedures relevant to notice and hearings is required in municipal demolition proceedings where "an intrusion on a substantial property right may result." Hepner v. Twp. Comm. of Twp. of Lawrence, 115 N.J.Super. 155, 161-62, 278 A.2d 513 (App.Div.), certif. denied, 59 N.J. 270, 281 A.2d 532 (1971); accord 21-23 Seidler Assocs., L.L.C. v. City of Jersey City, 391 N.J.Super. 201, 208, 917 A.2d 808 (App.Div.2007). A person aggrieved by a demolition accomplished by a municipality that did not "first comply[ ], at least substantially, with the statutory provisions," may recover for injuries sustained as a consequence. Hepner, supra, 115 N.J.Super. at 163, 278 A.2d 513. Both owners and other persons with "interests of record" are afforded protections under the law. See N.J.S.A. 40:48-2.4(d)-(e); *150 21-23 Seidler Assocs., supra, 391 N.J.Super. at 206, 917 A.2d 808.
An understanding of the statutory procedures a municipality must follow prior to demolition and the purposes served by adherence to those procedures is essential to a determination whether Brick failed to substantially meet its statutory obligations in connection with this demolition. See N.J.S.A. 40:48-2.5 (requiring a municipality to adopt an ordinance and specifying mandatory provisions); N.J.S.A. 40:48-2.7 (describing the manner of service of process). For that reason, we discuss together the statutory requirements and the actions Brick took in this case.
A municipality must issue a complaint stating the charges. N.J.S.A. 40:48-2.5(b). Brick did that. Brick's complaint was in the form of a letter to plaintiff dated October 2, 1998. In that letter, Brick notified plaintiff that his property had become "so out of repair so as to be unsafe, unsanitary or otherwise unfit for human occupation or occupancy." Brick cited violations of "the BOCA National Property Maintenance Code" governing public nuisance, weeds, exterior painting, street numbers and window and door framing. The letter included a warning that the conditions "may require immediate repair or correction." The letter further advised that Brick's Property Maintenance Appeal Board (Board) would consider whether an order should issue that would require repair, improvement, alteration, removal or demolition of Gamba's property and set a deadline for completion of the work deemed necessary.
In addition to a statement of the charges, a complaint must include information that notifies the owner of the date and time of a hearing on the charges and of the owner's right to file an answer, appear and testify at that hearing. Ibid. The hearing may not be held fewer than seven days after service of the complaint. Ibid.[2] Brick did not meet these requirements. Brick informed plaintiff of his right to appear and testify at a hearing to be held before the Board on October 8, 1998. But, contrary to N.J.S.A. 40:48-2.5(b), the notice did not advise Gamba of his right to file an answer. Further, although N.J.S.A. 40:48-2.5(b) does not permit a hearing fewer than seven days after the complaint is properly served, Brick scheduled this hearing for a date only six days from the date of the issuance of the complaint.
Timely notice, which in this context is notice that affords adequate time to permit preparation of a defense, is a basic component of due process. See H.E.S. v. J.C.S., 175 N.J. 309, 321-25, 815 A.2d 405 (2003). The Board was not free to ignore the Legislature's determination that a minimum of seven days is required for adequate preparation of a defense. Gamba presented the Board with an opportunity to cure its failure to provide timely notice by requesting an adjournment. But the Board denied that request, despite the fact that Gamba told the Board that he had contacted an attorney and asked for additional time to consult with the lawyer. Gamba also explained that he was attempting to hire a contractor, information potentially relevant to the need for and timing *151 of an order requiring and scheduling repairs or demolition.
The statute requires a municipality to afford additional procedural protections some of which were not afforded to Gamba. A determination that the building at issue is unfit for human habitation or occupancy or use must be accompanied by a written statement of findings of fact and served upon the owner. N.J.S.A. 40:48-2.5(c)(1). The Board partially complied. In a letter and order approved and dated November 5, 1998, the Board stated its reasons for concluding that Gamba's house was unfit for human habitation. It was not served, however, as required by N.J.S.A. 40:48-2.7.
Upon a finding that the building is "unfit," an order must be issued and served in accordance with N.J.S.A. 40:48-2.7. N.J.S.A. 40:48-2.5(c). The order may require repair within a reasonable time stated in the order. N.J.S.A. 40:48-2.5(c)(1). The order may also provide that if the building is "dangerous to the health and safety of persons on or near the premises, and the owner fails to repair, alter or improve the said building within the time specified in the order, then the owner shall be required to remove or demolish the said building within a reasonable time as specified in the said order of removal." N.J.S.A. 40:48-2.5(c)(2).
The statute is clear. Where demolition will be required if the work is not completed on the date set, the order must so state. The order also must provide and state a reasonable time, after the deadline for repair, to permit the owner to remove or demolish the structure. Ibid. If the relevant deadline for repair and reasonable period for removal are not so stated, then a separate "order of removal" is "required." Ibid.; see also N.J.S.A. 40:48-2.5(e) (providing that the municipality may remove or demolish if the owner does not comply with an order to remove or demolish). We have held that where the municipality's intention and right to remove or demolish is not clear, whether due to delayed enforcement or a dispute about the adequacy of a repair made, a second complaint and hearing is required prior to demolition. Hepner, supra, 115 N.J.Super. at 161-63, 278 A.2d 513.
In this case, the Board's November 5 order did not include provisions directing removal or demolition within a specified time. It directed Gamba to do the following work in accordance with the following schedule, which ran from the date of its November 5 decision and order: (1) eliminate weeds and overgrowth within two weeks (i.e., no later than November 19, 1998); (2) remove debris within thirty days (i.e., no later than December 5, 1998); (3) paint and repair windows, doors, door framing and exterior painting within sixty days (i.e., no later than January 4, 1999); (4) repair the roof and restore water, sewer and electrical service within ninety days (i.e., no later than February 3, 1999).
Brick suggests that the Board's order includes the notice required by N.J.S.A. 40:48-2.5(c)-(e). The claim is that the order states the Board's intention to require demolition upon Gamba's failure to meet any one of the four deadlines for repair and gives Gamba notice that the Board will demolish the house, at his expense, if he does not do so within thirty days of the first missed deadline.
We cannot agree that the order conveys the information required. In pertinent part it states:
Mr. Gamba is advised that, should he default in adhering to the above schedule, he shall be required to remove or demolish the building at his sole cost and expense, within thirty days of the default. In the event Mr. Gamba fails *152 to comply with the order to remove or demolish the building, then the Township shall be authorized to take the necessary steps to cause the building to be removed or demolished [at Gamba's expense].
[Emphasis added.]
This order is, at best, confusing. A reasonable reading suggests what the statute and Hepner require: that any demolition by Brick will be preceded by a finding of default, an "order to remove or demolish" and a demolition only in the event that Gamba does not comply with an order to "remove or demolish." See Hepner, supra, 115 N.J.Super. at 161-63, 278 A.2d 513. There is nothing in this order that even suggests what Brick argues, which is that the order authorizes Brick to jump straight to demolition, without a further hearing or an order of demolition, if Gamba misses any one of the four separate deadlines for repair included in the November 5 order.[3]
Brick took no subsequent action that afforded Gamba notice of his obligation to remove or demolish the building or a reasonable opportunity to accomplish the removal or demolition on his own. By letter dated December 21, 1998, Brick advised Gamba that his case was "scheduled for discussion" by the Board on January 14, 1999. In that letter the Board neither invited nor informed plaintiff that he had a right to attend the "discussion" or participate in a hearing. Cf. N.J.S.A. 40:48-2.5(b). The Board simply advised that it would be "discussing the status of [his] compliance or non-compliance with" the November 5 order and would "determine the next appropriate course of action." It invited plaintiff to contact the Board's attorney if he had questions. This letter did not meet the requirements of a new "complaint" for demolition. N.J.S.A. 40:48-2.5(b).
Although plaintiff was aware of the January 14, 1999 meeting, he did not attend. After reviewing photographs of plaintiff's property, the members of the Board determined that plaintiff had not complied with the November 5 order and voted to demolish the house on his property. The "discussion," without prior notice to Gamba of his opportunity to answer, appear and testify, did not meet the requirements of a new "hearing" on demolition. N.J.S.A. 40:48-2.5(b).
The Board prepared an order declaring its authority to demolish the structure and remediate the code violations. No date for the proposed demolition was stated. No time within which Gamba could arrange for demolition was provided. This "demolition" order did not meet the requirements of N.J.S.A. 40:48-2.5(e). Moreover, that order was not served as required by N.J.S.A. 40:48-2.7. The order was posted on the premises on January 14, 1999, and sent to plaintiff by registered and regular mail. On *153 January 17, the order was published in the local newspaper, but no affidavit of due diligence was prepared prior to publication. Cf. ibid.
On January 20, 1999, Brick demolished the house. The Board's final demolition order was recorded in the county clerk's office on January 21, 1999. The registered mail transmitting a copy of the January 14, 1999 order to Gamba was returned unclaimed on January 30, 1999.
According to plaintiff's testimony at trial, Brick subsequently filed a lien against plaintiff's property in the amount of $23,578.78, which he had paid by the time of trial. Plaintiff also introduced evidence to establish the value of the house and its contents.
We recently explained the purposes of statutes specifying the procedures a municipality must follow prior to demolishing private property under the authority of N.J.S.A. 40:48-2.3 to -2.12. The purposes are to give those with an interest in the property "adequate advance notice [that affords them] the opportunity to contest the charge of unfitness of the structure or to make necessary repairs[, and,] [i]f demolition is required, . . . to make the necessary arrangements, in a manner and at a cost satisfactory to them." Garden State Land Co. v. City of Vineland, 368 N.J.Super. 369, 378, 846 A.2d 625 (App. Div.2004). Even assuming that Gamba had "actual notice" because he received the complaint, the November 5, 1998 order, the December 21, 1998 letter about the January 14, 1999 meeting and the January 14 order, those communications did not fulfill Brick's statutory obligations.
In this case, Brick took no action that satisfied the purposes of the governing statutes, which is to afford adequate notice and fairness to the owner of the property. The first hearing was held too early to give Gamba an adequate opportunity to prepare a defense. There was no hearing prior to the issuance of the order requiring removal or demolition based on Gamba's "default." And, the order of demolition did not provide Gamba reasonable time to remove or demolish the house himself. Thus, there was no substantial compliance.
We do not foreclose the possibility that proof of actual notice might be sufficient to establish that a municipality substantially complied with its statutory obligation to exercise the power of demolition "in the manner" provided in N.J.S.A. 40:48-2.3 to -2.12. But the facts of this case preclude a finding that Brick's action amounted to substantial compliance. Among other things, substantial compliance requires "`general compliance with the purpose of the statute[s]'" at issue. Galik v. Clara Maass Med. Ctr., 167 N.J. 341, 353-54, 771 A.2d 1141 (2001) (quoting Bernstein v. Bd. of Trs. of Teachers' Pension & Annuity Fund, 151 N.J.Super. 71, 77, 376 A.2d 563 (App.Div.1977)). There was no substantial compliance with the purposes of the statutes at issue here. Actual notice, in the context of the demolition laws, must afford the property owner what is required by N.J.S.A. 40:48-2.5, both the information and opportunity necessary to permit defense against and avoid demolition.
It was error to submit the question of actual notice to the jury under the facts of this case. No reasonable juror could have found that Brick acted in accordance with the statutes. Plaintiff was entitled to a jury instruction directing that Brick's demolition of Gamba's property was not authorized.
The order dismissing plaintiff's complaint is reversed and the matter is remanded for trial on the remaining issues.
NOTES
[1] Plaintiff also alleged that Brick's action violated the Americans with Disabilities Act, 42 U.S.C.A. § 12101 to -12213, and the Law Against Discrimination, N.J.S.A. 10:5-1 to -42. We affirmed the dismissal of those claims. Gamba, supra, slip op. at 16.
[2] The statute requires service of the complaint, as well as any subsequent order issued, personally or by registered mail. N.J.S.A. 40:48-2.7. Service by publication is permitted only if the person's whereabouts are not known and cannot be ascertained through exercise of reasonable diligence. Ibid. Where circumstances warrant service by publication, the officer must prepare an affidavit stating the facts and "then" may accomplish the service by publication. Ibid. There is no evidence that Brick caused the complaint or any order issued in this case to be served in accordance with N.J.S.A. 40:48-2.7.
[3] Brick failed to serve this order as required by N.J.S.A. 40:48-2.5(c) in the manner specified in N.J.S.A. 40:48-2.7. It was not recorded as required by N.J.S.A. 40:48-2.7. The earliest date on which Gamba could have received the order by regular mail was November 30, 1998, the date of the mailing. The order was not posted on the premises as required by N.J.S.A. 40:48-2.7 until December 1, 1998.
Under Brick's reading of the order, Gamba was in default of the November 5 order when he missed its first deadline, which was November 19, 1998. The fact that the first deadline had passed prior to the earliest date on which Gamba could have had actual notice added factual ambiguity to the textual obscurity of the order. Under the circumstances, we do not see how a reasonable person reading the order would conclude that Brick could proceed to demolition at any point prior to the last of the four deadlines, which was February 3, 1999. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536687/ | 928 A.2d 402 (2007)
Dariusz KOSCIELNIAK, MD, Petitioner
v.
BUREAU OF PROFESSIONAL AND OCCUPATIONAL AFFAIRS, STATE BOARD OF MEDICINE, Respondent.
Commonwealth Court of Pennsylvania.
Submitted on Briefs June 1, 2007.
Decided June 29, 2007.
*403 James C. Sargent, Jr., West Chester, for appellant.
Sabina I. Howell, Counsel and Albert H. Masland, Chief Counsel, Harrisburg, for respondent.
BEFORE: SMITH-RIBNER, Judge, PELLEGRINI, Judge, and LEAVITT, Judge.
OPINION BY Judge PELLEGRINI.
Dariusz Koscielniak, M.D. (Doctor) appeals from an order of the State Board of Medicine (Board) finding that his treatment of Sonia Williams (Patient) fell below the accepted standard of care.
Doctor has been engaged in the practice of internal medicine through East Brown Medical Associates in East Stroudsburg, Pennsylvania, since 1997. Because Patient had turned 40 years of age, during her first examination with Doctor on April 18, 2000, she asked to be referred to a radiology facility for an initial bilateral mammogram screening. On May 24, 2000, she underwent a mammogram, and the staff at the radiology facility informed Patient that the screening results would be reported to Doctor and that his office would contact her if there was reason to be notified. Following the screening, the doctor preparing the mammogram report recommended additional imaging evaluation due to a "five mm in diameter speculated density within the mid portion of the right breast for which spot compression craniocaudal and mediolateral oblique views should be performed in initial further evaluation." (Proposed Adjudication and Order of July 28, 2006 at 3.) Doctor received the May 24, 2000 mammogram results and informed Patient that a follow-up screening was necessary.
In response to Doctor's notification, Patient scheduled her follow-up diagnostic mammogram at the same radiology facility and underwent the exam on June 7, 2000. Again, the facility's staff stated that the results of the screening would be reported to Doctor, and she would be contacted by his office if problems were present. The report of Patient's June 7, 2000 mammogram, which Doctor received, contained the following analysis:
1. PROBABLY BENIGN, 5 MM NODULAR DENSITY IN THE CENTRAL PORTION OF THE RIGHT BREAST AND THREE SMALLER PROBABLY BENIGN NODULAR DENSITIES IN THE INFERIOR ASPECT OF THE RIGHT BREAST.
2. SIX-MONTH FOLLOW UP MAMMOGRAM OF THE RIGHT BREAST IS RECOMMENDED.
(Proposed Adjudication and Order of July 28, 2006 at 3.) What is at issue in this case is whether Doctor failed to notify Patient of the results of this mammogram.
After the June 7, 2000 screening, Doctor treated Patient on six different occasions from September 2000 to July 2001 for various medical issues unrelated to the mammogram, including smoke inhalation, an upper respiratory infection and a *404 sprained ankle. On December 3, 2001, Doctor's office requested that the radiology facility schedule a routine mammogram for Patient, and one was performed on December 17, 2001. The results of the screening stated:
THERE HAS BEEN AN INCREASE IN SIZE OF THE MULTIPLE ROUNDED STRUCTURES IN THE INFERIOR MEDIAL ASPECT OF THE RIGHT BREAST SINCE STUDY DATED 5/24/00. THE PATIENT SHOULD RETURN FOR COMPRESSION SPOT VIEWS AS DISCUSSED ABOVE AND AN ULTRA SOUND OF THE RIGHT BREAST.
(Proposed Adjudication and Order of July 28, 2006 at 4.) Once Doctor received the results, he contacted Patient and informed her that a suspicious lesion was found requiring addition medical attention.
Patient then underwent a diagnostic mammogram which showed that the lesion was increasing in density, and a biopsy was necessary to determine whether the lesion was cancerous. Doctor referred Patient to a general surgeon who conducted a biopsy of her right breast which showed a Stage Two Infiltrating Papillary Carcinoma. Patient then had two surgical procedures at the Memorial Sloan Kettering Cancer Center in New York in March 2002 to remove the tumor, completed radiation therapy, and in March 2005, underwent reconstructive surgery.
On June 27, 2005, an Order to Show Cause (OSC) was filed against Doctor by the Department of State alleging that because he failed to notify Patient about the results of the June 7, 2000 mammogram and inform her to seek a follow-up screening, he was subject to disciplinary measures because his actions constituted a departure from the accepted standard of care a doctor owed to a patient under Section 41(8) of the Medical Practice Act,[1] as well as Sections 905 and 908 of the Medical Care Availability and Reduction of Error Act.[2] Doctor filed an answer to the OSC, and a hearing was conducted before a Board-appointed Hearing Examiner.
Testifying on behalf of the Commonwealth, Patient recounted that she initially asked Doctor about having a mammogram in April 2000, and one was scheduled for her in May 2000. She stated that she was *405 given the results of this exam by Doctor's office and understood that a second mammogram was necessary. After receiving a referral for another mammogram to be performed in June 2000, Patient said that the radiology facility stated that Doctor would discuss the results with her, but she maintained that Doctor never informed her of any problem with the exam. When asked why she had not contacted Doctor regarding the results of the June 2000 screening after she had not heard from him, Patient testified that Doctor was "her doctor and he would contact me again as he contacted me before." (Reproduced Record at 65a.) Patient further testified that she visited Doctor six, times for various medical problems beginning in September 2000, and she strictly complied with the treatments Doctor had recommended for each condition. She stated, however, that during these visits, Doctor did not discuss the findings of the June 2000 mammogram, and she denied telling Doctor that she did not want to undergo a follow-up mammogram until she lost weight. Patient also stated that she sought a referral from Doctor in August 2001, but at this time, she still was not notified of the abnormal results of the preceding diagnostic mammogram.
The Commonwealth also submitted Patient's medical records, including those from Doctor's office which failed to disclose whether she had been informed about the results of the June 7, 2000 mammogram and the need for a follow-up, as well as an expert report prepared by Jonathan Maltz, M.D. (Dr. Maltz). In the report, Dr. Maltz stated that Doctor did not inform Patient of the developing abnormality in her right breast and the need for a follow-up mammogram in six months after the June 7, 2000 screening. He also specified that "when a physician orders a mammogram and the radiologist recommends that the study be repeated in six months, the standard of care requires that the physician take reasonable steps to ensure that this recommendation is carried out." (Reproduced Record at 24a.) Dr. Maltz then opined that to a reasonable degree of medical certainty that Doctor deviated from this standard of care.
In defense, Doctor testified that after receiving the results from the May 24, 2000 mammogram, he telephoned Patient and notified her that the results were abnormal and additional studies were necessary. He explained that she received a mammogram on June 7, 2000, and he received the results of the screening as evidenced by his initials located on the report documents. Contrary to Patient's testimony that she was not informed of the June 7, 2000 mammogram, Doctor stated that he contacted Patient and informed her of what the mammogram results were and her need for a follow-up to be performed in six months. He then testified that he treated Patient several times following her initial visit in April 2000, and that he discussed the June 7, 2000 mammogram reports with her during every visit and urged her to undergo a six-month follow-up. Regarding a specific visit in January 2001, Doctor stated that after informing Patient about the need for a follow-up mammogram, she stated that she desired to lose weight before having another screening because her prior exam caused her discomfort. Doctor also denied having knowledge that Patient had contacted his office in August 2001 to schedule a yearly mammogram.
Doctor also offered an expert report prepared by Bruce G. Silver, M.D. (Dr. Silver) that acknowledged that Doctor failed to document his conversations with Patient, but opined that this did not constitute a deviation from the accepted standard of care.
*406 Finding Patient to be more credible than Doctor, the Hearing Examiner concluded that Doctor had not advised Patient of the need for a follow-up mammogram within six months of the June 7, 2000 exam and that this was a deviation from the generally accepted standard of care. While noting that Patient's and Doctor's testimonies directly conflicted as to whether Patient was informed of the results of the diagnostic mammogram and the need for a follow-up screening, the Hearing Examiner found Patient more credible than Doctor. He did so because Doctor failed to note in Patient's records that he had informed her about the June 7, 2000 mammogram's results. Moreover, despite his contention that he similarly did not note the results of the May 24, 2000 exam in her charts, Patient, nevertheless, complied with Doctor's recommendations following that screening demonstrating that she was a compliant patient. He also reasoned that the fact that Patient promptly complied with the recommended diagnostic mammogram in June 2000 was inconsistent with Doctor's testimony that she would have delayed the six-month follow-up screening to lose weight due to the discomfort of the procedure. In addition, the Hearing Examiner found Patient's overall demeanor more convincing than Doctor's, and she did not seem to be a passive patient based on her compliance with his recommended treatment of her medical concerns unrelated to the mammograms, as well as her response when she learned that she had breast cancer. The Hearing Examiner issued a proposed order that Doctor be issued a reprimand, that he pay a civil penalty of $10,000, and that within one year from the date of the order, he complete eight hours of continuing medical education in medical ethics and record keeping. The Board then issued a Notice of Intent to Review the Hearing Examiner's decision.
Before the Board, Doctor argued that he repeatedly discussed the abnormal mammogram results with Patient and the need for a six-month follow-up. He contended that the Hearing Examiner erroneously concluded that Patient was compliant because she did not undergo her yearly mammogram in May 2001, and that the imposition of the fine and the continuing medical education courses in medical ethics was excessive because his conduct was neither unethical nor immoral.
Dismissing Doctor's arguments, the Board adopted the Hearing Examiner's findings holding that his failure to inform a patient constituted a deviation from accepted standards of care to warrant corrective measures. However, it did sustain his challenge to the Hearing Examiner's recommendation that he take a continuing medical education course in medical ethics because the Commonwealth did not charge him with an ethics violation.[3] This appeal by Doctor followed.[4]
Doctor contends that the Board's conclusion that his actions deviated from the generally accepted standards of care was not supported by substantial evidence because it improperly found Patient more credible than him regarding whether he *407 had informed her of the results of the June 7, 2000 mammogram. He maintains that the Board improperly relied on factors such as Patient's compliance with treatment and his failure to document any discussion of the mammogram in her charts in making that determination.
Contrary to Doctor's argument, Patient's compliance and his failure to document his discussion with her was proper for the Board to use when making a determination as to who was more credible. As the Board noted, given her compliance with other treatments ordered, it was unlikely that Patient, faced with a potentially life-threatening illness, would not heed her physician's admonition for a follow-up study if communicated. As to Doctor's failure to document that he informed patient of the results of the mammogram, the Board properly took that into consideration because he failed to document in Patient's file that he had informed her of the results of the abnormal June 7 mammogram or her need to follow that up with another mammogram in six months. Moreover, the Board, in making its credibility determination, relied on the Hearing Examiner's observation that Patient's demeanor was more convincing.
What Doctor is actually arguing is that the Board should have found him more credible than Patient. Although he attempts to reargue the facts here to bolster his credibility, the Board was the ultimate fact-finder and decided to reject his testimony as to whether he had informed Patient of the results of the June 7, 2000 mammogram and the need for a follow-up within six months. Gleeson v. State Board of Medicine, 900 A.2d 430 (Pa.Cmwlth. 2006). Because we are bound by the Board's credibility determinations and may not reweigh the credibility of the witnesses on appeal, the order of the Board is affirmed. Marrero v. Bureau of Professional and Occupational Affairs, 892 A.2d 854 (Pa.Cmwlth.2005).
ORDER
AND NOW, this 29th day of June, 2007, the order of the State Board of Medicine, No. 0859-49-05, is affirmed.
NOTES
[1] Act of December 20, 1985, P.L. 457, as amended, 63 P.S. § 422.41(8). This section provides:
The board shall have authority to impose disciplinary or corrective measures on a board-regulated practitioner for any or all of the following reasons:
(8) Being guilty of immoral or unprofessional conduct. Unprofessional conduct shall include departure from or failing to conform to an ethical or quality standard of the profession. In proceedings based on this paragraph, actual injury to a patient need not be established.
(i) The ethical standards of a profession are those ethical tenets which are embraced by the professional community in this Commonwealth.
(ii) A practitioner departs from, or fails to conform to, a quality standard of the profession when the practitioner provides a medical service at a level beneath the accepted standard of care. The board may promulgate regulations which define the accepted standard of care. In the event the board has not promulgated an applicable regulation, the accepted standard of care for a practitioner is that which would be normally exercised by the average professional of the same kind in this Commonwealth under the circumstances, including locality and whether the practitioner is or purports to be a specialist in the area.
[2] Act of March 20, 2002, P.L. 154, as amended, 63 P.S. §§ 1303.905 and 1303.908. Section 905 provides:
If the licensure board determines, based on actions taken pursuant to section 904, that a physician has practiced negligently, the licensure board may impose disciplinary sanctions or corrective measures.
[3] Instead of being required to attend eight hours of continuing medical education in courses involving medical ethics and record keeping, the Board modified this requirement so that Licensee had to complete eight hours of Category 1 continuing medical education courses in the areas of patient safety/communications and record keeping.
[4] Our scope of review of a decision by the Board is limited to whether constitutional rights have been violated, the findings of fact are supported by substantial evidence, or errors of law have been committed. Taterka v. Bureau of Professional and Occupational Affairs, 882 A.2d 1040 (Pa.Cmwlth.2005). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919438/ | 541 A.2d 1269 (1988)
John H. JENKINS, Appellant,
v.
UNITED STATES, Appellee.
No. 86-70.
District of Columbia Court of Appeals.
Argued January 21, 1988.
Decided May 4, 1988.
*1270 James R. Klimaski, Washington, D.C., for appellant.
Sharon M. Collins, Asst. U.S. Atty., with whom Joseph E. diGenova, U.S. Atty., at the time the brief was filed, and Michael W. Farrell and N. Paul Patterson, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellee.
Before FERREN, TERRY, and STEADMAN, Associate Judges.
FERREN, Associate Judge:
A jury convicted John H. Jenkins of possession with intent to distribute heroin. D.C. Code § 33-541(b)(2)(A) (1987). Judge Salzman sentenced him to four to twelve years of imprisonment. In seeking reversal of his conviction, Jenkins alleges that the trial court erred in refusing (1) to require disclosure of the location of a police observation post and (2) to question the entire venire panel regarding possible bias in favor of police testimony. We disagree with his first contention, but, finding merit in his second argument, we reverse and remand for a new trial.
I.
The government introduced evidence showing that Metropolitan Police Officers James Starliper and Jay Wendell, from a covert observation post, observed Jenkins apparently selling narcotics at 1103 O Street, N.W. at about 12:10 a.m. on June *1271 23, 1984. They radioed a description, and Officer Duayne Beuthe arrested Jenkins within five minutes. Officer Perry Caldwell discovered a film canister containing heroin within 30 to 50 feet from the place of arrest. Officers Starliper and Wendell had observed Jenkins using the canister in transactions immediately before his arrest. The government's case consisted exclusively of the testimony of police officers: those involved in the observation and arrest, as well as a narcotics expert. Jenkins challenged the government's account with an alibi defense.
At trial, before the voir dire of the jury panel, defense counsel requested the court to ask the entire venire panel whether anyone "would give more weight to the testimony of a police officer." The court declined. Instead, the court indicated it would ask that question only of the prospective jurors "who [are] police officer[s]" but would instruct the jury, after the close of all the evidence, "not [to] give more weight to the testimony of a police officer."
At the voir dire, which the trial court itself conducted, the court described the offense charged, then asked all the prospective jurors if they had heard about the incident; if any of them had special familiarity with the immediate area of the alleged offense; if they were acquainted with the prosecutor, defense counsel, or defendant; if they had strong feelings about drugs that would prevent them from "decid[ing] this case fairly and impartially, on the evidence you hear and the instructions of law which the Court will give"; if they had reservations about sitting in judgment against another person such that they would be unable to decide the case based on the evidence and the law as instructed by the court; if, in the previous five years, they or their close friends or relatives had been witnesses to crimes, victims of crimes, or accused or convicted of crimes; if any in this group had legal training; and if any in the same group had been "employed by any law enforcement agency," defined as a "police force in and out of the District of Columbia, special police officers, prosecutors, corrections officers, someone in the Sheriff's Department, someone in the Department of Justice, other than the individual who has already disclosed that to us, someone in the Marshal's Service, Sheriff's Department, Internal Revenue Service, Secret Service or any other law enforcement agency."
One person employed by the Metropolitan Police Department as a crossing guard responded affirmatively to this last question, and the following dialogue took place:
THE COURT: Do you think that because you are a crossing guard you'd be inclined to believe the testimony of someone else in the law enforcement business more than anyone else, just because they're a police officer?
THE JUROR: No.
THE COURT: Could you be fair and impartial?
THE JUROR: Yes, I would.
The court conducted this questioning from the bench while the prospective juror stood at her seat. Consequently, their discussion could be heard by everyone in the courtroom.
As promised, the trial court, at the end of trial, instructed the jury on the proper treatment of police testimony:
Now police officers testified in this case; several of them. A police officer's testimony is to be considered by you just like the testimony of any other witness. And in evaluating the credibility of any of these police officers, the believability of them, you should use the very same guidelines that you would apply to the testimony of any other witness. In no event should you give either greater or lesser belief to the testimony of a witness simply because the witness is a police officer.
On the first day of trial, defense counsel implied that he might wish to request disclosure of the location of the police observation post, "since that is where all the observations were made from and all of the identifications were made from." Counsel also wanted "to determine the distance of the identification." The government, while professing "no objection to giving information such as distance, clarity of view, lack *1272 of obstructions, angle of sight, line of sight," and the like, contended it was not required to disclose the location. The court agreed with the government, citing as authority Thompson v. United States, 472 A.2d 899 (D.C.1984). It ruled that, absent some foundation or showing of necessity, the defense may not discover the precise location of the observation post.
Defense counsel adduced evidence that the observation post was diagonally across the street from Jenkins' transactions; that there were light posts, trees, and parked cars in the area (but these had not obstructed the officers' view); and that the officers, one with binoculars and the other without, had observed the transaction from 200 to 250 feet away. On the second day of trial, defense counsel formally requested the court to order the government to reveal the observation post. He argued that the police testimony about Jenkins' observed activities was incredible, that one officer testified about obstacles, and that nondisclosure had restricted Jenkins' right to cross-examination. The court denied the request because the defense failed to demonstrate necessity, as required by Thompson, to overcome the government's conditional privilege to maintain secrecy. The court noted that the testimony indicated a well-lighted street, good visibility, and, contrary to defense counsel's assertion, no obstruction.
II.
Jenkins alleges on appeal that the trial court erred in refusing to require disclosure of the observation post. We disagree. In Thompson, 472 A.2d at 900, we noted that the government's qualified privilege, at a suppression hearing, to withhold the exact location of an observation post, Hicks v. United States, 431 A.2d 18, 19 (D.C.1981), also applies at the trial stage. In order to overcome this qualified privilege, the defense must show there was some "vantage point in the relevant area that would not permit a clear view of appellant's activities." Thompson, 472 A.2d at 901. While Jenkins produced evidence of light posts, trees, and cars in the area, he made no positive showing that these could have precluded observation of his activities. "Nor did he suggest that the angle at which appellant's activities would have been viewed from some possible surveillance locations would have rendered some of them unobservable." Id. Consequently, the trial court did not err in ruling that, based on the evidence, the defendant's interest in avoiding wrongful conviction did not overcome the government's interest in protecting surveillance and, thus, that the location of the observation post need not be disclosed.
III.
Jenkins also argues that the trial court erred in failing, upon defense request, to inquire of the full panel of prospective jurors whether they would believe the testimony of a police officer more readily than that of other persons. He contends that where, as here, the government's case relies exclusively on the testimony of police officers, and where the defense challenges their credibility, the court's refusal to honor this request was an abuse of discretion requiring reversal of the conviction.
The purpose of voir dire is to allow the parties to satisfy themselves of an impartial jury, Harvin v. United States, 297 A.2d 774, 777-78 (D.C.1972), by affording "`a full and fair opportunity to expose bias or prejudice on the part of the veniremen.'" Glymph v. United States, 490 A.2d 1157, 1162 (D.C.1985) (quoting United States v. Robinson, 154 U.S.App.D.C. 265, 269-70, 475 F.2d 376, 380-81 (1973)). The trial court has broad discretion in conducting voir dire, however, and its rulings will not be disturbed on appeal "`absent an abuse of discretion and substantial prejudice to the accused....'" Cordero v. United States, 456 A.2d 837, 841 (D.C. 1983) (quoting Khaalis v. United States, 408 A.2d 313, 335 (D.C.1979), cert. denied, 444 U.S. 1092, 100 S. Ct. 1059, 62 L. Ed. 2d 781 (1980)). In sum, the trial court's discretion over the conduct of voir dire is subject to "`the essential demands of fairness.'" Cordero, 456 A.2d at 841 (quoting Aldridge v. United States, 283 U.S. 308, *1273 310, 51 S. Ct. 470, 471, 75 L. Ed. 1054 (1931)); Robinson, 154 U.S.App.D.C. at 269, 475 F.2d at 380; Brown v. United States, 119 U.S.App.D.C. 203, 204, 338 F.2d 543, 544 (1964); Sellers v. United States, 106 U.S. App.D.C. 209, 210, 271 F.2d 475, 476 (1959) (per curiam).
A defendant's right to an adequate voir dire is grounded in the sixth amendment guarantee of an impartial jury. Rosales-Lopez v. United States, 451 U.S. 182, 188, 101 S. Ct. 1629, 1634, 68 L. Ed. 2d 22 (1981) (plurality opinion) (where defendant convicted of aiding fellow Mexicans gain illegal entry into United States, trial court's failure to ask voir dire question about prejudice against Mexicans not reversible when court asked about bias against aliens in general). Appellant need not prove a constitutional violation, however, and does not purport to do so here. He relies on authorities demonstrating that an appellate court should reverse trial court rulings at voir dire not only for unconstitutional abuse of discretion but also for failure to satisfy a nonconstitutional standard of fairnessa standard developed by the appellate court in exercising its supervisory power over the administration of criminal justice. Id. at 190, 101 S. Ct. at 1635; see Boone v. United States, 483 A.2d 1135 (D.C.1984) (en banc) (trial court's refusal to allow defendant to approach bench where prospective jurors were being examined on voir dire violated defendant's right under Super.Ct.Crim.R. 43(a) to be present at all stages of his trial).[1]
In outlining a nonconstitutional standard for abuse of discretion at voir dire in the federal courts when racial or ethnic prejudice is at issue, the Supreme Court noted that the determination
does not depend upon a comparison of the concrete costs and benefits that its application is likely to entail. These are likely to be slight: some delay in the trial versus the occasional discovery of an unqualified juror who would not otherwise be discovered. There is, however, a more significant conflict at issue here *1274 one involving the appearance of justice in the federal courts.
Rosales-Lopez, 451 U.S. at 190, 101 S. Ct. at 1635. The Court identified a conflict between two competing concerns: (1) a concern for the justice system that the very asking of prospective jurors about their biases could create the appearance that outcomes in court turn on unfounded bias, and (2) a concern for the individual "criminal defendant's perception that avoiding the inquiry does not eliminate the problem, and that his [or her] trial is not the place in which to elevate appearance over reality" by refusing to ask about prejudices that could prevent a just outcome. Id. at 191, 101 S. Ct. at 1635. The Court's solution to this conflict is to allow the defendant to determine whether he or she would prefer such an inquiry. Id. at 191, 101 S. Ct. at 1635. The trial court's decision to refuse a requested inquiry will be reversible error if the circumstances indicate a "reasonable possibility" that the specified prejudice may have influenced the jury. Id.
Although the Supreme Court in Rosales-Lopez dealt exclusively with the question of racial and ethnic prejudice, the "reasonable possibility" standard effectively sums up the earlier caselaw of this jurisdiction on voir dire for bias attributable to police testimony. Our courts have held that, when the government's case consists entirely of police testimony challenged by the defense, failure to question prospective jurors, upon request, about "possible disqualification" for bias regarding such testimony may require reversal of a conviction depending on the impact of that testimony on the case as a whole. Harvin, 297 A.2d at 777-78. In Harvin, for example, with receipt of stolen property and unauthorized use of a vehicle at issue, police officer testimony was likely to embrace virtually the entire case for the prosecution. Id. at 777. Furthermore, the defense theory of the case sharply controverted the police testimony. Id. Defense counsel, who was conducting voir dire, sought permission to ask the venire members whether they would be likely to give greater credence to testimony of a police officer. Id. at 776. The trial court declined to allow the question, notingas the trial court did in the present casethat it would instruct the jury on that issue in its final instructions. Id. We reversed, ruling that the trial court, by refusing that question, denied the defense its right to be satisfied of an impartial jury. Id. at 777-78. In so holding, we relied on Sellers and Brown.
In Sellers, the trial judge, who alone questioned the venire panel, refused a defense request to ask whether "any of the jurors [is] inclined to give more weight to the testimony of a police officer merely because he is a police officer than any other witness in the case." 106 U.S.App.D. C. at 210, 271 F.2d at 476 (emphasis in original). The court of appeals reversed, ruling there was an abuse of discretion because police officer testimony "was virtually the entire case for the prosecution," and the voir dire had not been unduly protracted. Id. at 210-11, 271 F.2d at 476-77.
In Brown, the only prosecution witnesses were military police officers and Metropolitan Police officers. 119 U.S.App.D.C. at 204, 338 F.2d at 544. The defense presented evidence that the defendant's companion at the time of the alleged assault was the only perpetrator. Id. The trial court conducted the voir dire and declined to honor a defense request that it ask the prospective jurors, "Would you give greater credence to the testimony of a law enforcement officer merely because he is an officer as compared to any other witness?" Id. The court of appeals reversed on the authority of Sellers, which it construed to establish that
when important testimony is anticipated from certain categories of witnesses, whose official or semi-official status is such that a juror might reasonably be more, or less, inclined to credit their testimony, a query as to whether a juror would have such an inclination is not only appropriate but should be given if requested.
119 U.S.App.D.C. at 205, 338 F.2d at 545 (quoted in Harvin, 297 A.2d at 777).
*1275 A trial court's failure, upon request, to ask prospective jurors if they are predisposed to accord more or less credence to police officer testimony is not always reversible error. Brown, 119 U.S.App.D.C. at 205, 338 F.2d at 545. The answer depends upon "the degree of impact which the testimony in question would be likely to have had on the jury and what part such testimony played in the case as a whole." Id. The United States Court of Appeals for the Ninth Circuit, citing Brown among other authorities, pointed out that the factors for determining whether reversal is warranted when a trial court refuses to ask about police credibility include:
the importance of the government agent's testimony to the case as a whole; the extent to which the question concerning the venireperson's attitude toward government agents is covered in other questions on voir dire and on the charge to the jury; the extent to which the credibility of the government agent-witness is put into issue; and the extent to which the testimony of the government agent is corroborated by non-agent witnesses.
United States v. Baldwin, 607 F.2d 1295, 1298 (9th Cir.1979). We believe the Baldwin criteria, predating Rosales-Lopez, nicely elaborate what the Supreme Court intended by its "reasonable possibility" standard.
When assessed by reference to Harvin, Sellers, Brown, and Baldwin, the trial court's denial of Jenkins' requested voir dire question must be held reversible error. Police testimony constituted the entire case for the prosecution; there were no "non-agent witnesses" to corroborate that testimony. Further, Jenkins contested the testimony both by presenting an alibi defense and by challenging the police witnesses' ability to observe the alleged drug transaction.
Additionally, the potential bias was not covered by other questions. The court's question about the prospective jurors' ability to be impartial in the drug context was not sufficient to disclose bias regarding police testimony. Similarly, in asking whether the prospective jurors had friends or family who recently had been witnesses to, victims of, or accused or convicted of a crime, the trial court did not address the particular bias Jenkins sought to elicit.
Finally, by addressing the requested question in open court to the one prospective juror who disclosed a prior affiliation with the police, the trial court did not ferret out the only possible bias within the venire panel. Such selective questioning is premised on an assumption that it is not "reasonably possible" for prospective jurors without police connections to be influenced by a bias for or against the police. We find nothing in the record or in common experience to support such an assumption. A voir dire question directed at a single prospective juror, even though posed in open court and within earshot of all the venire members, is not sufficient to assure impartiality among the rest of the venire members to whom the question was not addressed and who, of course, did not respond.
The trial court did instruct the jury that it should assess the credibility of police witnesses no differently from its assessment of other witnesses. While that instruction may have reduced the potential for harm, a jury instruction at the end of trial cannot be a substitute for a voir dire question before trial. A question on voir dire will facilitate more informed use of peremptory challenges, as well as challenges for cause, altogether excluding biased jurors. Brown, 119 U.S.App.D.C. at 205, 338 F.2d at 545. In contrast, a jury instruction, at best, can neutralize the biases of participating jurors. As in Harvin, therefore, we conclude that, under the circumstances, the jury instruction on the credibility of police witnesses was not sufficient to make the error at voir dire harmless.[2]
*1276 IV.
Because we conclude that the trial court abused its discretion in failing, upon request, to ask all the prospective jurors at voir dire whether any would tend to give either more or less credence to testimony of police officers, we must reverse the judgment and remand the case for a new trial.
So Ordered.
NOTES
[1] In Boone v. United States, 483 A.2d 1135 (D.C. 1984) (en banc), the lead opinion, focusing on peremptory challenges, premised reversal on a trial court rule but noted its "constitutional underpinnings." Id. at 1139. A majority of the court also subscribed to a concurring opinion, focusing on challenges for cause, that relied on constitutional rights to due process and a fair trial. Thus, in Boone, the rule granting defendants the right to be present at the bench during voir dire has both constitutional and nonconstitutional bases. This struggle to sort out constitutional and nonconstitutional requirements governing voir dire reflects a similar development in the Supreme Court. In Ristaino v. Ross, 424 U.S. 589, 598, 96 S. Ct. 1017, 1022, 47 L. Ed. 2d 258 (1976), which concerned violent crimes by a black man against a white security guard, the Court held that, in contrast with the circumstances in Ham v. South Carolina, 409 U.S. 524, 93 S. Ct. 848, 35 L. Ed. 2d 46 (1973), the Constitution did not require the trial court to ask the venire panel a requested question about racial prejudice because the circumstances "did not suggest a significant likelihood that racial prejudice might infect Ross' trial." Later, however, in Rosales-Lopez v. United States, 451 U.S. 182, 101 S. Ct. 1629, 68 L. Ed. 2d 22 (1981), the Supreme Court stressed the "wiser course" noted in Ristaino, 424 U.S. at 597 n. 9, 96 S. Ct. at 1022 n. 9, and elaborated a nonconstitutional standard, under its "supervisory power over the federal courts," for requiring voir dire "questions directed at the discovery of racial prejudice." Rosales-Lopez, 451 U.S. at 190, 101 S. Ct. at 1635. Rosales-Lopez, announced a supervisory rule for the federal courts: the trial court must permit an inquiry of the venire panel into racial or ethnic prejudice if there is "a `reasonable possibility' that racial prejudice would influence the jury." 451 U.S. at 192, 101 S.Ct. at 1636. The Supreme Court called this formulation consistent with the application and discussion of the court's supervisory power, respectively, in Aldridge v. United States, 283 U.S. 308, 314, 51 S. Ct. 470, 473, 75 L. Ed. 1054 (1931), and Ristaino, 424 U.S. at 597 n. 9, 96 S. Ct. at 1022 n. 9.
As we understand the Supreme Court, therefore, the test under the nonconstitutional rule of the federal courts governing voir dire as to racial and ethnic prejudicethe "reasonable possibility standard," Rosales-Lopez, 451 U.S. at 192, 101 S. Ct. at 1636is stricter than the standard applied for constitutional purposes, namely the "significant likelihood" test, Ristaino, 424 U.S. at 596-98, 96 S. Ct. at 1021-22, on which we relied, for example, in Cordero v. United States, 456 A.2d 837 (D.C.1983). We recognize that Aldridge, Ham, Ristaino, and Rosales-Lopez dealt only with voir dire as to racial and ethnic prejudice and that we now exercise our supervisory power to apply this nonconstitutional, "reasonable possibility" standard to voir dire for bias as to police testimony. We do not deal with questions about how far this particular standard extends into other contexts.
[2] The government relies on interpretations of Brown v. United States, 119 U.S.App.D.C. 203, 338 F.2d 543 (1964), by several federal circuit courts of appeal to argue that refusal to pose the question requested in this case does not constitute reversible error. Therrien v. Vose, 782 F.2d 1 (1st Cir.), cert. denied, 476 U.S. 1162, 106 S. Ct. 2285, 90 L. Ed. 2d 727 (1986); United States v. Espinosa, 771 F.2d 1382 (10th Cir.1985); United States v. Spaar, 748 F.2d 1249 (8th Cir.1984). These cases are distinguishable on their facts. Moreover, to the extent they are instructive in this case, they tend to support appellant's position. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536952/ | 27 B.R. 21 (1982)
In re Lynn Earl WILEY dba Wiley Motors, Debtor(s).
Carole L. WILEY, Plaintiff,
v.
Lynn Earl WILEY, Defendant.
Bankruptcy No. 382-00574, Adv. No. 82-0381.
United States Bankruptcy Court, D. Oregon.
September 29, 1982.
Leeroy O. Ehlers, Pendleton, Or., for debtor.
Garry L. Reynolds, Hermiston, Or., for plaintiff.
MEMORANDUM OPINION
HENRY L. HESS, Jr., Bankruptcy Judge.
The complaint seeks an order of this court that certain obligations provided in decree of divorce to be performed by the debtor represent non dischargeable obligations under 11 U.S.C. § 523(a)(5) and requests a money judgment against the debtor.
*22 The evidence shows that the parties were married on June 18, 1977. The marriage was terminated by a decree entered November 25, 1980. At that time of the decree the plaintiff was earning a salary of $950 per month. At that time the defendant was selling cars. His income for 1980 was $2,700 and in 1981 was $6,000. Thus the plaintiff's earnings at that time were substantially greater than the earnings of the defendant. There were no children of the marriage. In the decree paragraph 1 provided for dissolution of the marriage. Paragraph 2 provided judgment to the plaintiff for her attorney fees and costs. Paragraph 3 provides: "The property of the parties is distributed as follows: * * *." Paragraph 3 is then divided into subparagraphs (a) and (b). (a) distributed to the plaintiff her personal property and effects, all household furniture and appliances, all bank accounts in her name, all state and federal income tax refunds for the year 1980 and a mobile home. It also provided that the plaintiff pay the indebtedness on the mobile home and that the defendant give the plaintiff a 1975 or newer automobile to replace an automobile which the defendant had sold. Subparagraph (b) awarded to the defendant his personal property and effects and all other property not specifically awarded to the plaintiff. It also provided that the defendant assume and pay all debts arising out of the ownership of Wiley Motors, all debts incurred by him since April 1, 1980 and certain other debts. Paragraphs 4 and 5 of the decree do not relate to property of the parties or support of the plaintiff. Thus the decree does not specifically use the terms support or alimony. If any part of the decree is to be considered as a provision for support for the plaintiff it must be by implication rather than by a provision labeled by the court as support or alimony.
In determining whether a particular provision of a decree was intended by the divorce court to be a provision for support of one of the parties rather than a division of the property and debts by the parties, it is not necessary that a provision claimed to be in the nature of support be labeled by the divorce court to be a provision for support in order to find that such was intended. On the other hand, when a provision in a divorce decree is claimed in the bankruptcy court to have been a provision of support, the fact that it was labeled by the divorce court as a division of property, should be given some weight.
In this case due to the short duration of the marriage, the fact that there were no children of the marriage, the fact that the earnings of the plaintiff exceeded the earnings of the defendant, the fact that the decree makes no specific provision for support as such, and the fact that the provisions claimed by the plaintiff to be provisions in the nature of support were labeled by the divorce court as provisions for divisions of property, this court concludes that none of the provisions of the decree are in the nature of support. Therefore any liability owing by the defendant to the plaintiff under the decree of divorce are dischargeable. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536944/ | 979 A.2d 368 (2009)
COMMONWEALTH of Pennsylvania, Appellant
v.
Derek BLOOM, Appellee.
No. 1756 WDA 2007.
Superior Court of Pennsylvania.
Submitted April 27, 2009.
Filed July 31, 2009.
*369 Michael W. Streily, Deputy District Attorney, Pittsburgh, for Commonwealth, appellant.
Kevin R. Zinski, Pittsburgh, for appellee.
BEFORE: DONOHUE, CLELAND and KELLY, JJ.
OPINION BY KELLY, J.:
¶ 1 The Commonwealth appeals from the order entered in the Allegheny County Court of Common Pleas granting the motion to suppress of Appellee, Derek Bloom. This case addresses the scope of jurisdiction granted to Port Authority police officers. We reverse and remand.
¶ 2 The suppression court issued a summary of pertinent facts:
On September 1, 2007 at 2:42 a.m. a Port Authority Police Officer was in his vehicle stationed on the side of the HOV ramp of the Wabash Tunnel, about 500 feet from a traffic signal on Woodruff Street. [Appellee] was traveling on Woodruff Street. The Officer testified at the suppression hearing that he remembered seeing vehicles exit the tunnel, and believe[d] that they were in danger of being struck by [Appellee's] vehicle, which he said had proceeded through a red light on Woodruff. The Officer was able to stop [Appellee's] vehicle about 75 feet from the traffic light. Finally, after effectuating the stop, the Officer detected signs of [Appellee's] possible intoxication, administered field sobriety tests and took [Appellee] to a hospital for a blood sample.
* * *
Neither the conduct of [Appellee], the possible [Motor Vehicle Code[1] violation], nor the stop of [Appellee's] vehicle occurred on Port Authority property.
(Findings of Fact & Conclusion of Law, 10/15/08). Appellee was charged with driving under the influence (DUI)[2] and *370 failure to stop at red signal.[3] He moved to suppress the evidence obtained in his arrest arguing that the officer lacked jurisdiction to stop him because he: (1) was never on Port Authority property; and (2) did not jeopardize Port Authority personnel, property, or passengers. The suppression court agreed, concluding that the Port Authority officer did not have jurisdiction to stop Appellee for violations of the Motor Vehicle Code. Thereafter, the Commonwealth filed this timely appeal.[4]
¶ 3 The instant appeal raises one issue for our review: whether the suppression court erred in concluding that the Port Authority officer lacked jurisdiction to stop Appellee's vehicle. The Commonwealth argues that the intersection where Appellee committed the vehicle code violations was in the immediate and adjacent vicinity of Port Authority property. In support of its argument, the Commonwealth submits that the uncontradicted testimony of the officer showed: (1) he was "on patrol" at the Wabash Tunnel which is Port Authority property, (Commonwealth's Brief, at 9); (2) the traffic light on Woodruff Street is activated by vehicles exiting the tunnel; and (3) the officer observed Appellee fail to stop at the stop light and then nearly collide with two vehicles exiting the tunnel. Accordingly, the Commonwealth contends that the officer had jurisdiction to stop Appellee's vehicle. We agree.
¶ 4 Our standard of review is well-settled:
When the Commonwealth appeals from a suppression order, we follow a clearly defined standard of review and consider only the evidence from the defendant's witnesses together with the evidence of the prosecution that, when read in the context of the entire record, remains uncontradicted. The suppression court's findings of fact bind an appellate court if the record supports those findings. The suppression court's conclusions of law, however, are not binding on an appellate court, whose duty is to determine if the suppression court properly applied the law to the facts.
Commonwealth v. Jones, 845 A.2d 821, 824 (Pa.Super.2004) (citation omitted).
¶ 5 The Railroad and Street Railway Police Act states the powers and duties afforded to Port Authority police officers:
(a) General Powers. Railroad and street railway policemen shall severally possess and exercise all the powers of a police officer in the City of Philadelphia, in and upon, and in the immediate and adjacent vicinity of, the property of the corporate authority or elsewhere within this Commonwealth while engaged in the discharge of their duties in pursuit of railroad, street railway or transportation system business.
22 Pa.C.S.A. § 3303(a) (emphasis added). Our Supreme Court has interpreted this statute as providing Port Authority police with two distinct grants of jurisdiction to exercise police power: primary and extraterritorial. Commonwealth v. Firman, 571 Pa. 610, 813 A.2d 643, 647 (2002).[5]*371 Port Authority police have primary jurisdiction, or "authority ... constrained by the geographical area corresponding within its territorial limits," to exercise regular police powers "in and upon, and in the immediate and adjacent vicinity of the property of the corporate authority." Id. Port Authority police are granted extraterritorial jurisdiction, or "authorization to arrest outside the territorial limits of the employer-municipality," id., "elsewhere within this Commonwealth while engaged in the discharge of their duties in pursuit of ... transportation system business" so long as the exercise of this authority bears a close connection to the interests of the Port Authority. Id. (citing 22 Pa.C.S.A. § 3303(a)).
¶ 6 In Firman II, our Supreme Court addressed the extraterritorial jurisdiction conferred upon Port Authority police officers under the Railroad and Street Railway Police Act. Id. at 644. The case involved an on-duty Port Authority officer who was traveling between two Port Authority properties. Id. After the appellant almost struck the officer's vehicle, causing the officer to swerve to avoid a collision, the officer stopped the appellant who was subsequently charged with DUI. Id. at 644-45. The appellant moved to suppress the evidence contending that the officer lacked the authority to stop him on a public road. Id. at 645. The Supreme Court interpreted the Act as limiting the extraterritorial use of police powers by Port Authority officers:
[B]y conditioning the grant of extraterritorial jurisdiction on engagement in the discharge of duties in pursuit of transportation system business, the General Assembly intended to require a closer connection between the interests of the transportation system and encounters in which police powers are to be exercised more than mere "on-duty" status of transportation system police on the observation of offenses.... [W]e find this interpretation to be supported by: the plain terms of the Act; reference to the specialized meaning of transportation system business ...; and the policy underlying the Act, namely, the maintenance of security of the transportation system and its charges.
Id. at 647. Despite this general interpretation, the Court asserted:
In circumstances in which a motorist's conduct on a public highway jeopardized Port Authority personnel, property or passengers ..., we conclude that a sufficient connection to transportation system business arises such that extraterritorial jurisdiction of Port Authority policemen is implicated. Once police power is so enabled, absent a sufficient break in the encounter, its exercise may continue through an investigatory stop and/or arrest, where otherwise warranted.
Id. at 648.
¶ 7 Applying the reasoning set forth in Firman II, this Court, in Com v. Quaid, 871 A.2d 246 (Pa.Super.2005), addressed whether a railroad police officer may stop a vehicle for violation of the Motor Vehicle Code on a public highway where there only connection between the vehicle and railroad property or passengers was the existence of railroad tracks close to the public highway. Id. at 247. This Court reasoned that mere visibility of railroad *372 tracks is not enough for the roadway to be considered "in the immediate and adjacent vicinity" of the railroad. Id. at 253-54. It further stated that "unless the place where Appellant was observed to drive in erratic fashion occurred `in the immediate and adjacent vicinity of' [railroad] property, the stop must be deemed illegal." Id. at 253. Ultimately, this Court held that the railroad officer did not have the authority to stop the appellant. Id. at 254.
¶ 8 Here, the suppression court held that: (1) "there was insufficient evidence to show that [Appellee] had endangered persons of property under the purview of the Port Authority;" and (2) "neither the conduct of [Appellee], the possible vehicle code violation, nor the stop of [Appellee] occurred on Port Authority property." (Suppression Ct. Op., 12/08/08, at 3; Findings of Fact & Conclusion of Law). However, the suppression court neglected to consider whether vehicle code violation and stop occurred "in the immediate and adjacent vicinity" of Port Authority property. See 22 Pa. C.S.A. § 3303(a).
¶ 9 The uncontradicted testimony of the officer established that: (1) he was patrolling the Wabash Tunnel which is Port Authority property; (2) the Wabash Tunnel ramp intersects with Woodruff Street which is a municipal street; (3) the traffic light on Woodruff Street is triggered by a Port Authority-owned signaling system, located approximately 500 feet from the tunnel, which is activated by cars exiting the Wabash Tunnel; (4) Appellee was traveling on Woodruff Street and failed to stop at the red traffic light; (5) Appellee nearly collided with two vehicles that had just proceeded from the Wabash Tunnel ramp; (6) the officer pursued Appellee's vehicle and stopped him approximately 150 feet from Port Authority property, and 75 feet from the traffic light. (N.T., 7/29/08, at 5-21). This evidence is sufficient to show that Appellee committed the violation and was stopped in the "immediate and adjacent vicinity" of Port Authority property. Therefore, Quaid, supra is factually distinguishable from the present case in that the vehicle code violation and stop in Quaid did not occur in the "immediate and adjacent vicinity" of railroad property. Here, because the Port Authority officer's stop occurred in the "immediate and adjacent vicinity" of Port Authority property, the officer had primary jurisdiction to stop Appellee. Thus, the Commonwealth met its burden of showing that the officer had the authority to stop Appellee. See 22 Pa.C.S.A. § 3303(a). Accordingly, the evidence from the stop was improperly suppressed.
¶ 10 Moreover, even if the officer had not exercised his authority in the "immediate and adjacent vicinity" of Port Authority property, the circumstances of Appellee's violation were sufficiently connected to transportation system business for a legal stop under the officer's extraterritorial jurisdiction. See Firman II, supra at 648. Pursuant to the standard set forth in Firman II, a Motor Vehicle Code violation is sufficient to trigger an officer's extraterritorial jurisdiction if it jeopardizes Port Authority passengers. Id. The officer's uncontradicted testimony showed that Appellee nearly hit two vehicles which were exiting the Wabash Tunnel ramp. (N.T., at 8).
¶ 11 Order reversed. Jurisdiction relinquished.
NOTES
[1] 75 Pa.C.S.A. §§ 101-8122.
[2] 75 Pa.C.S.A. § 3802.
[3] 75 Pa.C.S.A. § 3112.
[4] The Commonwealth complied with the requirements of Pa.R.A.P. 311(d): "In a criminal case, under the circumstances provided by law, the Commonwealth may take an appeal as of right from an order that does not end the entire case where the Commonwealth certifies in the notice of appeal that the order will terminate or substantially handicap the prosecution." See Pa.R.A.P. 311(d).
[5] In Commonwealth v. Firman, 789 A.2d 297 (Pa.Super.2001) (en banc) (Firman I), this Court interpreted the plain terms of the Act to permit extraterritorial exercise of police power not simply where there is a threat to the welfare of Port Authority passengers or property but also whenever an officer is engaged in the discharge of Port Authority business, even traveling from one Port Authority Property to another. Id. at 302. On appeal, our Supreme Court held, in Firman, 571 Pa. 610, 813 A.2d 643 (Firman II), that extraterritorial jurisdiction is limited, and may only be asserted where there is a sufficient connection to transportation system business. Id. at 647. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3016932/ | ___________
No. 96-1644
___________
United States of America, *
*
Appellee, *
* Appeal from the United States
v. * District Court for the
* District of Minnesota.
*
John Raymond Logergren, * [UNPUBLISHED]
*
Appellant. *
___________
Submitted: June 5, 1996
Filed: June 11, 1996
___________
Before McMILLIAN, WOLLMAN, and MURPHY, Circuit Judges.
___________
PER CURIAM.
John Raymond Logergren appeals from the district court1 order denying
his motion to dismiss the probation department's petition to revoke his
supervised release. After careful review of the parties' briefs and the
record, we affirm the judgment of the district court. See 8th Cir. R. 47B.
A true copy.
Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.
1
The Honorable James M. Rosenbaum, United States District
Judge for the District of Minnesota. | 01-03-2023 | 10-13-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1536548/ | 223 B.R. 421 (1998)
In re PUDGIE'S DEV. OF NY, et al., Debtors.
Bankruptcy No. 96 B 21969(ASH).
United States Bankruptcy Court, S.D. New York.
July 30, 1998.
*422 Jonathan S. Pasternak, Jill Abrams, Rattet, Hollander & Pasternak L.L.P., for Debtors and Pro Se Applicant.
Doria Stetch, Office of U.S. Trustee, New York City.
Douglas Skalka, Neubert, Pepe & Monteith, P.C., for Equity Committee.
Robert Feinstein, Kronish, Lieb, Weiner & Hellman L.L.P., Special Securities Counsel to Debtors and Pro Se Applicant.
William Kohler, Kohler & Barnes, P.C., for David Orenstein, CPA.
Robert Senzer, Fischbein, Badillo, Wagner, Harding, for Jeffrey Zisselman.
Glen Gruder, Mars, Slone & Conlon, for DiCarlo Food Distributors, Inc.
Schuyler Carol, Backenroth & Grossman, for Herbert Turk.
Mr. and Mrs. Martin Winter, Pro Se.
Bruce Kaplan, Hamburger, Maxson & Yaffe L.L.P., for Omni Partners.
DECISION RESOLVING CLAIMS TO PROCEEDS OF SALE
ADLAI S. HARDIN, Jr., Bankruptcy Judge.
This contested matter brings to a conclusion the failed Chapter 11 case of Pudgies Chicken, Inc. and its affiliates (collectively "Pudgies" or the "Debtors")
After exhaustive and fruitless efforts to find an investor to finance a reorganization or a purchaser to acquire the business of Pudgies for an economically significant purchase price, the Debtors, having no other offer, no alternative means to salvage any going concern value of the business and no working capital to continue the business, negotiated an agreement to sell Pudgies for a net purchase price of $425,000 (the "Fund").
The Debtors' collective estate is administratively insolvent. At the hearing to approve the sale I directed that applications be filed by all parties claiming entitlement to receive all or part of the Fund and set July 7, 1998 as the hearing date to consider the applications. The following applications were filed:[1]*423
Name of Entity Role in Case Amount Claimed
United States Trustee $ 49,750.00[2]
Herbert Turk Secured Creditor not less than $50,000
DiCarlo Distributors Secured DIP Supplier $ 44,741.70
Jeffrey Zisselman Secured DIP Lender $311,404.18
Rattet Hollander & Counsel to Debtors $ 31,193.43
Pasternak, LLP
David Orenstein, CPA Tax Return Accountants $ 22,145.00
to Debtors
Kronish, Leib, Weiner Securities Counsel $ 5,587.00
& Hellman, LLP to Debtors
Neubert Pepe & Monteith Counsel to Equity Comm. $ 13,410.55
Omni Partners, L.P. Landlord of rejected lease $156,676.27
Blockbuster Videos, Inc. Landlord of rejected lease $ 59,800.00
Each of these claims will be considered in the discussion below.
Turk
By "Final Stipulation and Order Granting Authority of Debtors-in-Possession to Use Cash Collateral" dated February 12, 1997, Turk was granted a lien on all property of the Debtors with priority over all other indebtedness, subject and subordinate to (1) the superpriority claim of Sysco Food Services Corporation of Connecticut ("Sysco"), (2) unpaid United States Trustee fees, (3) debtor-in-possession financing and a carveout for professional fees, subject to a cap for all amounts included in items (1), (2) and (3) of $375,000 in the aggregate. The $375,000 cap on all carve-outs from the Turk lien was reiterated in this Court's order dated March 13, 1997 providing for debtor-in-possession financing by Sysco, as provided in the following decretal paragraph:
ORDERED, that notwithstanding anything contained herein, the secured indebtedness of Sysco and the Lender to be senior to Turk, inclusive of: (a) fees; (b) costs, including interest; (c) expenses of all secured parties; and (d) claims of all professionals in the Debtors' Chapter 11 cases, shall not exceed the aggregate sum of $375,000.00. . . .
Since the amounts owing to the various parties to which Turk was subordinated in the aggregate far exceed the $375,000 cap and since Turk is entitled to priority over all other creditors, Turk is entitled to the full $50,000 difference between the $375,000 cap and the $425,000 Fund.
United States Trustee
Chapter 123, Section 1930(a)(6) of Title 28 states, in relevant part: "a quarterly fee shall be paid to the United States Trustee . . . in each case under Chapter 11 of title 11 for each quarter. . . . The fee shall be payable on the last day of the calendar month following the calendar quarter for which the fee is owed." Section 507(a)(1) of Title 11 provides as the first priority "administrative *424 expenses allowed under section 503(b) of this title, and any fees and charges assessed against the estate under chapter 123 of title 28." No priority is given as between administrative expenses under Title 11 and United States Trustee fees under Title 28. Thus, in the absence of a court order to the contrary, under Section 507(a)(1) unpaid United States Trustee fees would share pari passu with allowed administrative expenses.
The affected parties concede that the DIP supplier orders dated September 27, 1996 for Sysco and September 16, 1997 for DiCarlo provide, in substance and effect, that the Sysco and, subsequently, DiCarlo superpriority claims were subordinate to United States Trustee fees and senior to the Zisselman indebtedness. However, the March 13, 1997 order granting superpriority status to Zisselman, subordinate to Sysco, whether by advertence or oversight does not contain an express carve-out for or subordination to the United States Trustee fees. The ambiguity created by this lacuna may be resolved by simple logic. The September 27, 1996 and September 16, 1997 orders granting superpriority to Sysco and DiCarlo over all claims (including Zisselman's), while subordinating Sysco and DiCarlo to the United States Trustee fees, must necessarily render the Zisselman debt subordinate to the United States Trustee fees, even though Zisselman's March 13, 1997 order did not expressly recognize the primacy of the United States Trustee fees resulting from the other two others. No other interpretation of these three orders makes sense. Zisselman's argument to the contrary is rejected.
Accordingly, the United States Trustee shall be entitled to payment of $49,750 in fees from the Fund after the $50,000 payable to Turk but before payment to either DiCarlo or Zisselman.
DiCarlo and Zisselman
There is no dispute that DiCarlo, the secured DIP supplier and successor to Sysco, and secured DIP lender Zisselman have priority over all other administrative creditors under this Court's orders dated September 27, 1996 (Sysco), September 16, 1997 (DiCarlo) and March 13, 1997 (Zisselman). Under these orders, DiCarlo has priority over Zisselman.
Accordingly, DiCarlo and Zisselman will be entitled to receive payments from the Fund after the payments to Turk and the United States Trustee, with DiCarlo entitled to priority over Zisselman. Subject to deductions for the award under Section 506(c) to Debtors' counsel, discussed below, this will result in payment in full to DiCarlo and partial payment to Zisselman of the balance of the Fund.
Debtors' Counsel
The priority payments to which Turk, the United States Trustee, DiCarlo and Zisselman are entitled exceed the Fund by $30,895.88. The question remains, however, whether fees and expenses may be awarded out of the amounts payable to secured parties under 11 U.S.C. § 506(c). This provision states:
(c) The trustee may recover from property securing an allowed secured claim the reasonable, necessary costs and expenses of preserving, or disposing of, such property to the extent of any benefit to the holder of such claim.
It is my conclusion that an award under Section 506(c) to Debtors' counsel, Rattet Hollander & Pasternak LLP, is appropriate in the circumstances of this case. The Rattet firm played an exceptional and vital role in bringing the sale of the Debtors' assets to fruition. Without the efforts of the Rattet firm, it appears likely that the sale would not have occurred, the Debtors' business operations would have ceased, the case would have been converted to Chapter 7 and the paltry physical assets would have been sold for nominal values undoubtedly equating to a small fraction of the Fund.
I have examined the application of the Rattet firm and the detailed description of services covered by the firm's application for $31,193.43. The time expended appears reasonable and limited to the firm's services rendered in connection with the sale resulting in the Fund. The pending application does not include any amount for the hundreds *425 of thousands of dollars of services rendered by the Rattet firm in its diligent representation of the Debtors throughout these Chapter 11 proceedings. I find that the $31,193.43 sought by the Rattet firm on this application constitutes "reasonable, necessary costs and expenses of . . . disposing of [property securing an allowed secured claim] to the . . . benefit [of] the holder of such claim" within the meaning of the statute.
Counsel fees and expenses may not be deducted from the $50,000 payment to be made to Herbert Turk, by reason of the $375,000 cap provisions of the February 12 and March 13, 1997 orders. Section 506(c) provides that the necessary costs and expenses of disposing of property of the estate may be paid from "property securing an allowed secured claim" despite the invasion of the security interest, upon the evident rationale that costs incurred to benefit the secured party should be charged to the secured party. The same rationale should be applied to allocate a portion of the costs and expenses of disposing of the Debtors' property for the benefit of the United States Trustee, whose right to fees was unsecured.
Accordingly, the $31,193.43 payable to the Rattet firm shall be paid from the shares of the Fund allocable to the United States Trustee, DiCarlo and Zisselman in proportion to the payments to which each is entitled out of the Fund.
Other Professionals
The applications of David Orenstein, CPA, accountants to the Debtors, Kronish, Lieb, Weiner & Hellman LLP, securities counsel to the Debtors, and Neubert Pepe & Monteith, P.C., counsel to the Equity Committee, must be denied. I have no doubt that these professionals rendered important and effective services to the Debtors during their Chapter 11 proceedings. The same may unquestionably be said for the able counsel to the Creditors Committee, who did not make application for a share of the Fund, recognizing that the Debtors' estate is administratively insolvent. For all the contributions that these several professionals may have made during the course of the Debtors' Chapter 11 cases, their work did not contribute to "preserving" the estate assets within the meaning of Section 506(c), and none of these professionals made a material contribution to the process of "disposing" of the assets, as did the Debtors' counsel.
Accordingly, the applications of the professionals other than the Rattet firm must be denied.
Landlord Claims
Formal administrative claims against the Fund were filed by Omni Partners LP, landlord of the Debtors' headquarters offices, and Blockbuster Videos, Inc., landlord of one of the Debtors' company-owned stores. In addition, the Court has treated as a claim against the Fund a letter written by Martin J. Winter, pro se, landlord of premises rented by one of the Debtors' subsidiaries for use as a company store, which was completely gutted shortly before the Debtors' bankruptcy filings but was abandoned shortly thereafter. All three leases were rejected. These landlords assert a superpriority claim to the Fund under 11 U.S.C. § 365(d)(3).[3]
Section 365, which governs the assumption, assignment and rejection of executory contracts and unexpired leases, was amended by the Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub.L. 98-358, 98 Stat. 333 (1984). The amendments to this section were intended to give further protection to commercial lessors. Jeffrey S. Battershall, Commercial Leases and Section 365 of the Bankruptcy Code, 64 Am. Bank. L.J. 329 (1990). Specifically, subsection (d)(3) affords a landlord the right to "timely" performance of all lease obligations, including rent payments. It states:
(3) The trustee shall timely perform all the obligations of the debtor, except those specified in section 365(b)(2), arising from and after the order for relief under any unexpired lease of nonresidential real *426 property, until such lease is assumed or rejected, notwithstanding section 503(b)(1) of this title. The court may extend, for cause, the time for performance of any such obligation that arises within 60 days after the date of the order for relief, but the time for performance shall not be extended beyond such 60-day period. This subsection shall not be deemed to affect the trustee's obligations under the provisions of subsection (b) or (f) of this section. Acceptance of any such performance does not constitute waiver or relinquishment of the lessor's rights under such lease or under this title.
While arguably clear on its face, Section 365(d)(3) has given rise to considerable litigation and, to a degree, conflicting opinions by different courts. Joshua Fruchter, To Bind or Not to Bind Bankruptcy Code § 365(d)(3); Statutory Minefield, 68 Am. Bank. L.J. 437, 439 (1994). The statutory obligation of the trustee or debtor to "timely perform all the obligations . . . under any unexpired lease . . . until such lease is assumed or rejected, notwithstanding section 503(b)(1)" undoubtedly accords nonresidential lessors some preferred status vis-a-vis other administrative creditors, but the extent and timing of such preferred status is the subject of disagreement among the courts.
One area of disagreement, related to but not determinative of the present controversy, is the question of the immediacy with which "all the obligations" including rental payments must be performed. Some courts have held that the statutory mandate that the trustee "shall timely perform" all obligations means what it says, and that post-petition rent must be paid when due under the lease, subject to the power of the court to extend the time of performance for 60 days after the date of filing ("but the time performance shall not be extended beyond such 60-day period"). That is the view of this Court. In re Pudgie's Dev. of NY, 202 B.R. 832, 836 (Bankr.S.D.N.Y.1996) ("the purpose of Congress to treat post-petition rent the same as section 363(c) operating expenses and to prefer landlords over administrative creditors is perfectly clear on the face of the statute"). To the same effect, see In Re Telesphere Communications, Inc., 148 B.R. 525, 529 (Bankr.N.D.Ill.1992) ("Indeed, to withhold payment when the debtor may be administratively insolvent would actually reverse legislative intent, because it would require involuntary extensions of credit by lessors in the very circumstances where the debtors are least likely to honor their lease obligations"); In Re Coastal Dry Dock & Repair Corp., 62 B.R. 879, 882-83 (Bankr.E.D.N.Y.1986) ("In unmistakable terms, Section 365(d)(3), with certain exceptions not relevant here, requires trustees and debtors-in-possession to timely perform the debtor's obligations, including payment of all rents reserved under the lease until the lease is assumed or rejected. The command of Section 365(d)(3) is clear and unambiguous. It means exactly what it says").
Other courts have said that, despite the statutory mandate to "timely perform all the obligations" under a commercial lease, if there is uncertainty regarding the administrative solvency of the estate, payment of post-petition rent should be deferred and paid along with other Chapter 11 administrative expenses on a pro rata basis. See In re Wingspread Corp., 116 B.R. 915, 932 (Bankr. S.D.N.Y.1990) ("Given that there is a good deal of doubt concerning the ability of this estate ultimately to pay all expenses of administration . . . to honor the request for immediate payment would be, in effect to grant G & W a superpriority claim")[4]; In Re Virginia Packaging Supply Company, Inc., 122 B.R. 491, 494 (Bankr.E.D.Va.1990) ("It is by no means clear that the bankruptcy court is bound to compel immediate payment of such obligations, especially in cases where there may not be sufficient funds to pay all administrative claims in full"); In re Dieckhaus Stationers of King of Prussia, Inc., 73 B.R. 969, 973 (Bankr.E.D.Pa.1987) ("the *427 landlord's section 365(d)(3) administrative expense claim is not entitled to superpriority status; rather, it is entitled to payment pro rata with all other allowed chapter 11 administrative expense claims"); In re Tandem Group Inc., 61 B.R. 738, 742 (Bankr.C.D.Cal. 1986) (Section 365(d)(3) rent considered as an administrative expense and therefore subject to payment priorities set forth in Section 726(b)). Indeed, some courts have ordered payment subject to recapture if there are insufficient funds to pay all administrative claims. In re Buyer's Club Markets, Inc., 115 B.R. 700, 702 (Bankr.D.Colo.1990) (allowed as Section 503(b)(1)(A) administrative expense subject to recapture if insufficient funds available to pay Chapter 7 and Chapter 11 expenses); Dieckhaus, 73 B.R. at 973 (immediate payment ordered, but subject to recovery if all other administrative claims not paid in full).
The landlords argue that the "timely performance" requirement of Section 365(d)(3) gives them a superpriority administrative claim for rent which is not timely paid. The argument stretches the statute beyond its limits. Although this Court adheres to the view that Section 365(d)(3) grants a landlord a right to timely payment of post-petition rent obligations, if that right is not enforced by the landlord the statute does not give the landlord a superpriority claim for accrued but unpaid rent, to the prejudice of other administrative or priority claims. See, e.g., In re Joseph Spiess Co., 145 B.R. 597, 608 (Bankr.N.D.Ill.1992) ("This language [of timely performance] in no way, however, expressly elevates these post-petition obligations to super-priority status. Only section 364 contains any such language"); In re Wingspread Corp., 116 B.R. at 932 ("section 365(d)(3) does not serve as the basis for a superpriority claim").
A significant jurisprudential difference exists between the right to prompt payment conferred by Section 365(d)(3) and a claim for accrued but unpaid rents. Section 365(d)(3) advances the landlord to the head of the line for current payment of ongoing expenses in recognition of his unique, involuntary creditor status. And, as with other post-petition payments essential for the continued operation of the debtor's business, such as for supplies, utilities, employee wages and the like, these payments are not subject to recapture. But once the landlord allows his right to timely payment to lapse into an accrued liability for unpaid rents, Section 365(d)(3) becomes irrelevant. The accrued liability for rents is no more than the landlord's lapsed right. A claim comes into existence on the basis of that accrued liability, but Section 365(d)(3) does not purport to establish claim priority. The statute does not allow the landlord to permit his right to lapse into a claim for accrued amounts, and later attempt to assert the claim on a superpriority basis ahead of other administrative or superpriority creditors.
Section 365(d)(3) does not speak to the landlord's remedy, but other provisions of the Bankruptcy Code do. The landlord may enforce his right to timely performance under Section 365(d)(3) by moving to lift the stay for cause under Section 362(d)(1), or moving directly under Section 365(d)(3) to compel compliance on pain of contempt. What the landlord may not do is sit on his rights and allow the rent obligation to accrue, and later attempt to seek a superpriority status as an administrative claimant.
Summary
To summarize the foregoing, the following payments shall be made out of the Fund: Turk shall be paid $50,000; subject to payment of the award to the Rattet firm, the United States Trustee fees shall be paid in full, DiCarlo shall be paid in full and Zisselman shall be paid to the extent of the remainder of the Fund; the Rattet firm shall be paid the full amount of its application, to be deducted pro rata from the amounts payable to the United States Trustee, DiCarlo and Zisselman. All other applications are denied. Debtors' counsel is directed to settle an appropriate order consistent with this decision.
NOTES
[1] Table taken from page 2 of "Statement of Debtors in Response to Various Claims Against Estate Sale Proceeds Derived from Court-approved Sale on May 28, 1998."
[2] The United States Trustee applied for $67,750, but this figure included fees payable under 28 U.S.C. § 1930(a)(6) in respect of Pudgie-affiliated Debtor entities which were not included in the sale resulting in the Fund and which have no assets from which to pay United States Trustee fees. The $49,750 figure represents the unpaid United States Trustee fees applicable to the Pudgie-affiliated Debtor entities which were included in the sale resulting in the Fund.
[3] The Martin Winter post-petition claim under Section 365(d)(3) was for approximately one month.
[4] The claimant in Wingspread was not a landlord timely seeking to enforce its Section 365(d)(3) right to immediate payment, but a guarantor who had paid the debtor's rent and was asserting an administrative claim as subrogee. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536561/ | 928 A.2d 418 (2007)
NORTH CHESTNUT HILL NEIGHBORS, Appellant
v.
ZONING BOARD OF ADJUSTMENT OF THE CITY OF PHILADELPHIA and Woodmere Art Museum.
Commonwealth Court of Pennsylvania.
Argued March 5, 2007.
Decided July 5, 2007.
*419 S. David Fineman, Philadelphia, for appellant.
Cheryl L. Gaston, Philadelphia, for appellees, Zon. Bd. of Adjust. of the City of Phila. and the City of Phila.
Peter F. Kelson, Philadelphia, for appellee, Woodmere Art Museum.
BEFORE: BERNARD L. McGINLEY, Judge, DAN PELLEGRINI, Judge, ROCHELLE S. FRIEDMAN, Judge.
OPINION BY Judge FRIEDMAN.
North Chestnut Hill Neighbors (Neighbors) appeal from the June 26, 2006, order of the Court of Common Pleas of Philadelphia *420 County (trial court), which affirmed the decision of the Zoning Board of Adjustment of the City of Philadelphia (ZBA) granting the Woodmere Art Museum (Woodmere or Museum) a variance to permit construction of a proposed addition to the Museum. We vacate and remand.
Woodmere, a non-profit cultural institution, is housed in a five-story Victorian mansion situated on approximately five and one-half acres in the Chestnut Hill area of Philadelphia (City). Woodmere has been used as an art museum since 1916, prior to the enactment of the Philadelphia Zoning Code (Zoning Code), and it was opened as a public facility in 1940. The property is located at the corner of Germantown Avenue and Bells Mill Road and currently is zoned R-1 Residential, where, pursuant to section 14-205 of the Zoning Code, only single-family detached residential use is permitted. Previously, Woodmere has applied for, and received, several variances related to its operation as an art museum.[1]
On February 26, 2004, Woodmere submitted an application to the Department of Licenses and Inspections (L & I), seeking a permit to build: a two-story addition with cellar for use as an art museum on the first and second floor, with art storage and maintenance in the cellar; a one-story addition for use as an accessory mechanical room for erection of an oil tank; reconfiguration of the private parking lot with a new total of 82 spaces; and a retail gift shop, all as part of the existing Museum with accessory office, instructional classes and an accessory storage shed. (ZBA's Findings of Fact, No. 1; R.R. at 8a.) On March 7, 2004, L & I refused to issue the permit, explaining that the requested uses are not permitted in the R-1 District but are extensions of uses previously approved by the ZBA that also require the ZBA's approval. (ZBA's Findings of Fact, No. 2; R.R. at 9a.)
On March 10, 2004, Woodmere filed an appeal from L & I's refusal, arguing that the proposed expansion satisfies the criteria for the grant of variance relief pursuant to section 14-1802 of the Zoning Code[2]*421 and constitutes a reasonable modification of prior ZBA approvals. (R.R. at 10a.) Neighbors opposed the grant of the variance,[3] (see R.R. at 98a-104a), and the ZBA held four public hearings on the matter. (ZBA's Findings of Fact, Nos. 3-4.) In its Findings of Fact, the ZBA summarized the testimony of the various witnesses, beginning each summary with the words "the Zoning Board of Adjustment heard and considered" the testimony of the particular witness.[4] However, the ZBA made no specific credibility determinations or findings based on any of the summarized testimony. The relevant testimony "heard and considered" by the ZBA includes the following.
Eva Lew, an architect with the firm of Venturi Scott Brown, presented photographs showing that the proposed addition would not be any closer to the property lines than the current 55,000 square-foot building. Lew testified that the trees edging the property would be maintained and new trees would be added to block the view of the building. She explained that the design takes advantage of the topography in order to make the new elements less visible to the surrounding neighbors, and she said that the parking area will be designed so that lighting will point away from neighboring homes. Lew also noted that the neighborhood surrounding the Museum contained several other institutions. (ZBA's Findings of Fact, Nos. 10-11.)
Dr. Michael Schantz, Woodmere's director, testified about Woodmere's mission to foster and promote local arts, and he stated that the Museum is an asset to the community in that it has an exceptional collection and also provides children's and other educational programs. Dr. Schantz testified that, although the Museum currently is accredited by the American Association of Museums, Woodmere's accreditation is in jeopardy because it does not have enough visitor amenities, storage or display space. Dr. Schantz explained that in constructing the addition, the intent is not to provide more visitation or educational facilities but, rather, to better accommodate the Museum's present uses.[5]*422 According to Dr. Schantz, he only expects attendance at the Museum to grow incrementally at a rate of 6% per year, and he stressed that Woodmere has reached an agreement with community representatives to limit the size and number of special rental events at the Museum. Dr. Schantz also testified that storm water runoff from the property is a serious problem that will be addressed and corrected with construction of the addition. Dr. Schantz stated that the Museum currently is involved in a fund drive to raise $20,000,000 for the project and already has received $5,000,000 from the Commonwealth. (ZBA's Findings of Fact, Nos. 12, 18-19, 27.)
Maxine Maddox Dornemann, president of the Chestnut Hill Community Association (CHCA), testified that the CHCA conducted a three-year review of the proposed addition and, on October 13, 2004, reached an agreement with the Museum that accommodated the concerns of neighboring homeowners. (ZBA's Findings of Fact, Nos. 13, 24.)
Adrienne Eiss, a traffic expert, prepared a parking sufficiency and traffic study, in which she concluded that: there would be no difficulty with traffic to and from the Museum; all traffic is confined to the existing curb cut; the existing parking lot is adequate for the Museum; and additional parking can be accommodated for special events. (ZBA's Findings of Fact, Nos. 20-21.)
Jim Brzostowicz, an engineer, prepared a report and storm water management design for the proposed Museum addition. He testified that, after construction of the addition, there would be substantially less water runoff and no negative impact to adjacent properties. Brzostowicz agreed that maintenance of the runoff system would be required after construction and that this maintenance would be have to be outsourced. He noted that the plans were approved by the City Water Department and the City Planning Commission. (ZBA's Findings of Fact, No. 22.)
Robert Venturi, the architect for the project, testified that the addition was designed to be complementary to, and compatible with, the existing building and the surrounding neighborhood residences. He also noted that the addition would be devoted to both art and back-up functions. (ZBA's Findings of Fact, Nos. 23.)
Larry S. Waetzman, a land planner retained by Neighbors, presented an aerial photograph of the neighborhood, and counsel for Neighbors read from a 1977 trial court decision about traffic safety issues at the intersection of Germantown Avenue and Bells Mill Road. According to Waetzman, there are 15,500 vehicles per day passing through that intersection; the project will impact on the quiet nature of the residential neighborhood; the parking plan for the addition does not comply with the Zoning Code, which he says requires at least 64 spaces for the addition alone and 183 spaces for the entire building; the plan for overflow parking is chaotic; the headlights from the new parking area will shine into adjacent residences; and the overflow parking will impact nearby residences. However, on cross-examination, Waetzman acknowledged that he did not speak to anyone about the actual parking or traffic flow needs of the Museum but based his report solely on his interpretation of the Zoning Code. He admitted that the Zoning Code section he relied on might *423 be inapplicable, but he would not retract his opinion that the parking was inadequate. Waetzman refused to concede that a large buffer separates the Museum from the nearest residence or that trees would be preserved, and he admitted that he is not a civil engineer and is unaware of the storm water issues. (ZBA's Findings of Fact, Nos. 28-29.)
Alexander Messinger, a professor of architecture and interior design, testified on behalf of Neighbors and presented prepared drawings depicting how the parking lights would affect certain residences near the Museum. However, counsel for the Museum then introduced a new landscaping plan designed to buffer the effect of headlights from cars in the Museum parking lot. On cross-examination, Messinger conceded that he is not a landscape architect, and he testified that only three houses would be affected by the lights, with some of the impact on the building and not the windows. Messinger acknowledged that he never designed a museum in the United States and did not consider the requirements of the American professional practice manual related to museum design. He also admitted that his suggestion to build underground parking would require blasting and excavation of bedrock and that the proposed use of sound dampening devices around mechanical equipment during construction would control sound to a level that would have negligible impact on the closest house. Finally, Messinger acknowledged that he was not sympathetic to the Venturi design. (ZBA's Findings of Fact, Nos. 31-32.)
The ZBA also heard the recommendation of the City Planning Commission that reviewed the storm water management plans and, finding them appropriate, supported the grant of the variance. (ZBA's Findings of Fact, No. 33.)
By unanimous decision dated June 16, 2005, the ZBA granted Woodmere's variance request, subject to provisos that Woodmere meet the fire code, abide by the agreement between Woodmere and the CHCA, retain the size and number of existing curb cuts and make no plans to extend the parking lot to an adjoining parcel. (ZBA's op. at 15.) In doing so, the ZBA held that the applicable variance standards were those set forth in section 14-1802 of the Zoning Code and in Valley View Civic Association v. Zoning Board of Adjustment, 501 Pa. 550, 462 A.2d 637 (1983). The ZBA first concluded that Woodmere successfully demonstrated that an unnecessary hardship unique to the property would result if the variance were not granted, relying on Woodmere's evidence that the existing, accredited Museum is an asset to the community which lacks the space and facilities to continue its mission at its present location, and that the proposed plan for the addition will alleviate the storm water runoff problem. Second, the ZBA concluded that Woodmere established that the proposed use of the property is not contrary to the public interest, relying on Woodmere's evidence that the proposed project was extensively reviewed, and is supported, by the CHCA, as well as other civic groups, elected officials and other neighbors and interested parties. Therefore, the ZBA determined that Woodmere met its dual burden of proof and was entitled to variance relief. (ZBA's Conclusions of Law, Nos. 2-6.) Following appeal, the trial court affirmed. Neighbors now appeal to this court.[6]
*424 Neighbors argue that the ZBA erred and/or abused its discretion by granting Woodmere's request for a variance to construct the proposed Museum addition because: (1) the ZBA failed to make any findings of fact; (2) the ZBA failed to apply the proper variance standards or consider all the elements required for the grant of a variance; and (3) the ZBA failed to consider certain facts or address and resolve contradictions in the record.[7]
Neighbors first maintain that the ZBA violated section 14-1807(3) of the Zoning Code, which requires that the ZBA's record "shall concisely set forth the [ZBA's] findings of fact and conclusions of law showing the basis of the decision appealed from." Neighbors assert that, here, the ZBA simply summarized the testimony in a series of secretarial notes, without indicating what testimony it found to be credible and without discussing the weight attributed to any evidence. Neighbors contend that, as a result, proper appellate review was impossible, leaving the trial court to root through the record and cull from it those "facts" that the ZBA might have found to support its conclusions. Thus, according to Neighbors, the trial court did not review the record to see whether there was support for the ZBA's findings but, instead, took on the role of fact-finder and created a record purposely designed to support the ZBA's conclusions. We disagree with Neighbors' characterization.
Contrary to Neighbors' claim, the ZBA does not provide a mere recitation of all testimony pro and con and then grant the variance without an intimation of its reasoning. Cf. Jenkintown Towing Service v. Zoning Hearing Board of Upper Moreland Township, 67 Pa.Cmwlth. 183, 446 A.2d 716 (1982). Rather, in making its findings, the ZBA selects and includes portions of the testimony relating directly to the grant of variance relief. In addition, when summarizing the testimony of Neighbors' expert witnesses Waetzman and Messinger, the ZBA notes that their testimony on cross-examination undermines their opinions, thereby indicating that the ZBA did not attribute great weight to those opinions. (See ZBA's Findings of Fact, Nos. 29, 32.) Moreover, in the Conclusions of Law, the ZBA expressly states its bases for determining that Woodmere met its burden of proof.[8] We must agree *425 with Neighbors that it is not difficult, either conceptually or practically, for the ZBA to make credibility determinations or to identify specific findings of fact as such. Appellate review always benefits from such clarity, and we urge the ZBA to be more precise in the future. Nevertheless, with a few exceptions noted later in this opinion, we conclude that the format used by the ZBA does not, by itself, render the findings legally inadequate.
Neighbors also argue that the ZBA failed to consider Woodmere's variance request under the appropriate standards. With respect to this argument, the parties argue extensively as to the proper variance standards and governing authority to be applied in this case. Without delving further into their often confusing arguments, we note that the trial court correctly recognized, and the parties essentially agree, that this Philadelphia zoning case is governed by the variance criteria set forth in section 14-1802(1) of the Zoning Code.[9] In fact, in Civera v. Zoning Board of Adjustment, 39 Pa.Cmwlth. 499, 395 A.2d 700 (1979), this court adopted the trial court opinion recognizing the need for a variance to expand the Museum, and we affirmed the grant of the variance based on compliance with the criteria set out in section 14-1802 of the Zoning Code. As observed by our supreme court, "[t]he criteria [set forth in section 14-1802(1)] can be boiled down into three key requirements, that of: 1) unique hardship to the property; 2) no adverse effect on the public health, safety or general welfare; and 3) the variance will represent the minimum variance that will afford relief at the least modification possible." East Torresdale Civic Association v. Zoning Board of Adjustment of Philadelphia County, 536 Pa. 322, 324-25, 639 A.2d 446, 447 (1994); see also Wilson v. Plumstead Township Zoning Hearing Board, 894 A.2d 845 (Pa.Cmwlth.2006), appeal granted, 591 Pa. 678, 916 A.2d 1105 (2006).
Neighbors further argue that the ZBA erred or abused its discretion in finding that Woodmere satisfied the elements set forth in section 14-1802(1) of the Zoning Code. As to unnecessary hardship, Neighbors contend that the ZBA did not use the proper standard in considering this element of the variance test but, instead, employed a lower standard based on Woodmere's prior non-conforming use status. According to Neighbors, the ZBA simply concluded that existence of the Museum's prior non-conforming use was sufficient to show that the unique nature of the property necessitated a variance without fully addressing Woodmere's need for the variance or the unique nature of the property. We disagree.
As stated, the ZBA applied the variance criteria in section 14-1802(1) of the Zoning Code to undertake its hardship analysis. The applicable subsections of that Zoning Code section require the ZBA to consider: whether literal enforcement of the provisions *426 would result in unnecessary hardship because of particular conditions of the specific structure or land involved; that these conditions are unique to the property; and that the conditions requiring a variance did not result from any action by the applicant. Section 14-1802(1)(a), (b) and (d). Ultimately, the ZBA concluded that, as an art museum, Woodmere would suffer unnecessary hardship if the variance were not granted based on findings that Woodmere, housed in its existing historic building since 1916, lacks the space and appropriate "back-of-house" facilities to continue its mission as a modern public art museum. The ZBA also found that, due to the topography of the land, the Museum currently suffers from storm water runoff problems that the new construction will alleviate. These findings, which are fully supported by the record, constitute the type of unique hardship identified in the Zoning Code to justify the ZBA's conclusion.[10]
Moreover, contrary to Neighbors' contention, the record provides ample support for the ZBA's conclusion that the proposed variance is not detrimental to the public interest. The ZBA recognized that Woodmere has long provided a benefit to the public. Further, the ZBA found that the proposed improvements to the Museum: will be extensively set back from Woodmere's property line and a significant distance from neighboring residences; will be screened from view of the neighbors; will minimize glare from lights on adjacent residences; will not create traffic or parking problems; will facilitate storm water management; and have the support of the City Water Department, the City Planning Commission and numerous individuals and community organizations, including the CHCA, which entered an agreement with Woodmere to modify the impact of the proposed addition on adjacent property owners. These findings are supported by competent record evidence, and, therefore, the ZBA did not err in its conclusion regarding public interest. See section 14-1802(1)(c), (e), (i), and (j), (k) and (l).
However, we agree with Neighbors' contention that the ZBA erred in failing to make any findings of fact with respect to whether the proposed variance was the minimum that would afford relief. In fact, neither the ZBA nor the trial court even addressed the matter, completely omitting that required element from their analyses.[11]
Although the record contains testimony that Woodmere's present nineteenth-century building does not contain or allow for certain amenities and facilities found in "modern" art museums, the ZBA did not indicate in its summaries of testimony that a thriving institution demands a certain amount of display space, requires storage and meeting areas of a specific size or that *427 an addition smaller than the one proposed will not suffice to meet Woodmere's needs. Therefore, because the ZBA failed to address the "minimum variance" element, and, in fact, did not even recognize this element as part of the criteria for the grant of a variance, we agree with Neighbors that the case must be remanded for consideration of that issue.
We also agree with Neighbors that the ZBA's findings and conclusions are inadequate with regard to the dispute concerning whether the Museum's proposed expansion complies with the parking and screening requirements set forth respectively in sections 14-1402(7) and 14-1402(9) of the Zoning Code. The ZBA's findings do not identify the section of the Zoning Code that controls or the evidence relied upon to determine that the applicable requirements were satisfied. On remand, the ZBA should also make these necessary findings and legal determinations.[12]
In sum, we conclude that, for the most part, the ZBA's findings are sufficient to allow appellate review. As the trial court stated, so long as the record demonstrates that there was no manifest abuse of discretion, the judgment of the ZBA should receive deference. Silar v. Zoning Board of Adjustment of Spring Garden Township, 46 Pa.Cmwlth. 340, 407 A.2d 74 (1979). Here, the ZBA's findings on unnecessary hardship and detriment to the public are amply supported by substantial evidence in the record. However, a remand is required so that the ZBA may address and make findings with respect to whether the proposed construction is the minimum that would afford relief to Woodmere and to resolve disputes over alleged Zoning Code noncompliance with regard to parking and screening.
ORDER
AND NOW, this 5th day of July, 2007, the order of the Court of Common Pleas of Philadelphia County, dated June 26, 2006, is hereby vacated, and the case is remanded for further proceedings in accordance with the foregoing opinion.
Jurisdiction relinquished.
DISSENTING OPINION BY Judge PELLEGRINI.
Because a grant of a use variance for a use already in existence is an unknown and unauthorized zoning remedy, I respectfully dissent.
Woodmere Art Museum (Museum) is an art museum in a five-story Victorian mansion on five-and-one-half acres in the Chestnut Hill area of Philadelphia. The area is zoned R-1 Residential under the Philadelphia Zoning Code (Zoning Code) in which institutional uses are not allowed. However, because the Museum existed before the Zoning Code's enactment and opened to the public in 1940, normally, it would be considered as a non-conforming use. Over the years, the Museum has received several variances. In 1976, a use variance was sought for the construction of a parking lot. Other "use" variances were granted in 1980, 1982 and 2000 for expansions of the art gallery and the expansions of the Museum's administrative offices with attendant parking. No explanation was given why variances were sought rather *428 than special exceptions to expand a legal non-conforming use.
The Museum applied for a permit to build a two-story addition with a cellar for use as an art museum on the first and second floor with art storage and maintenance in the cellar; a one-story addition for use as an accessory mechanical room for erection of an oil tank; reconfiguration of the private parking lot with a new total of 82 spaces; and a retail gift shop, all as part of the existing Museum, with an accessory office, instructional classes and an accessory storage shed. The Department of Licenses and Inspection denied the permit because the requested uses were not permitted in the R-1 District as they were extensions of uses previously approved by the zoning board and had to also be approved.
The Museum appealed, contending that the proposed expansion met the requirements for a use variance and was a reasonable modification of its earlier use variances. Even though it was a legal non-conforming use, the use variance was sought because Section 14-104(4)(b) of the Zoning Code provides that a "nonconforming structure or use shall cease to be considered as such whenever it becomes the subject of a variance, granted by the [Board] or ordered by a Court, and its non-conforming status shall not be reinstated thereafter." The North Chestnut Hill Neighbors (Neighbors) opposed the grant of a variance. Following hearings, the zoning board granted the Museum's request for a use variance subject to conditions, and the trial court affirmed on appeal. The Neighbors then appealed to this Court contending that the Museum did not meet the standard for the grant of a use variance.
Holding that the unnecessary hardship requirement was met because of the zoning board's finding that the current Museum suffers from water run-off, lacks "back of the house facilities, and would be not be detrimental to the health welfare and safety of the community as there was not a showing of an adverse impact on the neighboring community," the majority remands to the Board to make findings that the use variance sought was the minimum use variance needed to afford relief. I disagree with the majority because I do not believe use variance standards are applicable, but instead, the expansion of a non-conforming use should apply.
A use variance involves a request to use property for a purpose that is wholly outside zoning regulations because otherwise it would be practically valueless. To show that an unnecessary hardship is needed for the grant of a use variance, one must prove that: (1) the physical features of the property are such that it cannot be used for a permitted purpose; (2) the property can be conformed for a permitted use only at a prohibitive expense; or (3) the property is valueless for any purpose permitted by the zoning ordinance. SPC Company, Inc. v. Zoning Board of Adjustment of the City of Philadelphia, 773 A.2d 209 (Pa. Cmwlth.2001). The applicant must show the hardship is unique or peculiar to the property as distinguished from a hardship arising from the impact of zoning regulations on the entire district. Laurento v. Zoning Hearing Board of the Borough of West Chester, 162 Pa.Cmwlth. 226, 638 A.2d 437 (1994). Where a condition renders a property almost valueless without the grant of a use variance, unnecessary hardship is established. Society Created to Reduce Urban Blight v. Zoning Board of Adjustment of the City of Philadelphia, 787 A.2d 1123 (Pa.Cmwlth.2001).
While there may be some inconvenience resulting if the variance is not granted, there is no showing that the property is almost valueless if the requirements for *429 the zone are followed because it still could be used for the same purpose that it has been used for before, that is, as a museum. There is also no unique hardship caused by any condition of the land placement that forecloses the property being used as zoned because there is nothing to show that it could not be developed for single-family homes. In recounting these use variance principles, I realize that there is a disconnect with what is being sought because the Museum is not contending that it cannot develop the property as zoned or that it is valueless when it is occupied by a world-class museum. The reason for that disconnect is because what is being sought is not a use variance, but an expansion of a legal non-conforming use, and I believe that is the proper standard to employ in evaluating this application.
Despite Section 14-104(4)(b) of the Zoning Code's provision that a use ceases if a variance has ever been granted, we have continued to apply the expansion of a non-conforming use standard,[1] even though what was requested was a use variance. In Civera v. Zoning Board of Adjustment, 39 Pa.Cmwlth. 499, 395 A.2d 700 (1979), involving the 1976 variance for the Museum's parking lot, we stated:
We affirm on the basis of Judge Gelfand's thorough opinion of June 22, 1977, at No. 4366 July Term, 1976, Court of Common Pleas of Philadelphia County (as yet unreported), which correctly applied the principles enunciated in Peirce Appeal, 384 Pa. 100, 119 A.2d 506 (1956) and Mack Zoning Appeal, 384 Pa. 586, 122 A.2d 48 (1958) to the special circumstances of the off-street parking needs involved in a natural expansion of applicant's nonconforming use. (Emphasis added.)
Because what is sought here is an expansion of a legal non-conforming use, I would remand for the zoning board to make a finding on the status of the Museum as a non-conforming use, and, if so, to address whether the Museum was entitled to expand its art museum under the natural expansion doctrine.
Accordingly, I respectfully dissent.
NOTES
[1] In 1976, the ZBA granted Woodmere a variance allowing construction of a parking lot to support the Museum's use. Civera v. Zoning Board of Adjustment, 9 Dall. & C.3d 39 (1977), aff'd, 39 Pa.Cmwlth. 499, 395 A.2d 700 (1979). Other variances permitting Museum expansion were issued in 1980, 1982 and 2000. (R.R. at 224a.)
[2] The ZBA is authorized to grant variances from the terms required by the Zoning Code that "will not be contrary to the public interest, where, owing to special conditions, a literal enforcement of the provisions of this Title would result in unnecessary hardship." Zoning Code, § 14-1801(1)(c). Section 14-1802 of the Zoning Code lists the criteria to be considered by the ZBA in granting a variance under section 14-1801(1)(c). In relevant part, those criteria are:
(a) that because of the particular physical surrounding, shape, or topographical conditions of the specific structure or land involved, a literal enforcement of the provisions of this Title would result in unnecessary hardship;
(b) that the conditions [on] which the appeal for a variance is [sic] based are unique to the property for which the variance is sought;
(c) that the variance will not substantially or permanently injure the appropriate use of adjacent conforming property;
(d) that the special conditions or circumstances forming the basis for the variance did not result from the actions of the applicant;
(e) that the grant of the variance will not substantially increase congestion in the public streets;
. . .
(i) that the grant of the variance will not adversely affect transportation or unduly burden water, sewer, school, park or other public facilities;
(j) that the grant of the variance will not adversely affect the public health, safety or general welfare;
(k) that the grant of the variance will be in harmony with the spirit and purpose of this Title, and
(l) that the grant of the variance will not adversely affect in a substantial manner any area redevelopment plan approved by City Council or the Comprehensive Plan for the City approved by the City Planning Commission.
Zoning Code, § 14-1802(1) (emphasis added).
[3] Neighbors are owners of twenty-six homes in the vicinity of Woodmere who incorporated and hired counsel to oppose Woodmere's planned addition.
[4] In addition to witness testimony, the ZBA stated that it also heard and considered the representations of Peter Kelson, the attorney for Woodmere, and those of David Fineman, the attorney for Neighbors. Kelson presented a site plan and stated that the Museum is on a lot of about 235,000 square feet, with 437 feet of frontage on Germantown Avenue and 524 feet of frontage on Bells Mill Road. Kelson also stated that the addition will contain 14,000 square feet and cover approximately 13% of the lot, far less than the 35% coverage permitted in the R-1 District. In addition, parking spaces for the Museum would increase from 78 to 82, and access would remain confined to the existing curb cut on Germantown Avenue. Kelson also presented letters of support from the Chestnut Hill Community Association, District Councilwoman Donna Reed Miller, State Senator Allyson Schwartz and others. (ZBA's Findings of Fact, Nos. 7, 9.) On the other hand, Fineman argued that the Museum could not show a hardship allowing for a variance and that the plan will put a "massive large museum" into a residential area, would not fit in the neighborhood and would overburden the community. (ZBA's Findings of Fact, No. 8.)
[5] In fact, Dr. Schantz testified that only about 2,000 square feet of the proposed addition would be used for public gallery space; the remaining square footage would be dedicated to "back-of-house" uses that do not exist in the existing mansion, such as rooms for storage and preservation of archival material, meeting and conference rooms and needed toilet facilities. (R.R. at 306a-10a.)
[6] Where, as here, the trial court takes no additional evidence, this court's scope of review is limited to determining whether the ZBA committed an abuse of discretion or an error of law. Money v. Zoning Hearing Board of Haverford Township, 755 A.2d 732 (Pa. Cmwlth.2000). A conclusion that the zoning board abused its discretion may be reached only if the zoning board's findings are not supported by substantial evidence. Id. Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Id.
[7] Neighbors list seven different issues in the Statement of Questions Involved portion of their brief; however, all these issues may be fairly subsumed within the stated objections.
[8] Neighbors maintain that the ZBA improperly included lawyers' statements in its recitation of facts, and Neighbors argue that to the extent the ZBA relied on these statements in reaching its conclusions, the ZBA erred. We agree that unsworn statements of counsel that have no independent basis of support in the record are not competent testimony, East Norriton Township v. Gill Quarries, Inc., 145 Pa.Cmwlth. 574, 604 A.2d 763 (1992), and we recognize that certain of the ZBA's findings include attorney representations. However, we note that, where such is the case, the representations either were identified as "argument," (see ZBA's Findings of Fact, Nos. 7, 8), or they had an independent basis of support in the record, (see ZBA's Findings of Fact, Nos. 9, 28, 31). Moreover, we note that, in concluding that Woodmere satisfied its burden of proof, the ZBA specifically relied on the following facts: the Museum would be unable to continue its mission in its present building; the proposed plan would alleviate the Museum's storm water runoff problem; the proposed plan arranged for overflow parking; and the proposed plan had the support of the CHCA and other interested parties. (ZBA's Conclusions of Law, Nos. 4-5.) These conclusions do not depend on any statements made by Woodmere's counsel; rather, they are amply supported by the testimony of Dr. Schantz, Brzostowicz, Eiss and Dornemann, respectively.
[9] In their respective briefs, Woodmere and the ZBA/City each maintain that the ZBA was correct in utilizing the criteria for a variance set forth in section 14-1802 of the Zoning Code, (Woodmere's brief at 20; ZBA/City's brief at 12, 14-15), and Woodmere contends that Neighbors, instead, want to impose a heightened burden by requiring Woodmere to satisfy "the standard for a variance from a nonconforming use." (Woodmere's brief at 32.) In their brief, Neighbors also assert that section 14-1802 of the Zoning Code applies to Woodmere's variance request, (Neighbors' brief at 23, 28-29), but contend that Woodmere, instead, would interpret the Zoning Code "to give greater leeway in granting variances to properties that had once been non-conforming uses." (Neighbors' brief at 23, emphasis added.)
[10] Neighbors argue that the ZBA and the trial court erred in considering the existence of other institutional uses in the area as supporting a finding of hardship for the Museum. In Valley View, our supreme court determined that the use of adjacent and surrounding land is a relevant factor in evaluating hardship. However, in that case, a residence was surrounded by commercial and industrial uses that rendered the property without value as a residential use. We agree with Neighbors that the presence of other institutional uses in the North Chestnut Hill area does not provide any justification for the grant of a variance to Woodmere because, unlike the situation in Valley View, the presence of the uses does not impact Woodmere. However, we decline to infer from its brief mention of these other industrial uses that the ZBA gave undue weight to this as a factor in granting variance relief to Woodmere.
[11] We note that the trial court identifies the minimum variance requirement as part of the variance test, (trial ct. op. at 2), but it fails to address that element in its brief opinion.
[12] Neighbors also claim that the ZBA improperly failed to consider or make findings on the Museum's financial viability and Neighbor's evidence that Woodmere would be unable to sustain the additions sought by variance. However, because this is not among the criteria set forth in section 14-1802(1) of the Zoning Code, we agree with Woodmere that this is an inappropriate consideration in a variance case. Therefore, we decline to make this a subject for consideration on remand.
[1] See Arter v. Philadelphia Zoning Board of Adjustment, 916 A.2d 1222, Pa.Cmwlth.2007. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536574/ | 928 A.2d 626 (2007)
50 Conn. Super. Ct. 367
Ann NOONAN
v.
MILLER MEMORIAL COMMUNITY HOME, INC., et al.
No. CV-01 0510353.
Superior Court of Connecticut, Judicial District of New Haven at Meriden.
May 8, 2007.
*627 Cooney, Scully & Dowling, Hartford, for the plaintiff.
Robinson & Cole, LLP, Hartford, for the defendant.
HOLZBERG, J.
Perodeau v. Hartford, 259 Conn. 729, 750, 792 A.2d 752 (2002), establishes that negligent infliction of emotional distress in the employment context arises only where it is based on unreasonable conduct of a defendant in the termination process. The question presented in the motion to strike filed by the defendants in the present case is whether the allegations in the plaintiff's second amended complaint are sufficient to state a claim under the rule in Perodeau.
The defendants' motion to strike is the latest installment in a long running dispute concerning the legal adequacy of the allegations of the third count of the complaints filed by the plaintiff, Ann Noonan, in which she asserts a claim of negligent infliction of emotional distress. The third count of the plaintiffs original complaint as well as the third count of her first amended complaint were the subjects of successful motions to strike, the courts, Shluger, J., and Dunnell, J., having ruled that neither count set forth sufficient allegations to sustain a claim of negligent infliction of emotional distress. To the great consternation of the defendants, the plaintiff has filed a second amended complaint, seeking, in the defendants' words, a third bite of the apple, as she attempts to respond to the defects identified by Judges Shluger and Dunnell.
Count three of the plaintiffs amended complaint dated December 26, 2006, asserts the following factual allegations.
First, Sister Ann Noonan, the plaintiff, was hired by the named defendant as its administrator in 1976. *628 Second, beginning on or before May, 2003, the named defendant began a targeted campaign and process calculated and intended to terminate her employment by imposing on her a series of unwarranted and unjustified demotions, investigations and disciplinary sanctions that would demean her and either force her to resign or provide a manufactured pretext for her termination.
Third, the process by which the defendants terminated the plaintiffs employment included the following acts and conduct arising out of seven different scenarios.
On several occasions, beginning in 2002, the defendants hired young staff members with the intention that they would replace the plaintiff.
In May, 2003, the defendants, without cause, demoted the plaintiff from her position as administrator, replacing her in that position with a much younger male.
On August 26, 2003, after conducting a secret investigation, the defendants issued a letter of severe reprimand. The letter was unjustified and imposed excessive and unnecessary penalties. The letter was issued without first affording the plaintiff a meaningful opportunity to answer the charges.
The penalties imposed in August, 2003, deprived the plaintiff of her ability to remain licensed as a nursing home administrator.
In October, 2003, the defendants performed an unnecessary and intrusive search of the plaintiffs office in her absence.
The defendants greatly exaggerated the significance of the forgotten antique pistol found in the [plaintiffs] office and, without reasonable cause or justification, demanded that the plaintiff accept a demotion or face termination. The defendants terminated the plaintiff, a twenty-six year employee, on November 18, 2003.
The defendants now move to strike the third count of the plaintiffs second amended complaint, arguing, principally, that under Perodeau, a viable claim for negligent infliction of emotional distress must arise out of conduct during the termination process. Given the defendants' view that the termination process in the present case is defined by the period between October 29, 2003, and the date of the plaintiffs termination on November 18, 2003, they argue that the numerous incidents alleged in the plaintiffs complaint prior to October 29, 2003, cannot be considered. It follows, therefore, according to the defendants, that in accordance with the rulings of Judges Shluger and Dunnell, who previously concluded that those allegations pertaining to the period between October 29, 2003, and November 18, 2003, are insufficient to make out a cause of action for negligent infliction of emotional distress, the most recent amended complaint must also fail.
The standards governing the court's review of a motion to strike are well established. The purpose of a motion to strike is to contest the legal sufficiency of the allegations of any complaint . . . . to state a claim upon which relief can be granted. Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003). A motion to strike challenges the legal sufficiency of a pleading, and, consequently, requires no factual finding by the trial court. Larobina v. McDonald, 274 Conn. 394, 400, 876 A.2d 522 (2005). It is fundamental that in determining the sufficiency of a pleading challenged by a party's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted. Id.
*629 In Perodeau, our Supreme Court set forth the applicable legal framework for evaluating the legal sufficiency of a plaintiff's claim of negligent infliction of emotional distress. "In Parsons v. United Technologies Corp., 243 Conn. 66, 700 A.2d 655 (1997), we again considered claims of wrongful discharge and negligent infliction of emotional distress. In that case, we concluded that the plaintiff had made out a prima facie case of wrongful discharge . . . but, relying on Morris [v. Hartford Courant Co., 200 Conn. 676, 513 A.2d 66 (1986) ] we also concluded that negligent infliction of emotional distress in the employment context arises only where it is based upon unreasonable conduct of the defendant in the termination process. . . . Accordingly, we concluded that [t]he mere termination of employment, even where it is wrongful, is therefore not, by itself, enough to sustain a claim for negligent infliction of emotional distress. The mere act of firing an employee, even if wrongfully motivated, does not transgress the bounds of socially tolerable behavior. We found that the actions that the defendant took in terminating the employment of the plaintiff, as alleged in his complaint, were not so unreasonable as to support a cause of action for negligent infliction of emotional distress. . . . Thus, Parsons stands for the proposition that a wrongful termination is not, in and of itself, a sufficient basis for a claim of negligent infliction of emotional distress. (Citations omitted; internal quotation marks omitted)." Perodeau v. Hartford, supra, 259 Conn. at 750, 792 A.2d 752.
"Accordingly, read together, Morris and Parsons merely stand for the proposition that, in cases where the employee has been terminated, a finding of a wrongful termination is neither a necessary nor a sufficient predicate for a claim of negligent infliction of emotional distress. The dispositive issue in each case was whether the defendant's conduct during the termination process was sufficiently wrongful that the defendant should have realized that its conduct involved an unreasonable risk of causing emotional distress and that [that] distress, if it were caused, might result in illness or bodily harm." (Emphasis in original; internal quotation marks omitted.) Id., at 751, 792 A.2d 752.
The dispositive issue in the present case is whether the plaintiff has properly alleged that the defendant's conduct during the termination process was sufficiently wrongful that the "defendant should have realized that its conduct involved an unreasonable risk of causing emotional distress, and that [that] distress, if it were caused, might result in illness or bodily harm." (Emphasis in original; internal quotation marks omitted.) Id., at 751, 792 A.2d 752. Contrary to the defendants' suggestions, a motion to strike is not the proper forum to determine whether the facts alleged in the complaint will be proven at trial. Indeed, the court is obligated to assume the truth of the facts asserted. Nor is it the proper forum to rule, as a matter of law, whether the termination process began and ended on certain dates. That is a peculiarly factual matter entrusted to the judgment of the jury. Finally, and most critically, it is not the province of the court, in ruling on a motion to strike, to determine whether the constellation of facts alleged by the plaintiff, constitutes the type of conduct that is sufficiently wrongful that the defendants should have realized it would involve an unreasonable risk of causing the plaintiff emotional distress. Id. That too, is ultimately a question reserved for the fact finder.
The plaintiff's allegations concerning the commencement of the termination process may ultimately be rejected. So too, may *630 her allegations concerning the wrongfulness of the acts complained of. A jury may well find, as the defendants claim, that the termination process commenced in October and concluded in November. It may also conclude that the conduct of the defendants during this time period was not wrongful, but rather the normal incidents of a termination process. The key point, however, is that those are questions to be decided at trial and not in the context of a motion to strike.
A review of the plaintiff's second amended complaint dated December 26, 2006, reveals that she has clearly and specifically alleged the elements necessary to sustain a cause of action for negligent infliction of emotional distress as set forth in Perodeau. Specifically, the plaintiff alleges that the defendants' conduct during the termination process was unreasonable and that the named defendant should have realized that its conduct involved an unreasonable risk of causing emotional distress and that distress, if it were caused, might result in illness or bodily harm.
The plaintiff has also set forth a series of actions by the defendants, which, if credited by the fact finder, are sufficient to support the elements of the plaintiff's cause of action. These include, but are not limited to, her demotion and replacement by a younger male, the issuance of a letter of severe reprimand, the search of her office and the ultimatum to accept a demotion or be fired. While these incidents, either standing alone or in the aggregate, may not ultimately persuade the fact finder, they are sufficient to withstand a motion to strike. See, e.g., note 3, Kanios v. UST, Inc., 2005 WL. 3579161, 2005 U.S. Dist. Lexis 38115; Copeland v. Home & Community Health Services, Inc., 285 F. Sup.2d 144 (D.Conn.2003) (holding that where employer pressured plaintiff to return to work by being inflexible about date on which she was required to return to work from medical leave, and by threatening to hire, and ultimately hiring, replacement when plaintiff did not return on desired date, a motion to dismiss should not be granted.); Edwards v. Community Enterprises Inc., 251 F. Sup.2d 1089 (D.Conn. 2003) (holding that where plaintiff, who was living on premises as part of share-home community was terminated and then, despite knowledge that worker had pneumonia, was told to leave in forty-eight hours and was threatened to have police evict her, summary judgment motion was denied); Nance v. M.D. Health Plan, Inc., 47 F. Sup.2d 276 (D.Conn.1999) (holding that where plaintiff alleges that he was terminated and sent home without incident but subsequent investigation performed in embarrassing manner and factual questions regarding when actual termination process began, motion to dismiss denied); Cameron v. Saint Francis Hospital & Medical Center, 56 F. Sup.2d 235 (D.Conn. 1999) (denying motion to dismiss where plaintiff was notified of impending termination and alleged that he was subsequently treated in embarrassing and humiliating manner during the months leading up to his termination).
Accordingly, for the foregoing reasons, the defendants' motion to strike count three of the plaintiff's second amended complaint dated December 26, 2006 is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536583/ | 928 A.2d 566 (2007)
103 Conn.App. 276
Mary Ellen PRITCHARD
v.
James L. PRITCHARD.
No. 25068.
Appellate Court of Connecticut.
Argued May 24, 2007.
Decided August 14, 2007.
*568 Robert D. Snook, assistant attorney general, with whom, on the brief, were Richard Blumenthal, attorney general, and Susan Quinn Cobb, assistant attorney general, for the appellant (state).
Albert Lau, with whom was David V. DeRosa, for the minor children.
BISHOP, LAVINE and DUPONT, Js.
BISHOP, J.
The authority of family support magistrates is defined and limited by statute. Although judges of the Superior Court exercise general jurisdiction, the court must act, in this area of the law, in a manner consistent with the statutory scheme governing the family support magistrate division of the Superior Court. In this matter, which is before us on remand from our Supreme Court,[1] resolution of the issues we confront requires us to examine the Family Support Magistrate's Act, General Statutes § 46b-231 et seq., and the interplay between Superior Court judges and family support magistrates. The state of Connecticut, support enforcement services, appeals from the January 12 and August 24, 2004 judgments *569 of the trial court rendered after the Superior Court "interceded" in a support enforcement action pending before the family support magistrate.[2] The state claims that the court improperly intervened in a matter pending before the family support magistrate, improperly vacated the magistrate's findings and retroactively modified the magistrate's orders without notice to the parties and in the absence of an appeal filed pursuant to § 46b-231(n). Although we conclude that § 46b-231(q) authorizes the Superior Court to intervene in a matter pending before the family support magistrate, the Superior Court does not have the authority to vacate orders issued by the family support magistrate in the absence of notice to the affected parties or an appeal filed pursuant to § 46b-231(n). Accordingly, we reverse the judgments of the trial court.
The following facts, as set forth by this court; see Pritchard v. Pritchard, 92 Conn.App. 327, 330-33, 885 A.2d 207 (2005), rev'd, 281 Conn. 262, 914 A.2d 1025 (2007); and adopted by the Supreme Court, are relevant to the resolution of the issues before us. "The plaintiff, Mary Ellen Pritchard, and the defendant, James L. Pritchard, were married on May 5, 1979. Two children were born of the marriage. On June 11, 1996, the parties were divorced. Pursuant to the judgment of dissolution, the defendant was ordered to pay, inter alia, child support in the amount of $180 per week and alimony in the amount of $100 per week. An alimony arrearage of $7549.80 was also found by the court, and the defendant told the court that he would continue to refuse to pay the delinquent alimony. In response, certain bank orders were issued. Nevertheless, on November 1, 1996, pursuant to a motion for contempt, the court found the defendant to be in arrears $3600 in child support, $2000 in alimony and $303 in unreimbursed medical expenses. Finding the defendant in contempt, the court issued additional bank orders, transferring certain moneys to the plaintiff. Following the transfer of the bank funds to the plaintiff, which did not clear up the arrearage entirely, the court appointed an attorney for the defendant on March 31, 1997, finding that the defendant was in jeopardy of incarceration for his failure to comply with the orders of the court.
"In response to another motion for contempt filed by the plaintiff, the court, Axelrod, J., on November 25, 1997, denied the motion because it concluded that the plaintiff, herself, had failed to comply with the orders of the court regarding the transfer of certain Florida property to the defendant and that her delay had caused the defendant to lose that portion of the property that the plaintiff had been ordered to transfer to him. The court did find, however, that the defendant owed an arrearage of $13,107.95, consisting of $1700 in alimony, $11,160 in child support and $247.95 in unreimbursed medical expenses. The court also stated that, pursuant to the terms of the judgment of dissolution, alimony had terminated on October 10, 1996, and the court ordered the payment on the arrearage to be $35 per week, with an increase as each child reached majority. On September 3, 1998, the plaintiff filed another motion for contempt, which was heard on September 8, 1998. After the defendant failed to appear for the hearing on the contempt motion, the court found that the arrearage was $27,608.70, and it issued a capias, finding the defendant in contempt.
*570 "On July 3, 2000, a new capias was issued after it was discovered that the original had been lost. On September 12, 2002, the defendant was arrested and bond was set at $30,000. After setting the bond, the court, Rodriguez, J., referred the matter to the family support magistrate. On September 18, 2002, the family support magistrate, John P. McCarthy, found the defendant in contempt and set a purge figure of $65,588.70, the amount of the support arrearage. The defendant continued to be brought before the court on a monthly basis for review of the contempt finding. On April 2, 2003, the magistrate increased the defendant's purge amount to $70,628.70 and also set a bond of $10,000.
"On April 23, 2003, the defendant filed a motion for contempt against the plaintiff, alleging that her failure to transfer the Florida property in a timely manner amounted to a fraudulent conveyance.[3] On July 30, 2003, during one of the monthly reviews of the defendant's incarceration on the contempt finding, the magistrate found that property owned by the defendant in Bethel had been fraudulently transferred to the defendant's companion, Suzanne Spellman, and the magistrate ordered that the defendant could be released if Spellman placed a mortgage on the property to secure a lien in the name of the plaintiff and then sold the property and paid the plaintiff. On November 26, 2003, the magistrate lowered the defendant's purge amount to zero and set a bond of $30,000. On December 4, 2003, the state filed a motion for reconveyance of the Bethel property with the Superior Court.[4] On December 15, 2003, Spellman and the defendant appeared before the Superior Court for a hearing on the motion for reconveyance. On January 7, 2004, the magistrate lowered the defendant's bond to $5000, and set another review date for the following week, January 14, 2004.
"On January 12, 2004, after a hearing on the state's motion for reconveyance, the court, Shay, J., ordered the defendant released from custody and vacated [the finding of an arrearage], the capias, the bond and all prior findings of contempt.[5] The court also suspended the payment of child support and continued the matter until April 19, 2004. The state filed an appeal from the January 12 [2004] judgment.... The state claimed on appeal that the trial court lacked authority under General Statutes §§ 46b-231(q) and 46b-86 to vacate *571 the prior orders issued by the Superior Court and the family support magistrate when the defendant had not appealed from or otherwise challenged those orders. Subsequently, on April 26, 2004, the trial court found that the defendant had fraudulently transferred the Bethel property to Spellman, but stayed enforcement until it could recalculate the amount of arrearage.
"On August 24, 2004, the trial court issued a memorandum of decision in which it reiterated its January 12, 2004 orders, recalculated the amount of arrearage and ordered the defendant to make certain payments. . . . The court explained that it had vacated the September 8, 2002 contempt order because the original court order did not comport with the fundamentals of due process. . . . With respect to its ruling vacating the arrearage order, the court recognized that the defendant had never filed a motion for modification. It concluded, however, that it was `equitable and appropriate' to treat the defendant's April 23, 2003 motion for contempt[6] against the plaintiff for her failure to comply with orders concerning the transfer of the Florida properties as a motion to reopen the September 8, 1998 judgment, because the defendant consistently contended that the loss of the Florida real estate was somehow tied to his child support obligation. . . . Accordingly, the court concluded that it was authorized to vacate the finding of contempt and to modify the existing child support orders. The state then filed an amended appeal from that decision, indicating that the original judgment was the one rendered on January 12, 2004. Attached to the amended appeal was an amended preliminary statement of issues in which the state raised two new issues related to the August 24, 2004 ruling." (Citations omitted; internal quotation marks omitted.) Pritchard v. Pritchard, 281 Conn. 262, 264-68, 914 A.2d 1025 (2007).
Emerging from this procedural and factual history are the following issues: whether the court had the authority to intervene in the matter that was pending before the family support magistrate and, if so, whether the court properly vacated the capias, contempt and arrearage orders, and modified the ongoing support order. We respond to each issue in turn.
At the outset, we address the applicable standard of review. The state's claims on appeal rest on our interpretation of the Family Support Magistrate's Act, § 46b-231 et seq. "Issues of statutory construction raise questions of law, over which we exercise plenary review. . . . The process of statutory interpretation involves the determination of the meaning of the statutory language as applied to the facts of the case, including the question of whether the language does so apply. . . . When construing a statute, [o]ur fundamental objective is to ascertain and give effect to the apparent intent of the legislature. . . . In other words, we seek to determine, in a reasoned manner, the meaning of the statutory language as applied to the facts of [the] case, including the question of whether the language actually does apply. . . . In seeking to determine that meaning, General Statutes § 1-2z directs us first to consider the text of the statute itself and its relationship to other statutes. If, after examining such text and considering such relationship, the meaning of such text is plain and unambiguous and does not yield absurd or unworkable results, *572 extratextual evidence of the meaning of the statute shall not be considered." (Citations omitted; internal quotation marks omitted.) Alvord Investment, LLC v. Zoning Board of Appeals, 282 Conn. 393, 401-402, 920 A.2d 1000 (2007). With the foregoing legal principles in mind, we turn to the state's specific claims.
To resolve the issues before us, we begin with the language of § 46b-231(q), which provides: "When an order for child or spousal support has been entered against an obligor by the Superior Court in an action originating in the Superior Court, such order shall supersede any previous order for child or spousal support against such obligor entered by a family support magistrate and shall also supersede any previous agreement for support executed by such obligor and filed with the Family Support Magistrate Division." Thus, according to the plain language of the statute, the Superior Court may enter support orders in a case that had been pending before the family support magistrate but which originated in the Superior Court.
The Superior Court's authority to intervene in a matter pending before a magistrate is further supported by our jurisprudence regarding the proper exercise of jurisdiction. "Our legislature has consistently drafted legislation to state expressly when a court has exclusive jurisdiction." Sender v. Sender, 56 Conn.App. 492, 498, 743 A.2d 1149 (2000). "The Superior Court of this state as a court of law is a court of general jurisdiction. It has jurisdiction of all matters expressly committed to it and of all others cognizable by any law court of which the exclusive jurisdiction is not given to some other court. The fact that no other court has exclusive jurisdiction in any matter is sufficient to give the Superior Court jurisdiction over that matter." (Internal quotation marks omitted.) LaBella v. LaBella, 134 Conn. 312, 316, 57 A.2d 627 (1948).
General Statutes § 46b-231(d) provides: "There is created the Family Support Magistrate Division of the Superior Court for the purpose of the impartial administration of child and spousal support." General Statutes § 46b-231(b)(6) provides: "`Family Support Magistrate Division' means a division of the Superior Court created by this section for the purpose of establishing and enforcing child and spousal support in IV-D cases and in cases brought pursuant to sections 46b-212 to 46b-213v, inclusive, utilizing quasi-judicial proceedings. . . ." As a creature of statute, the family support magistrate division has only that power that has been expressly conferred on it. Thus, while a family support magistrate has only the authority granted by statute, the Superior Court is a court of general jurisdiction and has authority over all cognizable claims not given to some other court.
Although the primary role of the family support magistrate division is the enforcement of support orders, General Statutes § 46b-212h(a) grants the family support magistrate division or the Superior Court exclusive jurisdiction over child support orders. Thus, because the legislature has not given the family support magistrate exclusive jurisdiction over child support matters and has specifically given the Superior Court jurisdiction in such matters, the Superior Court has authority to hear a support matter even if the magistrate has already exercised jurisdiction in that matter.
The authority of the Superior Court, however, is not unbounded. Although § 46b-231(q) provides that a judge may enter orders that would supersede those of a magistrate, this provision must be read in harmony with the other provisions *573 of the Family Support Magistrate's Act. "In giving a statute its full meaning where that construction is in harmony with the context and policy of the statute, there is no canon against using common sense in construing laws as saying what they obviously mean." (Internal quotation marks omitted.) Singh v. Singh, 213 Conn. 637, 655, 569 A.2d 1112 (1990). Section 46b-231(n) provides an avenue to appeal a decision of a family support magistrate to the Superior Court.[7] To read subsection (q) as allowing the Superior Court to vacate an order of a magistrate in the absence of an appeal would render subsection (n) meaningless. Thus, a Superior Court judge may vacate orders of a family support magistrate only when the criteria for appealing that order have been satisfied.
We now apply the general conclusions reached previously to the specific facts of the case before us. As noted, this case originated in the Superior Court as a dissolution matter. Subsequent to the judgment of dissolution, the plaintiff sought the services of the child support enforcement bureau to help her collect the child support she was owed by the defendant by virtue of the dissolution judgment, and the matter was referred to the family support magistrate division. For a period of several years, the family support magistrate enforced the support orders, periodically finding the defendant in arrears and in contempt. When the state filed its motion for reconveyance in the marital dissolution matter, the case was returned to the regular Superior Court docket due to the magistrate's limited jurisdiction. Because the present case fits squarely within the plain language of § 46b-231(q), the court properly could have entertained the issue of prospective child support. Additionally, the capias that ordered the defendant into the custody of the court was an ongoing matter over which the court properly could exercise its authority. However, although the court had the authority to intervene in this matter and to make prospective orders, because the defendant did not appeal from the previous arrearage and contempt orders, and the court was not exercising its statutory appellate authority, therefore, the court did not have the authority to vacate those previously made orders.[8]
The state also claims that it was not afforded adequate notice of the court's intention to modify the support orders. At the outset, we note the principles underlying the necessity for adequate and proper notice. "It is the settled rule of this jurisdiction, if indeed it may not be *574 safely called an established principle of general jurisprudence, that no court will proceed to the adjudication of a matter involving conflicting rights and interests, until all persons directly concerned in the event have been actually or constructively notified of the pendency of the proceeding, and given reasonable opportunity to appear and be heard. . . . It is a fundamental premise of due process that a court cannot adjudicate a matter until the persons directly concerned have been notified of its pendency and have been given a reasonable opportunity to be heard in sufficient time to prepare their positions on the issues involved." (Citation omitted; internal quotation marks omitted.) Egan v. Egan, 83 Conn.App. 514, 518, 850 A.2d 251 (2004).
Here, the only motion before the court when it vacated the prior contempt and arrearage orders and modified the ongoing support order was the state's motion for reconveyance of real estate. Although the state sought a reconveyance of property as an avenue for enforcing the support order, there was no motion pending before the court to modify the prior support orders. The court indicated that it was construing the defendant's motion for contempt, filed April 23, 2003, which may have been withdrawn, as a motion for modification. Because that motion did not even mention child support, it could not fairly be read as a request for modification of support.[9] Thus, because the motion for contempt was not before the court, and the motion before the court did not pertain to child support, none of the parties had notice that the court might vacate the prior contempt and arrearage orders and modify the support order.[10] Because the court acted in violation of the state's due process rights to be given adequate notice of the issues the court intended to address, and, accordingly, to be given a reasonable opportunity to be heard in sufficient time to prepare a position on the issues involved, the action taken by the court cannot stand.[11]
In sum, pursuant to § 46b-231(q), the court properly intervened in this matter and, because the defendant's imprisonment was ongoing, the court properly released him from incarceration. Because there was, however, no appeal filed from the prior arrearage and contempt orders, the court exceeded its authority in vacating those orders. Additionally, although the court had the authority to enter prospective orders pursuant to § 46b-231 (q), the court improperly modified the support orders in that it did so without giving adequate notice to the parties.
The judgments vacating the arrearage and contempt orders and modifying the child support order are reversed.
In this opinion the other judges concurred.
NOTES
[1] In Pritchard v. Pritchard, 281 Conn. 262, 914 A.2d 1025 (2007), the Supreme Court reversed this court's dismissal of the state's appeal for lack of a final judgment and mootness and remanded the matter to this court for consideration of the merits of the state's appeal.
[2] The minor children of the parties also have filed a brief in this appeal that basically reiterates the position of the state.
[3] "The state argues that this motion was withdrawn on May 12, 2003. Although there is a notation to that effect at the bottom of the motion, the case detail sheet does not show that this motion was withdrawn." (Internal quotation marks omitted.) Pritchard v. Pritchard, supra, 281 Conn. at 266 n. 2, 914 A.2d 1025.
[4] "The court case detail sheet shows this motion, no. 185, as having been filed on December 4, 2003. The motion in the court's file, however, contains three different date stamps, one on November 14, 2003, one on November 26, 2003, and the last on December 4, 2003. The order to show cause itself also shows that it was signed on November 19, 2003, by Judge Mintz, ordering Spellman and the defendant to appear on December 15, 2003, to show cause why the motion should not be granted. The notice of lis pendens was filed with the Bethel town clerk on November 24, 2003, a certified copy of which is contained in the court file." (Internal quotation marks omitted.) Pritchard v. Pritchard, supra, 281 Conn. at 266 n. 3, 914 A.2d 1025.
[5] "The trial court stated at the January 12, 2004 hearing that it was `vacating the previous order of contempt, nunc pro tunc. There is no contempt.... There is an arrearage that is to be determined, and we're going to set up a hearing ... to determine ... the proper arrearage as of [September 8, 1998, the date of the original arrearage order].' The court further ordered that the defendant `be freed forthwith.'" Pritchard v. Pritchard, supra, 281 Conn. at 267 n. 4, 914 A.2d 1025.
[6] "The trial court referred to the defendant's `March 5, 2003' motion for contempt. The motion was signed by the defendant on March 5, 2003, but was listed on the case detail sheet as having been filed on April 23, 2003." Pritchard v. Pritchard, supra, 281 Conn. at 268 n. 7, 914 A.2d 1025.
[7] General Statutes § 46b-231(n) provides in relevant part: "(1) A person who is aggrieved by a final decision of a family support magistrate is entitled to judicial review by way of appeal under this section.
"(2) Proceedings for such appeal shall be instituted by filing a petition in superior court for the judicial district in which the decision of the family support magistrate was rendered not later than fourteen days after filing of the final decision . . . .
"(7) The Superior Court may affirm the decision of the family support magistrate or remand the case for further proceedings. The Superior Court may reverse or modify the decision if substantial rights of the appellant have been prejudiced because the decision of the family support magistrate is: (A) In violation of constitutional or statutory provisions; (B) in excess of the statutory authority of the family support magistrate; (C) made upon unlawful procedure; (D) affected by other error of law; (E) clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or (F) arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion."
[8] The court vacated not only the findings of the magistrate, it also vacated the contempt and arrearage order made by a judge of the Superior Court on September 8, 1998. We are unable to find any authority for the court's action in this regard.
[9] Practice Book § 25-26(e) provides: "Each motion for modification shall state the specific factual and legal basis for the claimed modification and shall include the outstanding order and date thereof to which the motion for modification is addressed."
[10] The court orally notified the parties at the December 15, 2003 hearing that he might release the defendant from incarceration at his next court date, January 12, 2004.
[11] Furthermore, even if there had been a motion for modification pending or the court properly had given notice to the parties, it is well-settled that a court may not modify a financial order retroactively. See General Statutes § 46b-86 (no order for periodic payment of support may be subject to retroactive modification); Sanchione v. Sanchione, 173 Conn. 397, 405-406, 378 A.2d 522 (1977). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536578/ | 223 B.R. 290 (1998)
In re EAGLE ENTERPRISES, INC., and Liberty Recovery Systems, Inc., Debtors.
Bankruptcy Nos. 98-11297SR, 98-11298SR.
United States Bankruptcy Court, E.D. Pennsylvania, Philadelphia Division.
August 4, 1998.
*291 OPINION
STEPHEN RASLAVICH, Bankruptcy Judge.
INTRODUCTION
At issue in the present proceeding is the status of three top lifters acquired by one of the debtors shortly before filing bankruptcy. The acquisition of the top lifters was accomplished via a leasing arrangement and the question in dispute is whether the leases are "true leases" or disguised financing agreements. No financing statements were filed by the seller, and thus the trustee asserts that the leases are financing instruments giving rise to avoidable unperfected security interests. The seller proposes that the leases are governed by German law under which they would allegedly be true leases. As explained below, we agree with the trustee. Accordingly, we find that the seller is not entitled to any compensation for the use of the top lifters by the debtor or the trustee and there is no requirement for the leases to be assumed or rejected.
BACKGROUND
The debtors in this consolidated case, Eagle Enterprises, Inc., and Liberty Recovery Systems, Inc. (collectively referred to as "Debtor"), are two firms formerly engaged in waste management. Following a brief period in Chapter 11, the case was converted to Chapter 7 and Mitchell Miller was appointed trustee ("Trustee") to liquidate the Debtor's assets. At the time of conversion, the Debtor had three top lifters in its possession. Two of the top lifters were inoperable and located at a facility in Philadelphia, Pennsylvania. The third top lifter, located in Virginia, functioned, and, following conversion of the case to Chapter 7, was used in clean-up operations at the Debtor's premises by USA Waste Services, Inc. ("USA"), a secured creditor.
The top lifters were acquired by the Debtor within a year before filing bankruptcy via leasing arrangements with their seller, a German company named United Container Systems (Deutschland) GmbH ("UCS"). The leases, styled "Purchase Lease Agreement[s]," *292 were to last for a period of 36 months and required the Debtor to make quarterly payments of an amount slightly in excess of $16,000 for each top lifter. The leases could not be terminated prior to the end of their 36 month term and included a purchase option allowing the Debtor to acquire ownership of the top lifters for a payment of one dollar each.
UCS has filed two motions. The firsts seeks to have the leases rejected and the property returned. In the second motion, USC seeks compensation from USA for its use of the top lifters during the postpetition period. Both the Trustee and USA oppose the motions. A hearing was held on June 3, 1998, in which the parties orally stipulated to most of the evidence and presented legal argument. Briefs were submitted by all the parties thereafter in support of their respective positions.
USC argues that German law is applicable to the transaction based on a choice of law clause contained in the leases. According to German law, USC asserts that the leases are true leases and that title to the top lifters does not pass to the lessee until the purchase option is exercised at the end of the lease term.[1] USC thus posits that title to the top lifters is not part of the bankruptcy estate and that the leases are executory contracts, governed in bankruptcy by 11 U.S.C. § 365, and susceptible to being assumed or rejected. The Trustee argues that the choice of law clauses in the leases are unenforceable under Pennsylvania's version of the Uniform Commercial Code, 13 Pa.C.S. § 1105(b),[2] which directs that all choice of law issues pertaining to the perfection or nonperfection of security interests is governed by section 9103. 13 Pa.C.S. § 9103. That section incorporates the Uniform Commercial Code's ("U.C.C.") definition of "security interest" and its application to the present case leads to the conclusion that the leases created security interests that must be filed to become perfected. Hence, the Trustee posits that UCS is the holder of unperfected security interests that are avoidable under the Bankruptcy Code. 11 U.S.C. § 544.
DISCUSSION
I.
The first issue in deciding any choice of law question is to determine the applicable choice of law rules. In most instances bankruptcy courts rely on the rule observed by federal district courts hearing diversity cases and use the choice of law rules of the forum state. Klaxon Co. v. Stentor Electric Manufacturing Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941); M.J. Doyle v. Northrop Corp., 455 F. Supp. 1318, 1326 (D.N.J.1978); In re High-Line Aviation, Inc., 149 B.R. 730, 733 & n. 2 (Bankr.N.D.Ga. 1992). Both contestants in the present case have argued on the basis of Pennsylvania law and thus appear implicitly to agree that Pennsylvania's choice of law rules govern the case's resolution. The Court accepts the parties' position.
The controlling law in Pennsylvania with respect to conflicts of laws problems involving secured transactions under the U.C.C. is 13 Pa.C.S. § 1105. That section, which *293 states choice of law rules of general applicability, reads as follows:
1105. Territorial application of title; power of parties to choose applicable law
(a) General rule. Except as otherwise provided in this section, when a transaction bears a reasonable relation to this Commonwealth and also to another state or nation the parties may agree that the law either of this Commonwealth or of such other state or nation shall govern their rights and duties. Failing such agreement this title applies to transactions bearing an appropriate relation to this Commonwealth.
(b) Limitations on power of parties to choose applicable law. Where one of the following provisions of this title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:
Section 2402 (relating to rights of creditors of seller against sold goods).
Sections 2A105 (relating to territorial application of division to goods covered by certificate of title) and 2A106 (relating to limitation on power of parties to consumer lease to choose applicable law and judicial forum).
Section 4102 (relating to applicability of division on bank deposits and collections).
Section 4A507 (relating to choice of law).
Section 8110 (relating to applicability; choice of law).
Section 9103 (relating to perfection provisions of division on secured transactions).
Id. (emphasis added).
UCS grasps onto section 1105(a) for the proposition that parties to a contract are permitted to choose the law to be applied to their agreement as long as it bears a reasonable relationship to the transaction. Since UCS is a German company, it claims that German law bears a reasonable relationship to the transaction at issue and must be applied to govern its terms in accordance with the contract.
While the Court finds that UCS is generally correct in its summary of the law, the Court nevertheless concludes in this instance that UCS is reading more into the statute than is actually there. Section 1105(a) allows contracting parties to choose the law applicable to "their" relationship. The statute is silent, however, on the issue of whether parties may also make choice of law decisions that impact the rights of third parties who have not signed on to their contract. Fundamental principals of contract law, including most notably the rules governing offer and acceptance, strongly militate that they cannot. See Perry v. Tioga County, 694 A.2d 1176, 1178 (Pa.Cmwlth.Ct.1997) (offer and acceptance necessary elements of an enforceable agreement). A third party, that is, cannot have his rights altered, compromised or redefined by the provisions of a contract he has not accepted. See Hahnemann Medical College and Hospital of Philadelphia v. Hubbard, 267 Pa.Super. 436, 440, 406 A.2d 1120, 1122 (1979) (contract not binding without offer and acceptance). In the context of the instant Chapter 7 bankruptcy proceeding, the Trustee stands in the role of a third party as a representative of all creditors, 3 Collier on Bankruptcy ¶ 323.02[1] (15th ed.1998), and is specifically given the powers of a judicial lien creditor under 11 U.S.C. § 544. The Trustee, thus, is a third party whose rights cannot be governed by UCS's contract with the Debtor.
Moreover, even if contracting parties could use Section 1105(a) to impose contractual choice of law decisions on third parties, section 1105(b) expressly makes those choice of law decisions inapplicable to issues concerning the perfection of security interests under 13 Pa.C.S. § 9103. That section contains specific choice of law provisions to determine the law applicable to the perfection of security interests in transactions with multi-state contacts. At first blush the section may appear inapposite to the present controversy because it concerns the perfection of security interests, whereas the issue raised in this case relates to the classification of a transaction as a security agreement or lease. Nevertheless, section 9103 does contain the answer to the question. The answer lies in the fact that section 9103 references and *294 thereby incorporates the law applicable to the classification of security agreements through its use of the term "security interest." Under the U.C.C., "security interest" is a term of art defined in section 1201, 13 Pa.C.S. § 1201, as "an interest in personal property or fixtures which secures payment or performance of an obligation." Id. According to the first paragraph of section 1201, the definitions provided therein "shall" govern the meaning of the terms as used throughout the U.C.C. Id.[3] With reference to the present case, the definition of "security interest" contains the following pertinent provisions:
(2) Retention or reservation of title to delivered goods.The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (section 2401) is limited in effect to a reservation of a "security interest."
. . .
(6) Determination of lease or security interest.Whether a transaction creates a lease or security interest is determined by the facts of each case; however:
(i) A transaction creates a security interest if the consideration the lessee is to pay the lessor for the right to possession and use of the goods is an obligation for the term of the lease not subject to termination by the lessee and:
(A) the original term of the lease is equal to or greater than the remaining economic life of the goods;
(B) the lessee is bound to renew the lease for the remaining economic life of the goods or is bound to become the owner of the goods;
(C) the lessee has an option to renew the lease for the remaining economic life of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement; or
(D) the lessee has an option to become the owner of the goods for no additional consideration or nominal additional consideration upon compliance with the lease agreement.
Id.
Thus, the definition of "security interest" itself contains all of the rules applicable under the U.C.C. for determining whether an agreement is a "true lease" or security agreement. Since the term "security interest" is employed by section 9103, its definition is incorporated into the section and must be applied to any potential security agreement as the first step in the process of determining whether the choice of law rules contained in 9103 are applicable thereto. Accordingly, Pennsylvania law for classifying security interests is applicable to the Debtor's agreement with UCS through the operation of 13 Pa.C.S. § 9103 which applies to "security interests" and is made applicable to the parties' agreement by section 1105(b).
The cases addressing the issue are fairly uniform in holding that contractual choice of law provisions are not binding on third parties or otherwise capable of effecting the reclassification of security agreements into leases. Carlson v. Tandy Computer Leasing, 803 F.2d 391, 393 (8th Cir.1986); Hong Kong and Shanghai Banking Corp. v. HFH USA Corp., 805 F. Supp. 133, 140 (W.D.N.Y. 1992); In re Automated Bookbinding Services, Inc., 336 F. Supp. 1128, 1132 (D.Md. 1972), rev'd on other grounds, 471 F.2d 546; In re Kokomo Times Publishing and Printing Corp., 301 F. Supp. 529, 536 (S.D.Ind. 1968); In re High-Line Aviation, Inc., 149 B.R. 730, 735 (Bankr.N.D.Ga.1992); In re Wathen's Elevators, Inc., 32 B.R. 912, 919 n. 16 (Bankr.W.D.Ky.1983); In re Vintero Corp., 31 UCC Rep.Serv. (CBC) 1145 (Bankr. S.D.N.Y.1980); Industrial Packaging Products Co. v. Fort Pitt Packaging International, Inc., 399 Pa. 643, 647, 161 A.2d 19, 21 (1960). See generally J.C. Rozendaal, Note, Choice of Law in Distinguishing Leases from Security Interests Under the Uniform Commercial Code, 75 Tex.L.Rev. 375 (1996).
*295 The case most on point with the present controversy is Hong Kong and Shanghai Banking Corp. v. HFH USA Corp., 805 F.Supp. at 133. That case involved a priority dispute between a German company that sold goods to an American firm which later became encumbered by a consensual lien from a third party creditor. The German company sold the goods under an agreement that adopted German law and contained a title retention clause. Applying German law, the company argued it held an ownership interest in the property superior to the lien of the third party creditor even though the company never recorded a financing statement in accordance with the U.C.C. as adopted in New York.
The court held that the dispute was governed by New York law and that the German company's interest in the goods was inferior to the third party creditor who had a perfected security interest. In pertinent part, the court stated:
Under normal circumstances, contracting parties are free to stipulate what state's or nation's law will govern their contractual rights and duties, provided that the state or nation has a reasonable relationship with the transaction, and the law chosen does not violate a fundamental public policy of the forum state. Siegelman v. Cunard White Star, Ltd., 221 F.2d 189 (2d Cir.1955); Culbert v. Rols Capital Co., 184 A.D.2d 612, 585 N.Y.S.2d 67 (2d Dep't 1992). Nonetheless, the parties' stipulation will not be regarded where it would operate to the detriment of strangers to the agreement, such as creditors or lienholders. Broadcasting Rights International Corp. v. Societe du Tour de France, 675 F. Supp. 1439, 1448 (S.D.N.Y.1987); Carlson v. Tandy Computer Leasing, 803 F.2d 391 (8th Cir.1986). Where the rights of third parties are implicated, the court should be governed by the ordinary rule that the federal district courts apply the choice of law rules of the state in which they sit. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). The district court must apply the law it believes the state's highest court would apply.
Id. 805 F.Supp. at 139-40. The court continued its analysis of the choice of law question under section 1-105(b) of New York's U.C.C. The court's analysis of the issue under that section differs from this Court's, however, because New York had not yet updated its U.C.C. to include the 1972 amendments. Under the version of the U.C.C. in place in New York at the time of the decision, the final clause of section 1105(b) set forth the secured transactions exception to choice of law agreements as follows, "Policy and scope of the Articles on Secured Transactions. Sections 9-102 and 9-103." Id. at 140. Thus, instead of focusing its analysis on section 9-103, the court concentrated on section 9-102 and concluded that it mandated the application of New York law. Section 9-102 is a provision broadly stating that Article 9 applies to all transactions involving the creation of security interests in personal property and provided ample basis for the court's decision to apply Article 9 to the contract before it. Having concluded that section 9-102 mandated the application of New York law, the court did not continue its analysis under section 9-103.
In Pennsylvania, the 1972 amendments to the U.C.C. changed the text of the final choice of law exception in 1105(b) from, "Sections 9102, 9103 (relating to policy and scope of division on secured transactions)," 13 Pa. C.S. § 1105 (Historical Note), to "Section 9103 (relating to perfection provisions of division on secured transactions)." Id. § 1105(b). By enacting this amendment the legislature appears to have made the scope of the exception for secured transactions narrower by limiting the excepted sections of Article 9 to only 9103. Nevertheless, as demonstrated by the analysis above, section 9103 is itself sufficient to mandate the application of Pennsylvania law relating to the characterization of leases to the present dispute.
The commentary accompanying the amendment does not demonstrate that the change to the statute was meant to have a substantive effect. The commentary to section 1105 states:
The reference to Section 9-102 has been deleted and a change made in Section 9-102 *296 deleting any reference therein to conflict of law problems, because there is no reason why the general principles of the present section should not be applicable to the choice of law problems within its scope.
13 Pa.C.S. § 1105 (Official U.C.C. Reasons for 1972 Changes). The commentary explaining the 1972 amendments to section 9102 says, "[t]he omission in the first paragraph of subsection (1) make applicable the general choice of law principles of Section 1-105 (except for special rules in Section 9-103), instead of an incomplete statement in this section." 13 Pa.C.S. § 9102 (Official U.C.C. Reasons for 1972 Changes). With respect to section 9103, the commentary states that the section was,
completely rewritten [in 1972] to clarify the relationship of its several provisions to each other and to other sections defining the applicable law. Now that the Code has been adopted in all states but Louisiana and also adopted in the District of Columbia and the Virgin islands, the emphasis in the revision has been to make clear where perfection of a security interest must take place, rather than on problems of actual conflicts of rules of law.
13 Pa.C.S. § 9103 (Official U.C.C. Reasons for 1972 Changes). Taken together these comments indicate that the amendment to section 1105(b), deleting reference to 9102, was done more for the purpose of reorganizing and centralizing the choice of law rules to one code section rather than to effect a change in the law.
The substantive comment to section 1105 expresses a strong need for the uniform and consistent application of Article 9, stating:
Subsection (2) [1105(b) ] spells out essential limitations on the parties' right to choose the applicable law. Especially in Article 9 parties taking a security interest or asked to extend credit which may be subject to a security interest must have sure ways to find out whether and where to file and where to look for possible existing filings.
13 Pa.C.S. § 1305 (Uniform Commercial Code Comment 1972 ¶ 5) (emphasis added). This comment makes clear that one uniformly applicable law is necessary to make Article 9 function as intended. Only one law, applied in a uniform manner, can assure the existence of a comprehensive filing system upon which parties may rely with confidence when dealing in secured transactions. The need for uniformity as expressed in the comment illustrates the importance of applying the definition of "security interest" in section 1201 to the term as it is used in section 9103. The application of a uniform definition assures that all contracts susceptible to section 9103 will be treated in a similar manner based on their substance. All agreements which function as security devices will be classified as security agreements and made subject to the U.C.C.'s filing requirements. This treatment will in turn help eliminate the existence of secret liens that degrade the reliability of U.C.C. filing indexes and ultimately impede commerce.
The court in Carlson v. Tandy Computer Leasing, 803 F.2d 391 (8th Cir.1986), also dealt with a conflict of laws dispute concerning the classification of a lease as a disguised financing agreement. In this case the dispute was between a lessee located in Missouri and a lessor located in Texas. The lease specified that it was governed by Texas law. After the lessee filed bankruptcy, the trustee brought an action against the lessor claiming that its lease was an unperfected security agreement. On appeal, the Eighth Circuit concluded that Missouri law was controlling. The court disregarded the choice of law stipulation in the lease on the rationale that it was not binding on third parties and then reasoned that Missouri law was applicable based on the unamended provisions of section 1-105(2) and 9-102 of the Missouri U.C.C. Carlson, 803 F.2d at 394 (citing Mo. Rev.Stat. § 400.1-105 (1978) (amended)). In reaching its decision, the court stated:
The policy behind section 1-105(2), especially as it relates to the scope of Article 9 of the Missouri U.C.C., is to prohibit choice of law agreements when the rights of third parties are at stake. See Mo.Ann.Stat. S 400.1-105(2) Uniform Commercial Code Comment 5 (Vernon 1965). If we applied Texas law to determine whether a security interest existed here, this would violate a fundamental purpose of Article 9: to create *297 commercial certainty and predictability by allowing third party creditors to rely on the specific perfection and priority rules that govern collateral within the scope of Article 9. In order to prevent the constant unilateral expansion and contraction of the scope of Missouri's Article 9, a Missouri court would apply Missouri law to determine the scope of Article 9 of the Missouri U.C.C.
Carlson, 803 F.2d at 394. Applying Missouri law the court ultimately concluded that the lease was a true lease to which Article 9 did not apply.
In Industrial Packaging Products Co. v. Fort Pitt Packaging International, 399 Pa. 643, 161 A.2d 19 (1960), the Pennsylvania Supreme Court issued an opinion addressing choice of law involving secured transactions. In this case, a state court appointed receiver for a company located in Pennsylvania challenged the perfected status of a New York based creditor. Relying on a choice of law clause in its contract, the creditor argued for the application of New York law. The Supreme Court, however, determined that the status of the creditor's security interest had to be judged under Pennsylvania law. The court relied upon section 9103 of the U.C.C. as then in force to hold that Pennsylvania law governed the transaction. At that time, section 9103 provided that Article 9 governed the validity and perfection of security interests when the office where an assignor keeps its records is in this state. The court rejected the creditor's argument that its choice of law clause was enforceable, stating:
We agree with the court below that `as between parties it is lawful for them to agree as to what law shall apply; but where, as here, we are dealing with the rights of creditors in the property of one of the contracting parties, then the law of the state of such party's domicile or place of business shall apply. Otherwise, it would be possible for two parties to render nugatory as to third parties an act of Assembly passed for the benefit of such third parties.' The laws of Pennsylvania, not New York, governs this controversy.
Fort Pitt, 399 Pa. at 647, 161 A.2d at 21.
The cases UCS cites in support of enforcing the choice of law provision in its contracts are not persuasive. Citi-Lease Company v. Entertainment Family Style, Inc., 825 F.2d 1497 (11th Cir.1987); In re Pacific Express, Inc., 780 F.2d 1482 (9th Cir.1986); In re Lykes Bros. Steamship Co., 196 B.R. 574 (Bankr.M.D.Fla.1996), In re Wall Tire Distributors, 116 B.R. 867 (Bankr.M.D.Ga.1990), and In re O.P.M. Leasing Services, Inc., 23 B.R. 104 (Bankr.S.D.N.Y.1982), all lack authoritative force because each case involves an instance in which the parties' contractual choice of law was uncontested. The courts in the cases simply applied the parties' contractual choice of law without analysis.
In re Boling 13 B.R. 39 (Bankr.E.D.Tenn. 1981), is the single case cited by UCS that contains an actual analysis of the choice of law issue. The case is potentially distinguishable, however, because it involves a dispute between the original parties to a purported lease agreement, and thus the rights of third parties were not directly at stake. This distinction is not clear cut, though, because the debtor was acting as a debtor-in-possession and attempting to exercise the trustee's strong-arm powers under section 544 of the Bankruptcy Code and could potentially be viewed as representing the interests of creditors in general. Nevertheless, to the extent the case is not distinguishable, the Court declines to follow Boling because its reasoning is not persuasive.
The Boling court was faced with deciding whether a transaction with multi-state contacts was a lease or security interest and in the process decided to honor the parties' contractual stipulation on choice of law. The case involved a debtor located in the forum state of Tennessee and a seller/lessor located in North Carolina. The debtor had acquired possession of tractor trailers from the North Carolina entity pursuant to agreements purporting to be leases. The leases contained a choice of law clause mandating the application of North Carolina law. In reaching its decision to apply North Carolina law the court reiterated the familiar teachings of U.C.C. section 1-105 (identified by the court under Tennessee law as T.C.A. § 47-1-105) observing that parties are free to choose the law to govern their agreements except as *298 otherwise directed by the specific U.C.C. sections identified in 1-105(2). The court recognized that under the unamended version of 1-105(2) sections 9-102 and 9-103 of Article 9 were excepted from the parties' choice of law decisions. Nevertheless, the court declined to apply Tennessee law to the case, apparently reasoning that the characterization of the contract as a lease or security agreement was not an issue governed by Article 9 and thus was not effected by the exceptions in 1-105(2). The court did not address the issue of whether the rights of third parties were effected.
This Court declines to follow Boling for two reasons. First, the rights of third parties are at issue whenever a trustee is attempting to use the Bankruptcy Code's strong-arm powers to avoid a security interest. The unsecured creditors who will reap the benefit of the avoided lien are not parties to the security agreement and thus cannot have their rights altered thereby. Fort Pitt Packaging International, 399 Pa. at 643, 161 A.2d at 19. Secondly, as explained above, issues concerning the characterization of contracts as leases or security agreements do come under the auspices of Article 9 through the use of the term "security interest" in section 9-103. The Boling court rejected the application of section 9-103 on its face without considering its interaction with section 1-201. In the context of the Boling decision, the failure to recognize the interaction between the two sections was probably inconsequential because both jurisdictions, North Carolina and Tennessee, had adopted the U.C.C. and thus possessed similar if not identical laws. When dealing with a foreign jurisdiction, however, such as Germany in the present case, the interplay between sections 9103 and 1201 is critical and must be observed.
II.
The application of section 9103 in the present case shows that the UCS leases are security agreements governed by Pennsylvania law and must be filed to be perfected. In pertinent part, section 9103 states:
9103. Perfection of security interests in multiple state transactions
(a) Documents, instruments and ordinary goods.
(1) This subsection applies to documents and instruments and to goods other than those covered by a certificate of title described in subsection (b), mobile goods described in subsection (c) and minerals described in subsection (e).
(2) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected.
(3) If the parties to a transaction creating a purchase money security interest in goods in one jurisdiction understand at the time that the security interest attaches that the goods will be kept in another jurisdiction, then the law of the other jurisdiction governs the perfection and the effect of perfection or nonperfection of the security interest from the time it attaches until 30 days after the debtor receives possession of the goods and thereafter if the goods are taken to the other jurisdiction before the end of the 30-day period.
13 Pa.C.S. § 9103 (emphasis added).
As indicated, section 9103 refers to agreements which create "security interests" and thus the first step in applying the section is to determine whether a particular agreement creates a security interest within the meaning of the U.C.C. The bankruptcy court in In re Lerch, 147 B.R. 455 (Bankr.C.D.Ill.1992), interpreting the U.C.C. as enacted in Illinois, made the following useful observations with reference to the definition of "security interest," which is set forth in this opinion at pages 293-294, supra:
The initial portion of the first sentence of the second unnumbered paragraph [subsection (6)(i) under the definition of "security interest" in 13 Pa.C.S. § 1201] contains the basic direction that the determination is made based on the facts of each case. The latter portion of the first sentence of the second unnumbered paragraph *299 starting with the word "however" creates an exception to the basic direction that the determination is made on the facts of each case, as it provides that without looking at all the facts, a lease will be construed as a security interest if a debtor cannot terminate the lease, and if one of the four enumerated terms is present in the lease.
Absent a mandated classification, the determination is based on the facts of the case.
Id. at 460; accord In re Murray, 191 B.R. 309, 315 (Bankr.E.D.Pa.1996), aff'd, 191 B.R. 309 (E.D.Pa.1996).
A review of the UCS leases reveals that they fall neatly within the exception to case-by-case analysis. The leases are not terminable before the end of their 36 month term, and they provide the lessee with the right to purchase the top lifters for the obviously nominal sum of $1 apiece. Therefore, the leases are without doubt security agreements as that term is used in section 9103.
Further review of the leases reveals that they fall within subsection 9103(a)(3) concerning the sale of goods intended to be kept in a foreign jurisdiction. First, the top lifters qualify as "goods" within the meaning of the U.C.C. which generally defines the term as referring to all things that are movable. 13 Pa.C.S. § 9105. The transaction also created a purchase money security interest as required under 9103(a)(3) being that the interest was retained by the seller of the top lifters. Id. § 9107. Finally, the parties understood at the time the leases were negotiated, and presumably at all subsequent times, that the goods were to be kept in Pennsylvania. This understanding is evident from the leases themselves which call for delivery of the top lifters to the Debtor's facility in Philadelphia. Thus, section 9103 applies and it states that the law of the intended receiving jurisdiction, Pennsylvania in this case, controls perfection and the effect of perfection or nonperfection.
Turning to Pennsylvania law, it is evident that UCS's security interest in the top lifters was required to be perfected by the filing of a financing statement. See Id. § 9302 (generally requiring the filing of a financing statement except in specified instances). UCS's failure to file a financing statement in accordance with the U.C.C. renders its interest unperfected. In re Woolaghan, 140 B.R. 377, 386 (Bankr.W.D.Pa.1992). Accordingly, UCS's interest is subordinate to any party who becomes a lien creditor, 13 Pa.C.S. § 9301(a)(2), which is defined to include a trustee in bankruptcy. Id. § 9310(c). Pursuant to section 544 of the Bankruptcy Code, 11 U.S.C. § 544, a bankruptcy trustee has the status of a judicial lien creditor with the power to avoid any transfer or interest in property inferior thereto. Accordingly, in bankruptcy, as the holder of an unperfected security interest, UCS must assume the position of an unsecured creditor.
UCS, then, is neither the holder of an executory contract nor a security interest. It has no right to any type of performance under section 365 that might be due and owing with respect to an unassumed executory contract, no right to have the contract rejected by operation or law or otherwise, and no right to demand or collect any form of adequate protection payments. UCS has no continuing interest in the top lifters and they are property of the estate in their entirety.
CONCLUSION
UCS's motions seeking to have the leases for the top lifters assumed or rejected and seeking compensation for the use of the top lifters are denied. Any money placed in escrow for potential payment to UCS on account of the top lifters pending the resolution of this matter is released to its rightful owner.
NOTES
[1] UCS submitted an affidavit of a German lawyer explaining that under German law title to the top lifters would not pass to a purchaser until the end of the lease term. The court's initial reaction to the affidavit was to sustain the Trustee's hearsay objection and not admit the affidavit into evidence. The court has subsequently researched the matter and come to understand that under Bankruptcy Rule of Procedure 9017, incorporating Fed.R.Civ.Pro. 44.1, the Court is permitted to use any source to determine foreign law regardless of the rules of evidence. Accordingly, the Court accepts for purposes of this opinion that under German law the UCS leases would not have transferred title of the top lifters to the Debtor. See Kalmich v. Bruno, 553 F.2d 549 (7th Cir.1977) (unsworn opinion letter of foreign attorney properly considered as proof of foreign law).
[2] In the Pennsylvania Consolidated Statutes, the dash between the first and second numbers of U.C.C. sections is deleted. Thus, references in this Opinion to U.C.C. sections without dashes are references to Pennsylvania law. Where references to U.C.C. sections include dashes between the first and second numbers those references are to the U.C.C. as adopted in other jurisdictions made in accordance with that jurisdiction's stylistic conventions. Whose law is being cited should appear obvious based on the contexts of the discussion.
[3] To be specific, the section states: "[T]he following words and phrases when used in this title shall have, unless the context clearly indicates otherwise, the meanings given to them in this section" 13 Pa.C.S. § 1201. There is nothing in the context of section 9103 to indicate to any degree that the definition of "security interest" as provided in section 1201 is not applicable to the term as used in the former section. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536576/ | 223 B.R. 237 (1998)
In re DOLLAR TIME GROUP, INC., Store No. 22, Inc. a/k/a Dollar Time Dollar Time, Inc., Debtors.
Kenneth A. WELT, Trustee, Plaintiff,
v.
Joseph SASSON, Individually, Jeffrey Klansky, Individually, Defendants.
Bankruptcy Nos. 95-22816-BKC-RBR, 95-22817-BKC-RBR, 95-23589-BKC-RBR, Adversary No. 96-0380-BKC-RBRA.
United States Bankruptcy Court, S.D. Florida.
July 20, 1998.
*238 *239 Ronald Neiwirth, Miami, FL, for Debtors.
Irwin Fingerit, New York City, for Defendants.
Arthur Rice, Miami, FL, for Plaintiff.
RECOMMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW
JAMES G. MIXON, Chief Judge.
This cause of action is before the Court upon the complaint of Kenneth A. Welt, Trustee, ("Trustee") alleging that Joseph Sasson ("Sasson") and Jeffrey Klansky ("Klansky") breached their corporate fiduciary duty to Dollar Time Group, Inc. ("Dollar *240 Time"), a debtor in this jointly administered case. After a trial on the merits in Miami, Florida, on June 16 and September 15, 1997, the matter was taken under advisement.
Jurisdiction of this proceeding is pursuant to 28 U.S.C. §§ 157(a) & 1334. Sasson and Klansky have moved that the Court determine this to be a related, noncore case.
The Court agrees that this is a noncore proceeding related to but not arising in or under title 11. A core proceeding invokes a substantive right either provided by title 11 or dependent for its existence upon a bankruptcy environment. Diamond Mortgage Corp. v. Sugar, 913 F.2d 1233, 1238 (7th Cir.1990) (quoting Barnett v. Stern, 909 F.2d 973, 981 (7th Cir.1990)); Peterson v. 610 W. 142 Owners Corp. (In re 610 W. 142 Owners Corp.), 219 B.R. 363, 367 (Bankr. S.D.N.Y.1998) (quoting In re Leco Enters., 144 B.R. 244, 248-49 (S.D.N.Y.1987) (citing In re Wood, 825 F.2d 90, 96-97 (5th Cir. 1987))); Acolyte Electric Corp. v. City of New York, 69 B.R. 155, 173 (Bankr.E.D.N.Y. 1986), aff'd, 1987 WL 47763 (E.D.N.Y. March 27, 1987).
In contrast, a noncore proceeding involves non-bankruptcy law claims that are independent of and antecedent to the bankruptcy filing. Peter J. Schmitt Co. v. Firestone Star Market, Inc. (In re Peter J. Schmitt Co.), 150 B.R. 556, 558 (Bankr.D.Del. 1993); Nationwide Roofing & Sheet Metal, Inc. v. Cincinnati Ins. Co. (In re Nationwide Roofing & Sheet Metal, Inc.), 130 B.R. 768, 774 (Bankr.S.D.Ohio 1991). A noncore, related proceeding is one that affects the amount of property of the estate or allocation of property among creditors. Elscint, Inc. v. First Wis. Fin. Corp. (In re Xonics, Inc.), 813 F.2d 127, 131 (7th Cir.1987) (citing In re Paso Del Norte Oil Co., 755 F.2d 421 (5th Cir.1985)); Pacor, Inc. v. Higgins, 743 F.2d 984, 994-96 (3rd Cir.1984).
The instant case involves a state law cause of action alleging breach of fiduciary duty. The events giving rise to the cause occurred approximately two years before the pending chapter 7 bankruptcy was filed. Furthermore, the corporation could have pursued the cause even if the Debtor were not in bankruptcy. For these three reasons, the proceeding is noncore.
Though noncore, this proceeding is related to the bankruptcy case because the outcome will affect the amount of property of the estate and the extent of allocation to creditors. Numerous courts have characterized cases as both noncore and related when a trustee or debtor-in-possession has assumed the debtor corporation's cause of action against fiduciaries for breach of duty. See, e.g., Diamond Mortgage Corp. v. Sugar, 913 F.2d 1233, 1239 (7th Cir.1990) (where chapter 11 debtors sued former attorneys for breach of fiduciary duties, suit was related, noncore); Mellon v. Delaware & Hudson Ry. Co. (In re Delaware & Hudson Ry. Co.), 122 B.R. 887, 894 (D.Del.1991) (trustee's suit for breach of fiduciary duty by directors of debtor corporation's parent was noncore); Nationwide Roofing & Sheet Metal, Inc. v. Cincinnati Insurance Co. (In re Nationwide Roofing & Sheet Metal, Inc.), 130 B.R. 768, (Bankr.S.D.Ohio 1991) (adversary proceeding was related, noncore matter where chapter 11 debtor sued insurer for breach of fiduciary duty).
Because this is a noncore proceeding, the Court submits the following proposed findings of fact and conclusions of law to the district court for de novo review of those matters to which either party has lodged a timely objection. 28 U.S.C. § 157(c)(1) (1994); Federal Rule of Bankruptcy Procedure 9033.
FACTS
The relevant events precipitating this cause of action occurred between August 1993 and late March 1994, more than a year before Dollar Time filed its chapter 11 bankruptcy in July of 1995. In August 1993, Dollar Time was a publicly held corporation engaged in the retail sales of a broad range of merchandise selling for approximately one dollar. A Nevada corporation headquartered in Hollywood, Florida, Dollar Time operated numerous stores throughout the United States.
During the same period, Sasson and Klansky were 100 percent shareholders and the *241 principal officers of A Real New York Bargain Worldwide, Ltd. ("Bargain"), an entity created by Sasson and Klansky to engage in retail sales of men's and women's clothing at a price of approximately $10.00 per unit. Bargain owned and operated about ten stores and franchised another six, all in either Florida or the New York metropolitan area. Sasson and Klansky also owned the outstanding shares of stock and were the principal officers of affiliated corporations whose business concept was similar to that of Bargain.
In August 1993, certain Dollar Time shareholders initiated discussions with Sasson and Klansky about a possible merger between Bargain and its affiliates and Dollar Time. These major shareholders outlined a plan to restructure the management of Dollar Time, make its stores more compatible with Bargain's stores, and expand both entities, thereby increasing profits through the acquisition and merger of Bargain. The proposal entailed Sasson and Klansky selling their respective interests in Bargain and its affiliates to Dollar Time in return for shares of stock in Dollar Time and an agreement that Sasson and Klansky would operate Dollar Time.
On September 2, 1993, a letter of intent was executed between the parties. It provided that upon the consummation of the proposed merger, Sasson and Klansky would receive between them ten million shares of common stock of Dollar Time for their interest in 100 percent of all issued and outstanding securities of Bargain and its affiliates.
On the same date, Sasson entered into a Consulting Agreement with Dollar Time. The Consulting Agreement provided that while Dollar Time and Bargain continued to negotiate terms of a merger agreement, Sasson would act as "managing consultant" to Dollar Time with "authority to manage all aspects of the business of Dollar Time during the term of this agreement." (Trustee's Ex. 4 at 2.) The Consulting Agreement indemnified Sasson against liability for performance of his duties undertaken in good faith and the best interests of the corporation, and stated that New York law would apply to any dispute resulting from the agreement.
Before and during the period of Sasson's management of Dollar Time, the company was in poor financial condition, a circumstance Sasson acknowledged in his testimony. In 1993, before Sasson's and Klansky's involvement, Dollar Time incurred significant operating losses that led to a continual need to raise additional cash from third party sources. Bargain, by contrast, was financially healthy, with cash and equivalents of $640,000.00 and total assets of $3,000,000.00 as of June 1993.
On September 24, 1993, after Sasson's Consulting Agreement was in effect, Bargain borrowed $500,000.00 from Dollar Time as evidenced by a promissory note for that amount and a separate letter agreement captioned "Re: Bridge Loan." (Def.'s Ex. E; Trustee's Ex. 5). The $500,000.00 to fund the loan was supplied by Jordan Belfort, a controlling shareholder of Dollar Time. Bargain agreed to pay five percent per year interest and the note would mature in January 1995.
Testimony conflicts about whether the board had earmarked the funds to pay for goods for Dollar Time inventory and Bargain inventory, whether the funds were to be an inducement to Bargain to enter into the merger, or whether the funds were to be used for other expenses related to the merger. William McConnell, Dollar Time chairman of the board in September 1993, testified that the board did discuss the loan to Bargain at a September meeting. The Letter Agreement stated that the funds were for working capital.
The Letter Agreement granted Dollar Time a security interest in Bargain's assets, accounts receivable, and inventory and required Bargain to file the appropriate financing statements to perfect Dollar Time's lien. Dollar Time prepared the agreement as evidenced by the return address, and the board of directors approved the loan as evidenced by a signature of a representative of Dollar Time at the close of the agreement. A provision of the document stated that the note and Letter Agreement would be construed under New York law. Bargain did not execute or deliver to Dollar Time a formal security agreement, nor were UCC financing statements ever recorded.
*242 Sasson testified that commencing in September 1993, he and other personnel of both Bargain and Dollar Time began traveling around the county to assess the operations of Dollar Time and the business needs of the combined companies. During the ensuing four months, Sasson and Klansky, who remained officers, directors, and sole shareholders of Bargain, supervised the opening of ten new Dollar Time stores and converted eight others to clothing stores while continuing to operate Bargain and its affiliates. Sasson and Klansky had check writing authority and began writing checks on Dollar Time's account as early as October 4, 1993.
Five Bargain employees worked for Dollar Time for varying periods from September 1993 to January 1994. Paul Berman, while on the payroll of Bargain, evaluated, remodeled, and hired new personnel for and instituted new policies at 25 Dollar Time stores in the Northeast. Amy Wendrow, also a Bargain employee, scheduled travel arrangements for several Bargain employees who were traveling to various parts of the country to restructure Dollar Time stores. She also contacted each Dollar Time store daily for product reports and sales evaluations. Bargain's merchandise buyers Mary Jane Tipton and Jeff Dvoor scouted the New York market and other areas of the United States for merchandise for Dollar Time. Bargain's bookkeeper Allison Tau prepared documents required by Dollar Time for the proposed merger and coordinated the books and records of Bargain and Dollar Time.
On November 11, 1993, a formal Stock Purchase Agreement ("Merger Agreement") between Dollar Time and Bargain was executed. The Merger Agreement provided that Sasson and Klansky would transfer their shares of stock in Bargain and its affiliates in return for each receiving 5,750,000 shares of stock in Dollar Time. The closing of the merger was to take place after Christmas and was contingent upon the fulfillment of certain conditions and obligations of the parties as outlined in the Merger Agreement.
Also on November 11, 1993, while remaining shareholders and controlling officers of Bargain, Sasson and Klansky entered into employment agreements with Dollar Time. Pursuant to his agreement, Sasson was to serve as Chief Executive Officer and chairman of the Board of Directors of Dollar Time at a base annual salary of $300,000.00. Under his employment agreement, Klansky was designated president of Dollar Time and a board member and would also receive a base annual salary of $300,000.00.
From late October 1993 through early January 1994, substantial funds were transferred from Dollar Time to Bargain or its affiliates or to third parties for the benefit of Bargain and its affiliates. These transfers totaling $1,792,298.61 were exclusive of the $500,000.00 loan made to Bargain in September and were made from Dollar Time's Exte Bank account in New York City opened after Sasson and Klansky commenced working for Dollar Time.
Entries on Dollar Time's ledger sheets characterized nine of these transfers as loans to either Bargain or to two of Bargain's affiliates, Skorts, and Global Apparel. Checks written on Dollar Time's Exte account directly to Bargain evidenced other transfers. Sasson explained that some of the transactions were either advances to buy goods for Dollar Time or reimbursements for moneys expended by Bargain to purchase goods for Dollar Time. When asked about certain of the "loans," Sasson admitted he could not recall the specific purpose of the transfer, but he also testified that Gary Kaminsky, chief financial officer of Dollar Time, approved the transfers.
The evidence also reflected that not only were transfers made directly to Bargain and its affiliates, but checks were written on the Dollar Time Exte Bank account to pay rent for Bargain stores. Check numbers 1050 to 1059, written on Dollar Time's Exte Bank account on January 3, 1994, paid rental fees for space occupied by Bargain offices or stores. These checks, all dated the same day, totaled $182,291.37.
On January 12, 1994, approximately two months after execution of the Merger Agreement and Employment Agreements, Dollar Time terminated the Merger Agreement, and Sasson and Klansky resigned their positions as officers and directors of Dollar Time. The *243 testimonies of various witnesses posit several reasons for the termination, including differences in management style, Bargain's lack of financial profitability, disappointing Christmas sales, and dismay over transfers of funds from Dollar Time to Bargain.
After the termination of the Merger Agreement and the resignation of Sasson and Klansky, the parties engaged in protracted discussions aimed at reconciling amounts claimed due and owing from Bargain to Dollar Time. These discussions culminated in a Settlement Agreement dated February 16, 1994. In the Settlement Agreement Bargain and its affiliates acknowledged their indebtedness to Dollar Time on the $500,000.00 promissory note of September 24, 1993, and $1,792,298.61 evidenced by the series of checks and wire transfers from Dollar Time to Bargain and its affiliates or to third parties on Bargain's behalf from October 1993 to January 1994.
The Settlement Agreement provided that the $1,792,298.61, acknowledged as loans or advances by Dollar Time to Bargain, would be satisfied as follows:
(1) Bargain would receive a credit of $500,000.00 for services performed by Bargain and its principals, officers and employees, including but not limited to consulting fees, and for costs and expenses related to the proposed acquisition of Bargain.
(2) Bargain would receive a credit of $412,546.00 for 91,677 units of inventory held by Dollar Time at its distribution center in North Carolina. The parties agreed to value the inventory at $4.50 per unit.
(3) Bargain would be obligated to deliver to Dollar Time on or before May 1, 1995, additional inventory having a value of at least $879,752.61. Bargain was required to verify the fair market value of the inventory through an independent appraisal by an expert approved by both parties.
The Settlement Agreement also provided for a restructuring of the $500,000.00 promissory note of September 1993 that became due in full according to its terms on January 15, 1995. The restructuring required that the principal of $125,000.00 plus interest would be paid on January 15, 1995, and the balance of principal and interest would be paid in twelve equal installments beginning February 15, 1995, and terminating January 15, 1996.
The Settlement Agreement provided that New York law would apply as to the construction of its terms. Gary Kaminsky signed the agreement in his capacity as chief financial officer of Dollar Time, and Sasson and Klansky signed on behalf of Bargain and its affiliates. In late March 1994, the parties agreed that Charles T. Rosoff would appraise inventory held by Bargain to be shipped to Dollar Time to satisfy the $879,752.61 indebtedness acknowledged by Bargain and Dollar Time under the Settlement Agreement. Rosoff's report valued the merchandise shipped from Bargain to Dollar Time at a fair market value of $863,553.00. The shipment of inventory was accepted by Dollar Time employees at the company's North Carolina warehouse. The record reflects no other shipments of clothing from Bargain to Dollar Time.
With respect to the restructured $500,000.00 loan, Bargain failed to be make the scheduled payments beginning in January 1995. Bargain and Dollar Time subsequently agreed that in lieu of payment, Bargain's affiliate would sublease retail space in a Seacaucus, New Jersey retail center to Dollar Time for five years, during which time rents from Dollar Time to Bargain would be waived. This arrangement was to have saved Dollar Time $500,000.00 in rents over the five-year term of the sublease. Contemporaneous with the sublease, dated April 27, 1995, Bargain signed a confession of judgment and in exchange, Dollar Time released its lien on Bargain's assets.
Bargain prepared the space for retail use at a cost of at least $7,500.00, and Dollar Time opened and operated a store at that location sometime between May and July of 1995. On July 24, 1995, Dollar Time Group and Store Number 22 filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. On September 14, 1995, Dollar Time, Inc. filed for chapter 11. Pursuant to a court order, the three cases were consolidated for joint administration. On January 3, 1996, the cases were converted to cases under chapter 7 of the Bankruptcy Code, and *244 Kenneth Welt was appointed trustee. Dollar Time's Seacaucus store was closed in December, 1995.
PARTIES' ARGUMENTS
The Trustee argues that Sasson and Klansky owed a fiduciary duty to Dollar Time and that the $500,000.00 loan and other transfers from financially-troubled Dollar Time to Bargain at a time when Sasson and Klansky were fiduciaries of both corporations establish a prima facie case of self-dealing by fiduciaries. He contends that Sasson and Klansky have not met their burden to prove the inherent fairness of these transactions to Dollar Time and thus that they are liable for breach of fiduciary duty.
First, Sasson and Klansky urge the Court to exclude Plaintiff's Exhibits 20-21, which are ledger sheets, checks and reconciliations documenting transfers from Dollar Time to Bargain. They argue that the Trustee's original complaint alleges only one "debt" owed by Sasson and Klansky to Dollar Time, a "loan" on November 11, 1993. Sasson and Klansky argue that the exhibits evidence transfers not alleged in the complaint, and thus admission would constitute unfair surprise.
As to the breach of fiduciary duty charge, Sasson and Klansky counter that the September loan was a bona fide loan evidenced by an executed note and secured by substantial assets of Bargain and that it was an arm's length transaction entered into when Sasson and Klansky were neither shareholders nor directors of Dollar Time. They also state that the advances from Dollar Time in October, November and December did not constitute breach of fiduciary duty because they were made in good faith, with knowledge of the corporation, and in the best interests of Dollar Time. Sasson and Klansky argue that the plaintiff failed to prove that no person of ordinary sound business judgment would have taken the actions complained of. They also urge that under the intrinsic fairness standard the transfers were fair and reasonable to the corporation because the transferred funds were used to buy inventory for Dollar Time.
Finally, Sasson and Klansky argue that the Settlement Agreement of February 16, 1994, constituted an accord and satisfaction between the parties, and that the sublease in Seacaucus, New Jersey represented valuable consideration to discharge Bargain's debt under the note.
CONTROLLING LAW
As a threshold matter, the Court must decide what law controls. Because breach of fiduciary duty of corporate directors is a state law cause of action, state law, specifically, the law of the forum, applies. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 85 L. Ed. 1477 (1941). Sasson and Klansky argue that because the letter agreement documenting the September loan, the consulting agreement, merger agreement, employment agreements, and the settlement agreement of February 16, 1994, provide for their construction under New York law and because all relevant transactions occurred in New York, the law of New York should apply to this claim. The Trustee does not specifically respond to this argument but in his memorandum to the Court cites numerous cases from Nevada, the place of incorporation of Dollar Time; from Florida, where Dollar Time is headquartered; and from New York, where the relevant transactions occurred.
Given these circumstances, a Florida court would probably apply the choice of law rules of the Restatement (Second) of Conflicts. International Ins. Co. v. Johns, 874 F.2d 1447, 1458 n. 19 (11th Cir.1989). Under the Restatement, courts will permit parties to choose the state law that will govern their contractual rights and duties even if the issue for determination is one that the parties could not have resolved by terms of the agreement. Restatement of Conflicts (Second) § 187 (1971). This is so unless the chosen state has no substantial relationship to the parties or the transaction and no other reasonable basis for the parties' choice exists or unless application of the chosen state's law would be contrary to a fundamental policy of a state that has a materially greater interest than the chosen state. Restatement of Conflicts (Second) § 187 (1971).
*245 The chosen state, New York, does have a substantial relationship to the parties and the transactions. The parties negotiated and signed various agreements in New York and performance of those agreements frequently took place there as well. Bargain operated several stores and maintained offices in the New York metropolitan area; moreover, Dollar Time's attorneys advising the corporation about the proposed merger were situated in New York.
The laws of the state of Nevada, the state of incorporation, would typically be applicable in this case, but no other material relationship exists between Nevada and the parties. Although the state of Florida, the forum state, also has a material interest in the case, applying New York corporate law is not contrary to fundamental policy in Florida, and in fact, the two states' bodies of corporate law are similar. Moreover, courts interpreting Florida law have on occasion deferred to the choice of law provisions stated in contracts between the parties. See, e.g., Citi-Lease Co. v. Entertainment Family Style, Inc., 825 F.2d 1497, 1499 (11th Cir.1987).
ADMISSION OF PLAINTIFF'S EXHIBITS 20-21
Next, the Court must determine whether to admit Plaintiff's Exhibits 20-21 over the objections of Sasson and Klansky. The Court recommends admission for the following reasons. Counsel for Sasson and Klansky first objected to the introduction of the exhibits at trial, although the Court's Pre-Trial Order of March 27, 1997, required the parties to submit all exhibits and objections prior to trial. Objections not submitted by the Court's deadline would be deemed waived. Although the Trustee did not timely tender his exhibits, Sasson and Klansky's counsel, by his own admission, received copies of the exhibits approximately five days prior to trial, giving him time to examine the documents and lodge a written objection in advance of trial.
Furthermore, the Trustee's inaccurate characterization in the complaint of the $1,729,298.61 debt as arising from a single "loan" rather than from a series of transactions was not so misleading as to result in unfair surprise to Sasson and Klansky such that they would not have expected to have to defend the separate transactions as documented by the exhibits at issue. Moreover, the Trustee relied on the admission of these documents to establish his case in chief. To reverse that ruling would work substantial prejudice to his case.
BREACH OF FIDUCIARY DUTY
A fiduciary duty is the responsibility to act for the benefit of another while subordinating one's personal interests to that of the other person and is the highest standard of duty implied by law. Black's Law Dictionary 625 (6th ed.1990).
Corporate directors and officers owe specific fiduciary duties to the corporations and shareholders they serve. N.Y.Bus.Corp. Law § 717 (McKinney 1986); Pepper v. Litton, 308 U.S. 295, 306, 60 S. Ct. 238, 84 L. Ed. 281 (1939) (citing Twin-Lick Oil Co. v. Marbury, 91 U.S. 587, 588, 23 L. Ed. 328 (1875)); In re Happy Time Fashions, Inc., 7 B.R. 665, 670 (Bankr.S.D.N.Y.1980) (citing In re India Wharf Brewery, 96 F.2d 710 (2d Cir. 1938); In re Los Angeles Lumber Products Co., 46 F. Supp. 77, 88 (S.D.Cal.1941); In re McCrory Stores Corp., 12 F. Supp. 267, 269 (S.D.N.Y.1935)); Giblin v. Murphy, 73 N.Y.2d 769, 536 N.Y.S.2d 54, 532 N.E.2d 1282, 1283-84 (1988); Schmidt v. Magnetic Head Corp., 101 A.D.2d 268, 476 N.Y.S.2d 151 (Sup.Ct.1984) (citing Pepper, 308 U.S. at 306, 60 S. Ct. 238); Schachter v. Kulik, 96 A.D.2d 1038, 466 N.Y.S.2d 444, 446 (Sup.Ct. 1983), appeal dismissed, Matter of Carlton G., 61 N.Y.2d 758, 472 N.Y.S.2d 1030, 460 N.E.2d 1363 (1984). These fiduciary obligations include the duty of care, which is the responsibility to exercise the care of a reasonably prudent person in a similar position under similar circumstances, and the duty of loyalty, which proscribes unfair self-dealing. Norlin Corp. v. Rooney, Pace, Inc., 744 F.2d 255, 264 (2d Cir.1984).
In evaluating a fiduciary's duty of care, courts apply the business judgment rule, which bars judicial inquiry into a corporate fiduciary's actions taken in good faith *246 and in the exercise of honest judgment to further the corporation's purposes, even if hindsight reveals that conduct was unwise. Auerbach v. Bennett, 47 N.Y.2d 619, 419 N.Y.S.2d 920, 393 N.E.2d 994, 1000 (1979); Pollitz v. Wabash R.R. Co., 207 N.Y. 113, 100 N.E. 721, 724 (1912). A presumption of propriety inures to the benefit of the corporate fiduciary, and the initial burden of proving breach of fiduciary duty rests with the plaintiff. Hanson Trust PLC v. ML SCM Acquisition, Inc., 781 F.2d 264, 273 (2d Cir.1986).
As stated above, corporate fiduciaries owe not only a duty of care shielded by the business judgment rule but also a duty of loyalty requiring rigorous scrutiny of self-dealing. Pepper v. Litton, 308 U.S. 295, 306, 60 S. Ct. 238, 84 L. Ed. 281 (1939). The business judgment rule protects directors only to the extent that directors have no self-interest in the transaction at issue. Norlin Corp. v. Rooney, Pace, Inc., 744 F.2d 255, 265 (2d Cir.1984) (citing Treadway Cos., Inc. v. Care Corp., 638 F.2d 357, 382 (2d Cir. 1980)).
A transaction between a corporation and a director who has a financial interest in such transaction is voidable by the corporation unless the director's interest is disclosed and either the shareholders or the board, excluding the interested director, approves the transaction. N.Y.Bus.Corp. § 713(a)(1)(2) (McKinney 1986). If proper approval has not been received, the interested director must affirmatively prove the transaction was fair and reasonable to the corporation. N.Y.Bus.Corp.Law § 713(b) (McKinney 1986). Thus, a prima facie showing of director self-interest in a particular corporate transaction without board or shareholder approval shifts the burden to the director to demonstrate the transaction was fair and in the best interests of the corporation and not a breach of the fiduciary duty of loyalty. Norlin Corp., 744 F.2d at 264 (citations omitted).
Corporate self-interest or self-dealing by a fiduciary takes many forms. See, e.g., S. & K. Sales v. Nike, Inc., 816 F.2d 843 (2d Cir.1987) (manufacturer participating in employee's breach of fiduciary duty to employer was liable for damages); Norlin Corp. v. Rooney, Pace Inc., 744 F.2d 255 (2d Cir. 1984) (stock transferred to stock option plan and to subsidiary to solidify management's control over corporation created inference of self-dealing); Lewis v. S.L. & E., Inc., 629 F.2d 764 (2d Cir.1980) (directors of both lessor and lessee corporations were not disinterested as to the lease agreement between the corporations). Ault v. Soutter, 204 A.D.2d 131, 611 N.Y.S.2d 187 (Sup.Ct.1994) (director acquiescing in improper loan to co-director was accountable for breach of fiduciary duty).
THE SEPTEMBER LOAN
The Trustee alleges that Sasson and Klansky breached their fiduciary duty by accepting, on Bargain's behalf, a loan for $500,000.00 on September 24, 1993, from the financially struggling Dollar Time. In fact, at the time of the loan, Sasson and Klansky did have dual roles in the two companies involved in the transaction, serving both as employees of Dollar Time and as directors, officers and shareholders of Bargain. As such, the two owed fiduciary duties to both corporations. See, e.g., S & K Sales Co. v. Nike, Inc., 816 F.2d 843, 850 (2d Cir.1987) (holding employee was required to act with utmost loyalty and good faith in performing his duties to the corporation) (citations omitted).
Even if Sasson and Klansky qualify as fiduciaries to Dollar Time as early as September 1993, there is evidence that the loan was made with approval of the board and a controlling shareholder. Although the record does not contain board minutes reflecting approval of the loan, the note and letter agreement were prepared by Dollar Time attorneys and the letter agreement was signed by an agent of the corporation. Furthermore, Bargain promised to pay interest on the loan, and the loan was secured to the extent of approximately $3,000,000.00 in Bargain assets, circumstances that support the fairness of the transaction to Dollar Time.
The loan appears to be a board-approved, arm's length transaction between Dollar Time and Bargain whereby Dollar Time used the funds as an inducement to Bargain, which in turn may have needed working capital, *247 at a time when a merger of the two corporations was contemplated. The Court finds Sasson and Klansky breached no fiduciary duty in participating in this transaction.
OCTOBER-JANUARY TRANSFERS
In the Settlement Agreement, Bargain stipulated that it had received other loans and advances from Dollar Time totaling $1,792,298.61. Trustee's Exhibit 20 includes Dollar Time ledger sheets documenting numerous loans and checks from Dollar Time to Bargain and copies of checks written by Sasson and Klansky on Dollar Time's account to Bargain, its affiliates, or third parties for the benefit of Bargain from October 1993 through January 1994.
The evidence shows that during the October to January period, Gary Kaminsky, Chief Financial Officer for Dollar Time, transferred funds to Dollar Time's Exte Bank checking account in New York. Allison Tau, a bookkeeper for Bargain, also kept certain Dollar Time ledger sheets documenting transfers from the Exte account. The notation "loan" adjacent to nine of the entries reflected that Dollar Time funds were received by Bargain or its affiliates as loans or transfers. The evidence also demonstrates numerous checks written on the Dollar Time account to Bargain or its affiliates.
Sasson verified that he was aware of the various transfers and further testified that the transfers characterized as "loans" on the books were actually advances to Bargain for the purchase of inventory for Dollar Time and/or Bargain. However, Sasson and Klansky did not introduce into evidence any invoices or other documents to substantiate Sasson's testimony that the transfers benefitted Dollar Time. Although Sasson and Klansky argue that the transfers were made with the Dollar Time board's knowledge, there are no board minutes in evidence to show that Sasson and Klansky had disclosed the transfers to the board or shareholders or that the transfers were in fact approved by a sufficient vote of either the board or shareholders.
These transfers began in October when Sasson and Klansky were immersed in operating the two companies, when other Bargain employees had begun working full time for Dollar Time under Sasson's and Klansky's direction, and when Sasson and Klansky had begun to exercise their check writing authority to disperse funds from Dollar Time to Bargain. The Court finds that by October 1993, by virtue of their authority to operate the company and sign checks, Sasson and Klansky had attained the status of fiduciaries owing a duty to Dollar Time. Furthermore, from November 11, 1993, until January 12, 1994, Sasson and Klansky were fiduciaries to Dollar Time by virtue of their status as officers and board members of Dollar Time.
As fiduciaries, they owed the highest duty of loyalty implied by law. Because of this duty, any self-dealing by them must be judged not by the reasonably prudent standard of the business judgment rule, but by the intrinsic fairness test, that is, whether Sasson and Klansky proved their transactions were fair and reasonable to the corporation. Clearly, the answer is no.
The nine loans reflected on Dollar Time's books and the checks written to Dollar Time, its affiliates, and to third parties for the benefit of Bargain are transactions in which Sasson and Klansky had an interest because Sasson and Klansky's companies received the money or benefit. Such transactions amount to self-dealing.
The record reflects no evidence that the transfers were disclosed to the board or shareholders or that the board or shareholders approved the transfers. The only evidence of board participation in these transfers is that Dollar Time's chief financial officer, Gary Kaminsky, transferred substantial Dollar Time funds to Dollar Time's Exte Bank account, but nothing in the record suggests Kaminsky or anyone else in a position of authority at Dollar Time, other than Sasson and Klansky, knew of the transfers from Dollar Time's account to Bargain and its affiliates. Therefore, under section of New York's Business Corporations Law, the corporation could have voided the transactions unless Sasson and Klansky proved they were fair and reasonable to the corporation.
*248 The transfers fail the fair and reasonable test because they were made when Dollar Time was experiencing cash flow difficulties and was resorting to bridge loans from outside sources to continue to operate. Although Sasson and Klansky argue that the transfers of funds were used for the purchase of inventory for Dollar Time, they introduced into evidence no documents to verify this assertion. Furthermore, the ledger sheets clearly document checks written in January 1994 for rents due on Bargain stores. Thus, Sasson and Klansky have failed to meet their burden of proving the self-dealing transactions were fair and reasonable to Dollar Time and are liable for breach of fiduciary duty by transferring $1,792,298.61 from Dollar Time to Bargain.
ACCORD AND SATISFACTION
Sasson and Klansky argue that even if they are liable to Dollar Time for breach of fiduciary duty, the settlement agreement between Dollar Time and Bargain represented an accord and satisfaction releasing Bargain and Sasson and Klansky from further obligation to Dollar Time.
An accord and satisfaction is a form of contract in which the parties agree to give or accept what is offered in settlement of an outstanding claim in contract or tort. The claim is satisfied upon performance of the agreement. City of Amsterdam v. Daniel Goldreyer, Ltd., 882 F. Supp. 1273, 1279-80 (E.D.N.Y.1995) (citing N.Y.Jur.2d, Compromise, Accord, and Release § 1); Pepper's Steel & Alloys, Inc. v. Lissner Minerals & Metals, Inc., 494 F. Supp. 487, 496 (S.D.N.Y. 1979) (citing McMahon v. Pfister, 39 A.D.2d 691, 332 N.Y.S.2d 591 (1972)). Whether an accord has been reached depends on the parties' expressions of intent. Pepper's Steel & Alloys, Inc., 494 F.Supp. at 497 (citing Werking v. Amity Estates, Inc., 2 N.Y.2d 43, 155 N.Y.S.2d 633, 137 N.E.2d 321 (1956)). An accord and satisfaction cannot be reached between parties other than those who were party to the original contract or claim. Trans-Orient Marine Corp. v. Star Trading & Marine, Inc., 736 F. Supp. 1281, 1284 (S.D.N.Y.1990), aff'd, 925 F.2d 566 (2d Cir. 1991) (citing Stahl Management Corp. v. Conceptions Unlimited, 554 F. Supp. 890, 892 (S.D.N.Y.1983); Restatement (Second) Contracts 280, Comment a.) Accord and satisfaction is an affirmative defense in which the asserting party bears the burden of proof. Amsterdam, 882 F.Supp. at 1280; Stahl Management Corp. v. Conceptions Unlimited, 554 F. Supp. 890, 893 (S.D.N.Y.1983) (citing Reilly v. Barrett, 220 N.Y. 170, 115 N.E. 453, 454 (1917)); Studiengesellschaft Kohle v. Novamont Corp., 485 F. Supp. 471, 475 (S.D.N.Y.1980) (citing Geeslin v. Knight Bros., Inc., 554 F.2d 865, 866 (8th Cir.1977); Simpson v. Norwesco, 442 F. Supp. 1102 (D.S.D.1977), aff'd, 583 F.2d 1007 (8th Cir. 1978)).
While it is true that the Settlement Agreement did represent an accord to settle all claims between Dollar Time and Bargain, the Agreement contained no expression of an intent to settle the claims between Dollar Time and Sasson and Klansky individually. Further, Sasson and Klansky were indemnified for liability incurred by authorized acts only; the indemnification specifically excluded acts that breached fiduciary duty to Dollar Time. Because the parties to the Settlement Agreement were Dollar Time and Bargain, the Agreement does not document an accord and satisfaction between the parties to this action.
THE TRUSTEE'S RECOVERY
The commencement of a bankruptcy case creates an estate comprising all legal or equitable interests of the debtor in property of the estate, including the debtor's interest in a cause of action. 11 U.S.C. § 541(a)(1) (1994). Under title 11, a trustee is successor to the debtor's interest in property of the estate and may pursue the debtor's cause of action. 11 U.S.C. § 541 (1994).
Upon a corporation's bankruptcy, any claim the debtor corporation has against directors for breach of fiduciary duty passes to the bankruptcy estate. Brandt v. Hicks, Muse & Co. (In re Healthco Int'l, Inc.), 195 B.R. 971, 985 (Bankr.D.Mass.1996); Hassett v. McColley (In re O.P.M. Leasing Servs. Inc.), 28 B.R. 740, 759 (Bankr.S.D.N.Y.1983) (citing In re Happy Time Fashions, Inc., 7 *249 B.R. 665 (Bankr.S.D.N.Y.1980)). Thus, as successor to the debtor's interest in a cause of action that passes to the estate, the trustee stands in the shoes of a debtor corporation and is authorized to bring a suit for breach of fiduciary duty against the corporation's directors. Mixon v. Anderson (In re Ozark Restaurant Equip. Co., Inc.), 816 F.2d 1222, 1225 (8th Cir.1987), cert. denied, 484 U.S. 848, 108 S. Ct. 147, 98 L. Ed. 2d 102 (1987); Brandt, 195 B.R. at 985.
A basic concept of fairness prohibits a double recovery by any debtor. Towne Realty, Inc. v. A-1 Hydro Mechanics Corp. (In re A-1 Hydro Mechanics Corp.), 92 B.R. 451, 457 (Bankr.D.Hawai'i 1988) (citing In re Mohawk Industries, Inc. v. United States, 82 B.R. 174, 178 (Bankr.D.Mass.1987)). Because the trustee stands in the shoes of the debtor as to the debtor's cause of action, he may not recover those damages previously received by the debtor. To permit such an outcome would result in a double recovery.
Substantial evidence in the record supports the finding that Dollar Time recovered from Bargain the equivalent of $1,276,109.50 in inventory under the Settlement Agreement of February 16, 1994. Dollar Time and Bargain agreed to a credit of $412,546.50 on Bargain's debt to Dollar Time for inventory in Dollar Time's North Carolina warehouse. Testimony and exhibits confirmed that Bargain customarily paid a wholesale price of between $4.50 and $6.00 per unit of clothing. Nothing in the record reflects that the inventory was worth less than that amount.
Dollar Time also received inventory with an appraised value of $863,563.00 shipped by Bargain to Dollar Time's North Carolina warehouse March 24, 1994. The independent appraiser of the inventory was approved by Dollar Time's attorneys, and his report was placed in the record. Although the Trustee now takes issue with the value of the inventory by demonstrating that Dollar Time later listed the inventory for accounting purposes at only $63,000.00, he introduced no persuasive evidence that questioned either the number of items shipped or the value placed by the appraiser on each item when the items were shipped.
Therefore, Sasson's and Klansky's liability for $1,792,298.61 for breach of fiduciary duty to Dollar Time shall be reduced by $1,276,109.50, the value of the inventory previously received by Dollar Time as partial compensation for the transfers at issue. To award the Trustee an amount Dollar Time has already received would equate to a double recovery and a windfall to the debtor. Expressed another way, Sasson and Klansky have no liability for $1,276,109.50 because Dollar Time has been previously made whole to that extent.
Also under the Settlement Agreement, Bargain received a credit of $500,000.00 for services performed by Bargain and its principals, officers and employees, including consulting fees, and for costs and expenses related to the proposed acquisition of Bargain. Testimony evidenced that Sasson, Klansky, and five other Bargain employees worked for Dollar Time for varying periods between September 1993 and January 1994. Dollar Time initially paid Sasson a consulting fee of $5000.00 a month; he later received $300,000.00 a year after he became Chief Executive Officer. Both Sasson and Klansky received compensation for their services to Dollar Time during their employment, but the other Bargain employees did not.
The record does not reflect what salary or hourly wage was paid to the five Bargain employees during the September-January period. Similarly, the record is void of testimony or documents relating to Bargain's expenses resulting from the proposed merger. Consequently, the Court must conclude that these salaries and expenses were of de minimus value to Dollar Time. Therefore, reducing the Trustee's recovery by the $500,000.00 credit in the settlement agreement would be unfair because Dollar Time actually received nothing of value under this term of the settlement.
CONCLUSION
For the reasons stated, the Court recommends, pursuant to 28 U.S.C. § 157(c)(1), that Sasson and Klansky be held liable for *250 breach of fiduciary duty to Dollar Time for the sum of $516,189.11.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536707/ | 928 A.2d 1061 (2007)
COMMONWEALTH of Pennsylvania, Appellee
v.
Lewis A. FAULK, Appellant.
Superior Court of Pennsylvania.
Argued October 25, 2006.
Filed June 15, 2007.
*1063 Kenneth M. Baldonieri, Monessen, for appellant.
Thomas R. Grace, Asst. Dist. Atty., Greensburg, for Com., appellee.
BEFORE: LALLY-GREEN, McCAFFERY, and KELLY, JJ.
OPINION by McCAFFERY, J.:
¶ 1 Appellant, Lewis A. Faulk, appeals from his judgment of sentence for aggravated assault. Specifically, Appellant asks us to determine, inter alia, whether his waiver of his right to be present at trial was preceded by a proper colloquy and hence was valid. Following review, we affirm.
¶ 2 The relevant facts and procedural history of this case are as follows. Appellant was charged with aggravated assault and related offenses after he severely injured the victim by punching him in the face several times with a closed fist. The victim and another man, Mark Kastelic, had been watching television in Mr. Kastelic's living room when Appellant, who was an acquaintance of both men, came to the door. Mr. Kastelic admitted Appellant into the home and then walked toward the kitchen in the back to let his dog inside. Upon hearing some noises, Mr. Kastelic returned to the living room to find Appellant standing over the victim and hitting him in the face with a closed fist. The victim was beaten severely, bleeding profusely, and barely conscious. Appellant then walked out the door and left the premises while Mr. Kastelic sought emergency medical care for the victim. (See Trial Court Opinion, dated March 9, 2006, at 6).
¶ 3 The victim required many weeks of treatment for his trauma-related injuries, first at a hospital in the intensive care unit and then at a rehabilitation facility. His injuries included brain injury, several fractures, lost teeth, and subdural hematoma.[1] He experienced post-traumatic amnesia, and at the time of Appellant's trial, continued *1064 to have difficulty with memory, balance, and walking. (Id. at 7).
¶ 4 Appellant was arrested shortly after the incident and charged with, inter alia, aggravated assault and simple assault.[2]
¶ 5 A succession of attorneys was appointed to represent Appellant. Initially, in October 2004, Patricia Elliott, Esq., was appointed as Appellant's counsel; approximately six months later she filed a motion to withdraw, citing a menacing and intimidating letter that she had received from Appellant and an irretrievable breakdown of the attorney-client relationship. Following a hearing on June 9, 2004, the court granted attorney Elliott's motion to withdraw and appointed Brian Aston, Esq., as Appellant's new counsel. In September 2004, Appellant sent a letter to the trial judge, firing attorney Aston and demanding new counsel, based on Appellant's perception that attorney Aston was devoting insufficient attention to Appellant's case. A third attorney, Scott Avolio, was appointed to represent Appellant. Citing an unspecified conflict, Appellant petitioned the court to choose an attorney other than Mr. Avolio. The court then appointed a fourth attorney, Michael DeMatt, on November 12, 2004.
¶ 6 Although Appellant was represented by appointed counsel throughout the pretrial and trial proceedings, he filed numerous pro se petitions, regarding, inter alia, alleged Rule 600 violations, bail bond, discovery and evidentiary matters. Appellant also sent three threatening and profane letters to the trial judge, demanding recusal. In October 2004, the trial judge recused herself, and a new judge assumed responsibility for Appellant's case.
¶ 7 A three-day jury trial commenced on January 5, 2005. Just before jury selection began, the court discussed with Appellant his dissatisfaction with his latest attorney, Mr. DeMatt. Appellant complained that Mr. DeMatt did not follow Appellant's instructions with regard to trial preparations, and Appellant stated to the court that he did not wish to be present for his trial. Appellant also threatened to disrupt verbally the voir dire proceedings. The court informed Appellant of his right to be present at trial and the risks of not exercising that right. However, Appellant refused to take an oath or to acknowledge the court's comments. Appellant was then transported from the courtroom, as he had requested. The trial was conducted in Appellant's absence, and after hearing extensive testimony, the jury found Appellant guilty of aggravated assault and simple assault. Sentencing was deferred pending the preparation of a pre-sentence report.
¶ 8 Approximately one month after the end of the trial, Appellant filed a pro se motion to vacate his conviction, alleging ineffective assistance of counsel. Per order of the trial court, Attorney DeMatt withdrew and Attorney James Wells was appointed as Appellant's new counsel. Appellant then sent a letter to the clerk of courts, stating that he would hence forth proceed pro se and would rely on court-appointed counsel only in a co-counsel capacity. Following a hearing, the court denied Appellant's request to proceed pro se. However, the court directed Attorney Wells to withdraw and appointed Mark Shire, Esq., to represent Appellant. On June 13, 2005, the court sentenced Appellant to serve not less than six and not more than twenty years in prison. Appellant filed a post-sentence motion, which was denied following a hearing.
¶ 9 After reinstatement of Appellant's direct appeal rights nunc pro tunc, Appellant *1065 filed a counseled appeal, raising the following five issues for our review:
A. Whether [Appellant] was denied his rights under the Sixth Amendment to the United States Constitution[;] Article I, Section 9 of the Pennsylvania Constitution[;] and Pa.R.Crim.P. 602(A) to be present at trial because [Appellant's] purported waiver was neither knowing nor intelligent?
B. Whether the sole eyewitness'[s] conflicting statements provided an adequate basis to support the jury's verdict that [Appellant] was guilty of aggravated assault pursuant to 18 Pa.C.S.A. § 2702(a)(1)?
C. Whether the evidence was sufficient to support the jury's implied finding that [Appellant] consciously disregarded an unjustified risk of death or ser[i]ous bodily injury?
D. Whether the evidence was sufficient to support the jury's implied finding that [Appellant] exhibited reckless conduct to the degree that life-threatening behavior was certain to occur?
E. Whether the trial court abused its discretion by setting [Appellant's] maximum sentence at twenty (20) years?
(Appellant's Brief at 5). We address Appellant's issues in turn.[3]
¶ 10 Appellant's first issue concerns his decision to absent himself from his trial. Appellant contends that his waiver of his right to be present at trial was neither knowing nor intelligent because the trial court did not conduct a proper and thorough colloquy. Therefore, Appellant argues, his waiver was invalid. We disagree.
¶ 11 A defendant's right to be present at trial is guaranteed by the Sixth Amendment to the United States Constitution; by Article I, Section 9 of the Pennsylvania Constitution; and by Pennsylvania Rule of Criminal Procedure 602(a). See, e.g., Taylor v. United States, 414 U.S. 17, 20, 94 S.Ct. 194, 38 L.Ed.2d 174 (1973); Illinois v. Allen, 397 U.S. 337, 338, 90 S.Ct. 1057, 25 L.Ed.2d 353 (1970); Commonwealth v. Tizer, 454 Pa.Super. 1, 684 A.2d 597, 604 (1996). This Court has previously declined to interpret our state Constitution *1066 as requiring more protection for the accused with respect to trials in absentia than the United States Constitution. See Commonwealth v. Hill, 737 A.2d 255, 260 (Pa.Super.1999). Furthermore, the right may be waived either impliedly, via the defendant's actions, or expressly. See, e.g., Commonwealth v. Vega, 553 Pa. 255, 259-60, 719 A.2d 227, 229-30 (1998); Commonwealth v. Sullens, 533 Pa. 99, 102, 619 A.2d 1349, 1351 (1992).
¶ 12 For example, our Supreme Court has held that when a defendant is abusive and disruptive to the proceedings, the trial judge does not abuse his or her discretion in having the defendant removed from the courtroom. Commonwealth v. Basemore, 525 Pa. 512, 524-27, 582 A.2d 861, 867-68 (1990); see also Allen, 397 U.S. at 343, 90 S.Ct. 1057 (holding that "a defendant can lose his right to be present at trial if, after he has been warned by the judge that he will be removed if he continues his disruptive behavior, he nevertheless insists on conducting himself in a manner so disorderly, disruptive, and disrespectful of the court that his trial cannot be carried on with him in the courtroom").
¶ 13 Furthermore, a defendant may be tried in absentia if he or she is absent without cause when the trial is scheduled to begin or if the defendant absconds without cause after the trial commences. Commonwealth v. Wilson, 551 Pa. 593, 598-99, 712 A.2d 735, 737 (1998); Sullens, supra at 104, 619 A.2d at 1352; see also Taylor, 414 U.S. at 20, 94 S.Ct. 194 (concluding that the trial court had committed no error in proceeding with a trial even though the defendant had chosen not to return to the courtroom for the afternoon session, and quoting Allen, 397 U.S. at 349, 90 S.Ct. 1057 (Brennan, J., concurring) for the proposition that "the governmental prerogative to proceed with a trial may not be defeated by conduct of the accused that prevents the trial from going forward").
¶ 14 A criminal defendant can also expressly waive his right to be present at his trial; however, our Supreme Court has imposed certain requirements to ensure that such a waiver is knowing and intelligent. Vega, supra at 259-62, 719 A.2d at 230-31. The trial court must conduct a colloquy to communicate to the accused the nature of the constitutional right to be present at trial and the risks of failing to exercise this right. Id. at 260, 719 A.2d at 230. While our Supreme Court did not mandate any specific language or rote dialogue for this colloquy, the Court did state that "the inquiry must be calculated to insure a defendant is aware of the dangers and disadvantages of waiving his right to be present during trial." Id. at 262, 719 A.2d at 231.
Such an inquiry would necessarily include, at a minimum, a discussion of whether the defendant understands that if trial proceeds without his presence: (1) he would be unable to participate in the selection of a jury; (2) he waives his right to confront and cross-examine witnesses; (3) he will not be present to testify in his own defense; and (4) any claim challenging effective assistance of counsel will be severely limited since the defendant has chosen not to participate in his defense and will be unable to aid counsel during trial.
Id.
¶ 15 When we as an appellate court review a challenge to the validity of a waiver of the right to be present at trial, we look to the record to determine whether all the necessary information concerning the nature of the right and the risk of not exercising that right was communicated to the appellant. If such information was communicated to the appellant, the waiver will not be disturbed. See id. at *1067 260, 719 A.2d at 230. "The focal point of this analysis is whether the [a]ppellant made an informed choice." Id.
¶ 16 We turn now to the instant case. At the beginning of trial, before jury selection had begun, Appellant stated directly that he did not wish to be present in the courtroom, and he threatened to disrupt the voir dire proceedings, as illustrated by the following excerpts from the transcript:
[Appellant]: I'm going to object to everything that happens, period.
[Court]: Well, you're not going to object because Mr. DeMatt is your attorney.
[Appellant]: I won't be a part of it, then. [Court]: All right. You can, you know, you can sit quietly.
[Appellant]: Every juror you bring in here, I'm going to object in front of them.
[Court]: That's fine. You are not permitted to object because Mr. DeMatt is your attorney. He's the only one that's permitted to speak. If you start that, then you'll go downstairs.
[Appellant]: You might as well take me there now.
[Court]: Is that what you're requesting?
[Appellant]: No, I'm telling you I'm not going through . . . with this loser representing me. Period. I made that clear.
* * *
[Appellant]: I don't want to be part of this. You might as well take me downstairs, period.
[Court]: Mr. Faulk, you're to be present. If you can't behave yourself in the proper manner, then I'll take steps to take you downstairs.
[Appellant]: Well, that will happen. I'll assure you that.
[Court]: You're indicating to me that you do not want to be present during these proceedings?
[Appellant]: No, I don't. I don't want to be present during any of this, Your Honor, period.
* * *
[Court]: Well, first of all, the record should be clear that [Appellant] applied for counsel. He has been provided counsel. He has actually been represented by Patricia Elliott, Brian Aston and now by Mr. DeMatt in these proceedings. This Court has made a determination that Mr. Faulk is not going to run these proceedings and he's not going to be in charge of the process of who represents him. Every one of the attorneys who have been appointed to represent [Appellant] are [sic] very, very capable criminal attorneys. . . . By being difficult, by creating difficulties with his various attorneys, [Appellant] is simply no longer going to control the agenda with regard to this matter. . . .
[Appellant]: Are we just going to start calling the jurors in now?
[Court]: Yes.
[Appellant]: I would ask to be removed, then, Your Honor. At this point I want to be removed. I will not participate. I told you that. You go ahead and pick a jury. Proceed. You do it without me.
(Notes of Testimony Trial ("N.T."), 1/5/05, at 28-29, 31-34).
¶ 17 After Appellant thusly made so clear that he did not wish to be present at trial, the court attempted to engage him in a colloquy to explain the right he was waiving and the risks of not exercising that right. The court attempted to administer the oath to Appellant for purposes of the colloquy, but he refused to participate, responding "no" after being read the oath. (Id. at 37). The court and the prosecutor then made the following statements in Appellant's presence:
*1068 [Court]: If you [Appellant] refuse to go through a colloquy with the Court, the Court is simply going to make a statement upon the record here in your presence. Mr. Faulk, I want you to understand that you have the right to be present at all stages of the criminal proceedings against you, including jury selection and trial in this matter, and this Court is taking your indication that you don't want to be present as your voluntary waiver of your right to be present during all stages of criminal proceedings. Do you understand that? The record should reflect that the Court has not received any response, although it does appear that [Appellant] is within hearing distance of the Court and has previously appeared to hear the Court. . . .
* * *
[Prosecutor]: . . . I just wanted to make sure [that Appellant is] aware that from time to time in the course of a trial, counsel confers with his client factually regarding the circumstances of the case. [Appellant] can volunteer things that he knows personally about certain witnesses. He can make contributions as to howor make suggestions to counsel on how the case should proceed. Obviously, when he's not present in the courtroom, he can't do that. He should be aware [that] by absenting himself from the courtroom [] he's waiving any claims that he would have in that regard somewhere down the road.
(Id. at 37-39).
¶ 18 Immediately following these statements, to which Appellant did not respond, he was removed from the courtroom, and he was held in the holding cell downstairs from the courtroom throughout the proceedings. He had been told earlier that if he changed his mind and wished to return to the courtroom, he need only tell the deputy in charge of the holding cell and he could rejoin the proceedings. (Id. at 35). Furthermore, the trial court instructed Appellant's counsel to report to Appellant at each break in the proceedings all events that had taken place, even if Appellant did not want to listen. (See id. at 58; N.T., 1/6/05, at 63-64; N.T., 1/7/05, at 176-77).
¶ 19 Appellant now contends that the trial court's colloquy did not satisfy in all respects the mandate of our Supreme Court in Vega. Appellant acknowledges that the trial court's statement did inform him that he would be waiving the right to participate in jury selection, as required under Vega. (See Appellant's Brief at 10). Appellant also acknowledges that he was informed of his right to testify, albeit at a later point in the trial. (See id. at 12). However, Appellant contends that he was not informed of his right to confront and cross-examine witnesses, nor of the severe limitations that would of necessity attach to any subsequent ineffective assistance claim because of his failure to participate in the proceedings. (See id. at 11-12). Appellant's contention has no merit.
¶ 20 During the colloquy, the words used by the court and the prosecutor did not track precisely the language in Vega. However, our Supreme Court expressly declined to mandate any specific language or rote dialogue. Vega, supra at 262, 719 A.2d at 231. The necessary information was relayed to Appellant concerning the value of his participation in the proceedings, particularly with regard to his personal knowledge of the witnesses. Furthermore, he was warned that by refusing to be present to aid his counsel, he was waiving subsequent claims regarding counsel's decisions on how the case should proceed. The colloquy conducted by the court was of necessity a one-way discussion because, although Appellant was given every *1069 opportunity to engage in the colloquy, he refused to participate or even to acknowledge the proceeding. The trial court was conscientious in protecting Appellant's rights, but it refused to allow Appellant's unreasonable behavior to delay further the selection of the jury and the beginning of his trial.[4] After review of the entire transcript, we conclude that the trial court acted properly in protecting Appellant's rights pursuant to Vega, while also preserving the decorum and authority of the court. Appellant's allegations to the contrary must fail.
¶ 21 Appellant's next three issues are all challenges to the sufficiency of the evidence in support of his conviction for aggravated assault under Section 2702(a)(1). To obtain a conviction for aggravated assault, the Commonwealth must prove that the accused has "attempt[ed] to cause serious bodily injury to another, or cause[d] such injury intentionally, knowingly or recklessly under circumstances manifesting extreme indifference to the value of human life." 18 Pa.C.S.A. § 2702(a)(1); see also Commonwealth v. McClendon, 874 A.2d 1223, 1229 (Pa.Super.2005) (explaining the elements of aggravated assault).
¶ 22 A challenge to the sufficiency of the evidence is a question of law and thus is subject to plenary review. Commonwealth v. Brotherson, 888 A.2d 901, 904 (Pa.Super.2005), appeal denied, 587 Pa. 719, 899 A.2d 1121 (2006). In reviewing a sufficiency challenge, we must determine
whether the evidence at trial, and all reasonable inferences derived therefrom, when viewed in the light most favorable to the Commonwealth as verdict[-]winner, are sufficient to establish all elements of the offense beyond a reasonable doubt. We may not weigh the evidence or substitute our judgment for that of the fact-finder. Additionally, the evidence at trial need not preclude every possibility of innocence, and the fact-finder is free to resolve any doubts regarding a defendant's guilt unless the evidence is so weak and inconclusive that as a matter of law no facts supporting a finding of guilt may be drawn. The fact-finder, when evaluating the credibility and weight of the evidence, is free to believe all, part, or none of the evidence.
Commonwealth v. Stevenson, 894 A.2d 759, 773 (Pa.Super.2006), appeal denied, 591 Pa. 691, 917 A.2d 846 (2007) (citations and quotation omitted).
¶ 23 Appellant's first insufficiency claim is that the eyewitness to the assault, Mr. Kastelic, gave conflicting statements. Appellant contrasts Mr. Kastelic's testimony at trial with the testimony of other witnesses at trial as to what Mr. Kastelic had previously told them about the assault. The jury, not this Court, is charged with the responsibility of evaluating the credibility of the witnesses, and in doing so, the jury is free to believe all, part, or none of the evidence. Id. We will not disturb the jury's resolution of any conflict between the testimony of Mr. Kastelic and that of any other witnesses.
¶ 24 Appellant's second and third insufficiency claims are that the Commonwealth *1070 did not prove that Appellant acted with the requisite mens rea to induce serious bodily injury. Serious bodily injury is statutorily defined as "[b]odily injury which creates a substantial risk of death or which causes serious, permanent disfigurement, or protracted loss or impairment of the function of any bodily member or organ." 18 Pa.C.S.A. § 2301. To obtain a conviction for aggravated assault when the victim sustained serious bodily injury, the Commonwealth must establish that the offender acted intentionally, knowingly, or with a high degree of recklessness that included "an element of deliberation or conscious disregard of danger." Commonwealth v. Roche, 783 A.2d 766, 771 (Pa.Super.2001) (quoting Commonwealth v. O'Hanlon, 539 Pa. 478, 482, 653 A.2d 616, 618 (1995)); see also Commonwealth v. Bruce, 207 Pa.Super. 4, 916 A.2d 657, 661-65 (2007) (explaining the mens rea that must be proven for aggravated assault). At a minimum, the Commonwealth must prove that the offender acted with malice, consciously disregarding "an unjustified and extremely high risk that his actions might cause death or serious bodily harm." Commonwealth v. Payne, 868 A.2d 1257, 1261 (Pa.Super.2005), appeal denied, 583 Pa. 681, 877 A.2d 461 (2005) (citation omitted). In other words,
[a] defendant must display a conscious disregard for almost certain death or injury such that it is tantamount to an actual desire to injure or kill; at the very least, the conduct must be such that one could reasonably anticipate death or serious bodily injury would likely and logically result.
Bruce, supra at 664 (citation omitted).
¶ 25 This Court has previously acknowledged that intent can be difficult to prove directly because it is a "subjective frame of mind." Commonwealth v. Lewis, 911 A.2d 558, 564 (Pa.Super.2006) (citation omitted). However, the fact-finder is free to conclude that "the accused intended the natural and probable consequences of his actions to result therefrom." Id. (citation omitted).
We must look to all the evidence to establish intent, including, but not limited to, [the] appellant's conduct as it appeared to his eyes. Intent can be proven by direct or circumstantial evidence; it may be inferred from acts or conduct or from the attendant circumstances.
Id. (citation omitted).
¶ 26 Each case must be evaluated on its own particular facts, but under appropriate circumstances, even a single punch to the face can constitute aggravated assault. Id.; see Commonwealth v. Davis, 267 Pa.Super. 370, 406 A.2d 1087, 1089 (1979) (taking into account the appellant's overall conduct, as well as the serious injury inflicted, to conclude that the appellant's single punch to the victim's face revealed extreme disregard of the value of human life and thus supported a conviction for aggravated assault). But see Commonwealth v. Alexander, 477 Pa. 190, 194-95, 383 A.2d 887, 889-90 (1978) (concluding that the circumstances of the case did not permit a finding of the requisite intent for aggravated assault because the appellant merely struck the victim once in the face with a closed fist, breaking his nose); Roche, supra at 770-72 (concluding that the appellant's belligerent words and throwing of one punch were insufficient to establish the requisite mens rea for aggravated assault, even though the victim suffered serious bodily injury, but noting that the appellant had ceased his attack immediately and did not continue to strike the victim).
¶ 27 Our decisional law also includes cases of aggravated assault in which the assailant landed multiple punches on the *1071 victim. For example in Lewis, supra, the appellant punched the victim's face and stomach multiple times, resulting in life-threatening injuries and a lengthy recovery. This Court concluded that the evidence was sufficient to support the appellant's conviction for aggravated assault, noting that the appellant continued to strike the victim after she was rendered dazed and helpless from the first few punches and ceased his assault only when he became aware of the approach of police. Lewis, supra at 564-65. Indeed, this Court has expressly held that intent to cause serious bodily injury can be established by evidence showing that an appellant intended to strike again a victim already rendered dazed and helpless by the initial blows. See Bruce, supra at 663 (citation omitted).
¶ 28 In the instant case, the evidence supported the findings that Appellant entered a home where the victim was seated in a chair and proceeded to punch him numerous times in the head until his face was bloody and swollen, and he was barely conscious. Appellant is a large man, and the evidence indicated that he repeatedly struck the victim very hard with a closed fist. Mr. Kastelic testified that when he reentered his living room and observed the ongoing assault, the victim already appeared to be unconscious, but Appellant continued to punch him five or six more times. (N.T., 1/6/05, at 95). Appellant ceased his assault on the victim only when Mr. Kastelic asked Appellant what was going on. Appellant made no attempt to aid the victim in any way, but simply left the premises immediately after the assault.
¶ 29 The victim's treating physician testified that it would have taken "substantial force" to cause the fractures that the victim sustained. (N.T., 1/7/05, at 190). Indeed, the victim was so severely injured that he required hospitalization in the intensive care unit followed by intensive and lengthy rehabilitation. The victim was unable to speak, to walk, or to eat without aid of a feeding tube. He required occupational, speech, and physical therapy. He remained confused, and he experienced post-traumatic amnesia, e.g., he was unable to remember the assault. According to the victim's treating physician, the injuries were consistent with a "significant traumatic brain injury" and were sufficiently serious as to have been life-threatening had he not obtained treatment. (Id. at 196-97).
¶ 30 Based on all the circumstances surrounding this assault, we have no difficulty concluding that the evidence was sufficient to establish that Appellant acted with the requisite degree of malice, consciously disregarding "an unjustified and extremely high risk that his actions might cause death or serious bodily harm." Payne, supra at 1261. This is not a case in which drawing the line between aggravated and simple assault is difficult or subject to reasonable disagreement. Appellant continued to strike the victim's head, repeatedly and brutally, even after the victim had been rendered helpless. The blows were so severe as to induce traumatic brain injury and to cause the victim's face to look "like mush." (N.T., 1/6/05, at 96). Appellant's insistence that he could not have anticipated that his actions could cause death or serious bodily injury is entirely untenable.
¶ 31 In Appellant's final issue, he contends that the trial court erred in sentencing him to the statutory maximum. Appellant's challenge is to the discretionary aspects of his sentence, from which there is no appeal as of right. Commonwealth v. Raybuck, 915 A.2d 125, 127 (Pa.Super.2006).
¶ 32 To be reviewed on the merits, a challenge to the discretionary aspects of sentence must raise a substantial question that the sentence imposed is *1072 not appropriate. A substantial question is raised when the appellant advances a "colorable argument" that the sentence was either "inconsistent with a specific provision of the Sentencing Code" or "contrary to the fundamental norms which underlie the sentencing process." Id. (citations omitted). This Court determines whether an appellant has raised a substantial question by examination of the appellant's concise statement of the reasons relied upon for allowance of appeal, which must be included in the appellant's brief, pursuant to Pennsylvania Rule of Appellate Procedure 2119(f). Commonwealth v. Shugars, 895 A.2d 1270, 1273-74 (Pa.Super.2006). If a Rule 2119(f) statement is not included in the appellant's brief and the appellee objects to the omission, then this Court is precluded from reviewing the merits of the appellant's claim. Raybuck, supra at 127-28 n. 3; Shugars, supra at 1274 n. 6.
¶ 33 Appellant has not included a Rule 2119(f) statement in his brief, and the Commonwealth has objected to this deficiency. Therefore, we may not reach the merits of Appellant's claim.[5]
¶ 34 In summary, we conclude that Appellant's first four issues lack any merit and his final issue has been waived. Therefore, we affirm his judgment of sentence.
¶ 35 Judgment of sentence affirmed. Motion to proceed pro se denied.
NOTES
[1] Subdural hematoma is defined as bleeding along the lining of the brain. (See Notes of Testimony Trial, ("N.T."), 1/7/05, at 187, testimony of prosecution expert witness Dr. Ross Zafonte). Risks associated with subdural hematoma include death, cognitive deficits, motor dysfunction, speech problems, and seizure. (Id. at 189).
[2] Respectively, 18 Pa.C.S.A. § 2702(a)(1) and 18 Pa.C.S.A. § 2701(a)(1).
[3] In December 2006, nearly eleven months after filing his counseled direct appeal, Appellant filed with this Court a pro se "Notice of Intent to Proceed pro-se," in which he asserted his right to proceed pro se because of an unspecified conflict of interest with his attorney, Mark Shire. This Court treated Appellant's filing as a Motion to Proceed Pro Se, and the motion is hereby denied for the following reasons.
The United States Supreme Court has concluded that the right to self-representation conferred by the Sixth Amendment to the United States Constitution does not extend to appellate proceedings. Martinez v. Court of Appeal of California, 528 U.S. 152, 154, 120 S.Ct. 684, 145 L.Ed.2d 597 (2000). In contrast, our Supreme Court has held that in this Commonwealth, an accused has the right to proceed pro se not only at trial but also through any appellate proceedings. Commonwealth v. Grazier, 552 Pa. 9, 12, 713 A.2d 81, 82 (1998) (citing Commonwealth v. Rogers, 537 Pa. 581, 583, 645 A.2d 223, 224 (1994)). However, our Supreme Court has also held that the court "has the discretion to require an appellant to remain with counsel after briefs have been filed rather than permit the disruption of the orderly disposition of the case." Commonwealth v. Albrecht, 554 Pa. 31, 62, 720 A.2d 693, 709 (1998) (citing Rogers, supra); see also Commonwealth v. Pursell, 555 Pa. 233, 251, 724 A.2d 293, 302 (1999) (explaining that in Rogers, supra, the Court held that "the Superior Court may prohibit the filing of pro se briefs by appellants represented by counsel on appeal.")
In the instant case, Appellant's counseled brief was filed on April 24, 2006, approximately seven months before Appellant filed his pro se motion to proceed pro se. Appellant's motion was manifestly untimely, and it is hereby denied.
[4] The trial court placed on the record Appellant's repeated "effort[s] to be as difficult as he could be without being physical about it throughout these proceedings." (N.T., 1/5/05, at 41). Appellant's actions included refusing to be cooperative with the four trial counsel appointed to represent him, threatening a trial judge, and sending disrespectful correspondence to the court. (See id. at 39-41). The trial court deemed it inappropriateas do wethat Appellant should benefit from the belligerent and uncooperative manner that he exhibited throughout the proceedings.
[5] We also note that Appellant fails to develop any argument as to his sentencing challenge. Appellant merely asserts that his sentence was unreasonable because he had no prior felony convictions and he did not use a weapon in the assault and because the dispute involved two adults. Appellant provides no insight into why any or all of these factors render unreasonable the sentence imposed, and he cites no decisional law relevant to these factors. Therefore, Appellant's sentencing claim has been waived. Commonwealth v. Price, 876 A.2d 988, 996 (Pa.Super.2005), appeal denied, 587 Pa. 706, 897 A.2d 1184 (2006), cert. denied, ___ U.S. ___, 127 S.Ct. 224, 166 L.Ed.2d 179 (2006) (holding that failure to develop a claim with appropriate discussion, argument, and citation to relevant authority results in waiver of the claim). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536725/ | 928 A.2d 61 (2007)
395 N.J. Super. 1
CRAMER HILL RESIDENTS ASSOCIATION, INC., Maria Calaf, Felipe Diaz, Nilda Diaz, Magda Jusino, Carmen Lopez, Marcos Lopez, George Murray, Darlene Figueroa, and Wanda Quiles, Plaintiffs-Appellants, and
Ablett Village Resident Association, Centennial Village Tenants' Action Council, Carmen Arce, Velletta Bailey, Carmen Barbosa, Teresa Belcher, James Blue, Elwood Brown, Donald Brown, Iris Capo, Shakia Carney, Kalisha Carter, Carmen Castro, Dolores Chapman, Ernestine Chase, Lydia Cintron, Maria Diaz, Carmen Flores, Latonya Ford, Babbette Gilbert, Lavern Gilchrist, Carmen Gonsalez, Aida Gonzalez, Karen Hairstone, Cheryl Hall, Sandra Hilton, Edna Hinkle, Demitron Hunter, Dawn Jenkins, Alleeish Jones, Sharon Joyce, Veronica Lovett, Elizabeth Malare, Eusenio Martinez, Virgilio Matias, Carmen Mendez, Ivelisse Mercado, Monique Mitchell, Rose Mitchell, Lakeisha Molock, Olga Morales, Sugeid Morales, Johanna Muniz, Katherine Muniz, Yolanda Nash, Belinda Norris, Ruth Oliveras, Yolanda Ortiz, Miguel Morales, Marisel Pabon, Phyllis Perry, Juanita Peters, Christine Peters, Deborah Phillips, Sharon Phillips, Carmen Planteny, Elizabeth Ponce, Floyd Pope, Jose Quinones, Samuel Reyes, Angel Rosa, Conrada Sanchez, Linnette Santiago, Teresa Santiago, Mary Simpson, Aricka Smith, Elicia Sosa, Nancy Surgick-Inge, Lisa Tatum, Luz Vasquez, Maria Villanueva, Ada Washington, Tony Whidbee, Carmen Acevedo, Hilda Ahart, Bernard Barfield, Teresa Berroa, Richard Brown, Hannah Brown, Carmen Cardona, Jesus Cordero, Mary Cortes, Linda Davis, Rebecca Garcia, Lester Grossnick, Margaret Grossnick, Michael Hagan, James Haulsey, Sara Hernandez, Clayton King, Mary Lewis, John Maher, Larraine Maher, Hector Martinez, Lisa Mellet, Philip Mills, Luz Pacheco, Luzi Reyes, Samuel Reyes, Ana Rivera, Catherine Rivera, Junel Rivera, Lidia Rivera, Carmen Santiago, Jose Santiago, Samuel Santiago, Jose Torres, Maria Acetty, Jose Gonzalez, Nelida Martinez, Vance Mcmanany, Wanda Nieves, Margarita Rivera, Sherman Robinson, Jesenia Roldan, Luz M. Serrano, Tiffany Whitehead, Maria Abuerto, Laura Sharon Baker, Sara Baldwin, Lisa Boswell, Laura Brown, Nicole Burgos, Margit Burkhaltiz, Mildred Caraballo, Cynthia Carter, Carmen Cintron, Jeanne Clark, Marilyn Clark, Gabriela Colon, Kevin Dorman, Carmen Figueroa, Carmen Garcie Correa, Elmer Hammond, Angel Isquierdo, Sheila Johnson, Delores Jones, Claribel Larios, Gertrude Lewis, Alberto Lopez, Norma Matos, Juanita McCoy, Aileen Medina, Kylene Medina, Sylvia Mercado, Sara Mojica, Delia Molina, Felicia Parker, Josefa Pagon, Edwina Pennington, Tiffany Pritchett, Luz Rentas, Jenythe Ruberte, Lucila Santiago, Leticia Santos, Michelle Seddens, Marisol Senquiz, Chekeya Streater, Daysi Tarqini, Genevieve Torres, Luz *62 Torres, Belinda Vaneman, Betty Vazquez, Olga Vega, Joanna Villegas, Saka Watkins, Evelyn Whetstone, Connie Witcher, Lavenda Wynn, Patricia Wynn, Donna Young, Maria Zapata, Milagros Acosta, Alexander Hernandez, Madelaine Adderley, Bobby Barr, Santo Bonillo, Carmen Cabon, Constance Carstarphen, Danika Daniels, Phenesia Darby, Milagros Diaz, Sandra Gonzalez, Howard Hall, Irma Hernandez, Terri Johnson, Loretta Lee, Miriam Lopez, Luz Molina, Salvador Morales, Rosa Muller, Phoebe Munoz, Teresa Murray, Robert Muse, Nilda Ortega, Lisette Paneto, Linda Perry, Luz Ramos, Tammy Robinson, Ayda Rodriguez, Betsy Toro, Julio Vasquez, Zulma Vasquez, Latisha Williams, Susie Williams, Awilda Zayas, Plaintiffs,
v.
Melvin R. PRIMAS, City of Camden, City of Camden Planning Board, Camden City Council, Camden Redevelopment Agency, Economic Recovery Board for Camden, State of New Jersey, Defendants-Respondents, and
Cherokee Camden, LLC, Michaels Development Company, River Hayes Renewal Associates I, L.P., River Hayes Renewal Associates II, L.P., Intervenors/Defendants.
Superior Court of New Jersey, Appellate Division.
Argued May 9, 2007.
Decided July 17, 2007.
*63 Olga D. Pomar, Camden, argued the cause for appellants (South Jersey Legal Services, attorney; Ms. Pomar, Kenneth M. Goldman and David Podell, on the brief).
William J. DeSantis, Voorhees, argued the cause for respondents Melvin R. Primas and Camden Redevelopment Agency (Ballard Spahr Andrews & Ingersoll, attorneys; Mr. DeSantis, of counsel and on the joint brief).
Lewis Wilson, Camden, attorney for respondent City of Camden, on the joint brief.
Calvin L. Fisher, Marlton, attorney for respondent Planning Board of the City of Camden, on the joint brief.
Daniel P. Reynolds, Senior Deputy Attorney General, argued the cause for respondents Economic Recovery Board of Camden and the State of New Jersey (Stuart Rabner, Attorney General, attorney; Patrick DeAlmeida, Assistant Attorney General, of counsel; Mr. Reynolds, on the brief).
DeCotiis, Fitzpatrick, Cole & Wisler, attorneys for intervenor-defendant Cherokee Camden, LLC, did not file a brief.
Baron & Riefberg, Voorhees, attorneys for intervenor-defendant W. Hargrove Recycling, Inc., did not file a brief.
Before Judges WINKELSTEIN, FUENTES and BAXTER.
The opinion of the court was delivered by
FUENTES, J.A.D.
Plaintiffs, a homeowner's association and individual homeowners affected by the City of Camden's intended redevelopment of an area known as Cramer Hill, appeal from the order of the trial court dismissing the one remaining count in their complaint in lieu of prerogative writs. This action was originally brought to challenge the City's proposed redevelopment plan. After extended litigation, the court invalidated the redevelopment plan, and directed *64 the City to undertake a new needs assessment before proposing a new plan.
Plaintiffs' remaining legal challenge seeks to invalidate an ordinance authorizing the City to acquire property on four sites within the Cramer Hill section of the City, by eminent domain, under the authority of section 325 (N.J.S.A. 52:27D-325) of the Fair Housing Act (FHA). This ordinance was enacted after the redevelopment plan was invalidated. The City alleges that this new land acquisition plan will increase the number of affordable housing units.
The matter came before the Law Division by way of defendants' motion for summary judgment. After considering the documentary evidence presented, and hearing oral argument from counsel, the court dismissed plaintiffs' legal challenge to the ordinance. Plaintiffs now appeal, arguing that the trial court erred in granting summary judgment to defendants because: (1) defendants had not participated in the substantive certification process required under N.J.S.A. 52:27D-313, and were thus not authorized to use the power of eminent domain under N.J.S.A. 52:27D-325; (2) the City had not demonstrated how the ordinance's proposed land acquisition scheme related to meeting the City's fair share housing obligation under the FHA; (3) the proposed development will actually decrease the supply of affordable housing in the City, in direct contravention of the purpose and policies of the FHA; and (4) the City enacted the challenged ordinance in bad faith, in an effort to circumvent the procedural and substantive problems that led to the invalidation of the original redevelopment plan.
After reviewing the record, and in light of prevailing legal standards, we reject the arguments advanced by plaintiffs. We hold that under the express language of N.J.S.A. 52:27D-325, the City has the authority to acquire private property by eminent domain, without having to obtain the substantive certification from the Council on Affordable Housing (COAH) provided for in N.J.S.A. 52:27D-313.
We are nevertheless compelled to remand this matter for the trial court to conduct a fact-finding hearing to determine if the ordinance passed under N.J.S.A. 52:27D-325 will assist the City in meeting its fair share housing obligation under the FHA. Stated differently, the trial court must determine whether the proposed land acquisition plan authorized by the ordinance actually increases the number of affordable housing units in the City.
In going about this task, the trial court should be guided by the overarching public policy supporting the City's authority to take private property by eminent domain under N.J.S.A. 52:27D-325: the exercise of the power of eminent domain granted to municipalities under section 325 is expressly predicated upon a finding that the proposed land acquisition is "necessary or useful for the construction or rehabilitation of low or moderate income housing." Ibid. Absent such a finding, the City lacks the legal authority to proceed under N.J.S.A. 52:27D-325.
I
On February 24, 2005, acting under the authority provided to municipalities in section 325, the City enacted Ordinance MC-4032, authorizing the acquisition of seventy-two parcels of land by eminent domain. The expressed purpose for this acquisition was the "construction or rehabilitation of low and moderate income housing in the Cramer Hill section of the City of Camden." The Ordinance listed the parcels to be acquired as Sites E, F, L and M, identified further by various block and lot numbers *65 on River and Hayes Avenues. The record before us does not include any information as to the types of housing to be erected on the lots listed in the ordinance.
One month later, the Camden Redevelopment Agency forwarded the Workable Relocation Assistance Plan (WRAP) to the New Jersey Department of Community Affairs. This relocation plan was limited to the residents of sites E and F.
For purposes of addressing the issues raised herein, we accept plaintiffs' description of the Cramer Hill community, as an enclave of stability in the midst of a City with a rapidly deteriorating affordable housing stock:
Cramer Hill is a neighborhood . . . located approximately one mile northeast of the downtown area of the City of Camden. Cramer Hill is cohesive and stable, having experienced no population loss between 1990 and 2000, according to Census Bureau reports.
Cramer Hill is approximately 1.8 miles long and approximately 0.8 miles wide, running from the Cooper River on the southwest, northeast along the Back Channel of the Delaware River, north to the boundary of the City of Camden and the Township of Pennsauken, and southeast to a rail yard. Cramer Hill encompasses over one hundred sixty-two (162) city blocks containing nearly four thousand (4000) properties.
The buildings are variously constructed of wood, brick and stone. The residential area contains modest, mostly single and semi-detached family homes. They are primarily of nineteenth century construction with many fine period structures which continue to be solid, comfortable urban dwellings. Many homes are well-maintained and have attractively landscaped yards and gardens.
Cramer Hill is the only neighborhood in Camden City with primarily R1-A low-density zoning, the most restrictive type of zoning provided for in Camden's zoning code. The zoning designation requires large residential lots of 3,000 square feet, with 15 foot yard setbacks, structures no higher than two stories, and a maximum density of 14.5 homes per acre, giving the community an almost suburban character.
Cramer Hill contains one hundred twenty-two (122) storefront and other businesses. There is a thriving aggregation of family owned businesses primarily clustered along River Avenue, but also spread throughout the neighborhood. The majority of these business owners and operators are Latino and African-American. There are also a number of light industrial and some heavy industrial uses, including a demolition and salvage operation and a dredging operation, all primarily located along the Back Channel, between the residential community and the Channel. There are also industrial uses associated with the rail yard.
Cramer Hill is home to several large urban parks and playgrounds, ball fields and a swimming pool, as well as public and parochial schools and numerous houses of worship of many faiths.
A "Determination of Needs" study commissioned by the City in April 2004, to support the now legally defunct Redevelopment Plan, indicates that eighty-five percent of the residential properties in the Cramer Hill neighborhood are privately owned. Of the remaining fifteen percent, more than ten percent are owned by the City, either directly or through the Board of Education. The report further notes that of a total of 2,623 privately own residential properties, 142 were rated in "Good" condition, and 1,564 were rated in *66 "Fair condition."[1] The authors of the study further qualified these numbers by inserting the following disclaimer:
Superficial: Observations were of building exteriors only; it was not possible to observe the condition of buildings' interiors and rears.
Subjective: Even among design professionals (architects, planners and engineers), there is expected to be some variation of opinion regarding the assessments of property conditions. This subjectively applies all the more when the observers are not trained to assess property conditions in terms of their structural and cosmetic needs or investments.
Mutable: Whether they improve or decline, property conditions change over time. The purpose of this assessment is to capture appearances in this point in time, a "snapshot" of conditions, as it were.
[(Emphasis added).]
With these facts as background, we will now address the issues raised by the parties.
II
Plaintiffs argue that the trial court erred by ruling that the FHA, through N.J.S.A. 52:27D-325, authorized the City to use eminent domain to acquire the properties described in the challenged ordinance, without first filing a substantive certification application with COAH, as required by N.J.S.A. 52:27D-313. We disagree with plaintiffs' argument.
The FHA, N.J.S.A. 52:27D-301 to -329, was enacted to implement the Mount Laurel doctrine.[2] In its findings, the Legislature stated in part:
b. In the second Mount Laurel ruling, the Supreme Court stated that the determination of the methods for satisfying this constitutional obligation "is better left to the Legislature," that the court has "always preferred legislative to judicial action in their field," and that the judicial role in upholding the Mount Laurel doctrine "could decrease as a result of legislative and executive action."
c. The interest of all citizens, including low and moderate income families in need of affordable housing would be best served by a comprehensive planning and implementation response to this constitutional obligation.
. . . .
g. Since the urban areas are vitally important to the State, construction, conversion and rehabilitation of housing in our urban centers should be encouraged. However, the provision of housing in urban areas must be balanced with the need to provide housing throughout the State for the free mobility of citizens.
[N.J.S.A. 52:27D-302.]
The FHA established COAH "to provide an administrative mechanism for implementing the Mount Laurel doctrine." In re Adoption of N.J.A.C. 5:94, 390 N.J.Super. 1, 21, 914 A.2d 348 (App.Div.), certif. denied, 192 N.J. 71, 926 A.2d 856 (2007). The duties of COAH include: (1) determining the "housing regions of the State;" *67 (2) estimating "the present and prospective need for low and moderate income housing at the State and regional levels;" and (3) adopting criteria and guidelines for determination of municipal "present and prospective share of the housing need in a given region." N.J.S.A. 52:27D-307. The FHA also provides that:
a. Within four months after the effective date of this act, each municipality which so elects shall, by a duly adopted resolution of participation, notify the council of its intent to the submit to the council its fair share housing plan. Within five months after the council's adoption of its criteria and guidelines, the municipality shall prepare and file with the council a housing element, based on the council's criteria and guidelines, and any fair share housing ordinance introduced and given first reading and second reading in a hearing pursuant to R.S. 40:49-2 which implements the housing element.
[N.J.S.A. 52:27D-309(a) (emphasis added).]
Within two years of filing their housing element, a municipality "may . . . petition the council for a substantive certification of its element and ordinances or institute an action for declaratory judgment granting it repose in the Superior Court. . . ." N.J.S.A. 52:27D-313 (emphasis added).
Although participation in the process is voluntary, COAH's grant of substantive certification plays a "critically important role" because it "effectively insulates a municipality from exclusionary zoning litigation" for the term of the certification, up to a maximum of ten years. In re Twp. of Southampton, 338 N.J.Super. 103, 113, 768 A.2d 233 (App.Div.), certif. denied, 169 N.J. 610, 782 A.2d 428 (2001); see N.J.S.A. 52:27D-313. Under the FHA, COAH may grant substantive certification only if the municipality's fair share plan is consistent with COAH's rules and criteria and makes achievement of the municipality's fair share realistically possible. In re Twp. of Southampton, supra, 338 N.J.Super. at 113, 768 A.2d 233 (citing N.J.S.A. 52:27D-314).
Here, it is undisputed that the City did not seek substantive certification under N.J.S.A. 52:27D-313. Nor did the City pursue the alternate approach mentioned in N.J.S.A. 52:27D-313, whereby the City could have sought a judgment of repose from the Superior Court. Rather, the City sought to proceed under the authority given in N.J.S.A. 52:27D-325, which provides that:
Notwithstanding any other law to the contrary, a municipality may purchase, lease or acquire by gift or through the exercise of eminent domain, real property and any estate or interest therein, which the municipal governing body determines necessary or useful for the construction or rehabilitation of low and moderate income housing or conversion to low and moderate income housing. The municipality may provide for the acquisition, construction and maintenance of buildings, structures or other improvements necessary or useful for the provision of low and moderate income housing, and may provide for the reconstruction, conversion or rehabilitation of those improvements in such manner as may be necessary or useful for those purposes.
This statute's legislative history provides vital insight into its intended purpose. As originally enacted in 1985, section 325 did not include the language authorizing the use of eminent domain as a means to acquire property for low and moderate income housing. In 1990, the Legislature amended the statute to reflect its current form, partly in response to the unpublished decision of *68 Township of Denville v. McGreevey, No. MRSL 2402-88E (Law Div. August 26, 1988), in which the court denied Denville Township the right to acquire by eminent domain a 45-acre tract of land that was part of a fair-housing plan to produce 388 units of low and moderate income housing. Assembly Housing Committee Statement to A. 211 (enacted as L. 1990, c. 109).
The Legislature explained that although the bill to enact the FHA originally allowed for condemnation, the Legislature agreed with the Governor's recommendation to withhold the "drastic power" of condemnation unless it was shown to be necessary. The amendment came after the Denville case provided "[e]vidence of such necessity. . . ." Ibid. Thus, "this bill would restore to the `Fair Housing Act' the authority for a municipality to acquire property through condemnation in order to attain its `fair share' of affordable housing as determined pursuant to the act." Ibid. (emphasis added). The history of this legislation also includes the following statement from the Senate State Government and Federal and Interstate Relations Committee:
This bill amends the "Fair Housing Act," P.L.1985, c. 222 (C.52:27D-301 et al.) to specify that a municipality has the power to acquire real property through the exercise of eminent domain when its governing body determines that such property is necessary or useful for the provision of low and moderate income housing.
[Senate State Government and Federal and Interstate Relations Committee Statement to A. 211 (enacted as L. 1990, c. 109).]
Notwithstanding the Senate Committee's statement, plaintiffs argue that the highlighted language in the Assembly Housing Committee Statement is critical to understanding the true intent of the amendment; that is to require municipalities to first obtain a COAH substantive certification under N.J.S.A. 52:27D-313, as a prima facie showing that the power of eminent domain is being exercised consistent with the constitutional mandate underpinning the FHA.
The judicial starting point in statutory interpretation is always the plain language of the statute. DKM Residential Props. Corp. v. Twp. of Montgomery, 182 N.J. 296, 305, 865 A.2d 649 (2005). "As a general rule, `[a] statute should be interpreted in accordance with its plain meaning if it is clear and unambiguous on its face and admits of only one interpretation.'" Carpenter Tech. Corp. v. Admiral Ins. Co., 172 N.J. 504, 512, 800 A.2d 54 (2002) (quoting Franklin Tower One v. N.M., 157 N.J. 602, 613, 725 A.2d 1104 (1999)). If the plain language of the statute allows for the possibility of different meanings, then the court must seek to give effect to the legislative intent in light of the statute's language and context. Liberty Mut. Ins. Co. v. Land, 186 N.J. 163, 170-71, 892 A.2d 1240 (2006). To ascertain that intent, a court may turn to "the statute's structure, history, and purpose." In re Adoption of N.J.A.C. 71I, 291 N.J.Super. 183, 191, 677 A.2d 218 (App.Div.1996), aff'd, 149 N.J. 119, 693 A.2d 97 (1997).
These tools of construction, however, do not authorize a reviewing court to "rewrite a plainly-written enactment of the Legislature nor presume that the Legislature intended something other than that expressed by way of the plain language." O'Connell v. State, 171 N.J. 484, 488, 795 A.2d 857 (2002). In the process of interpretation, a court is not licensed to "`write in an additional qualification which the Legislature pointedly omitted in drafting its own enactment,' Craster v. Bd. of Comm'rs of Newark, 9 N.J. 225, 230, 87 A.2d 721 (1952), or `engage in conjecture *69 or surmise which will circumvent the plain meaning of the act,' In re Closing of Jamesburg High School, 83 N.J. 540, 548, 416 A.2d 896 (1980)." DiProspero v. Penn, 183 N.J. 477, 492, 874 A.2d 1039 (2005).
With these principles in mind, we are satisfied that the only limitation imposed on a municipality under the plain language of N.J.S.A. 52:27D-325, is that the power of eminent domain must be used for acquiring property "which the municipal governing body determines necessary or useful for the construction or rehabilitation of low and moderate income housing. . . ." Ibid. Had the Legislature intended any other restriction, including compliance with the certification process in N.J.S.A. 52:27D-313, it could have easily inserted language asserting that restriction.
The absence of any such limiting language negates the need to look for meaning within the legislative history and cannot simply be considered "legislative inadvertence." Deland v. Twp. of Berkeley Heights, 361 N.J.Super. 1, 14, 824 A.2d 185 (App.Div.) (interpreting an amendment to the FHA, which, pursuant to N.J.S.A. 52:27D-311(g), allowed a municipality that had received substantive certification from COAH and satisfied its affordable housing obligations to amend its compliance plan and zoning ordinances without the necessity of seeking additional approval from COAH), certif. denied, 179 N.J. 185, 843 A.2d 1152 (2003).
III
Plaintiffs also argue that the ordinance's proposed land acquisition scheme will actually reduce the number of affordable housing units in the City, thus contravening the expressed public policy rationale in N.J.S.A. 52:27D-325. Specifically, plaintiffs assert that "[t]he current proposal is to acquire and demolish 43 occupied homes at these four sites, and then build some unknown number of units of `low and moderate income housing.'"
In response, the City argues that neither the FHA nor its legislative history contains a qualification that "a municipality cannot use its power of eminent domain under § 325 if the project will decrease the supply of affordable housing." Thus, according to the City, even if plaintiffs' allegations are true, such an outcome would not render the ordinance invalid.
The trial court did not specifically address whether demolition of the units as set forth in the ordinance would increase or decrease the number of affordable housing units in the City. The ordinance does not specify the number of affordable housing units to be developed if the City proceeds with acquisition, by condemnation or otherwise, in all of the intended locations. In its statement of material facts presented to the trial court, the City asserted that it intends to build 162 units of affordable housing on sites E and F. Defendant Primas certified that sites E and F contain twenty-eight properties, only eleven of which were occupied residential buildings. These statements of intent lie outside the four corners of the ordinance, rendering their potential enforceability questionable.
Against this background, plaintiffs' argument requires us to determine the role of the court in reviewing municipal action taken under the expressed grant of authority in a statute adopted to fulfill the constitutional mandate of the Mount Laurel doctrine.
As with all acts of duly elected legislative bodies, municipal "ordinances are presumed valid and reasonable." Quick Chek Food Stores v. Springfield Twp., 83 N.J. 438, 447, 416 A.2d 840 (1980). *70 "The burden of proof to establish that they are arbitrary and unreasonable rests on the party seeking to overturn them." Ibid. "The presumption may be overcome only by a clear showing that the local ordinance is arbitrary or unreasonable." Hudson Circle Servicenter, Inc. v. Kearny, 70 N.J. 289, 298-99, 359 A.2d 862 (1976). "The underlying policy and wisdom of ordinances are the responsibility of the governing body, and if any state of facts may reasonably be conceived to justify the ordinance, it will not be set aside." Quick Chek Food Stores, supra, 83 N.J. at 447, 416 A.2d 840 (internal citations omitted).
We hold, however, that in reviewing ordinances adopted by a municipality under the authority granted to it by the FHA, (such as N.J.S.A. 52:27D-325), a court must determine whether such legislation is consistent with, and in furtherance of, the overarching constitutional mandate of the Mount Laurel doctrine; (requiring a municipality's land use regulations provide a realistic opportunity for low and moderate income housing). In reaching this conclusion, we emphasize that the FHA was expressly adopted by the Legislature to fulfill its constitutional obligation under Mount Laurel. N.J.S.A. 52:27D-302.
The guiding standard to be used in the exercise of this judicial oversight function was recently reaffirmed by our Supreme Court in Gallenthin Realty Development, Inc., v. Borough of Paulsboro, 191 N.J. 344, 924 A.2d 447 (2007). In Gallenthin, the Court was required "to ascertain the meaning of the term `blighted' as used in the New Jersey Constitution, and determine whether Paulsboro's interpretation of N.J.S.A. 40A:12a-5(e) is within the scope of that term." Id. at 358, 924 A.2d 447.
In its analysis of this issue, the Gallenthin Court noted that the Constitution's "Blighted Area Clause" enlarges the Legislature's eminent domain power to include the taking of private property for redevelopment purposes. Id. at 358, 924 A.2d 447. The statute in question here has a similar effect. By its plain language, N.J.S.A. 52:27D-325 "enlarges" a municipality's power to take private property by eminent domain. The only check on the exercise of that enhanced power is the statute's expressed predicate that the taking be "necessary or useful for the construction or rehabilitation of low or moderate income housing."
Here, confronted with plaintiffs' challenge, the trial court should have conducted an evidentiary hearing to determine whether the City's implementation plans are reasonably likely to fulfill the ordinance's expressed purpose. Stated differently, the court must determine whether there is a rational basis to sustain the municipal determination authorizing the use of eminent domain, as a means of fulfilling the constitutional mandate to provide low and moderate income housing.
In Gallenthin, the Court reviewed the Blighted Areas Clause, an expressed constitutional provision, N.J. Const. art VIII, § 3, ¶ 1, in the context of interpreting N.J.S.A. 40A:12a-5(e). Ibid. Here, we review municipal legislation pursuant to a statutory grant of authority, intended to fulfill an implied, yet now well-settled part of our State Constitution: the Mount Laurel doctrine. Thus, the role of the courts in reviewing governmental action in both of these contexts is the same. As Chief Justice Zazzali reminded us in Gallenthin:
[T]he Judiciary is the final arbiter of the institutional commissions articulated in the Constitution, see Sherman v. Citibank, 143 N.J. 35, 58, 668 A.2d 1036 (1995) ("It is emphatically the province and duty of the judicial department to say what the law is.") (quoting Marbury *71 v. Madison, 5 U.S. (1 Cranch) 137, 177, 2 L.Ed. 60, 71 (1803)), vacated on other grounds, 517 U.S. 1241, 116 S.Ct. 2493, 135 L.Ed.2d 186 (1996). Our Constitution makes clear that "[a]ll political power is inherent in the people" and that "[g]overnment is instituted for the protection, security and benefit of the people." N.J. Const. art. I, P 2. By adopting the Blighted Areas Clause, the People entrusted certain powers to the Legislature, and the courts are responsible for ensuring that the terms of that trust are honored and enforced. We find no merit to Paulsboro's assertion that the Blighted Areas Clause divests the Judiciary of that responsibility.
[Id. at 358-59, 924 A.2d 447.]
Here, we have a similar responsibility. The municipal action here is subject to the same judicial scrutiny the Supreme Court conducted in Gallenthin. Our function is to ensure that the constitutional mandate of the Mount Laurel doctrine is not undermined by municipal action that, although taken in its name, may fall wide of the mark of actually fulfilling its purpose.
The people entrust the government with the power of eminent domain, with the expectation that it will be used sparingly, and in furtherance of a public good. The court's function is to ensure that this power is used consistent with and in furtherance of a clearly defined public good. Here, that public good is the creation of low and moderate income housing. The ordinance at issue professes to respond to that public good; yet the City has not offered evidence that this is in fact the case.
To pass constitutional scrutiny, the municipal action taken under the authority of section 325 must be supported by a well-developed record from which a reviewing court can find a rational nexus between the exercise of the power of eminent domain, and an increase in the number of affordable housing units. The City's mere, unsupported assertion in the body of the ordinance, that its governing body has determined that the exercise of eminent domain here is "necessary or useful" is insufficient.
As the parties challenging the ordinance, plaintiffs carry the burden of proving that this legislation is arbitrary and capricious because it does not do what it claims to do. That is, the taking by eminent domain of the Cramer Hill lots identified in the ordinance is not "necessary or useful" to the construction of low and moderate income housing in the City.
Reversed and remanded. We do not retain jurisdiction.
NOTES
[1] The study defined "Good" to mean "[n]ew/well maintained structures in need of minor cosmetic improvement." "Fair" is defined as "[s]tructures in need of minor non-structural rehab improvements."
[2] S. Burlington County NAACP v. Mount Laurel, 67 N.J. 151, 336 A.2d 713, appeal dismissed and cert. denied, 423 U.S. 808, 96 S.Ct. 18, 46 L.Ed.2d 28 (1975), and S. Burlington County NAACP v. Mount Laurel, 92 N.J. 158, 456 A.2d 390 (1983). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536826/ | 979 A.2d 944 (2009)
Wilfredo PORTALATIN, Petitioner
v.
DEPARTMENT OF CORRECTIONS, Respondent.
No. 569 M.D. 2008
Commonwealth Court of Pennsylvania.
Submitted on Briefs May 8, 2009.
Decided August 10, 2009.
*945 Wilfredo Portalatin, petitioner, pro se.
Jeffrey M. Paladina, Asst. Counsel and Suzanne N. Hueston, Chief Counsel, Camp Hill, for respondent.
*946 BEFORE: LEADBETTER, President Judge, and SIMPSON, Judge, and FRIEDMAN, Senior Judge.
OPINION BY Judge SIMPSON.
Before this Court in our original jurisdiction are the preliminary objections of the Department of Corrections (DOC) to a petition for review in the nature of a complaint seeking declaratory judgment filed by Wilfredo Portalatin (Portalatin), an inmate serving a life sentence at a state correctional institution. Portalatin seeks a declaration that DOC's assessment of co-pay fees for treatment of his chronic skin condition violates the Prison Medical Services Act[1] (Act) and DOC regulations prohibiting charges for medical treatment of chronic conditions and prescription refills for those conditions.[2] Portalatin also seeks to appeal DOC's denial of his grievance challenging the co-pay assessments deducted from his prison account. DOC contends this Court lacks both original and appellate jurisdiction over this matter. DOC further contends Portalatin's petition fails to state a colorable claim under the Act or 37 Pa.Code § 93.12. We sustain DOC's preliminary objections and dismiss Portalatin's petition.
I. Petition
A. Declaratory Judgment
In "Count One Original Jurisdiction," Portalatin alleges as follows. He began to suffer from tinea versicolor (TV)[3] prior to his incarceration. In June 1996, DOC's Diagnostic and Classification Center diagnosed Portalatin with this skin condition. Following his 1996 diagnosis, Portalatin was treated for TV without being assessed a co-pay fee. Sometime thereafter, DOC began assessing Portalatin's prison account co-pay fees for his TV treatment.[4]
Portalatin further alleges, pursuant to 37 Pa.Code § 93.12(d)(7), DOC is prohibited from charging a fee to an inmate for a chronic or intermittent disease or illness. Pursuant to 37 Pa.Code § 93.12(d)(16), DOC is prohibited from charging a fee for prescription refills provided to an inmate for the same illness or condition. Dorland's Illustrated Medical Dictionary (29th ed.2000) defines TV as a common chronic disorder. Id. at 1843. A National Institute of Health website, medlineplus.gov, defines TV as a chronic fungal infection of the skin. TV can also be classified as an intermittent disease or illness.
Portalatin also alleges as follows. Despite the Act and 37 Pa.Code §§ 93.12(d)(7) and (16), DOC repeatedly assessed him co-pay fees for his TV treatment and medication. DOC continues to interpret and enforce the Act and the regulations in a manner contrary to their language. DOC denied Portalatin's grievance and subsequent appeals protesting the co-pay fees. See Pet. for Review, Ex. A. DOC refuses to refund the co-pay fees assessed.
Based on these allegations, Portalatin seeks a declaration that he is entitled to compensation for all co-pay fees assessed against him for the treatment of his chronic *947 and intermittent skin disorder, as well as litigation costs. Portalatin also seeks to enjoin DOC from assessing any further fees for treatment.
B. Appeal
In "Count Two Appellate Jurisdiction," Portalatin contends this Court has appellate jurisdiction over DOC's denial of his grievance. He attaches DOC's grievance and grievance appeal determinations in this matter to his petition for review as Exhibit A. Portalatin asserts DOC's determinations upholding the co-pay charges as appropriate are contrary to Section 3 of the Act[5] and 37 Pa.Code §§ 93.12(d)(7) and (16).
II. Preliminary Objections
In response to Portalatin's petition, DOC raises the following preliminary objections. First, the matter does not fall within our original jurisdiction because it does not involve any constitutional rights not limited by DOC. See Bronson v. Cent. Office Review Comm., 554 Pa. 317, 721 A.2d 357 (1998) (unless an inmate can identify a personal or property interest not limited by DOC regulations and affected by a final DOC decision, the challenged decision is not an adjudication subject to Commonwealth Court review); Weaver v. Pa. Dep't of Corr., 829 A.2d 750 (Pa. Cmwlth.2003) (same). Second, this Court lacks appellate jurisdiction because fee assessments for medical care and inmate grievance decisions are not government agency adjudications appealable to this Court. Bronson; Silo v. Ridge, 728 A.2d 394 (Pa.Cmwlth.1999). Third, Portalatin's petition fails to state a colorable claim because the imposition of a medical co-payment for treatment of TV does not violate either the Act or the attendant regulations. DOC asserts its Policy Bulletin DC-ADM 820 (Policy 820) further regulating the co-payment program is consistent with both Section 3 of the Act and 37 Pa.Code §§ 93.12(d)(7) and (16).
When ruling on preliminary objections in the nature of a demurrer, this Court considers as true all well-pled facts that are material and relevant. Silo; Giffin v. Chronister, 151 Pa.Cmwlth. 286, 616 A.2d 1070 (1992). More specifically, a preliminary objection in the nature of a demurrer is deemed to admit all well-pled facts and all inferences reasonably deduced from those facts. Id. In determining whether to sustain a demurrer the court need not accept as true conclusions of law, unwarranted inferences from the facts, argumentative allegations, or expressions of opinion. Id.
III. Discussion
DOC maintains this Court lacks original and appellate jurisdiction over Portalatin's claim that DOC made erroneous deductions from his prison account for medical *948 co-pay fees. In support, DOC cites Bronson and Silo. In addition, DOC asserts Portalatin fails to state a cognizable claim because Policy 820, which limits the definition of chronic illness or disease to several specific conditions other than TV, does not contradict either Section 3 of the Act or 37 Pa.Code § 93.12(d).
On the question of jurisdiction, Bronson v. Cent. Office Review Comm., 554 Pa. 317, 721 A.2d 357 (1998) is instructive. In Bronson our Supreme Court addressed confiscation of inmate civilian clothing. The Court held the Commonwealth Court does not have appellate jurisdiction over inmate appeals of decisions by intra-prison disciplinary tribunals, such as grievance and misconduct appeals. The Court said:
[I]nternal prison operations are more properly left to the legislative and executive branches, and ... prison officials must be allowed to exercise their judgment in the execution of policies necessary to preserve order and maintain security free from judicial interference. [See Robson v. Biester, 53 Pa.Cmwlth. 587, 420 A.2d 9, 12 (1980)] (citing Bell v. Wolfish, 441 U.S. 520, 99 S.Ct. 1861, 60 L.Ed.2d 447 (1979)). We agree. Unlike the criminal trial and appeals process where a defendant is accorded the full spectrum of rights and protections guaranteed by the state and federal constitutions, and which is necessarily within the ambit of the judiciary, the procedures for pursuing inmate grievances and misconduct appeals are a matter of internal prison administration and the "full panoply of rights due a defendant in a criminal prosecution is not necessary in a prison disciplinary proceeding...." [Robson, 420 A.2d at 12] (citing Wolff v. McDonnell, 418 U.S. 539, 94 S.Ct. 2963, 41 L.Ed.2d 935 (1974)).
Id. at 321, 721 A.2d at 358-59.
Also, the Supreme Court held the Commonwealth Court usually does not have original jurisdiction over an inmate's petition for review after a grievance proceeding. The Court held that original jurisdiction was not available "in a case not involving constitutional rights not limited by the [DOC]." Id. at 323, 721 A.2d at 359. Noting that prison inmates do not enjoy the same level of constitutional protections afforded to non-incarcerated citizens, the Court concluded that an attempt to color the confiscation as a constitutional deprivation would fail. "Unless `an inmate can identify a personal or property interest ... not limited by [DOC] regulations and which has been affected by a final decision of the department' the decision is not an adjudication subject to the court's review." Id. at 323, 721 A.2d at 359 (citation omitted).
In addition, DOC asserts that even if the withdrawal of funds from Portalatin's prison account implicates a protected property interest, DOC's inmate grievance system procedure provided him with adequate due process to challenge the determination that TV is not a chronic or intermittent condition. Silo.
In response, Portalatin counters that DOC's decision to assess him a fee for the treatment of his skin disorder constitutes an "adjudication" under the Administrative Agency Law, 2 Pa.C.S. §§ 501-08, 701-04. That act defines an "adjudication" as "[a]ny final order, decree, decision, determination or ruling by an agency affecting personal or property rights, privileges, immunities, duties, liabilities or obligations of any or all of the parties to the proceeding in which the adjudication is made." 2 Pa.C.S. § 101.
Portalatin acknowledges that inmate grievances are internal prison management matters not usually subject to appellate review. However, Portalatin argues that the co-pay fees assessed against his *949 prison account affect protected personal and property interests not limited by DOC's regulations. Portalatin contends 37 Pa.Code § 93.12(d)(7), which prohibits DOC from charging a fee for treatment of chronic or intermittent disease or illness, is mandatory in nature and does not vest prison officials with discretion in its implementation. Therefore, 37 Pa.Code § 93.12(d), by its non-discretionary language, confers a state-created liberty interest not to be charged for the treatment of a chronic or intermittent disease. Portalatin asserts TV is such a disease. Portalatin also contends he has a property interest in the funds held in his prison account. Reynolds v. Wagner, 128 F.3d 166 (3d Cir.1997).
We disagree. There is no constitutional right to free medical services and prescription medicine. Here, however, Portalatin claims such a right based on DOC regulations stating it will not charge inmates co-payments for medical services and prescriptions arising from a chronic or intermittent condition.
In Sandin v. Conner, 515 U.S. 472, 115 S.Ct. 2293, 132 L.Ed.2d 418 (1995), the United States Supreme Court refocused its analysis of whether prison regulations give rise to enforceable rights. The Court shifted the focus of the liberty interest inquiry from the language of the particular regulation to the nature of the deprivation. Id. at 481-84, 115 S.Ct. 2293.
In Sandin, the Court considered whether liberty interests were created by prison regulations relating to disciplinary confinement. The Court determined that a state-created liberty interest could arise only when a prison's action imposed an "atypical and significant hardship on the inmate in relation to the ordinary incidents of prison life." Id. at 484, 115 S.Ct. 2293. The Court went on to point out that the punishment of incarcerated prisoners serves the aim of effectuating prison management and prisoner rehabilitative goals and that discipline by prison officials in response to misconduct is within the expected parameters of the prisoner's sentence. The Court found that the prisoner's placement in segregated confinement did not present the type of atypical, significant deprivation in which a state might conceivably create a liberty interest.
Construing Sandin, this Court holds that only those regulations that impose atypical sanctions and significant hardships when compared to the normal incidents of prison life implicate a constitutional right. Luckett v. Blaine, 850 A.2d 811 (Pa.Cmwlth.2004) (inmate's temporary residence in disciplinary custody did not violate his due process rights). Portalatin does not aver, nor can he aver, that the regulations and policy statements detailing the co-payment program here impose such atypical and significant hardships as to implicate a constitutional right. Because any right Portalatin may have to be free of co-payments is not of constitutional dimension, and because any right Portalatin has is limited by DOC regulations and policy statements, this Court does not enjoy original jurisdiction over the case. Bronson; Weaver.
Similarly, this Court does not have appellate jurisdiction over inmate appeals from grievance tribunals. Id. Thus, this Court does not enjoy appellate jurisdiction over this case.[6]
*950 Finally, we reject the basic premise of Portalatin's claim, that DOC is committing an error of law in its ongoing interpretation of the Act and the regulations. Section 3(a) of the Act directs DOC to establish a co-pay program for medical services provided to inmates. 61 P.S. § 1013(a). The purpose of this program is to require inmates to cover a portion of the actual costs of the medical services provided. Id. Section 3(b) requires that DOC develop by regulation a program with consistent medical services guidelines specifying the services subject to fees, the fee amounts, the payment procedures and the services not subject to fees. 61 P.S. § 1013(b).
DOC regulations at 37 Pa.Code § 93.12 (relating to the Prison Medical Services Program) provide as follows:
(c) [DOC] will charge a fee to an inmate for any of the following:
(1) Nonemergency medical service provided to an inmate at the inmate's request.
* * *
(d) [DOC] will not charge a fee to an inmate for any of the following:
* * *
(7) Medical treatment for a chronic or intermittent disease or illness.
* * *
(16) Medication prescription subsequent to the initial medication prescription provided to an inmate for the same illness or condition.
Further, in Policy 820, DOC establishes a co-pay fee (currently $5) for any non-emergency medical service provided at the inmate's request. DC-ADM 820 at V(A)(1)a. Policy 820 also provides that no fee will be charged for a chronic disease or illness that requires return or regular visits and for prescription refills for the same chronic illness or condition. Id. at V(A)(2)(g) and (p). However, Policy 820 provides the following definition of a chronic medical disease or illness:
Chronic Medical Diseases/illness are defined as: Asthma, Congestive Heart Failure, Coronary Artery Disease, Diabetes, Dislipidemia, Hepatitis C, HIV and Hypertension
Id. at III(G).
Nothing in Section 3(b) of the Act or 37 Pa.Code § 93.12(d)(7) states that DOC may not charge a co-pay fee for any chronic illness or disease. Policy 820 limits its definition of a "chronic medical disease/illness" to asthma, congestive heart failure, coronary artery disease, diabetes, dislipidemia, hepatitis C, HIV, and hypertension. DC-ADM 820 at III(G). Although Portalatin contends this definition is too narrow, DOC's interpretation of its own regulations is entitled to controlling weight. Dep't of Pub. Welfare v. Forbes Health Sys., 492 Pa. 77, 422 A.2d 480 (1980). Unless plainly erroneous or inconsistent with the statute and the regulation, DOC's interpretation must be upheld. Id.
DOC's interpretation is not plainly erroneous or inconsistent with Section 3(b) of the Act or 37 Pa.Code § 93.12(d)(7). Section 3(b) of the Act merely requires DOC *951 to provide guidelines specifying which medical services are subject to fees and which are not. Section 3(b) does not require DOC to exempt treatment of all chronic conditions from co-pay fees. Similarly, 37 Pa.Code § 93.12(d)(7) does not prohibit DOC from assessing co-pay fees for any and all chronic or intermittent conditions. The chronic conditions listed in Policy 820 are significant disorders which may be accompanied by serious symptoms and death. By listing the conditions considered to be chronic for purposes of the co-pay program, DOC fulfilled its duty under Section 3(b) to inform prisoners seeking treatment whether a co-pay fee will be assessed.
For these reasons, DOC preliminary objections are sustained, and Portalatin's petition for review is dismissed.
ORDER
AND NOW, this 10th day of August, 2009, the preliminary objections of the Department of Corrections are SUSTAINED and Petitioner's petition for review is DISMISSED.
NOTES
[1] Act of May 16, 1996, P.L. 220, as amended, 61 P.S. §§ 1011-17.
[2] See 37 Pa.Code §§ 93.12(d)(7) and (16).
[3] TV is defined as "an eruption of tan or brown branny patches on the skin of the trunk, often appearing white, in contrast with hyperpigmented skin after exposure to the summer sun; caused by growth of the fungus Malassezia furfur in the stratum corneum with minimal inflammatory reaction." Stedman's Medical Dictionary 1837 (27th ed.2000).
[4] As of July 1, 2007, the co-pay fee for any medical service became $5.00. See 37 Pa. Code § 93.12(e).
[5] Section 3 of the Act, 61 P.S. § 1013, pertinently provides:
(a) Establishment.The Prison Medical Services Program is established in the [DOC] which shall include, but not be limited to, the provisions of this act. This program shall be a copay program requiring inmates to pay a fee to cover a portion of the actual costs of the medical services provided.
(b) Fees.[DOC] shall develop by regulation a program for inmates which includes fees for certain medical services. The regulations shall provide for consistent medical services guidelines by specifying the medical services which are subject to fees, the fee amounts, payment procedures, medical services which are not subject to fees and fees applicable to medical emergencies, chronic care and preexisting conditions. In addition to other medical services provided to the inmate, an inmate may be required to pay a fee for medical services provided because of injuries the inmate inflicted upon himself or another inmate.
[6] The inmate grievance system available to challenge the assessment of co-pay fees provides adequate due process for any state-based claims Portalatin may have. Here, Portalatin filed a grievance challenging the determination that TV is not a chronic condition for purposes of 37 Pa.Code §§ 93.12(d)(7) and (16). See Pet. for Review, Ex. A. A grievance officer denied the grievance, noting TV is not defined as a chronic condition in Policy 820. Id. Portalatin appealed to the Superintendent of SCI-Houtzdale. Id. After reviewing Policy 820, the Superintendent concurred with the grievance officer that TV is not defined in Policy 820 as a chronic medical disease. Id. Portalatin then appealed to the Secretary's Office of Inmate Grievances and Appeals, which reviewed the record and determined the responses at the institutional level were reasonable and appropriate in accordance with DOC's policy and procedure. Id. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536827/ | 207 B.R. 909 (1997)
In re Ronald C. MARKOVICH, Debtor.
Ronald C. MARKOVICH, Appellant,
v.
Richard J. SAMSON, Chapter 7 Trustee; Clarence William Roper, real party in interest, Appellees.
BAP No. MT-95-2298-RyJR, Bankruptcy No. 95-50151-7.
United States Bankruptcy Appellate Panels of the Ninth Circuit.
Argued and Submitted January 22, 1997.
Decided March 28, 1997.
*910 Gregory E. Paskell, Kalispell, MT, for Ronald C. Markovich.
Don Torgenrud, St. Ignatius, MT, for Clarence Roper.
Before: RYAN, JONES, and RUSSELL, Bankruptcy Judges.
OPINION
RYAN, Bankruptcy Judge:
Ronald C. Markovich ("Debtor") obtained a discharge in his chapter 7 case. Later, Clarence W. Roper ("Roper") obtained a non-dischargeability judgment against Debtor. In response, Debtor moved the bankruptcy court to vacate his discharge under Bankruptcy Code (the "Code")[1] § 727(d) and to convert his case to chapter 13. The bankruptcy court held that Debtor lacked standing to vacate his discharge under § 727(d) and denied Debtor's motion. Debtor appealed. We AFFIRM.
I. FACTS
On January 26, 1995, Debtor filed a chapter 7 petition. On May 5, 1995, Roper filed a complaint (the "Complaint") to determine the dischargeability of a debt. On May 30, 1995, Debtor received his chapter 7 discharge. On October 3, 1995, after a trial on the Complaint, the bankruptcy court held the debt nondischargeable under Code § 523(a)(2)(A) in the amount of $28,793.67 (the "Judgment").
On October 9, 1995, Debtor filed a motion (the "Motion") to vacate the discharge order and convert Debtor's case to a chapter 13. The Motion referred to the Judgment and indicated that Debtor had no choice but to convert his case to chapter 13.[2] No additional reasons or legal authorities were offered in support of the Motion. Roper filed an objection to the Motion indicating that a chapter 13 plan cannot be confirmed unless it is proposed in "good faith" and accusing Debtor of manipulating the bankruptcy system.
At the hearing on the Motion on November 8, 1995, the bankruptcy judge asked Debtor's counsel for legal authority for the request to have the bankruptcy court vacate the discharge order. The bankruptcy court ultimately stated that "[t]here is no authority to set aside the discharge. There is no showing of cause to set aside the discharge." Transcript of Nov. 8, 1995 Hearing at 4-5:25-1. Debtor's counsel repeatedly insisted that the bankruptcy court had the authority to vacate the discharge order. The bankruptcy court issued its order denying the Motion on November 17, 1995. In the order, the court held that Debtor did not have standing under § 727(d) to seek revocation of the discharge order. The court also indicated that even if Debtor had standing, Debtor had not shown good cause to revoke the discharge.
Also on November 17, 1995, Debtor filed a motion to extend the time within which to file a notice of appeal. The bankruptcy court granted Debtor's motion and extended Debtor's time to file a notice of appeal to December 5, 1995. On December 5, 1995, Debtor filed his notice of appeal.[3]
II. ISSUES
1. Did the bankruptcy court err in holding that Debtor did not have standing under § 727(d) to seek the revocation of his discharge?
2. Did the bankruptcy court err in not revoking Debtor's discharge on equitable grounds?
*911 III. STANDARD OF REVIEW
We review the bankruptcy court's findings of fact for clear error and the court's conclusions of law de novo. Neben & Starrett v. Chartwell Fin. Corp. (In re Park-Helena Corp.), 63 F.3d 877, 880 (9th Cir. 1995), cert. denied, ___ U.S. ___, 116 S.Ct. 712, 133 L.Ed.2d 667 (1996) (citing Sousa v. Miguel (In re United States Trustee), 32 F.3d 1370, 1372 (9th Cir.1994)). Debtor's standing to seek revocation of his discharge under § 727(d) and the bankruptcy court's refusal to apply equity principles to revoke Debtor's discharge are questions of law which we review de novo. See Bowman v. Belt Valley Bank (In re Bowman), 173 B.R. 922, 924-25 (9th Cir. BAP 1994); Ross v. Mitchell (In re Dietz), 914 F.2d 161, 163 (9th Cir.1990).
IV. DISCUSSION
Debtor raises two issues on appeal. First, Debtor contends that he had standing to ask the bankruptcy court to vacate his discharge under § 727(d). Second, Debtor argues that after applying equitable principles, the bankruptcy court should have vacated his discharge order.
A. Debtor Does Not Have Standing to Vacate his Chapter 7 Discharge under § 727(d).
Debtor argues that he has standing under § 727(d) to bring a motion to have the bankruptcy court vacate his chapter 7 discharge order. Section 727(d) allows a trustee, a creditor, or the United States Trustee to ask the court to revoke a discharge. In order to obtain a revocation of a discharge, the complaining party must satisfy the conditions set out in § 727(d).[4]In re Eccleston, 70 B.R. 210, 212 (Bankr.N.D.N.Y.1986) (interpreting § 727(d) prior to the 1986 amendments that added the U.S. Trustee as a party who may bring a revocation of discharge motion); In re Long, 22 B.R. 152, 154 (Bankr.D.Me.1982).
Section 727(d) does not authorize a debtor to bring a motion to revoke a discharge. Eccleston, 70 B.R. at 212 ("The unequivocal language of the section limits its applicability to trustees and creditors; a debtor may not seek revocation of his discharge under Code § 727(d).").
Most bankruptcy courts have held that a debtor does not have standing to bring a § 727(d) proceeding. In re Wyciskalla, 156 B.R. 579, 580 (Bankr.S.D.Ill.1993) ("The Bankruptcy Code contains no provision that would allow the Court to revoke the debtor's discharge at his behest."); In re Fischer, 72 B.R. 111, 114 (Bankr.D.Minn.1987) ("The plain wording of the statute grants standing to request revocation of discharge only to the Chapter 7 Trustee, a creditor, or the United States Trustee. A debtor has no authority under the Code to request revocation of discharge on his own motion."); Matter of Calabretta, 68 B.R. 861, 863 (Bankr.D.Conn.1987) ("There is no basis in either § 727(a)(10) or § 727(d) for inferring a statutory right by the debtor to seek a revocation of a discharge once granted by the court."); In re Gruber, 22 B.R. 768, 769 (Bankr.N.D.Ohio 1982) ("There is no provision in § 727(d) or elsewhere in the Bankruptcy Code, to this Court's knowledge, for setting aside a discharge on request of a debtor. . . ."). One case has even held that a bankruptcy judge may not, sua sponte, revoke a discharge because such an act "violates the letter and spirit of the Bankruptcy Code. . . ." McIlroy Bank & Trust v. Couch (In re Couch), 43 B.R. 56, 58 (Bankr.E.D.Ark.1984).
A leading treatise on bankruptcy lends further support to this interpretation of § 727(d).
*912 Section 727(d) requires the court to revoke a discharge granted under section 727(a) on request of the trustee, a creditor, or the United States Trustee, and after notice and a hearing if the grounds for revocation listed in the section exist.
The debtor does not have standing to seek revocation of a discharge.
4 Collier on Bankruptcy, ¶ 727.15[1][b] at 727-109 (15th ed.1996) (footnotes omitted) (emphasis added). The language of § 727(d) clearly restricts its use to the persons named therein.
As the bankruptcy court held, when resolving a dispute over the meaning of a statute, the analysis begins with the language of the statute. Where the statutory language is plain, the inquiry ends and the sole function of the court is to enforce the statute according to its terms. United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 241, 109 S.Ct. 1026, 1030, 103 L.Ed.2d 290 (1989). In Ron Pair, the Supreme Court stated that "[t]he plain meaning of legislation should be conclusive, except in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of its drafters.'" Id. at 242, 109 S.Ct. at 1031 (citing Griffin v. Oceanic Contractors, Inc., 458 U.S. 564, 571, 102 S.Ct. 3245, 3250, 73 L.Ed.2d 973 (1982)). Our holding does not contravene the intent of the framers of the Code, does not conflict with any other section of the Code, and is not contrary to § 727(d)'s legislative history.[5] In short, there is no reason not to interpret § 727(d) consistent with its "plain meaning." The bankruptcy court was correct in enforcing § 727(d) according to its terms. Debtor did not have standing under § 727(d) to seek the revocation of his discharge.
B. The Bankruptcy Court Did Not Err in Refusing to Revoke Debtor's Discharge on General Equity Principles.
Debtor argues that two cases support the principle that the bankruptcy court has the equitable power to revoke a discharge when requested by a debtor. See In re Jones, 111 B.R. 674, 675 (Bankr.E.D.Tenn. 1990); In re Tuan Tan Dinh, 90 B.R. 743, 745 (Bankr.E.D.Pa.1988). In Jones, the bankruptcy court referred to an earlier decision, In re Caldwell, 67 B.R. 296, 300 (Bankr. E.D.Tenn.1986), where the court held that a debtor could convert his chapter 7 case to a case under chapter 13 and revoke his discharge when the discharge was meaningless. Jones, 111 B.R. at 676.
In Caldwell, the court viewed the discharge as "meaningless," because the debtor's only unsecured debts had been held non-dischargeable. Caldwell, 67 B.R. at 301. Additionally, the court saw no harm to any creditor by granting the debtor's motion to revoke the discharge. Id. At no point in its decision did the Caldwell court discuss the implications of § 727(d).
The Jones court, however, distinguished its situation from Caldwell, finding that a reaffirmation creditor and other unsecured creditors would be harmed if the discharge were revoked. The court also recognized that "the Bankruptcy Code provides for revocation of discharges granted under chapter 7 only in accordance with Code § 727(d) and (e)." Jones, 111 B.R. at 679. Despite § 727(d), the court was willing to weigh equitable considerations. Id. The court discussed the Tuan Tan Dinh decision and concluded that, under the circumstances, a chapter 7 discharge may be revoked upon the motion of a debtor filed pursuant to Federal Rule of Civil Procedure ("FRCP") 59(e) and/or 60(b), as incorporated into Federal Rules of Bankruptcy Procedure ("FRBP") 9023 and 9024. Id. at 680.[6] After weighing the factors, the court denied the debtor's request to vacate the discharge.
In Tuan Tan Dinh, the debtor sought to vacate his discharge when he learned that his educational loan was not dischargeable. The debtor cited two cases where the courts vacated *913 discharges to allow for the approval of post-discharge reaffirmation agreements. See Long, 22 B.R. at 152; In re Solomon, 15 B.R. 105, 106 (Bankr.E.D.Pa.1981). The debtor also argued that FRCP 59(e) and 60(b) allow for reconsideration of any order, including a discharge order. Tuan Tan Dinh, 90 B.R. at 744-45. The court stated that "the finality of a discharge order must be accorded special consideration. In that sense, it is like a confirmation order in a Chapter 11, 12, or 13 case, which will not be vacated for even the clearest of equitable grounds." Id. at 745 (citations omitted).
The Tuan Tan Dinh court then determined that the equitable considerations for vacating default judgments in the context of a FRCP 59(e) or 60(b) motion were applicable. Id. at 744-45. The court held that when prejudice to the parties and the debtor's lack of culpability in allowing the order to be entered tip sharply in favor of the debtor, the bankruptcy court has the power to vacate a discharge order. Id. at 746. Weighing these considerations, the court denied the debtor's request. Id. at 747.
In its November 17, 1995 order, the bankruptcy court considered the Jones and Tuan Tan Dinh cases and decided not to follow the minority view as expressed in these cases, because the United States Supreme Court in Ron Pair instructed the lower courts to enforce the plain language of a statute. Additionally, the bankruptcy court determined that it must exercise its equitable powers within the confines of the Code. See Order of Nov. 17, 1995 at 2 ("There are two cases which hold that some equitable consideration may allow a court to set aside a discharge order when the order is entered in error. . . . I doubt the wisdom of the minority rule in light of the admonition of the United States Supreme Court in United States v. Ron Pair Enterprises, Inc .. . . . ."). Furthermore, even assuming Debtor had standing, the bankruptcy court held that Debtor did not present sufficient grounds to revoke the discharge.
We agree with the bankruptcy court that it did not have the inherent equitable power to revoke a discharge outside the framework of § 727(d). The equity powers of the bankruptcy court cannot be used to override specific statutory provisions in the Code. Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 206, 108 S.Ct. 963, 968, 99 L.Ed.2d 169 (1988) ("The short answer to these arguments is that whatever equitable powers remain in the bankruptcy courts must and can only be exercised within the confines of the Bankruptcy Code."); Geothermal Resources International, Inc. v. Lumsden, 93 F.3d 648, 651 (9th Cir.1996) ("While `[a]s a court of equity, [the bankruptcy court] may look through form to the substance of a transaction and devise new remedies,' In re Chinichian, 784 F.2d 1440, 1443 (9th Cir. 1986), the court cannot, in the name of its equitable powers, ignore specific statutory mandates."). Clearly, the bankruptcy court was not empowered to circumscribe the specific statutory requirements of § 727(d).
V. CONCLUSION
The bankruptcy court did not err in holding that Debtor did not have standing under § 727(d) to seek revocation of his discharge or in refusing to grant standing to Debtor under its inherent equitable powers. Accordingly, we AFFIRM the bankruptcy court's denial of Debtor's request to revoke his discharge.
NOTES
[1] The Code is set forth in 11 U.S.C. §§ 101-1330 (1994).
[2] The soundness of this argument is questionable since nothing was to be gained by moving to vacate the discharge in Debtor's chapter 7 case. The nondischargeable claim could be discharged in either a converted chapter 13 or a new chapter 13 case filed by Debtor. Compare 11 U.S.C. § 727(a)(8) (1994) with 11 U.S.C. § 1328 (1994). See also Downey Savings and Loan Ass'n v. Metz (In re Metz), 67 B.R. 462, 465 (9th Cir. BAP 1986) (discussing the advantages of "chapter 20" cases); Packerland Packing Co. v. Griffith Brokerage Co. (In re Kemble), 776 F.2d 802, 803-04 n. 1 (9th Cir.1985).
[3] On January 19, 1996, the bankruptcy court issued an order nunc pro tunc that corrected an introductory error in the court's November 17, 1995 order. The court also formally denied Debtor's request to convert his case to chapter 13.
[4] Section 727(d) states, in relevant part:
On request of the trustee, a creditor, or the United States trustee, and after notice and a hearing, the court shall revoke a discharge granted under subsection (a) of this section if
(1) such discharge was obtained through the fraud of the debtor, and the requesting party did not know of such fraud until after the granting of such discharge;
(2) the debtor acquired property that is property of the estate . . . and knowingly and fraudulently failed to report . . . such property . . . to the trustee; or
(3) the debtor committed an act specified in subsection (a)(6) of this section.
11 U.S.C. § 727(d) (1994).
[5] See H.R.Rep. No. 95-595, at 385 (1977); S.Rep. No. 95-989, at 99 (1978), reprinted in 1978 U.S.C.C.A.N. 5885.
[6] The circumstances listed were: (1) when no creditor objects and all appear to concur in the order vacating the discharge; (2) where the factors of relative prejudice between the other interested parties and lack of culpability of the debtor weigh strongly in favor of the debtor. Jones, 111 B.R. at 680. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536828/ | 979 A.2d 591 (2009)
117 Conn.App. 465
The WEST HAVEN LUMBER COMPANY
v.
SENTRY CONSTRUCTION CORPORATION.
No. 29609.
Appellate Court of Connecticut.
Argued April 13, 2009.
Decided October 6, 2009.
*592 Lawrence G. Rosenthal, Hartford, for the appellant (defendant).
Genevieve P. Salvatore, Milford, for the appellee (plaintiff).
*593 FLYNN, C.J., and LAVINE and HENNESSY, Js.
HENNESSY, J.
The defendant, Sentry Construction Corporation, appeals from the judgment of the trial court awarding the plaintiff, The West Haven Lumber Company, $16,731.37 plus taxable costs. On appeal, the defendant claims that the court abused its discretion in denying both the defendant's motion for a continuance and motion for a nonsuit. Additionally, the defendant claims that the court was incorrect in failing to apply credits to the defendant's account, which would have reduced the amount of debt owed to the plaintiff. We affirm the judgment of the trial court.
The following facts and procedural history inform our disposition of the defendant's appeal. Beginning in 2005, the plaintiff, a dealer in building supplies, sold construction materials to the defendant, a general contractor, pursuant to a credit agreement between the parties. Because of alleged failed payments on this open account, the plaintiff filed a complaint against the defendant instituting this collection action on October 2, 2006. Following a default judgment in January, 2007, the court granted the defendant's motion to open the judgment. The pleadings closed in March, 2007.
Following informal discovery and unsuccessful negotiations through September, 2007, the parties were notified in October that the court had set a trial date for December 12, 2007. For the first time since the action began in October, 2006, the defendant engaged in formal discovery by sending a notice of deposition to the plaintiff on November 9, 2007. The defendant requested to depose the plaintiff's corporate representative on November 28, 2007. In response to this deposition notice, the plaintiff filed a motion for a protective order stating that its counsel's busy hearing schedule made counsel unavailable for a deposition on the day the defendant requested.[1] Because the parties could not agree on an alternative deposition date, the defendant filed a motion for a continuance.[2] Before the court rendered a decision on the continuance request, the court granted the plaintiff's motion for a protective order, while also ordering that a "[d]eposition . . . be scheduled at a mutually convenient time prior to December 12, 2007." Because the plaintiff's counsel could not find a "mutually convenient time" to hold a deposition, the defendant, in turn, filed a motion for a nonsuit.
When the trial date arrived, the plaintiff's corporate representative had not been deposed. Consequently, the defendant's counsel renewed his motion for a continuance and requested that the court rule on the earlier motion for a nonsuit. After the court denied both of these motions, thereby allowing the case to move forward, the court considered evidence regarding the appropriate amount of debt owed to the plaintiff. Because the court found the "plaintiff's evidence and explanations the more credible [as compared to the defendant's]," the court determined that the defendant was indebted to the plaintiff in the amount of $13,385.11.[3] Additional facts will be provided as necessary.
*594 I
On appeal, the defendant first claims that the court acted arbitrarily in denying its request for a continuance.[4] In support of this claim, the defendant states that the inability to depose the plaintiff's corporate representative proved prejudicial at trial. Specifically, the defendant argues that the lack of a pretrial deposition left it unprepared to confront: duplicate copies of invoices, instead of originals; a revised reconciliation sheet, instead of the original reconciliation sheet that accompanied the complaint; and the plaintiff's new accounting of the defendant's balance prepared for trial, allegedly an amount arrived at through information the deposition would have revealed.[5] We are not persuaded by these arguments.
We first set forth the applicable standards governing our resolution of the defendant's appeal. "The trial court has a responsibility to avoid unnecessary interruptions, to maintain the orderly procedure of the court docket, and to prevent any interferences with the fair administration of justice. . . . In addition, matters involving judicial economy, docket management [and control of] courtroom proceedings. . . are particularly within the province of a trial court. . . . Accordingly, a trial court holds broad discretion in granting or denying a motion for a continuance. Appellate review of a trial court's denial of a motion for a continuance is governed by an abuse of discretion standard that, although not unreviewable, affords the trial court broad discretion in matters of continuances. . . .
"A reviewing court is bound by the principle that [e]very reasonable presumption in favor of the proper exercise of the trial court's discretion will be made. . . . To prove an abuse of discretion, an appellant [bears the burden of] show[ing] that the trial court's denial of a request for a continuance was [unreasonable or] arbitrary.. . . There are no mechanical tests for deciding when a denial of a continuance is so arbitrary as to violate due process. The answer must be found in the circumstances present in every case, particularly in the reasons presented to the trial judge at the time the request is denied." (Citations omitted; internal quotation marks omitted.) Peatie v. Wal-Mart Stores, Inc., 112 Conn.App. 8, 12, 961 A.2d 1016 (2009). It is important to note that "[w]e are especially hesitant to find an abuse of discretion where the court has denied a motion for continuance made on the day of the trial." (Internal quotation marks omitted.) Hamlin v. Commissioner of Correction, 113 Conn.App. 586, 593, 967 A.2d 525 (2009).
Although no single continuance test exists, "[o]ur Supreme Court has catalogued a nonexhaustive list of relevant factors that courts frequently consider when determining whether to grant a motion for a continuance. Courts have considered *595 matters such as: the timeliness of the request for continuance; the likely length of the delay; the age and complexity of the case; the granting of other continuances in the past; the impact of delay on the litigants, witnesses, opposing counsel and the court; the perceived legitimacy of the reasons proffered in support of the request; [and] the defendant's personal responsibility for the timing of the request. . . ." (Internal quotation marks omitted.) Mazurek v. East Haven, 99 Conn.App. 795, 807, 916 A.2d 90, cert. denied, 282 Conn. 908, 920 A.2d 1017 (2007). "Although the court need not consider all of these factors in every case, and may consider factors not previously enumerated, the [previously mentioned list of factors] provides a useful framework in which to consider the court's exercise of its discretion." Id.
On the basis of the foregoing standard, we conclude that it was not an abuse of the court's discretion to deny the defendant's motion for a continuance. The court reasoned that the collection of an open account is a simple matter, not a complex undertaking. Accordingly, the court did not think it was necessary for the case to consume any more time than it already had to arrive at a disposition. In denying the renewed motion for a continuance, however, the court added the caveat that it would entertain a future continuance request by the defendant if it believed that it could not proceed at trial without having previously deposed the plaintiff's witnesses.
In response to the court's leaving the continuance door potentially open, the defendant raised the issue that prejudice concerns may arise further along in the proceeding, citing again the inability to depose the plaintiff's corporate representative in advance of trial as the justification. With each prejudice argument raised, however, the court determined, on the basis of the evidence presented, that the defendant was not disadvantaged or taken advantage of in light of the lack of formal discovery. In response to the defendant's specific argument focusing on the prejudice associated with not having viewed the plaintiff's exhibit five before trial, the court, yet again, rejected the continuance request because the plaintiff bore the burden of proving the amount of debt owed, not the defendant. Thus, the court clearly weighed the continuance argument raised by the defendant before denying the request and allowing the case to proceed.
Even though the previously mentioned circumstances standing alone adequately support the court's denial of the motion for a continuance, additional findings by the court strengthen our determination that the court's decision was reasonable. For example, the court stated in its response to the defendant's motion for articulation that counsel from both sides contributed to the deposition's delay. Neither party in fact moved to depose the other for more than one year after the complaint was filed. Additionally, the court found, in its memorandum of decision on the defendant's motion for a new trial, that the defendant's counsel had failed to perform his trial preparation in a timely fashion. Last, because the defendant claims on appeal particular prejudice from an exhibit introduced at trial that did not exist at the proposed deposition date, a presumption exists, especially given the previously mentioned findings of delay by the court, that the defendant's motion for a continuance lacks legitimacy.[6] As a result, the defendant did not meet its burden of *596 proof in showing that the court's denial of its motion for a continuance was an unreasonable or arbitrary decision.[7]
We conclude that the court adequately considered the defendant's motion for a continuance and that the denial of the motion was not an abuse of discretion.
II
The defendant next clams that the court improperly denied its motion for a nonsuit. The defendant states that it not only properly gave notice of the deposition of the plaintiff's corporate representative, but that the court, in ruling on the plaintiff's motion for a protective order, ordered the deposition to be taken prior to trial. Because the defendant was denied that discovery, it argues that the court abused its discretion in refusing to grant the motion for a nonsuit. We disagree.
Because the procedural history was recited previously in detail, we only briefly highlight the court's deposition order that gave rise to the motion for a nonsuit. On November 27, 2007, the court granted the plaintiff's motion for a protective order. Although the court granted this motion, the court also ordered that a "[d]eposition. . . be scheduled at a mutually convenient time prior to December 12, 2007," the date set for trial. Because the plaintiff's counsel could not find a convenient time to schedule the deposition prior to trial, the defendant filed a motion for a nonsuit on December 3, 2007. At trial, the court denied the defendant's nonsuit request, determining that it was not worth penalizing anyone for the failure to hold a deposition.
"Generally speaking, a nonsuit is the name of a judgment rendered against a party in a legal proceeding upon his inability to maintain his cause in court, or when he is in default in prosecuting his suit or in complying with orders of the court. . . . The nonsuit forecloses the plaintiff from further prosecution of the action. . . ." (Citation omitted; internal quotation marks omitted.) Trumbull v. Palmer, 104 Conn.App. 498, 512, 934 A.2d 323 (2007), cert. denied, 286 Conn. 905, 944 A.2d 981 (2008).
Practice Book § 13-14 provides sanctions for failure of a party to appear and to testify at a deposition duly noticed, which the court may order upon motion as the "ends of justice require." Practice Book § 13-14(a). "These orders may vary in severity from entry of a nonsuit or default or judgment of dismissal to an award of costs of the motion, including a reasonable attorney's fee. Decisions on the entry of such sanctions rest within the sound discretion of the trial court. . . . On viewing a claim that this discretion has been abused, great weight is due to the action of the trial court and every reasonable presumption should be given in favor of its correctness. . . . [T]he ultimate issue is whether the court could reasonably conclude as it did. . . .
"The factors to be considered by the court include: (1) whether the noncompliance was caused by inability, rather than wilfulness, bad faith or other fault; (2) whether and to what extent noncompliance caused prejudice to the other party, including the importance of the information sought to the party's case; and (3) *597 which sanction would, under the circumstances of the case, be an appropriate judicial response to the noncomplying party's conduct." (Citations omitted; internal quotation marks omitted.) Tuccio v. Garamella, 114 Conn.App. 205, 208, 969 A.2d 190 (2009).
In addressing the noncompliance factor, we conclude that the record supports that the court reasonably could have concluded that the plaintiff's counsel was unable to attend a deposition before trial.[8] At trial, the plaintiff's counsel laid out her schedule, in detail, in support of her argument that a mutually convenient time to schedule a deposition was simply not possible.[9] No evidence exists that the plaintiff wilfully disregarded the order when it was in fact possible to comply with it or that the plaintiff avoided the deposition out of bad faith.[10]
Because we addressed the prejudice factor in the context of the defendant's motion for a continuance claim, we only briefly discuss it here. The court appropriately found that the extent of the prejudice experienced by the defendant did not support the granting of a nonsuit. This is true given the court's finding that counsel for both parties contributed to the deposition's delay; it also is true because exhibit five, the exhibit allegedly causing the most prejudice to the defendant, did not exist until the day before trial and, thus, would not have been discussed at a pretrial deposition.
The final nonsuit factor is whether the court abused its discretion in determining that, under the circumstances of the case, no sanction was the appropriate judicial response to the noncomplying party's conduct. "[D]iscretion imports something more than leeway in decision-making. . . . It means a legal discretion, to be exercised in conformity with the spirit of the law and in a manner to subserve and not to impede or defeat the ends of substantial justice.. . . In addition, the court's discretion should be exercised mindful of the policy preference to bring about a trial on the merits of a dispute whenever possible and to secure for the litigant his day in court. . . . Therefore, although dismissal of an action is not an abuse of discretion where a party shows a deliberate, contumacious or unwarranted disregard for the court's authority . . . the court should be reluctant to employ the sanction of dismissal except as a last resort. . . . [T]he sanction of dismissal should be imposed only as a last resort, and where it would be the only reasonable remedy available to vindicate the legitimate interests of the other party and the court." (Internal quotation marks omitted.) Id., at 209, 969 *598 A.2d 190.[11]
Under the circumstances of this case, we conclude that the court appropriately denied sanctions against the plaintiff. Provided the time constraints between the originally scheduled deposition and the start of trial, the plaintiff's counsel explained that she was unable to schedule a deposition. Furthermore, the defendant did not persuade the court that it suffered prejudice due to the lack of the deposition. Thus, granting the defendant's nonsuit request would have been disproportionate to the violation of the discovery order. See id., at 210, 969 A.2d 190.
Accordingly, we conclude that the court adequately considered the defendant's motion for a nonsuit and that the denial of the motion was not an abuse of discretion.
III
The defendant last claims that the court was incorrect in failing to apply credits to its account. Specifically, the defendant argues that a number of credits for materials charged and later returned to the plaintiff were not accounted for in the plaintiff's ultimate balance determination in exhibit five. We are not persuaded.
Because the determination of whether the plaintiff appropriately applied credits due on the defendant's account is a question of fact, the trial court's credit findings are binding on this court unless such findings are clearly erroneous. "A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed. . . . Because it is the trial court's function to weigh the evidence and determine credibility, we give great deference to its findings. . . . In reviewing factual findings, [w]e do not examine the record to determine whether the [court] could have reached a conclusion other than the one reached. . . . Instead, we make every reasonable presumption . . . in favor of the trial court's ruling." (Internal quotation marks omitted.) New Hartford v. Connecticut Resources Recovery Authority, 291 Conn. 433, 487, 970 A.2d 592 (2009).
Our review of the record reveals that the court did not incorrectly refuse to apply the defendant's alleged credits on the account. From the transcript, as well as the court's memorandum of decision, it is clear that the court weighed conflicting evidence and testimony regarding the numerous credits involved. After evaluating the credit arguments, the court specifically found that the plaintiff's explanations and evidence as to the amount owed were much more credible than the defendant's.
Although it is true that the defendant's cross-examination of the plaintiff's credit manager called into question whether some credits were appropriately applied to the plaintiff's exhibit five, we are not left with the definite and firm conviction that a mistake has been committed. Conversely, the entirety of the evidence strongly supports the court's determination that the plaintiff's balance was accurate. For example, the court indicated in its articulation of its decision that the testimony of the defendant's president regarding credits was not credible; in fact, the document admitted in support of the president's credit arguments was found by the court to be "self-serving" and "untrustworthy, in fact, contrived. . . ." Because we give great deference to the court's weighing *599 of evidence and credibility determinations, and make all reasonable presumptions in favor of its ruling, we conclude that it was not clearly erroneous for the court to reject the defendant's credit arguments.
The judgment is affirmed.
In this opinion FLYNN, C.J., concurred.
LAVINE, J., concurring.
In the usual circumstance, counsel's failure to find the timeeven in the midst of a busy scheduleto attend a court-ordered deposition prior to trial would create significant concerns about the fairness of the proceedings. The order requiring that a deposition be scheduled at "a mutually convenient time" cannot plausibly be read as a request of counsel to schedule a deposition only if a convenient time could be found. The only reasonable reading was to require counsel to make herself available for a deposition. Nonetheless, I agree that the court's denial of the motions filed by the defendant, Sentry Construction Corporation, for a continuance and a nonsuit was not an abuse of discretion, given the particular facts of this case. This decision should not, however, be read to countenance self-serving interpretations of court orders.
For the foregoing reasons, I respectfully concur in the majority opinion.
NOTES
[1] Not only did the plaintiff's counsel state that she had a hearing on November 28, 2007, but she also stated that she was traveling to Georgia for a hearing at the end of November and had previously scheduled hearings on November 19, 29 and 30, and December 3, 4 and 12.
[2] Although no written notice was provided, the parties were notified by the clerk of the court that the defendant's motion for a continuance was denied.
[3] Because the defendant agreed in the credit application to pay collection costs, including attorney's fees, to the plaintiff, the court determined the plaintiff's total award to be $16,731.37.
[4] The defendant acknowledged at oral argument before this court that the original motion for a continuance was denied properly. The court's denial of the second motion for a continuance raised at trial is the claim on appeal.
[5] The defendant states that the ultimate prejudice against it was the inability to ascertain the information in exhibit five before trial. Exhibit five contains a summary of the outstanding invoices, which the plaintiff argues reflect the balance owed by the defendant. Because the court relied on exhibit five in determining the plaintiff's award, the defendant argues that a deposition would have allowed access to this information in advance of trial, thereby decreasing the alleged prejudice the defendant experienced when it saw the exhibit for the first time at trial.
[6] The plaintiff's exhibit five, which the defendant argues most severely prejudiced it, was created the day before trial. Thus, it would not have been discussed at a deposition before trial.
[7] The defendant relies on Ramos v. Ramos, 80 Conn.App. 276, 835 A.2d 62 (2003), cert. denied, 267 Conn. 913, 840 A.2d 1175 (2004), in arguing that the failure of a party to have the opportunity to refute an important and untimely piece of evidence constitutes prejudice. Not only did Ramos involve an arguably more complex damages action than the current collection action before this court, but the defendant here has not adequately shown that deposing the plaintiff's corporate representative would have impacted the outcome of the case.
[8] Because the plaintiff's counsel claimed that a mutually convenient time prior to December 12, 2007, did not exist in light of her schedule, counsel argued that she was not disregarding the court's order. Because we affirm on other grounds, given the particular time constraints existing in this case, in light of the full record, we need not address this argument.
[9] In support of her inability to reschedule a deposition before trial, the plaintiff's counsel stated to the court, "If I could have found a day, Your Honor, that would not have prejudiced my other clients, I certainly would have done so. However, given thethe time of the year, given thethe short timing with which [the defendant's counsel] decided to notice his deposition it simply wasn't possible."
[10] Although arguably "other fault" exists under this first nonsuit factor because the plaintiff did not request that the court clarify the intention of its order, even if such a clarification mandated a pretrial deposition, nothing in the record supports that the plaintiff's counsel could then have reshuffled her hearing schedule to comply with that unequivocal directive.
[11] The court determined that the standard for sanctions in Tuccio, as adopted from Millbrook Owners Assn., Inc. v. Hamilton Standard, 257 Conn. 1, 16-17, 776 A.2d 1115 (2001), applies equally to nonsuits and dismissals. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536699/ | 928 A.2d 699 (2007)
George PURCELL, et al., Appellants,
v.
Marva E. THOMAS, Appellee.
No. 03-CV-1038.
District of Columbia Court of Appeals.
Argued September 6, 2006.
Decided July 26, 2007.
*702 Karl W. Carter, Jr., with whom Nathaniel Speights, Washington, DC, was on the brief, for appellants.
Johnny M. Howard, Washington, DC, for appellee.
Before REID and FISHER, Associate Judges, and SCHWELB, Senior Judge.
REID, Associate Judge:
Appellants, George Purcell and Fedora, Inc., challenge the judgment of the trial court entered after a jury rendered a verdict in favor of appellee, Marva E. Thomas, on her sexual harassment hostile work environment claim under the District of Columbia Human Rights Act ("DCHRA"), and her intentional infliction of emotional distress claim. They primarily contend that (1) the trial court should have dismissed Ms. Thomas's DCHRA claim on statute of limitations grounds; (2) the trial court improperly instructed the jury on Ms. Thomas's claims and erred by denying their motions for judgment as a matter of law and for a new trial; and (3) Mr. Purcell "cannot be held individually liable under the provisions of the [DCHRA]." Discerning neither error nor abuse of discretion, we affirm the judgment of the trial court.
FACTUAL SUMMARY
On October 27, 2000, Ms. Thomas filed a complaint against Mr. Purcell and Fedora, Inc. under the District of Columbia Human Rights Act, D.C.Code § 2-1401, et seq. (2001). She alleged, in part, that "[Mr.] Purcell terminated [her] employment after she failed to yield to the unwelcome sexually harassing, verbal and physical advances that he repeatedly made toward her." She further complained that "[Mr.] Purcell's sexually discriminatory conduct created a hostile work environment extremely detrimental to [her] emotional and physical health, interfered with [her] work performance, and caused her acute emotional distress necessitating medical treatment and consequent medical expenses." She demanded damages and reasonable attorney's fees. The defendants filed a motion to quash service of process and to dismiss the complaint in February 2001, which motion the trial court denied. Later, they renewed the motion to dismiss for insufficiency of service of process, which the court also denied.
Pre-trial matters were discussed on May 28, 2003, and trial commenced on May 29, 2003. Ms. Thomas presented the following relevant evidence at trial.[1] She was trained in educational psychology, and had work experience in different parts of the country pertaining to neglected, abused and troubled children. She met Mr. Purcell in October 1996, and they discussed a proposal to create a residential/educational facility for troubled and educationally challenged students in the District, which *703 would be modeled upon her past experiences. By late 1996 or early 1997, the Fedora Center was launched. Ms. Thomas and Mr. Purcell had "a verbal agreement" for a partnership, but by July 1997, Mr. Purcell informed Ms. Thomas that he had decided against an ownership interest for her, and she "became a salaried employee." Ms. Thomas was "disappointed" but because of her "sweat equity" in the project and her belief in the concept, she remained at Fedora.
According to Ms. Thomas, Mr. Purcell's inappropriate sexual comments began around early 1998. At first the comments were "very complimentary" ("You're so beautiful," "nice outfit or nice suit"). Then they became a little uncomfortable, with statements about his wife's "wonder bra," an inquiry as to whether Ms. Thomas wore one; his "miss[ing] the scent of a black woman" during lovemaking; the "size of [Ms. Thomas'] . . . a * * "; and discussions with his son about how to wear a condom. On one occasion, Mr. Purcell "closed the door" to Ms. Thomas' office, "walk[ed] over toward [her] . . . unbuckled his belt . . . [and] pulled his pants out to show [her] how much weight he had lost on his stomach."
When Mr. Purcell made what Ms. Thomas thought were inappropriate comments, she would call people whom she trusted to "ask what does this mean." The comments "started really to affect [her]." She "started feeling degraded . . . helpless . . . [and] really kind of afraid to say anything."
In October 1998, Ms. Thomas' father, who lived in California, became critically ill and she traveled back and forth to California, in order to both be with her father, and to continue to work on matters pertaining to Fedora. Ms. Thomas received "very complimentary" words from Mr. Purcell, and Fedora gave her a bonus in early 1999. When Ms. Thomas thanked Mr. Purcell for the bonus, he said, "yeah, yeah, yeah, you said thank you but what's in it for me? What am I getting out of this?" He also stated that he was "not reaping any of the benefits"; that Ms. Thomas' boyfriend was "getting all goods or stuff," words of "that nature."
In February 1999, Mr. Purcell and Ms. Thomas went to a restaurant to discuss business. A "kind of busty" waitress served them. Mr. Purcell "started telling [Ms. Thomas] about his past experiences making love to women with large breasts and how it was distasteful to him." He said, "you flop them from here flop this way flop `em that way. . . . That was enough for him. He didn't like women with large breasts." In March 1999, while Mr. Purcell and Ms. Thomas were discussing "the strategy of the program" at a restaurant, Mr. Purcell called her "a good cookie" and also asked whether he could go to her apartment, which was close to the restaurant. Ms. Thomas said, no. On another occasion in 1999, Mr. Purcell went to Ms. Thomas' office, and he asked her assistant to leave. When he saw some unopened Superior Court envelopes on her desk, he inquired why they were not opened. After Ms. Thomas responded, Mr. Purcell "took his arm and just knocked everything off [her] desk." Ms. Thomas "kneeled down and started crying and saying why are you doing this." Mr. Purcell "kneeled down to pick [her] up and held [her] and said I am sorry, I am so sorry." Ms. Thomas "pushed him away." Mr. Purcell again apologized and left after Ms. Thomas' administrative assistant returned. Ms. Thomas "felt destabilized, . . . felt emotionally just shattered."
In May 1999, Ms. Thomas received a call from Mr. Purcell while he was on Pennsylvania Avenue en route to Fedora's office. He stated, "you need to hurry up and get *704 downstairs. I'll be there in five minutes. We've got a problem. Hurry up. Come downstairs." Ms. Thomas was "frantic," and ran downstairs. Mr. Purcell instructed her to get into his car. She got into his car; the motor was running. Mr. Purcell "shifted the gear from left to right to reverse and he said this is what I want to do to you [to Ms. Thomas]. When was the last time you had a good f* *k anyway? And just started laughing, thought it was funny."
Fedora encountered a problem in August 1999, with respect to payment for certain services (known as "wrap around services") provided to children in its care. The Youth Services Administration ("YSA") requested "sign-in sheets" for each facility, reflecting the services rendered. YSA gave Fedora three days to hand in the sign-in sheets. On the morning of Ms. Thomas' meeting with the YSA contact, she and Mr. Purcell met to discuss the matter. She informed him that "there were some loopholes but . . . most [of the sheets] were signed." Ms. Thomas then met with the YSA contact and gave her the sign-in sheets, which turned out to be incomplete. As a result, Fedora's payment invoice was challenged. About a week later, while Ms. Thomas was on vacation with her elementary school son, Mr. Purcell requested a meeting with her at a coffee shop during which he expressed "outrage[] at the fact that [Ms. Thomas] allowed [the sign-in sheets] to be given without assuring that they were complete." He blamed her for "a lot of money that [Fedora] lost," became "agitated," and told her to go back to California. Mr. Purcell spoke in a "loud" voice; Ms. Thomas was "crying." About a week later, Mr. Purcell called Ms. Thomas and said: "I just wanted to let you know how much of an asset you have been to this company. How are you doing, Ms. Thomas?" Ms. Thomas was "confused" but "relieved" because Mr. Purcell "was no longer [the] beast" that he was "the day before." Ms. Thomas returned to work a week later.
Fedora faced the prospect of losing all of the children placed in its care in September 1999, due to Mr. Purcell's decision to employ a strategy of telling the agency to remove all of the children because Fedora had not been given a new purchase service agreement. About that time, Mr. Purcell's wife was facing surgery and he asked to meet with Ms. Thomas so that they could discuss strategy. They met at the Café Deluxe. Mr. Purcell said: "[M]y wife is going to undergo surgery this week. And I'm going to be out of commission for six weeks." He continued, I "need to have sex with somebody I can trust. I can trust you, Ms. Thomas." Ms. Thomas said, "no." As they were leaving the café, Mr. Purcell asked whether Ms. Thomas "was wearing underwear." When Ms. Thomas said, "excuse me," Mr. Purcell asserted, "I feel like doing something freaky." Mr. Purcell "walked away and called [Ms. Thomas] a f* *k* *g amateur." Ms. Thomas spoke with a friend after the incident, and began to look for other work. Ms. Thomas testified that she "was losing [her] confidence" and that she "felt degraded."
Ms. Thomas recounted an incident in 1999, "around the second week of October," after a meeting with businessmen had taken place. Ms. Thomas asked Mr. Purcell, "how do you think the meeting went," and Ms. Thomas observed that one of the men in the room "never looked at me[,] . . . never acknowledged that I was even in the room." Mr. Purcell responded, "that's because he thought you were my b* * *h, it's called respect." Ms. Thomas told Mr. Purcell: "I . . . really wish you would not talk to me this way. It's really degrading to me. I don't appreciate it." She then "walked out."
*705 Around late October, 1999, Ms. Thomas "was rushed to the hospital" because of a physical ailment. She was given medical treatment and released early the next morning. On the morning of October 27, 28 or 29, 1999, the YSA contact called Ms. Thomas and indicated that she "really need[ed Ms. Thomas'] help" with one of Fedora's clients. When Ms. Thomas explained her need for bed rest because of her hospitalization, the YSA contact "insisted" that Ms. Thomas come in to help her during a meeting with the client's social worker who was convinced that the client was absent from a Fedora facility without leave. Ms. Thomas complied with the social worker's plea, attended the meeting, and was able to provide the social worker with a copy of a court order showing that the client was not absent without leave.
While Ms. Thomas was gathering her belongings in order to return home from the emergency meeting, Mr. Purcell's assistant called to say that Mr. Purcell wanted to see Ms. Thomas in his office. Ms. Thomas explained that she had been in the hospital the previous day, had a leave slip, and asked the assistant to let Mr. Purcell know that she would reschedule the meeting. Mr. Purcell then called Ms. Thomas directly. He was "fuming, angry," and said "what the f* *k do you mean you're not coming to my meeting. You passed one of my f* *k* *g buildings to get to another one of my f* *k* *g buildings and you can't come to my meeting." Ms. Thomas was "stunned" and told Mr. Purcell she was "on sick leave" and had only come in for the meeting with the YSA contact. Mr. Purcell replied: "Ms. Thomas, when I call a meeting you're to be there. Since you didn't come to this meeting you're fired. Get the f* *k out of my building. Take your sh*t, you got one hour to get your sh*t out of my building." Then he "hung up." Ms. Thomas began to cry and called Mr. Purcell. She asked Mr. Purcell, "what is this about. Why are you firing me, what is this about, is this about sex. Is that what this is about." Mr. Purcell answered, "you know what it's about, you know what this is about, Ms. Thomas," and hung up. Ms. Thomas described herself as "just frantic"; she was "nervous, jittery . . ., didn't eat . . ., couldn't sleep."
Mr. Purcell called Ms. Thomas "around November 7th or 8th . . . [and] said he needed to talk to [her]," needed to give her something. Ms. Thomas thought he wanted to give her her last check. They met at the Café Deluxe on Wisconsin Avenue. Mr. Purcell had "decided . . . to . . . give [Ms. Thomas] 10 thousand dollars," and to "keep [her] on salary for November and December [1999]." In response to Ms. Thomas's question concerning the reason for the ten thousand dollars, Mr. Purcell characterized it as a "severance" or words to that effect. When they were outside the Café, Mr. Purcell stated, "I can't believe that I had you making all the decisions here in this company and I wa[s]n[']t even getting the sex." Ms. Thomas said "is that what this is really all about, Mr. Purcell?" He replied: "trust me, if I wanted the sex I'd have had it and [he] walked away." Thereafter, Mr. Purcell telephoned Ms. Thomas repeatedly during the month of November to inquire about Ms. Thomas and to inform her that her "next check was there." He declined to mail the check and took the position that Ms. Thomas should "come get" her check or he could "bring" it to her. During one conversation Ms. Thomas asked for a discharge letter, and Mr. Purcell declared: "I told everybody here you're on sick leave." When Ms. Thomas explained that she needed the discharge letter for "unemployment purposes," Mr. Purcell asserted, "that's a couple of months away." Mr. *706 Purcell continued to call Ms. Thomas in December, but she "didn't pick up."
During her trial testimony, Ms. Thomas discussed her subsequent job search, and her difficulty in finding other employment. She also focused on the difference in pay between the job for which she was hired and her compensation at Fedora. And she outlined her medical expenses related to her therapy sessions.
Lydia Mallet, Ms. Thomas' long-time friend and college classmate, communicated with Ms. Thomas on a regular basis. Ms. Thomas "would call [Dr. Mallet] and tell [her] about something Mr. Purcell had said to her that was sexual in nature, and that was vulgar and [Ms. Thomas] was shocked and amazed and embarrassed and confused." She "was extremely upset" and "didn't know how to handle" the situation when Mr. Purcell made sexual comments to her. On one occasion Ms. Thomas said that "she couldn't sleep, and couldn't eat, she was nervous, nervous about running into [Mr. Purcell], nervous about doing the wrong thing, and nervous about doing something that might set [Mr. Purcell] off after he called [her] from her office and said come meet me downstairs and he took the stick shift of his car and moved it in several different directions and said that is what I want to do to you," and also she was "crying on the phone" after Mr. Purcell "told her she just needed a good f* *k and she would get in line. . . ."
Dr. Mallet stated that Ms. Thomas "was really upset and concerned . . ." and "she was nervous, concerned and worried, . . . crying." A "couple of weeks before [Ms. Thomas] was fired," and after "Mr. Purcell told [Ms. Thomas] that his wife was going to have surgery and he was going to be out of commission for six weeks or so, and that he wanted to have sex with someone he could trust." Ms. Thomas said, "no" and Mr. Purcell "got very angry and told her that she was an amateur." Ms. Thomas called Dr. Mallet "within hours [after this incident], as soon as she could get to [her]." Ms. Thomas also "was crying" during her telephone call to Dr. Mallet "right after" Mr. Purcell terminated her and told her "to get her stuff and get the f* *k out of his building. . . ." Subsequently, Dr. Mallet stated, "it went on for months where it was hard for [Ms. Thomas] to get herself together and put her life back together." "[T]here were several times where [Ms. Thomas] would call [Ms. Mallet] and be . . . in a low mood or upset or crying or not saying anything, just holding the phone."
Ms. Thomas was referred to Rev. Angelaloyd B. Fenwick, a licensed psychotherapist. Rev. Fenwick met Ms. Thomas in November 1999, and began seeing her in early December 1999, "to help her to deal with anxiety and stress that she was going through," which was related to "her work situation." Rev. Fenwick noticed that Ms. Thomas "was feeling almost in a hopeless situation, especially regarding her employment situation," and Rev. Fenwick's "impression was that [Ms. Thomas] was someone who was experiencing severe depression at that time. . . ." Ms. Thomas "felt like as she looked back on the situation, that many innuendos had been made and inappropriate language said to her," and "she felt . . . that she had allowed herself to be berated sexually in terms of some language that was used toward her and she just felt very bad about it." Rev. Fenwick's "impression" was that Ms. Thomas "was experiencing dysthymia . . . and anxiety with mixed emotional features."[2]
*707 Mr. Purcell's defense theory was that he never made any comments of a sexual nature to Ms. Thomas, and that she was properly terminated from Fedora because of inadequate performance in aspects of her work. The defense theory was presented through several witnesses.[3] The *708 last witness for the defense was Mr. Purcell. Mr. Purcell denied making any of the sexual comments attributed to him by Ms. Thomas and her witnesses. He stated that there were complaints about Ms. Thomas both from Fedora staff and the District, and that Ms. Thomas did not follow his instructions regarding her court appearances. He "placed Ms. Thomas on a thirty-day probation . . . two weeks before the date of [her October] termination." The District had conducted an audit of Fedora, and Ms. Thomas had not followed Mr. Purcell's instructions. He asked Ms. Thomas to leave Fedora because "[w]e no longer could afford to continue the kind of downward spiral that our company was going through as a result of Ms. Thomas' behavior. The complaints were too numerous and we were under all kinds of pressure that was of Ms. Thomas's doing."
The jury was presented with four questions on the verdict form, all of which were answered yes, in favor of Ms. Thomas:
1. Do you find by a preponderance of the evidence that defendant Fedora, Inc. sexually discriminated against Marva Thomas?
2. Do you find by a preponderance of the evidence that defendant George Purcell sexually discriminated against Marva Thomas?
3. Do you find by a preponderance of the evidence that Fedora, Inc. intentionally inflicted emotional distress on Marva Thomas?
4. Do you find that defendant George Purcell intentionally inflicted emotional distress on Marva Thomas?
The jury awarded Ms. Thomas damages in the amount of $165,000.00, in response to the verdict form statement: "Please state the amount of damages you award to Marva Thomas." Defendants filed a post-judgment renewed motion for judgment as a matter of law and for a new trial, which the trial court denied. Defendants noted an appeal.
ANALYSIS
Appellants make several arguments on appeal. Our review of these arguments reveals no reversible trial court error.[4]
*709 Statute of Limitations and Jury Instructions
Appellants contend that the trial court erred by not dismissing Ms. Thomas's complaint on statute of limitations grounds because it "does not allege an event within the one year statute of limitations of the District of Columbia Human Rights Act." Ms. Thomas maintains that appellants waived the statute of limitations defense because they failed to timely plead it as an affirmative defense. Appellants also challenge the trial court's jury instructions regarding Ms. Thomas's DCHRA and intentional tort claims. They assert that they were unfairly prejudiced and deprived of a fair trial, in part, because the trial court "failed to instruct the jury adequately on [Ms. Thomas'] burden of proof of liability . . ., and further, "failed to instruct the jury on . . . the proper two-part analysis for finding extreme and outrageous conduct and the prohibition on recovery for insults, petty oppressions, and other trivialities. . . ." Appellants made substantially the same arguments in their post-verdict renewed motion for judgment on the pleadings and for a new trial.
We turn now to the legal principles which govern our analysis. In Daka v. Breiner, 711 A.2d 86 (D.C.1998), we again recognized that a motion for judgment after trial is granted only in "`extreme' cases." Id. at 96 (quoting Oxendine v. Merrell Dow Pharm., Inc., 506 A.2d 1100, 1103 (D.C.1986)). We give deference to the trial court's decision, and "[r]eversal is warranted only if `no reasonable person, viewing the evidence in the light most favorable to the prevailing party, could reach a verdict in favor of that party.'" Id. (quoting Arthur Young & Co. v. Sutherland, 631 A.2d 354, 363 (D.C. 1993)) (citations and internal quotation marks omitted); see also Smith v. District of Columbia, 882 A.2d 778, 786-87 (D.C. 2005). In addition, "the trial court has broad latitude in passing upon a motion for a new trial," and our review is only for abuse of discretion. Gebremdhin v. Avis Rent-A-Car Sys., Inc., 689 A.2d 1202, 1204 (D.C.1997). The trial court may grant a motion for a new trial if it determines that the verdict is against the weight of the evidence, or that there would be a miscarriage of justice if the verdict is allowed to stand. Id. With regard to jury instructions, "`[a] trial court has broad discretion in fashioning appropriate jury instructions, and its refusal to grant a request for a particular instruction is not a ground for reversal if the court's charge, *710 considered as a whole, fairly and accurately states the applicable law.'" Nelson v. McCreary, 694 A.2d 897, 901 (D.C.1997) (quoting Psychiatric Inst. of Washington v. Allen, 509 A.2d 619, 625 (D.C.1986)). "We read the instructions as a whole, in light of the evidence presented and the law." Ruffin v. Temple Church of God in Christ, Inc., 749 A.2d 719, 721 n. 3 (D.C. 2000) (citations omitted).
"To prove sex or gender discrimination under the DCHRA, [Ms. Thomas] was required, initially, to `make a prima facie showing of discrimination by a preponderance of the evidence.'" United Mine Workers of America, Int'l Union v. Moore, 717 A.2d 332, 338 (D.C.1998) (quoting Sutherland, supra, 631 A.2d at 361).[5] "To establish a prima facie case of sexual harassment under [the DCHRA], a plaintiff must demonstrate that (1) she is a member of a protected class; (2) she has been subject to unwelcome sexual harassment; (3) the harassment complained of was based on sex; (4) the harassment complained of affected a term, condition, or privilege of employment; (5) respondeat superior." Howard Univ. v. Best, 484 A.2d 958, 978 (D.C.1984) (citations omitted). Sexual harassment "must be sufficiently pervasive so as to alter the conditions of employment and create an abusive working environment," and plaintiff must show that "her psychological well-being has been detrimentally affected." Id. at 980 (citations omitted). "More than a few isolated incidents must have occurred, and genuinely trivial occurrences will not establish a prima facie case," but "[n]o specific number of incidents, and no specific level of egregiousness, can be set forth; nor is the fact that each incident may not be individually actionable determinative." Id. "Instead, the trier of fact must consider the totality of the circumstances. . . ." Id. (citation omitted). "Conduct need not . . . be overtly sexual to contribute to a sexual harassment hostile work environment claim." Psychiatric Inst. of Washington v. District of Columbia Comm'n on Human Rights, 871 A.2d 1146, 1151 (D.C. 2005) (citations omitted). "Rather, all adverse conduct is relevant so long as it would not have taken place but for the gender of the alleged victim." Id. (citing Williams v. General Motors, 187 F.3d 553, 565 (6th Cir.1999)) (other citations omitted).
In sum, "a plaintiff establishes a prima facie case of sexual harassment upon demonstrating that unwelcome verbal and/or physical advances of a sexual nature were directed at him/her in the workplace, resulting in a hostile or abusive working environment." Best, supra, 484 A.2d at 981 (citations omitted). And, "a plaintiff `has a viable hostile environment claim if [she] can demonstrate (1) that *711 [she] is a member of a protected class, (2) that [she] has been subjected to unwelcome harassment, (3) that the harassment was based on membership in the protected class, and (4) that the harassment is severe and pervasive enough to affect a term, condition, or privilege of employment.'" Daka, Inc. v. McCrae, 839 A.2d 682, 693 n. 11 (D.C.2003) (quoting Breiner, supra, 711 A.2d at 92). "If the employer then satisfies its burden by articulating some legitimate nondiscriminatory reason for [the employer's action], [ ] the burden shifts back to the employee to prove, . . . by a preponderance of the evidence, that the employer's stated justification for its action was not its true reason but was in fact merely a pretext to disguise discriminatory practice." Moore, supra, 717 A.2d at 338.
With respect to statute of limitations consideration, "`[i]t does not matter . . . that some of the component acts of the hostile work environment fall outside the statutory time period.'" Lively v. Flexible Packaging Ass'n, 830 A.2d 874, 890 (D.C.2003) (en banc) (quoting AMTRAK v. Morgan, 536 U.S. 101, 117, 122 S.Ct. 2061, 153 L.Ed.2d 106 (2002)). Indeed, "[e]ven if there are significant gaps in the occurrence of acts constituting the hostile work environment claim, the filing of that claim still may be timely because this type of `unlawful employment practice . . . cannot be said to occur on any particular day. It occurs over a series of days or perhaps years.'" Id. (quoting Morgan, 536 U.S. at 115, 122 S.Ct. 2061). This is so "because a hostile work environment claim concerns a single unlawful practice which is treated as an indivisible whole for purposes of the limitations period, even if an initial portion of that claim accrued outside the limitations period." Id. at 892 (footnote omitted); see also Ledbetter v. Goodyear Tire & Rubber Co., Inc., ___ U.S. ___, ___, 127 S.Ct. 2162, 2175, 167 L.Ed.2d 982, ___ (2007) ("A hostile work environment . . . typically comprises a succession of harassing acts, each of which `may not be actionable on its own'[;] . . . the actionable wrong is the environment, not the individual acts that, taken together, create the environment.") (citation and footnote omitted).
"Intentional infliction of emotional distress consists of `(1) extreme and outrageous conduct on the part of the defendant which (2) intentionally or recklessly (3) causes the plaintiff severe emotional distress.'" Best, supra, 484 A.2d at 985 (citation and internal quotation marks omitted). "Intent or recklessness can be inferred from the outrageousness of the acts." Id. (citing Anderson v. Prease, 445 A.2d 612, 613 (D.C.1982)) (other citation omitted). "The conduct must be so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society." Smith, supra, 882 A.2d at 794 (quoting Homan v. Goyal, 711 A.2d 812, 818 (D.C.1998)) (other citation and internal quotation marks omitted). "Creation of a hostile work environment by racial or sexual harassment may, upon sufficient evidence, constitute a prima facie case of intentional infliction of emotional distress." Best, supra, 484 A.2d at 986 (citation omitted). "The ultimate question is whether the recitation of the facts to an average member of the community would arouse his [or her] resentment against the actor, and lead him [or her] to exclaim `Outrageous!'" Id. (citations and internal quotation marks omitted).
After applying the applicable legal principles to our examination of the evidence presented and to the trial court's instructions to the jury, we are satisfied that the statute of limitations was not a bar to Ms. Thomas' sexual harassment *712 hostile work environment claim, and that reasonable jurors could conclude that she presented ample evidence to refute appellants' denial of sexually harassing comments and conduct by Mr. Purcell, and also to rebut the defense of a legitimate nondiscriminatory reason for her termination (unsatisfactory work performance), that is, Ms. Thomas satisfied her ultimate burden to "prove . . . by a preponderance of the evidence" that appellants' stated unsatisfactory work performance justification was a pretext to disguise sexual harassment. Moore, supra, 717 A.2d at 338. Furthermore, read "as a whole, in light of the evidence presented and the law," Ruffin, supra, 749 A.2d at 721, the trial court correctly charged the jury regarding a sexual harassment hostile work environment claim and a claim for intentional infliction of emotional distress, "accurately stat[ing] the applicable law." McCreary, supra, 694 A.2d at 901. Contrary to appellants' arguments, the trial court properly instructed the jury on Ms. Thomas' burden to prove liability and the circumstances under which she could not recover damages for a hostile work environment claim and for intentional infliction of emotional distress. The trial court charged the jury, in part, that defendants' "liability clearly does not extend to mere insult or indignities or threats or annoyances or petty omissions or other trivialities," and that their "conduct must be so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency." The court further informed the jury that it must "find by a preponderance of the evidence that the reasons for and/or manner by which Mr. Purcell and Fedora Incorporated terminated and sexually harassed Ms. Thomas involved extreme and outrageous conduct that caused Ms. Thomas severe emotional distress." When the entire record is reviewed, and recognizing that "a hostile work environment claim concerns a single unlawful practice which is treated as an indivisible whole for purposes of the limitation period, even if an initial portion of that claim accrued outside the limitations period," Lively, supra, 830 A.2d at 892, and that "the actionable wrong is the environment, not the individual acts that, taken together, create the environment," Ledbetter, supra, 127 S.Ct. at 2175, we are satisfied, as we indicate below, that reasonable jurors could find that Ms. Thomas not only filed a timely claim, but also that she proved, by a preponderance of the evidence, that defendants were liable.
Ms. Thomas' proof established that she is a member of a protected class (women), that Mr. Purcell "subjected [her] to unwelcome harassment . . . based on membership in the protected class" (females), and that "the harassment [was] severe and pervasive enough to affect a term, condition, or privilege of employment." McCrae, supra, 839 A.2d at 692 n. 11 (quoting Breiner, supra, 711 A.2d at 92). If believed by reasonable jurors, "the totality of the circumstances" revealed by Ms. Thomas' trial testimony proved repeated comments and actions by Mr. Purcell, or a series of harassing acts which were "sufficiently pervasive [that they] alter[ed] the conditions of [Ms. Thomas'] employment and create[d] an abusive working environment," which "detrimentally affected" Ms. Thomas' "psychological well-being." Best, supra, 484 A.2d at 980. It does not matter that some of the incidents described by Ms. Thomas, such as the early 1998 events, may have been offensive but not actionable by themselves.
Around 1998, Mr. Purcell's comments and actions in the presence of Ms. Thomas had sexual connotations (for example, saying that he missed "the scent of a black woman" during lovemaking; unbuckling his belt and pulling his pants out, reportedly *713 to demonstrate his loss of weight; and stating that "when his son was at an age where he might be interested in sex[,] . . . [he] made him whip it out right in front of [him] and put the condom on right there so [he] knew exactly what [his son] was doing with the condom"). In the face of these actions, Ms. Thomas "started feeling degraded . . . helpless . . . [and] really kind of afraid to say anything." Mr. Purcell's actions became more bold, grossly disgusting and beyond decency in 1999, and included vivid accounts by him of "his past experiences making love to women with large breasts," and calling and ordering Ms. Thomas to meet him downstairs immediately, to get into his car, whereupon Mr. Purcell shifted the gears in his car, told Ms. Thomas, with laughter: "this is what I want to do to you" and asked, "[w]hen was the last time you had a good f* *k anyway?" In an earlier encounter in her office, Mr. Purcell "took his arm and just knocked everything off [Ms. Thomas'] desk; she rebuffed his efforts to hold her while apologizing. This particular conduct, as well as certain other behavior is relevant because it `need not . . . be overtly sexual to contribute to a sexual harassment hostile work environment claim, . . . so long as it would not have taken place but for the gender of [Ms. Thomas].'" Psychiatric Inst. of Washington, supra, 871 A.2d at 1151 (citation omitted).
Mr. Purcell continued with his sexual harassment in Fall 1999, telling Ms. Thomas that his wife was scheduled for surgery and that he "need[ed] to have sex with somebody [he could] trust." Even after Ms. Thomas told him "no," Mr. Purcell persisted, asking her whether she "was wearing underwear" and stating that he "fel[t] like doing something freaky." When Ms. Thomas complained that one male ignored her during a business meeting, Mr. Purcell responded, "that's because he thought you were my b* * *h, it's called respect." Mr. Purcell suddenly fired Ms. Thomas in a fit of anger, cursing at her, at the end of October 1999. Ms. Thomas had left her sick bed following hospitalization, to come into the office on an emergency basis to attend a meeting, and explained, through her assistant, that she was on sick leave and would have to reschedule his requested meeting with her. A few days later, Mr. Purcell decided to "keep [Ms. Thomas] on salary for November and December [1999]," and called Ms. Thomas repeatedly, insisting that she come to the office to pick up her check or he could "bring it to her," all after his comment to Ms. Thomas in early November that he could not "believe that [he] had [her] making all the decisions here in this company and [he] wa[s]n[']t even getting the sex." From this behavior, reasonable jurors could infer that Mr. Purcell still had the intent to pursue Ms. Thomas and to have sex with her by keeping her on the payroll in November and December 1999 and telling others that she was on sick leave; "intent can be inferred from the outrageousness of the acts," Best, supra, 484 A.2d at 985.
Ms. Thomas presented proof of the impact on her and her emotional well being of Mr. Purcell's behavior recounted how Mr. Purcell's harassing behavior had had a detrimental effect on her well-being. For example, she felt "degraded," "helpless," "destabilized," "emotionally just shattered," "frantic," "nervous, jittery," and unable to eat or sleep. In addition, other witnesses such as Dr. Mallet and Dr. Green testified about Ms. Thomas' reaction to Mr. Purcell's sexual harassment her crying, nervousness, worry, and inability to sleep. Ms. Thomas' licensed psychotherapist, Rev. Fenwick, testified about Ms. Thomas' anxiety, hopelessness, and depression which she related to Ms. Thomas' "work situation." In Rev. Fenwick's view, *714 Ms. Thomas "was experiencing dysthymia . . . and anxiety with mixed emotional features."
From this record, reasonable jurors could find that Ms. Thomas's proof established sexual harassment "severe and pervasive enough to affect a term, condition, or privilege of employment," McCrae, supra, 839 A.2d at 693 n. 11, and that appellants created a hostile and abusive work environment. We conclude that the jury's verdict was not based on "merely a few isolated incidents . . . [or] genuinely trivial occurrences." Best, supra, 484 A.2d at 986. Indeed, reasonable jurors could find that Mr. Purcell's conduct was "so outrageous in character and so extreme in degree as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized society." Smith, supra, 882 A.2d at 794. Furthermore, an impartial jury could reasonably find that Ms. Thomas' proof "would arouse [the] resentment [of `the average member of the community'] against [Mr. Purcell] and [would] lead [that member] to exclaim `Outrageous!'." Smith, supra, 882 A.2d at 794. Hence, we cannot say, as the trial court could not, that "no reasonable person, viewing the evidence in the light most favorable to the prevailing party [Ms. Thomas] could reach a decision in [her] favor." Breiner, supra, 711 A.2d at 96 (quoting Arthur Young & Co., supra, 631 A.2d at 363). Nor can we declare that the trial court abused its discretion in denying appellants' motion for a new trial; appellants do not meet our standard that the verdict must be "against the clear weight of the evidence," or that there would be a miscarriage of justice if the verdict is allowed to stand. Gebremdhin, supra, 689 A.2d at 1204.
Mr. Purcell's Liability as an Individual
Mr. Purcell argues that the trial court erred by not granting him judgment as a matter of law "because he cannot be held individually liable under the provisions of the District of Columbia Human Rights Act." He claims that "[b]ecause . . . a supervisor is not himself the employer, he cannot be held individually liable under the [DCHRA], whose prohibition against employment discrimination is limited to employers." Although recognizing "that individual supervisor liability is permissible under the [DCHRA]," based on our decision in Wallace v. Skadden Arps, Slate, Meagher & Flom, 715 A.2d 873, 887-89 (D.C.1998), he points out that Wallace "extended a partnership's liability to the individual partners," whereas in this case "plaintiff's employer was . . . a corporation that has a distinct legal personality and thereby shields the individual officers and shareholders like defendant Purcell from liability for its wrongful acts."
As we have seen, the DCHRA makes it an unlawful discriminatory practice for an employer "to discriminate against any individual with respect to his [or her] compensation, terms, conditions, or privileges of employment, . . . or otherwise adversely affect his [or her] status as an employee." D.C.Code § 2-1402.11(a)(1). We had occasion to consider the definition of "employer" under the DCHRA in Wallace, supra. D.C.Code § 2-1401.02(10) (2001), formerly codified at D.C.Code § 1-2502(10) (1999), defines "employer" as
any person who, for compensation, employs an individual, except for the employer's parent, spouse, children or domestic servants, engaged in work in and about the employer's household; any person acting in the interest of such employer, directly or indirectly; and any professional association.
We focused on the definition of "employer" for the purpose of determining "[t]he amenability of [law] partners to suit." We emphasized the last category of the definition, *715 "any person acting in the interest of such employer, directly or indirectly," and observed that there is no comparable provision in Title VII. Id. Nor does Title VII include an aiding and abetting provision as does the DCHRA: "It shall be an unlawful discriminatory practice for any person to aid, abet, invite, compel, or coerce the doing of any of the acts forbidden under the provisions of this chapter [Chapter 14, Human Rights] or to attempt to do so." D.C.Code § 2-1402.62 (2001), formerly codified at D.C.Code § 1-2526 (1999). We relied on these provisions to "support our conclusion that the partner defendants are amenable to suit." Wallace, supra, 715 A.2d at 889. Thus, we determined that the phrase "`any person acting in the interest of such employer, directly or indirectly,' necessarily includes a partner" in a law firm. Id. at 888.
Here, we are faced not with a question of the individual liability of law partners under the DCHRA, but with an issue involving the individual liability of Mr. Purcell, the President, Chief Operating Officer, controlling shareholder, and Director of Fedora, as well as the supervisor of Ms. Thomas. In his various capacities, Mr. Purcell was acting, directly or indirectly, in the interest of Fedora and hence fell within DCHRA's definition of employer. Consequently, we hold that because Mr. Purcell was a high level official of Fedora who exercised extensive supervisory, management and administrative authority over the corporation, he was individually liable to Ms. Thomas under the DCHRA.
While we have not had an occasion to consider the individual liability of supervisors other than law firm partners under the DCHRA, the United States District Court for the District of Columbia has decided cases in the context of other types of supervisors and has found that supervisors are subject to individual liability. In Mitchell v. National R.R. Passenger Corp., 407 F.Supp.2d 213 (D.D.C.2005), plaintiff sued not only the National Railroad Passenger Corporation, but also two employees, the former Director of the Workforce Development unit in the Human Resources Department of the corporation who had supervised the plaintiff during her employment, and the Vice President of the corporation's Human Resources Department. The court determined that both individuals were "proper defendants in plaintiff's DCHRA claim," because: "The text and purpose of the DCHRA and Wallace, do not suggest it would be appropriate to follow Title VII here and preclude a claim against individual management and supervisory employees involved in committing the allegedly discriminatory conduct." Id. at 241.[6] Earlier, in MacIntosh v. Building Owners & Managers Ass'n, 355 F.Supp.2d 223 (D.D.C.2005), the court concluded that the DCHRA "provides for individual liability" and refused to dismiss the complaint against two individual employees of a nonprofit corporation, the Executive Director and the Vice President of Advocacy and Research. Id. at 225, 228.[7]
*716 Other jurisdictions have imposed individual liability upon management and supervisory employees under state law in employment discrimination cases. See, e.g., Brown v. Scott Paper Worldwide Co., 143 Wash.2d 349, 20 P.3d 921, 928 (2001) ("We hold individual supervisors, along with their employers, may be held liable for their discriminatory acts. The plain meaning of [Revised Code of Washington] 49.60.040(3), by its very terms, encompasses individual supervisors and managers who discriminate in employment."); Vivian v. Madison, 601 N.W.2d 872, 878 (Iowa 1999) ("[W]e hold that a supervisory employee is subject to individual liability for unfair labor practices under Iowa Code section 216.6(1) of the Iowa Civil Rights Act.").
Mr. Purcell leans heavily on Lenhardt v. Basic Inst. of Tech., Inc., 55 F.3d 377 (8th Cir.1995), a federal case which followed precedents interpreting Title VII's definition of "employer" to declare its belief that "the Missouri Supreme Court would hold that the definition of the term employer in the MHRA [Missouri Human Rights Act] does not subject employees, including supervisors or managers, to individual liability." Id. at 381. But Lenhardt has been questioned and criticized by other jurisdictions. Most notably, the Court of Appeals of Missouri, which first considered the issue of individual liability under the MHRA, categorically rejected the Eighth Circuit's view of its law in declaring: "We find that the plain and unambiguous language within the definition of `employer' under the MHRA imposes individual liability in the event of discriminatory conduct." Cooper v. Albacore Holdings, Inc., 204 S.W.3d 238, 244 (Mo.App.2006). Thus, the court affirmed a judgment finding the Chief Executive Officer of the employer individually liable in a sexual harassment claim under the MHRA. Id. ("[T]he CEO of Employer [ ] falls within the definition of `employer' under the MHRA."). The Missouri Court of Appeals also rejected Lenhardt in affirming an age discrimination judgment against the Athletic Director and the Vice Chancellor for Administrative Affairs of the University of Missouri at St. Louis, declaring that "as [plaintiff's] supervisors, . . . [they] fall within the definition of `employer' under the MHRA [and] . . . may be found individually liable for age discrimination. . . ." Brady v. The Curators of the Univ. of Missouri, 213 S.W.3d 101, 113 (Mo.App.2006). See also Rose v. Wooten, No. 06-4141-CV-C-WAK, 2006 WL 3511507, *1 (D.W.D.Mo.2006), 2006 U.S. Dist. LEXIS 87836, at *3 ("Federal cases in this district have also called into question the continuing validity of Lenhardt, and have permitted claims to proceed against individual employees. . . .") (citations omitted).
Accordingly, for the foregoing reasons, we affirm the judgment of the trial court.[8]
NOTES
[1] Pre-trial and trial proceedings took place over several days, from May 28, 2003 to June 11, 2003. The plaintiff presented ten witnesses and the defense called seven, and the parties offered documentary evidence. We do not mention all of the evidence in our factual summary.
[2] Other witnesses testified in behalf of Ms. Thomas. Robert Green, a friend, mentor, coach, and former professor of Ms. Thomas, received several calls from Ms. Thomas during the period 1998 through 1999. Ms. Thomas "was tearful, . . . crying," and "[s]he expressed fear of losing her job," after Mr. Purcell made comments about her bra and panties. One or two months before Mr. Purcell fired her, Ms. Thomas called Dr. Green and was "[t]earful, crying, almost sobbing," after a meeting with Mr. Purcell during which he made comments about going to bed with Ms. Thomas and going to her apartment. And, Ms. Thomas was "sad, fearful" after going to pick up a post-termination check and hearing Mr. Purcell talk about "how good she looked" and when he "again asked her for sex," or to be his "housewife, office wife, or something to that effect."
Two other witnesses testified in behalf of Ms. Thomas, LaCrisha Butler and Charren Brooks. Ms. Thomas enlisted the help of LaCrisha Butler, a fellow church member, to pick up her checks following her termination. On the first occasion, Ms. Butler was given the check by an employee. The second time, Mr. Purcell asked to see her and made inquiries about Ms. Thomas, expressing his concern about her. During the course of his conversation with Ms. Butler about Ms. Thomas, Mr. Purcell said that "he had gone to the line but never crossed the line." Charren Brooks, a colleague of Ms. Thomas' at another organization and her roommate for about eighteen months, also picked up a check for Ms. Thomas in Fall 1999. When Mr. Purcell gave the check to Ms. Brooks, he asked about Ms. Thomas, said he was trying to reach her, and inquired as to why she did not return his call.
[3] Sandra McPhaul (also known as Sandra Webb), who worked under Ms. Thomas at Fedora and who was married previously to Mr. Purcell's brother, "several times observed [Ms. Thomas] very upset because Mr. Purcell wanted her to produce certain information and she hadn't done it or she didn't have it." and "at the end [of her employment] . . . Ms. Thomas completely wasn't doing anything. She was barely even coming to work." Ms. McPhaul claimed that Ms. Thomas made sexually explicit comments about Mr. Purcell and her desire with respect to one of his private parts, and called Mr. Purcell's wife a "b* * *h." Erica Brown of the District's Youth Services Administration testified that in August 1999, she "requested backup documentation" from Ms. Thomas for Fedora's bills for the children placed with the center, because "her boss felt [that] the bills had gotten excessive. . . ." And, "after about two weeks, the documents still weren't ready because it was a lot of documentation." However, Ms. Thomas eventually called to say that the documents were ready, and Ms. Brown picked up "about four or five boxes worth of documents" from Fedora at "the end of the summer of '99."
Dominic Andrew Zirpoli, then an assistant juvenile prosecutor for the Office of the Corporation Counsel (now the Attorney General, D.C.), worked with YSA. Mr. Zirpoli was concerned about a court order (eventually vacated on appeal) that required the District to pay Fedora for certain services to children who were still under the supervision of Court Social Services. He discussed with Ms. Thomas "how it was that Fedora could be paid for the services that were provided to the youth while they were under the supervision of the court." On one occasion during a court hearing, he became "frustrated" and "said to the Court . . . that Ms. Thomas was not a party to the case and had no standing." On another occasion, he objected to payment issues relating to Fedora being raised during a juvenile commitment proceeding. Mr. Zirpoli and Ms. Thomas had a verbal altercation after another hearing when Ms. Thomas accused him of doing something "sneaky." William Taylor Stansberry, a "financial advisor consultant" to Fedora from 1996 through 1999, testified that during certain of his meetings with Mr. Purcell, designed to discuss accounting and other business matters, Ms. Thomas would interrupt to talk about such things as pictures taken at a beach, and her visits to the court and one of the District's agencies. Another witness, Magdalena Aldona Johnson, Mr. Purcell's sister-in-law, served as Mr. Purcell's administrative assistant, sat close to Mr. Purcell's office, and could "hear what was going on inside the office." On cross-examination, however, she was asked, "could you hear what was happening inside [Mr. Purcell's] office?" She replied, "No."
The defense wanted to present Dr. Robert Yancey as a witness "to testify about the prescription medication that he prescribed for [Ms. Thomas] and [to indicate that Ms. Thomas had] described certain conditions and reasons for requesting [the medication.]," as "the possible alternative cause of [Ms. Thomas'] emotional distress." The trial court declined to permit the testimony on the ground that it was substantive rather than impeachment testimony, and because Dr. Yancey was not on defendants' witness list.
[4] We dispose of appellants' service of process argument summarily. They in essence contend that the trial court erred when it failed to dismiss Ms. Thomas' lawsuit for failure to effect service and file proof thereof within sixty days of the filing of her complaint. Ms. Thomas argues, in part, that appellants "waived the right to complain about the service of process after having conceded at the initial scheduling conference that they were satisfied with the timeliness of service." On December 27, 2000, Ms. Thomas filed a motion to enlarge the time for effecting service of process on appellees, but the motion was one day late. Her motion stated that "[n]umerous attempts were made to serve both [Mr.] Purcell and Fedora, Inc. . . ., [that she was] able to contact staff persons employed by [Mr.] Purcell, but [had] not reached him personally." She also indicated that Mr. Purcell would "be away from the office during the holiday season and [would] not return until [the following] week." Service was effected on January 11, 2001, and proof was filed the following day all before an order of dismissal had been filed. On February 8, 2001, appellants moved to quash service of process and to dismiss Ms. Thomas' complaint on the basis of untimely service of the complaint. At a status conference held on February 9, 2001, defense counsel mentioned the motion to quash service, but then said:
[Counsel for Ms. Thomas] explained to me this morning that they, in fact, had submitted a motion for an extension of time but there was no file in the office at the time that I reviewed it before I filed my motion. But, now that I have a copy of that we will file that answer.
Appellants filed an answer on February 9, 2001, but did not raise untimely service of process as an affirmative defense. We conclude that appellants waived the right to assert untimely service of process, by failing to raise this defense when they filed their answer. At any rate, because Super. Ct. Civ. R. 4(m) is "mechanical rather than dispositive," Wagshal v. Rigler, 711 A.2d 112, 114 (D.C. 1998) (citation omitted), the trial court did not abuse its discretion in denying both appellants' motion to quash service of process and to dismiss the complaint, and their renewed motion. The record shows that Ms. Thomas made numerous efforts to serve Mr. Purcell and Fedora, but was unable to do so because Mr. Purcell was out of town for the holiday season. Appellants were served on January 11, 2001, prior to the initial scheduling conference on February 2, 2001, and before the beginning of discovery, and therefore, could not have suffered any prejudice. Nor did defendants allege any prejudice either in their February 6, 2001, "motion to quash service of process and dismiss complaint," or in their "renewed motion to dismiss for insufficiency of service of process and failure to comply with the rules of this court." We discern no error on the part of the trial court. See Packheiser v. Miller, 875 A.2d 645 (D.C.2005).
[5] D.C.Code § 2-1402.11(a)(1) (2001), formerly codified at D.C.Code § 1-2512(a)(1) (1999), provides:
(a) General.It shall be an unlawful discriminatory practice to do any of the following acts, wholly or partially for a discriminatory reason based upon the actual or perceived: race, color, religion, national origin, sex, age, marital status, personal appearance, sexual orientation, gender identity or expression, family responsibilities, genetic information, disability, matriculation, or political affiliation of any individual:
(1) By an employer.To fail or refuse to hire, or to discharge, any individual; or otherwise to discriminate against any individual, with respect to his compensation, terms, conditions, or privileges of employment, including promotion; or to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities, or otherwise adversely affect his status as an employee[.]
[6] Mitchell noted that one of the cases on which the individual defendants had relied, and which Mr. Purcell here claims precludes his individual liability, Hunter v. Ark Rests. Corp., 3 F.Supp.2d 9 (D.D.C.1998), was decided before Wallace, supra.
[7] In response to a motion for reconsideration in MacIntosh, the court reiterated that the Executive Director and corporate vice president could be sued individually under part of the definition of "employer" in the DCHRA "any person acting in the interest of [the] employer, directly or indirectly." See also Lance v. United Mine Workers of Am.1974 Pension Trust, 400 F.Supp.2d 29 (D.D.C.2005).
[8] We are unpersuaded by appellants' remaining arguments. Appellants assert that the trial court erred by admitting the testimony of Dr. Mallet and Dr. Green and that even if the "testimony met the Court's standard for admissibility . . . [it] unfairly prejudiced Appellants." The record shows that the trial court carefully considered defendants' hearsay objections, sustained some of them, and appropriately limited what could be introduced under the state of mind exception. Even assuming, without deciding, that the trial court erred in admitting portions of the testimony, we are satisfied that "the error did not influence the jury, or had but slight effect," and that "the judgment was not substantially swayed by the error" and that it did not affect appellants' "substantial rights." R & G Orthopedic Appliances & Prosthetics, Inc. v. Curtin, 596 A.2d 530, 539 (D.C.1991) (quoting Kotteakos v. United States, 328 U.S. 750, 764-65, 66 S.Ct. 1239, 90 L.Ed. 1557 (1946)).
Appellants complain that the trial court committed prejudicial error by allowing testimony concerning alleged post-termination of employment events such as that relating to Ms. Butler's and Ms. Brooks's trips to Fedora to pick up checks for Ms. Thomas, and their encounter with Mr. Purcell, as well as part of Rev. Fenwick's testimony that focused on the alleged post-employment period. They contend that this testimony related to "conduct that is not actionable sexual harassment as a matter of law." However, Mr. Purcell himself testified that he extended Ms. Thomas' time on the payroll through December 1999, and there was testimony that he initiated contact with Ms. Thomas during this period and continued his sexual harassment of her, indicating the relevance of this evidence. "The trial court is entrusted with a large measure of discretion to control the introduction of evidence." Moore v. United States, 757 A.2d 78, 85 (D.C.2000) (citation and internal quotation marks omitted). And, "[a] ruling on the relevance of evidence rests within the sound discretion of the trial court, and will not be disturbed absent a showing of an abuse of discretion." In re Je. A., 793 A.2d 447, 449 (D.C.2002) (citation omitted). We see no abuse of discretion in the admission of the testimony about which appellants complain.
Appellants argue that the trial court's exclusion of the testimony of Robert Yancey "unfairly prejudiced [them] and denied them a fair trial." According to counsel for defendants, Dr. Yancey was "prepared to testify about the prescription medication that he prescribed for [Ms. Thomas] and that she described certain conditions and reasons for requesting it. And that goes to the possible alternative cause of the emotional distress. . . ." The trial court excluded the testimony because, rather than impeachment evidence, Dr. Yancey's testimony would have been substantive evidence, and Mr. Yancey was not included in appellants' witness list. We see no reason to disturb the trial court's ruling. See Drs. Groover, Christie & Merritt v. Burke, 917 A.2d 1110, 1115 (D.C.2007); Gubbins v. Hurson, 885 A.2d 269, 276-77 (D.C. 2005).
Appellants contend that the trial court allowed Ms. Thomas to testify about a lost opportunity to purchase a condominium and that "[i]t is . . . likely that [that testimony] improperly influenced the jury's calculation of damages." The relevant transcript reveals that appellants made no objection immediately after Ms. Thomas testified that she was having difficulty finding employment so that she could remain in her condominium unit by obtaining a $235,000 loan to purchase it. The objections came when Ms. Thomas was about to say what the loan officer told her and also as she was poised to state that the price of the unit at the time of trial would have been $391,000. The trial court observed that no "motions objecting to . . . the measure of damages" had been filed. Moreover, the jury verdict form does not provide any clue as to how the jury calculated the damages since the jury was only asked to "state the amount of damages you award to Marva Thomas." On this record we cannot say that Ms. Thomas's testimony as to the $391,000 value of a condominium unit influenced the jury to award her $165,000.00 in damages.
Finally, appellants claim that they are entitled to a new trial because "Juror 1, who was elected the jury's foreman, allowed a pre-deposed (sic) bias to infect his and other jurors' deliberations," since the juror stated during a post-verdict conversation with defense counsel that "[w]e all know that sexual harassment happens, even when the plaintiff can't prove it." Appellants presented no affidavit to the trial court from Juror 1 or regarding Juror 1's alleged statement. In addition, "[a]s a general rule, a party cannot impeach a jury verdict by evidence given by the jurors." Posner v. Holmes, 739 A.2d 358, 364 (D.C. 1999) (internal quotation marks and citation omitted); see also Bellamy v. United States, 810 A.2d 401, 409 (D.C.2002) ("we have often warned trial judges to exercise great caution in allowing jurors to impeach their own verdicts") (citations omitted). Furthermore, we have said that "the determination of juror bias or prejudice lies particularly within the discretion of the trial court, reversible only for a clear abuse of discretion. . . ." Id. at 408 (citations omitted). On this record, we cannot say that the trial court abused its discretion in denying appellants a new trial based upon the alleged post-verdict statement of Juror 1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536740/ | 928 A.2d 1072 (2007)
Traine SMITH, Appellant
v.
FRIENDS HOSPITAL, Dewight Magwood, Benjamin Messina, Ronald Potter, Robert Anthony and Dewayne Thomas, Appellees.
Superior Court of Pennsylvania.
Submitted March 19, 2007.
Filed June 21, 2007.
Reargument Denied August 23, 2007.
*1073 Laurence A. Narcisi, III, Philadelphia, for appellant.
Kathleen M. Kramer, Philadelphia, for Friends Hospital, appellee.
BEFORE: LALLY-GREEN, McCAFFERY, and PANELLA, JJ.
OPINION BY McCAFFERY, J.:
¶ 1 Appellant, Traine Smith, appeals from the order of the Court of Common Pleas of Philadelphia County that denied her petition to open a judgment of non pros filed against her by Appellee, Friends Hospital ("the Hospital"). Specifically, Appellant argues that the trial court abused its discretion when it refused to open the judgment of non pros based on its erroneous determination that Appellant was required to have filed a certificate of merit pursuant to Pa.R.C.P. 1042.3(a). After careful review, we reverse.
¶ 2 On October 28, 2005, Appellant filed a complaint alleging that she sustained injuries during a hospitalization at the Hospital when she was sexually assaulted by Appellee, Dewayne Thomas, and "physically assaulted and beaten" by Appellees Thomas, Dewight Magwood, Benjamin *1074 Messina, Ronald Potter, and Robert Anthony (collectively, "the individual Appellees"). (Complaint, filed October 28, 2005, at 8). The complaint alleged that the individual Appellees were at all relevant times employees of the Hospital and that the Hospital was liable under theories of corporate negligence, negligent supervision of employees and agents, and negligence generally.
¶ 3 On January 20, 2006, the Hospital filed a praecipe to enter a judgment of non pros on the grounds that Appellant's cause of action constituted a professional liability claim requiring the filing of a certificate of merit within sixty days of the filing of the complaint, pursuant to Pa.R.C.P. 1042.3. Appellant had not filed a certificate of merit by the sixty-day deadline, and a judgment of non pros was entered in favor of the Hospital and against Appellant on January 23, 2006. On February 3, 2006, Appellant filed a petition to open the judgment of non pros. On April 5, 2006, following oral argument, the trial court denied Appellant's petition.
¶ 4 Appellant filed a timely appeal in which she raises the following single issue for our review:
Whether the [trial court] erred in refusing to open the judgment of non pros where [Appellant] filed a timely petition to open the judgment, there is reasonable explanation for her actions and, finally, she has a meritorious cause of action.
(Appellant's Brief at 5).[1]
[A] petition to open a judgment is an appeal to the equitable powers of the court. [Such petition] is committed to the sound discretion of the hearing court and [an order denying the petition] will not be disturbed absent a manifest abuse of that discretion. Ordinarily, if a petition to open a judgment is to be successful, it must meet the following test: (1) the petition to open must be promptly filed; (2) the failure to appear or file a timely answer must be excused; and (3) the party seeking to open the judgment must show a meritorious defense. In making this determination, a court can consider facts not before it at the time the judgment was entered.
Mother's Restaurant Inc. v. Krystkiewicz, 861 A.2d 327, 336 (Pa.Super.2004) (en banc) (citations omitted). See also Pa. R.C.P. 3051(b) (stating that a petition to open a judgment of non pros must allege facts showing that (1) the petition is timely filed; (2) there is a reasonable explanation or legitimate excuse for the inactivity or delay; and (3) there is a meritorious cause of action).
¶ 5 In the case sub judice, the trial court determined that Appellant's petition to open the judgment of non pros itself established that the petition had been promptly filed and that Appellant had alleged a meritorious cause of action. (Trial Court Opinion, dated November 27, 2006, at 3). However, because the trial court determined that Appellant's failure to file a certificate of merit was without reasonable explanation or legitimate excuse, it denied Appellant's petition. (Id.)
¶ 6 A certificate of merit must be filed either with the complaint or within sixty days after the filing of the complaint in any action asserting a professional liability claim "based upon an allegation that *1075 a licensed professional deviated from an acceptable professional standard." Pa. R.C.P. 1042.3(a) (emphasis added). The certificate must aver:
(1) an appropriate licensed professional has supplied a written statement that there exists a reasonable probability that the care, skill or knowledge exercised or exhibited in the treatment, practice or work that is the subject of the complaint, fell outside acceptable professional standards and that such conduct was a cause in bringing about the harm, or
(2) the claim that the defendant deviated from an acceptable professional standard is based solely on allegations that other licensed professionals for whom this defendant is responsible deviated from an acceptable professional standard, or
(3) expert testimony of an appropriate licensed professional is unnecessary for prosecution of the claim.
Id.
¶ 7 A "licensed professional" includes any person licensed as a health care provider as defined by Section 503 of the Medical Care Availability and Reduction of Error ("MCARE") Act, 40 P.S. § 1303.503. Pa.R.C.P. 1042.1(b)(1)(i). There is no dispute here that the Hospital is a health care provider as defined by the MCARE Act. Therefore, if Appellant's cause of action sounded in professional (i.e., medical) negligence or malpractice, she would have been required to have timely filed a certificate of merit pursuant to Rule 1042.3(a).
¶ 8 Appellant argues that the filing of a certificate of merit was not required because her action against the Hospital did not allege that the Hospital's actions fell below a professional or medical standard; rather, the complaint alleged that the Hospital had committed corporate negligence and had engaged in negligent supervision of its employees who were engaged in nonprofessional activities. We agree.
¶ 9 Recently, this Court reviewed a challenge to a trial court's determination as to whether a complaint sounded in medical malpractice. In our review, we took note of how our courts have defined "medical malpractice" and how case law has interpreted this tort:
Medical malpractice is defined as the unwarranted departure from generally accepted standards of medical practice resulting in injury to a patient, including all liability-producing conduct arising from the rendition of professional medical services. To prevail in a medical malpractice action, a plaintiff must establish a duty owed by the physician to the patient, a breach of that duty by the physician, that the breach was the proximate cause of the harm suffered, and the damages suffered were a direct result of the harm. Thus, the basic elements of medical malpractice and ordinary negligence are the same, although medical malpractice has some distinguishing characteristics. . . .
A medical malpractice claim is distinguished by two defining characteristics. First, medical malpractice can occur only within the course of a professional relationship. Second, claims of medical malpractice necessarily raise questions involving medical judgment. Claims of ordinary negligence, by contrast, raise issues that are within the common knowledge and experience of the fact-finder. Therefore, a court must ask two fundamental questions in determining whether a claim sounds in ordinary negligence or medical malpractice: (1) whether the claim pertains to an action that occurred within the course of a professional relationship; and (2) whether the claim raises questions of *1076 medical judgment beyond the realm of common knowledge and experience. If both these questions are answered in the affirmative, the action is subject to the procedural and substantive requirements that govern medical malpractice actions.
Therefore, where a complaint is predicated upon facts constituting medical treatment, that is, when it involves diagnosis, care and treatment by licensed professionals, the action must be characterized as a professional negligence action.
Ditch v. Waynesboro Hospital, 917 A.2d 317, 321-22 (Pa.Super.2007) (quotations and citations omitted; emphases added). Further, a complaint sounds in medical malpractice where "the conduct at issue constitute[s] an integral part of the process of rendering medical treatment," and where the complaint alleges that "the injury caused to the patient occurred during, and as a direct result of the performance of professional services." Id. at 323 (citations omitted).
¶ 10 In the case sub judice, Appellant's cause of action is based only on her allegations that while hospitalized, she was sexually assaulted and beaten. Appellant's allegations against the Hospital center only around claims that the Hospital failed to properly employ and supervise the individual Appellees, who allegedly perpetrated the sexual and physical assaults on Appellant, and that the Hospital failed to create an environment where such acts could not occur.
¶ 11 Thus, although Appellant's claims pertain to an action that occurred within the course of a professional relationship, they clearly do not raise questions involving medical judgment beyond the realm of common knowledge and experience. In fact, they do not raise questions of medical judgment at all. Nothing in Appellant's complaint is predicated upon substandard medical treatment, that is, acts involving "diagnosis, care and treatment by licensed professionals." Id. at 322.[2] Therefore, Appellant's complaint does not allege professional negligence or a deviation from an acceptable professional standard. Id.[3]
¶ 12 Because Appellant had not filed an action against the Hospital alleging that it had "deviated from an acceptable professional standard," a certificate of merit was not required to be filed with the complaint or within sixty days of the complaint's filing pursuant to Pa.R.C.P. 1042.3(a). Accordingly, we determine that the trial court manifestly abused its discretion in denying Appellant's motion to open the judgment of non pros on the sole grounds *1077 that Appellant had failed to timely file a certificate of merit. Because we conclude that the trial court committed a clear abuse of its discretion, we reverse the order entered April 6, 2006.
¶ 13 Order reversed. Case remanded. Jurisdiction relinquished.
¶ 14 LALLY-GREEN, J., notes her dissent.
NOTES
[1] The trial court's interlocutory order is appealable as of right pursuant to Pa.R.A.P. 311(a)(1) (stating that orders refusing to open, vacate, or strike off a judgment are appealable as of right). See Krauss v. Claar, 879 A.2d 302, 303 n. 4 (Pa.Super.2005), appeal denied, 586 Pa. 713, 889 A.2d 1217 (2005) (noting that an order denying a motion to strike a judgment of non pros is appealable as of right pursuant to Pa.R.A.P. 311(a)(1)).
[2] We further note that with respect to matters of professional medical insurance coverage, our courts have consistently held that professional liability policies do not provide coverage for health care professionals who sexually assault their patients, observing that sexual assaults do not reflect medical skills associated with specialized training. See Physicians Insurance Co. v. Pistone, 555 Pa. 616, 726 A.2d 339 (1999); see also St. Joseph Medical Center v. Medical Professional Liability Catastrophe Loss Fund, 854 A.2d 692 (Pa.Cmwlth. 2004), aff'd, 583 Pa. 412, 879 A.2d 146 (2005) (applying these principles to coverage afforded under the Medical Professional Liability Catastrophe Loss Fund).
[3] Cf. Gondek v. Bio-Medical Applications, Inc., 919 A.2d 283 (Pa.Super.2007) (holding that a plaintiff injured in an automobile accident who had filed a negligence action against the kidney dialysis treatment company that had, immediately prior to the accident, treated a kidney dialysis patient allegedly responsible for the accident, was required to file a certificate of merit pursuant to Rule 1042.3 because the plaintiff's action, which alleged that the treatment company had inadequately monitored and warned the patient concerning possible activity risks of such treatment, set forth a claim of substandard professional care). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536791/ | 207 B.R. 597 (1997)
In re Muthukumaran KALIANA, Debtor.
STATE BANK OF INDIA, Plaintiff,
v.
Muthukumaran KALIANA, Defendant.
Bankruptcy No. 95 B 9323, Adv. No. 96 A 00109.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
April 21, 1997.
*598 *599 John Moore, Chicago, IL, for plaintiff.
Gregory K. Stern, Gregory K. Stern, P.C., Chicago, IL, for defendant.
MEMORANDUM OPINION
JOHN H. SQUIRES, Bankruptcy Judge.
This matter comes before the Court on the motion for sanctions pursuant to Federal Rule of Bankruptcy Procedure 9011 filed by Muthukumaran Kaliana (the "Debtor") against State Bank of India (the "Bank") and one of its attorneys, John Moore ("Moore"), and their response in opposition thereto. For the reasons set forth herein, the Court denies the motion.
I. JURISDICTION AND PROCEDURE
The Court has jurisdiction to entertain this matter pursuant to 28 U.S.C. § 1334 and Local General Rule 2.33(A) of the United States District Court for the Northern District of Illinois. It is a core proceeding under 28 U.S.C. § 157(b)(2)(A), (J), and (O).
II. FACTS AND BACKGROUND
Most of the relevant facts and background are contained in a Memorandum Opinion dated November 27, 1996 wherein the Court denied the Bank's request to revoke the Debtor's discharge. See State Bank of India v. Kaliana (In re Kaliana), 202 B.R. 600 (Bankr.N.D.Ill.1996). The Court found that, although the Debtor had fraudulently concealed a foreign bank account and its proceeds (the "Account"), the Bank had prior knowledge of the existence of the Account, which was located at one of its branches in India, thereby defeating its cause of action under 11 U.S.C. § 727(d)(1). The Court referred the matter to the United States Attorney pursuant to 18 U.S.C. § 3057(a) because of the Debtor's nondisclosure and concealment of the Account. 202 B.R. at 606.
The Bank's knowledge of the Account was evidenced by a certain letter dated July 7, 1988 (the "July 7th letter") from the manager of the Bank's Chicago branch to the manager of its Madras branch. See Debtor's Exhibit No. 3. The July 7th letter was later discovered in the Bank's files after the Debtor's discharge was entered on September 1, 1995. The discovery of the July 7th letter prompted the Bank's investigation into the Debtor's alleged fraud and the subsequent filing of the complaint.
Represented by Moore, the Bank filed its original complaint to revoke the Debtor's discharge on January 26, 1996, and its first amended complaint on May 3, 1996, which Moore signed on behalf of the Bank. See Bank's Exhibit Nos. 1 and 2. The Bank's basis for filing the complaint was the Debtor's failure to disclose the Account. Moore testified that he first became aware that the July 7th letter had been located in the Bank's file on October 16, 1996, during the pretrial *600 discovery incidental to the Debtor's attorneys' request for production of documents.
On January 13, 1997, the Debtor, through his attorneys, Gregory K. Stern, P.C., filed the instant motion under Bankruptcy Rule 9011 seeking to tax the Bank and Moore with the Debtor's unpaid attorneys' fees in the sum of $6,786.65 for the defense against the Bank's attempted revocation of the Debtor's discharge. The Debtor contends that the Bank and Moore had knowledge of the existence of the July 7th letter before the original complaint was filed. Therefore, the allegation in the complaint that the Debtor's fraud was unknown and undetected by the Bank until after the Debtor's discharge order was entered was not well grounded in fact. The Debtor also contends that at no time did the Bank or Moore assert that the filing of the complaint was warranted by a good faith argument for the extension, modification or reversal of existing law, given the existence of the July 7th letter.
Gregory K. Stern testified in support of the motion. In his opinion, all the services rendered were both reasonable and necessary for the Debtor's defense. As early as March 1996, he questioned the viability of the Bank's cause of action and discussed it with Moore on several occasions. He concluded that the Bank's contention that its Chicago branch should be treated as if it were a separate corporate entity from the Madras branch was unsupported by case law and was not a properly articulated good faith argument for the modification, extension, or reversal of existing law. Additionally, Stern testified that he thought the Bank's cause of action was fatally flawed from the outset because of the existence of the July 7th letter in the files of the Bank's Chicago branch by which it had knowledge of the Debtor's Account. Stern further stated that the law firm was owed between $6,000.00-$7,000.00 in unpaid accrued fees for the defense of the Bank's complaint. Stern and his associates first became aware of the July 7th letter when it was furnished to them by Moore at the time discovery closed, just prior to the trial.
In their response in opposition to the motion, the Bank and Moore contend that at the time of the Debtor's discharge, no officer or natural person at the Bank's Chicago branch had knowledge of the July 7th letter. Further they argue that the complaint made a good faith argument for the extension or modification of existing law because the Bank lacked a central registry system, and the Chicago branch essentially operated as a separate banking entity under the Illinois Foreign Banking Office Act, 205 ILCS 645/1 et seq. Consequently, the Bank's corporate knowledge of the Account prior to the Debtor's discharge could not be imputed to the Chicago branch. In addition, they raise five affirmative defenses: (1) the Court lacks jurisdiction because the motion was not filed within the time limit of Local General Rule 46 of the United States District Court for the Northern District of Illinois; (2) the motion is untimely; (3) the motion fails to state a cause of action; (4) the Debtor failed to mitigate damages by allowing the revocation proceeding to proceed to trial rather than earlier disposition on motion for summary judgment, judgment on the pleadings or a motion to dismiss; and (5) it would be inequitable to grant the relief requested in light of the Court's findings in its Memorandum Opinion and the referral to the United States Attorney for possible criminal prosecution of the Debtor as a result of his fraudulent concealment of the Account. The Court will address the instant motion and the defenses thereto in turn.
III. STANDARDS
Federal Rule of Bankruptcy Procedure 9011(a) provides in relevant part:
Every petition, pleading, motion . . . served or filed in a case under the Code on behalf of a party represented by an attorney . . . shall be signed. . . . The signature of an attorney or a party constitutes a certificate that the attorney or party has read the document; that to the best of the attorney's or party's knowledge, information, and belief formed after reasonable inquiry it is well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law; and that it is not interposed for any improper purpose, *601 such as to harass, or to cause unnecessary delay or needless increase in the cost of litigation or administration of the case. . . . If a document is signed in violation of this rule, the court on motion or on its own initiative, shall impose on the person who signed it, the represented party, or both, an appropriate sanction, which may include an order to pay to the other party or parties the amount of the reasonable expenses incurred because of the filing of the document, including a reasonable attorney's fee.
Fed.R.Bankr.P. 9011(a).
Bankruptcy Rule 9011 and former Federal Rule of Civil Procedure 11 are analogous and cases interpreting former Rule 11 (those decided prior to the 1993 amendments) are useful in analyzing Bankruptcy Rule 9011. See In re International Oriental Rug Center, Inc., 165 B.R. 436, 441 (Bankr.N.D.Ill.1994); In re Chapman, 154 B.R. 258, 265 (Bankr. N.D.Ill.) (citation omitted), aff'd, 159 B.R. 812 (N.D.Ill.1993), aff'd, 46 F.3d 1133 (7th Cir.), cert. denied, ___ U.S. ___, 116 S. Ct. 153, 133 L. Ed. 2d 97 (1995). Moore, as attorney for the Bank, signed the original and first amended complaints thereby triggering the potential for Bankruptcy Rule 9011 sanctions against him and his client, the Bank.
The primary purpose of both rules is to deter unnecessary filings for the benefit of the judicial system. Szabo Food Serv., Inc. v. Canteen Corp., 823 F.2d 1073, 1077-1080 (7th Cir.1987), cert. dismissed, 485 U.S. 901, 108 S. Ct. 1101, 99 L. Ed. 2d 229 (1988). Rule 11 is not a fee shifting statute requiring the loser to pay; the focus of Rule 11 is on conduct rather than on results. See Mars Steel Corp. v. Continental Bank N.A., 880 F.2d 928, 932 (7th Cir.1989) (en banc).
Former Rule 11 contains two grounds for the imposition of sanctions: (1) the "frivolousness clause," which looks to whether a party or an attorney for a party made a reasonable inquiry into both the facts and the law; and (2) the "improper purpose clause," which looks to whether a document was interposed for an improper purpose, such as delay, harassment, or increasing the cost of litigation. Brown v. Federation of State Medical Bds. of the United States, 830 F.2d 1429, 1435-36 (7th Cir.1987), abrogated on other grounds, Mars Steel, 880 F.2d at 930. The standard for imposing sanctions under both bases is an objective determination of whether a sanctioned party's conduct was reasonable under the circumstances. Pacific Dunlop Holdings, Inc. v. Barosh, 22 F.3d 113, 118 (7th Cir.1994); Chambers v. American Trans Air, Inc., 17 F.3d 998, 1006 (7th Cir.), cert. denied, 513 U.S. 1001, 115 S. Ct. 512, 130 L. Ed. 2d 419 (1994).
The signer's conduct must be judged by inquiring what was objectively reasonable to believe at the time the pleading was signed. LaSalle Nat. Bank of Chicago v. County of DuPage, 10 F.3d 1333, 1338 (7th Cir.1993). It is not necessary, prior to filing the pleading, that an investigation into the facts be carried out to the point of absolute certainty. Kraemer v. Grant County, 892 F.2d 686, 689 (7th Cir.1990) (citation omitted). The investigation, however, must be reasonable under the circumstances of the particular case. In re Excello Press, Inc., 967 F.2d 1109, 1112-13 (7th Cir.1992).
IV. DISCUSSION
The gravamen of the instant motion is that both the Bank and Moore knew of the existence of the July 7th letter prior to or at the time the amended complaint was filed, thus making it impossible for the Bank to prevail on the second prong required to prove its prima facie case under § 727(d)(1). Thereby, the filing, which alleged a lack of knowledge of the Debtor's fraudulent concealment of the Account prior to the entry of the discharge order on September 1, 1995, was factually untrue and not well grounded in fact. The Debtor does not allege that the complaint was interposed for an improper purpose. Hence, the basis of the motion is the "frivolousness clause" whether the Bank and Moore made a reasonable inquiry into the facts and law.
Both Moore and the Bank counter that prior to the entry of the Debtor's discharge, no individual at the Bank's Chicago branch had actual knowledge of either the July 7th letter or the Account. In essence, Moore and the Bank contend that while constructive *602 notice of the July 7th letter may have barred the Bank from relief under § 727(d)(1), the lack of actual notice of the July 7th letter should serve as a defense to the sanctions.
For purposes of Bankruptcy Rule 9011 sanctions, like many other things, timing can mean everything. That the Court in its Memorandum Opinion concluded that the Bank was on at least constructive notice, for purposes of § 727(d)(1), because of the existence of the July 7th letter in one of its files, does not ipso facto mandate the imposition of sanctions. The Chicago branch of the Bank was not actually aware of the Account until after the Debtor's discharge. Had the evidence at trial indicated that the Bank's Chicago branch's officers, agents, or attorneys actually learned of the July 7th letter's existence prior to entry of the discharge on September 1, 1995, but waited over three months until belatedly filing the complaint, the Court would be inclined to conclude that there would be proper grounds to sanction the Bank or Moore. The evidence adduced at the trial, however, proved that Moore saw the July 7th letter for the first time in October 1996, near the pretrial discovery cut-off date and may have heard of it for the first time either in August or September 1996, over six months after the complaint was filed. No evidence was adduced to establish exactly when the Chicago branch manager or some other responsible officer or agent actually discovered and located the July 7th letter which led to the discovery of the Account.
It is one thing for the Bank's complaint to be denied because it, a single corporate entity, was found to be on constructive notice of the Account located in one branch, of which another branch became actually aware of the Account after the time to object to discharge had run under Bankruptcy Rule 4004. It is another and different thing to prove that an unsuccessful litigant should be sanctioned under Bankruptcy Rule 9011 because the party did not review all possibly relevant files prior to filing the pleading. The Court notes that the evidence at the trial on the complaint showed that the Bank's vice president of credit noticed the July 7th letter in the files he reviewed in conjunction with a subsequent bankruptcy case filed by the Debtor's spouse over two months after the Debtor's discharge was entered. See 202 B.R. at 602.
Thus, the Court concludes that the resident personnel in the Bank's Chicago branch became aware of the existence of the Account sometime between November 1995 and January 1996, a time too late under Bankruptcy Rule 4004 to timely file objections to the Debtor's discharge. The Court finds that Moore's conduct at the time the complaints were filed was objectively reasonable. It would have been better to have actually learned of the July 7th letter prior to the entry of the Debtor's discharge, but not all possibly relevant files must be reviewed prior to a complaint being filed. One's own discovery of its case can continue along with the pretrial discovery of the opponent's case after a complaint is filed. Rule 11 does not impose a continuing obligation on a party to amend its complaint if the complaint was reasonably interposed in the first place. See Schoenberger v. Oselka, 909 F.2d 1086, 1087 (7th Cir.1990); Pantry Queen Foods, Inc. v. Lifschultz Fast Freight, Inc., 809 F.2d 451, 454 (7th Cir.1987). Moreover, failure of proof at trial is not necessarily sufficient to support the imposition of sanctions. The Court must focus on what was reasonable for the Bank and Moore to believe at the time the pleading was filed, not on what the Court later found to be the case. The Bank's theory was adequately proven at trial on the first required element of proof under § 727(d)(1), so the amended complaint was adequately factually supported in that regard.
Even though the Court declined to agree with the Bank's argument that the Chicago branch must essentially operate as a separate banking entity under the Illinois Foreign Banking Office Act, 205 ILCS 645/1 et seq., and thus should be treated as divisible from the Madras branch, this does not mean that the Court considers such argument frivolous. Moore testified that he conducted research on this point, but was unable to find any case law supporting the Bank's position. Lack of such support does not compel a conclusion that the argument, raised in the amended complaint itself (Bank's Exhibit No. 2 at ¶ 12), was not made in good faith. This is reinforced by the undisputed fact that the *603 Bank, though one single corporate entity, lacked any central registry of accounts or central computerized data base from which Bank agents at one branch could search for and retrieve information concerning customer accounts, loans or other relevant data on customers who file bankruptcy.
Bankruptcy Rule 9011 sanctions should not be utilized to penalize attorneys for taking novel, innovative positions. Dicker v. Allstate Life Ins. Co., 730 F. Supp. 111, 115 (N.D.Ill.1989) (citation omitted). The mere absence of legal precedent, the presentation of an unreasonable legal argument, or the failure to prevail on the merits of a particular contention does not justify the imposition of sanctions. See Lerch v. Boyer, 929 F. Supp. 319, 324 (N.D.Ind.1996). In evaluating a filed document under former Rule 11, "a court must take care not to penalize arguments for legal evolution." Szabo, 823 F.2d at 1082. Moreover, "[t]he only way to find out whether a complaint is an effort to change the law is to examine with care the arguments counsel later adduced." Id. The Court finds that the Bank and Moore made a good faith argument in the complaint and at trial for the extension or modification of existing law with respect to the issue of the Bank's knowledge. Accordingly, the Debtor's request for sanctions against the Bank and Moore is hereby denied.
Turning to the defenses asserted by the Bank and Moore, the Court rejects the argument that it lacks jurisdiction over this matter. The Court has subject matter jurisdiction under the text of Bankruptcy Rule 9011 and the cited case authorities. See In re Memorial Estates, Inc., 132 B.R. 19, 22 (N.D.Ill.1991). Both the Bank and Moore have subjected themselves in personam to the Court's limited subject matter jurisdiction by filing the complaint and appearing before the Court.
Next, the Court rejects the argument that the motion at bar is not timely. First, Bankruptcy Rule 9011 contains no explicit time limits for bringing a motion for sanctions. Second, Local General Rule 46 of the District Court and its time limits are inapposite and not applicable in these proceedings before this Court. While it is true that the bankruptcy judges in the District constitute a unit of the District Court pursuant to 28 U.S.C. § 151, the Local General Rules of the District Court are not identical to and are separate from the Local Bankruptcy Rules, promulgated under Federal Rule of Bankruptcy Procedure 9029. The Local Bankruptcy Rules contain no analogue to Local General Rule 46. Rule 11 can be invoked even after a voluntary dismissal of a case. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 393-98, 110 S. Ct. 2447, 2454-57, 110 L. Ed. 2d 359 (1990); Szabo, 823 F.2d at 1077-80; see also In re Slaughter, 191 B.R. 135, 139 (Bankr.W.D.Wis.1995). Szabo defines the outer parameters of the timeliness for a Rule 11 motion in this Circuit. See Kaplan v. Zenner, 956 F.2d 149, 151 (7th Cir.1992). The Kaplan court stated, however, that "where appropriate, such motions should be filed at an earlier time as soon as practicable after discovery of a Rule 11 violation." Id. (footnote omitted). The Court concludes that the instant motion was not untimely. The motion was filed on January 13, 1997, less than two months after the Court entered a final judgment on the merits. The Court finds this constitutes a reasonable amount of time given the Debtor's contention that he did not know what arguments the Bank would make at the trial with respect to the issue of the Bank's knowledge, and thus had to wait until after the trial to file the instant motion.
Moreover, the Court finds the defense that the motion fails to state a cause of action lacks merit because it was not established until trial when Moore and the Chicago branch personnel actually discovered and learned of the July 7th letter. Had either discovered it prior to the Debtor's discharge, the end result of this motion would have been far different. Further, the defense regarding the Debtor's failure to mitigate damages will not be addressed because the Court is not sanctioning the Bank or Moore.
The Court agrees, however, with the argument that it would be an inappropriate and inequitable result to tax the Bank or Moore with the Debtor's attorneys' fees in *604 the absence of objective proof that either violated Bankruptcy Rule 9011, and in light of the finding that the Debtor fraudulently concealed the existence of the Account which was discovered by the Bank after it was too late to timely raise an objection to his discharge. It would be singularly inappropriate to visit the defense costs upon the Bank or Moore in light of the Debtor's conduct. Each party should bear its own costs and fees under the facts and circumstances shown by this record.
V. CONCLUSION
Accordingly, the Court concludes that neither the Bank nor Moore has violated Bankruptcy Rule 9011. The Court finds that the complaints were in substantial part factually grounded and based on legal theories warranted by existing law which was sought to be modified and extended by good faith arguments. The Bank facially stated a viable cause of action in its complaint. It subsequently failed, however, to prove all required elements at trial. This failure does not constitute sufficient grounds to warrant the imposition of Bankruptcy Rule 9011 sanctions. There was no evidence furnished by the Debtor that the original or amended complaints were not filed in good faith. Thus, the sanctions requested are denied.
This Opinion constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. A separate order shall be entered pursuant to Federal Rule of Bankruptcy Procedure 9021. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536801/ | 979 A.2d 209 (2009)
187 Md. App. 514
MONTGOMERY COUNTY, Maryland
v.
Valerie J. WILLIS.
No. 3081, September Term, 2007.
Court of Special Appeals of Maryland.
August 28, 2009.
*210 Wendy B. Karpel (Leon Rodriguez, County Attorney, Marc P. Hansen, Edward B. Lattner, Karen L. Federman Henry on the brief), Rockville, MD, for the Appellant
Douglas M. Gross (Chirumbole, Gross & Conrad P.C. on the brief), Gaithersburg, MD, for Appellee.
Panel: HOLLANDER, MEREDITH, and THIEME, RAYMOND G., JR., (Retired, specially assigned), JJ.
HOLLANDER, J.
In this appeal, we must determine whether an employer is entitled to judicial review of an Order issued by the Workers' Compensation Commission (the "Commission"), denying the employer's request to refer a worker's compensation claim to the Insurance Fraud Division (the "Division") of the Maryland Insurance Administration.
Valerie Willis (the "Employee" or the "Claimant"), appellee, a former Montgomery *211 County Police Officer, obtained compensation benefits for a work related injury sustained in July 2001. Montgomery County (the "County" or the "Employer"), appellant, claimed that after the work-related event, but before benefits were awarded, the Employee sustained a nonwork related injury that she failed to disclose. On that basis, pursuant to Md.Code (2008 Repl.Vol.), § 9-310.2 of the Labor and Employment Article ("L.E."), the County filed a "Request for a Hearing for Referral to the Maryland Insurance Fraud Division." After an evidentiary hearing, the Commission determined there was insufficient evidence of fraud, and declined to refer the matter to the Division. Thereafter, the County sought judicial review in the Circuit Court for Montgomery County. The Claimant moved to dismiss, arguing, inter alia, that the Commission's Order was not appealable. The circuit court agreed and dismissed the appeal.
This appeal followed. The County presents one question for our review, which we quote:
When an employer seeks reimbursement of workers' compensation benefits based on its belief that an employee wrongfully obtained those benefits, is the Commission's determination subject to review in the circuit court as a final order of the Commission?[1]
For the reasons that follow, we shall reverse and remand to the circuit court for further proceedings.
FACTUAL AND PROCEDURAL BACKGROUND[2]
Valerie Willis, a former Montgomery County Police Officer, injured her left knee during a training exercise on July 20, 2001. Despite the injury, Ms. Willis continued to work. She injured her knee again during "a shooting scenario" in August 2001, for which she did not seek medical treatment. Rather, she cared for her knee herself while continuing to work. Then, on December 31, 2001, appellee injured her knee for a third time. On this occasion, however, the injury was not work-related. Appellee was diagnosed with a ruptured anterior cruciate ligament ("ACL"), for which she underwent surgery on January 30, 2002.
On January 26, 2002, a few days before appellee's first surgery, Willis's direct supervisor, Corporal Ed Shropshire, filed with the Commission an "Employer's First Report of Injury or Illness" for appellee. He listed July 20, 2001, as the date the Employer had been notified of appellee's injury.
On March 4, 2002, the Claimant signed a form titled "Employee's Claim Workers' Compensation Commission," in which she represented that she had twisted her left knee during a training exercise on July 20, 2001, and that she had given notice to Lieutenant Rodney Hill on that date. Appellee filed a "Corrected Claim" with the Commission on April 21, 2002, indicating that she injured both her left knee and her back on July 20, 2001. The claim listed July 21, 2001, as the "1st day unable to work," and reflected that Willis returned to work on July 26, 2001. Neither the initial claim nor the corrected claim referred to the incident of December 31, 2001. Nor did the County have any records pertaining to the December 2001 occurrence. According to the County, the *212 claim was "accepted" but "no medicals were forthcoming."
On June 4, 2002, the Commission issued an Order, finding that Willis sustained an accidental injury "arising out of and in the course of employment" on July 20, 2001. But, the Commission ordered that the claim for compensation "be held pending until such time as the nature and extent of the claimant's disability, if any, can be determined."
Appellee had a second knee surgery on September 26, 2005, to repair a torn meniscus in the left knee, for which the County paid the medical expenses. Willis was awarded temporary total disability ("TTD") from September 1, 2005, through February 23, 2006.[3] In April 2006, appellee sought TTD benefits dating to 2002. According to the County, at that point it obtained medical records for the period prior to June 2002, which "revealed an intervening event that was non work related."
On November 20, 2006, through the Montgomery County Self-Insured Fund, appellant filed with the Commission a form titled "Request For A Hearing For Referral To Maryland Insurance Fraud Division" (the "Petition"). The preprinted form stated:
This form may be filed by any party at any time.
The Commission shall refer the case on the person named below to the Insurance Fraud Division in the Maryland Insurance Administration where the Commission finds, after a hearing, that a party requesting the referral has carried the burden of establishing by a preponderance of the evidence that the named person knowingly affected or knowingly attempted to affect the payment of compensation, fees, or expenses under Title 9 of the Labor Law by means of a fraudulent representation.
The undersigned alleges that the person named below violated section 9-310.2(a) of the Labor & Employment Article and requests a hearing before the Commission.
The Commission held an evidentiary hearing on the Petition on April 17, 2007. The Employer's attorney represented that the matter concerned a claim of "Fraud." Explaining "the basis of the fraud," the County's lawyer said:
[I]n May of 2002, ... [appellee] indicated that she twisted her knee on the job in July of 2001, the claim was accepted at that time. No medicals were forthcoming. The medicals we had, that we later received very soon thereafter, was June 24th, 2002 and beyond. So the claim was accepted.
Then in April of 2006, she made a claim for T.T.D. back in 2002, a back claim for temporary total disability. At that point, we were able to secure the medicals predating June of 2002. Those medicals revealed an intervening event that was non work related. That was the first time that the County was aware that there was a non work-related accident on or about December 30th or 31 st of 2001. And then we also found at that time that she had a surgery, an ACL reconstruction, related to that incident in January of 2002. That surgery was never paid for by the County, but a subsequent surgery of 9/26/2005 was paid by the County and the T.T.D. related to that.
*213 And that's the basis of the fraud that we were never informed of theand there was no treatment from July of 2001 until January of 2002, until the intervening event. And the County was unaware and never informed of the intervening event.
Willis testified that she injured herself while on duty on July 20, 2001, while carrying a bullet proof shield. She recalled that she planted her foot, twisted, heard a popping sound, and could not walk for fifteen or twenty minutes. According to appellee, she promptly notified her supervisor, Lieutenant Rodney Hill, but she did not file a claim for compensation at that time. She explained that she did not miss work because she had three days off and treated her knee while at home, with ibuprofen and ice. As a result of her knee injury in July 2001, Willis was temporarily placed on light duty.
Appellee recounted that she sustained a second injury while on duty in August 2001:
[W]e were doing a shooting scenario where we were required to jump up out of the car, run up to the range and engage bad guys, for lack of a better term. When I hit the cement where I had to kneel behind a barrier, my left leg went out from underneath me in a slipping motion and I fell to the ground....
Willis did not seek medical treatment at that time, nor did she miss work. Again, she self-treated with ice and ibuprofen.
Then, on December 31, 2001, Willis injured her knee for a third time, when she jumped off a pick-up truck while "at church." She was not on duty at the time. Willis recounted that she "hopped off" the truck and her "knee twisted," which caused "excruciating pain, extreme swelling." Willis sought medical attention from her primary care physician, Dr. David Harding, on January 2, 2002. The next day, she was seen by Dr. Sheldon Mandel, an orthopaedic surgeon. His report reflects that Willis only mentioned her injury of December 31, 2001.
According to appellee, shortly after her third knee injury, she spoke with her supervisor, Lieutenant Hill. As a result of that conversation, Willis consulted Dr. David Higgins, an orthopaedic surgeon, on January 17, 2002, and an attorney. As noted, she filed a workers' compensation claim on March 4, 2002, pertaining to her injury of July 20, 2001.
Dr. Higgins diagnosed appellee with a torn ACL, a torn medial meniscus, and a torn lateral meniscus. He performed knee surgery on appellee on January 30, 2002. Willis did not ask the County to pay for the surgery, nor did it do so.
On cross-examination, the following ensued:
[EMPLOYER'S COUNSEL]: And the first time you went to the doctor for your knee problems was on January 2nd, 2002; is that
[EMPLOYEE]: That is correct. That was Dr. Harting [sic].
[EMPLOYER'S COUNSEL]: And, at that point, you gave a history of jumping off of the truck; is that correct?
[EMPLOYEE]: That's correct. My knee was so swollen, I couldn't get a pair of jeans on.
* * *
[EMPLOYER'S COUNSEL]: And when you saw [Dr. Mandel on January 3, 2002], you told him about the truck incident [which occurred December 31, 2001] and denied any prior injuries; is that correct?
[EMPLOYEE]: He didn't ask me about any prior injuries.
* * *
*214 [EMPLOYER'S COUNSEL]: When you were evaluated by Dr. [Clifford] Hinkes, or [sic] an independent medical examination on March the 31st, 2006 at the request of the County, you told him that you did not have any priorany subsequent
[EMPLOYEE]: He never asked me that question.
[EMPLOYER'S COUNSEL]: And you never told him of the December 2001 injury; is that correct?
[EMPLOYEE]: I never told him. He never asked me. He asked me what pain I was having that day and what my issues were at that time, and that's what I told him about.
[EMPLOYER'S COUNSEL]: You had another surgery to your knee in September of 2005?
[EMPLOYEE]: Yes, I did.
[EMPLOYER'S COUNSEL]: And you claim that that was related to your accident in July of 2001; is that correct?
[EMPLOYEE]: That's correct.
* * *
[EMPLOYER'S COUNSEL]: In April of 2006, you sought temporary partial disability for the period that you were off of work in 2002; is that correct?
* * *
[EMPLOYEE]: That's probably one of the times we asked for that....
Notably, Dr. Higgins's report of January 17, 2002, reflects that Willis reported the injuries she sustained in July, August, and December of 2001. Dr. Higgins stated:
HISTORY: The patient is a 42-year-old Montgomery County police officer with complaints of left knee pain with multiple injuries, the first being in July 2001, on the job as a police officer. She had a minimal amount of swelling with pain that gradually resolved. She had another injury at the end of August 2001, with reoccurrence of her twisting injury and she had resolution on the pain with minor swelling. The third injury was on 12/31/01, when she jumped down out of a pickup truck and had another twisting injury to her left knee. She had pain and swelling. This was the most amount of swelling she has had over the three injuries.
Dr. Higgins also wrote a letter to appellee's attorney, dated March 14, 2002, stating:
I am writing concerning Ms. Valerie Willis's left knee injury. She sustained her first injury in 07/01 while on duty as a police office [sic] when she sustained a twisting injury to her left knee. She did have swelling at that time. It is my opinion within a reasonable degree of medical certainty that Ms. Valerie Willis tore her left knee anterior cruciate ligament while on duty as a police officer with a twisting injury in 07/01. She had continued symptoms since that initial injury in 07/01. I hope this clears up any confusion concerning her knee injury.
On March 31, 2006, Dr. Clifford Hinkes evaluated Willis at the request of the County. His report chronicled appellee's medical care between 2002 and 2006.[4]
*215 Joan Fitzwater, a Senior Workers' Compensation Adjuster for The Schaffer Companies, Ltd., was one of several people who handled appellee's compensation claim for the County. At the time of the hearing, she had worked for The Schaffer Companies for two years, and worked the previous ten years "for the predecessor adjusting companies for the County."
Ms. Fitzwater stated that it was not until 2006 that the County received appellee's medical records for any period prior to June 2002. She related that the adjusting company asked for those records because appellee's attorney was seeking a period of TTD, and the company did not have documentation to support it.
Michael B. Willis, appellee's husband, had worked as a police officer for the Montgomery County Police Department for 23 years. He testified that he learned in late July or early August of 2001 that his wife had injured her knee in July 2001. Mr. Willis recalled that from July 2001 through the end of December, his wife would "periodically complain that [her knee] was swollen. You could see her limp from time to time, depending upon the weather ... It was apparent that she was in discomfort."
At the time of the hearing, Rodney Hill worked as an Assistant State's Attorney for Baltimore County. In July 2001, he was a Lieutenant with the Montgomery County Police Department, and in the "supervisory chain of command of Officer Valerie Willis ... ."[5] He recalled that Willis made "a comment" after her initial injury in July 2001, although he did not remember "too much specific detail as to ... what exactly it was she said ...." The following exchange is relevant:
[EMPLOYEE'S COUNSEL]: Did she report to you at all that day [i.e., July 21, 2001] whether or not she had injured her left knee?
[HILL]: I vaguelyagain, I vaguely remember her telling me she had been injured. If she said it was the left knee, at this pointI definitely remember her saying she injured herself. I can remember saying, okay, and pretty much from what I recall, that was that. After that I remember having a subsequent conversation with her.
[EMPLOYEE'S COUNSEL]: When was that?
[HILL]: It might have been a few weeks, might have been about a month. It wasn't that long afterwards.
[EMPLOYEE'S COUNSEL]: And what was the nature of that conversation?
[HILL]: She was assigned to the desk. I just happened to be going by the desk and saw some plain clothes. I said, what are you doing at the desk? She said, well, remember I injured my knee...
* * *
She had mentioned to me a subsequent injury as well ... I said, well, did you take care of the paperwork, necessary paperwork? She said, what are you talking about? I said, you have to do your first report of injury and you have to do your worker's compensation. I went into all the detail about it ... now, I take off my lieutenant hat and put on my lawyer hat. You need to protect yourself. You need to do X, Y, and Z and make sure you do this. Probably *216 said it 200 times, you know, get your worker's compensation lawyer, do this, do that, protect yourself. You have a legitimate injury, you know. I said, that's why the law is in place.
Appellant's counsel asked Hill if he was aware that "function code 350" requires an employee to report an injury immediately to a supervisor. Hill stated that he was aware and he also knew that it was a supervisor's "responsibility to insure the completion of all the required reports prior to the end of [their] tour of duty." However, he clarified that he was not Ms. Willis's direct supervisor.
On May 1, 2007, the Commission issued an Order that stated:
Hearing was held in the above claim at Beltsville, Maryland on April 17, 2007 on the following issues:
1. Fraud
2. Penalties and Fees
The Commission finds on the first issue presented that no fraud on the part of the claimant or her counsel has been proven. The Commission finds on the second issue presented that no fees, costs or penalties are appropriate.
It is therefore, this 1 st day of May, 2007, by the Workers' Compensation Commission ORDERED that the above-entitled claim be reset only upon request.
Thereafter, on May 17, 2007, the County sought judicial review in the circuit court, pursuant to L.E. § 9-737. Appellee filed a "Pre-Trial Statement" on November 16, 2007, asserting that the Commission "was correct in its findings and the Claimant committed no fraud arising out of her accidental personal injury on July 20, 2001." The County subsequently filed a "Pre-Trial Statement of The Petitioner," in which it averred that Ms. Willis "obtained benefits without properly disclosing an intervening injury of December 30-31, 2001."
On December 21, 2007, Willis filed a Motion for Summary Judgment/To Dismiss, arguing, pursuant to L.E. § 9-737, that the Order of the Commission was not appealable because the decisionnot to refer the case to the Divisiondid not grant or deny a benefit to appellant under the Workers' Compensation Act. She also averred that the County failed to "allege facts sufficient to prove that [appellee] made a fraudulent representation."
In its opposition to Willis's motion, the County asserted, in part:
The Commission did not find fraud, and therefore declined to make the referral set forth in Labor & Employment Article, § 9-310.2. Had the Commission found that the Claimant "knowingly affected or knowingly attempted to affect the payment of compensation, fees or expenses ... by means of a fraudulent representation," the Commission would have referred the matter to the Insurance Fraud Division. Necessarily, the Commission would have also ordered the Claimant to reimburse the County for the benefits that she knowingly obtained and to which she was not entitled. This would be done pursuant to § 9-310.1. That Section is not discretionarythe statute says that, if the County establishes that she knowingly obtained benefits to which she is not entitled, "the Commission shall order the person to reimburse ...."
If the Commission had found fraud, not only would the referral of § 9-310.2 take place but the reimbursement of § 9-310.1 would have been ordered. Therefore, the Commission's decision denied the County of a benefit, and is a "final order."
In addition, § 9-737 states that an "employer ... or any other interested *217 person aggrieved by a decision of the Commission ... may appeal from the decision of the Commission provided the appeal was filed within thirty days after the date of mailing the Commission's Order." As a party that was aggrieved by the Commission's decision, the County is entitled to this appeal. The simply [sic] statutory language provides for such judicial review. Under these circumstances, the County is entitled to appeal the decision of the Commission.
The court held a hearing on January 24, 2008. The following colloquy is relevant:
THE COURT: [A]s I read [L.E. § ] 9-310.1, I understand it to be that the County would have been entitled to recover monies improperly paid to your client if fraud had been found. Why is that not a benefit under the act?
[EMPLOYEE'S COUNSEL]: Okay. For two reasons. One, it's a separate section. And actually 9-310.1 never mentions fraud. It's a completely different standard. [L.E. § ] 9-310[.1] is just if they knowingly obtain benefits to which they are not entitled. There's nothing about a fraudulent representation or anything else ... the decision in this case was to not refer this case to the insurance division, fraud division. That does not in any way address benefits....
THE COURT: So if there's a finding of fraud, it doesn't follow by necessity that theWould it be the Commission that would order this back payment?
[EMPLOYEE'S COUNSEL]: It doesn't necessarily follow that. They [i.e., the County] would have to raise that under the separate section....
* * *
THE COURT: So if the decision is, okay, I find fraud, I'm going to refer it, there is no award of a benefit is your argument. And it would be for that agency to which it was referred. Who is that? To whom was it referred back to?
[EMPLOYEE'S COUNSEL]: It's actually to thetechnically it's the Insurance Fraud Division in the Maryland Insurance Administration.
According to appellee, because the Commission did not rule on reimbursement in its Order of May 1, 2007, the ruling was not "a final appealable decision." Appellee's counsel emphasized that the Commission was merely asked to decide whether the case should be referred, and he stated: "There are no benefits being decided by that ...." Therefore, he claimed the circuit court lacked jurisdiction to hear "the subject matter of this appeal."
The County's lawyer argued:
[L.E. § ] 310.2 is what the Commission makes you go through first .... And the standard is preponderance of the evidence, "a person knowingly affected or knowingly attempted to affect the payment of compensation, fees or expenses by means of a fraudulent representation." By necessity, if they were to find that: 310.1 says, "if it is established by a preponderance of the evidence that a person has knowingly obtained benefits under this title to which the person is not entitled, the Commission shall order the person to reimburse the insurer." It's not may. It's not discretionary with the Commission. So, if they find that there is a referral, they've already found that there's a preponderance of the evidence that she knowingly affected or knowingly attempted to affect payment of compensation by means of a fraudulent representation. If they find that, then under 310.1, they shall order the reimbursement so it's tied together.
Without citation to any authority, the County's lawyer insisted that the County *218 could not obtain reimbursement under L.E. § 9-310.1 unless it first proceeded under "what the Commission terms their `referral statute,'" i.e., L.E. § 9-310.2. Appellant's counsel said: "I don't think there's any case law on it. It just doesn't come up that often. However, I mean, all I have is the language of the statute that says if you got [that] to which you're not entitled, the Commission shall order reimbursement." Appellant's counsel continued:
You have to file for fraud and the Commission decides really both issues together. Now we've lost both issues. I understand that. The Commission decided no referral. It didn't say anything about reimbursement because they didn't have to. That's part of that decision. The Commission makes you go through that. If we were to say that failure ... to decide that is not appealable... if we were to say that refusing to refer the case is not appealable, then this can never be appealable because the Commission always decides the referral issue first. And if they find no referral, then they're not going to order reimbursement.
By Opinion and Order dated January 25, 2008, the circuit court granted appellee's motion for summary judgment, upheld the Commission's Order of May 1, 2007, and dismissed the appeal. The court stated:
As a general rule, an action for judicial review of an administrative order will lie only if the administrative order is final. See Holiday Spas v. Montgomery County, 315 Md. 390, 395, 554 A.2d 1197, 1199 (1989). "`Final order' or `final action,' within the ambit of the Workmen's Compensation Law, means an order or award made by the Commission in the matter then before it, determining the issues of law and of fact necessary for a resolution of the problem presented in that particular proceeding and which grants or denies some benefit under the Act." Great American Ins. v. Havenner, 33 Md.App. 326, 332, 364 A.2d 95, 99 (1976).
Pursuant to MD. CODE ANN., LAB & EMPL. § 9-310.1, if it is established by a preponderance of the evidence that a person has knowingly obtained benefits to which she is not entitled, the Commission shall order the person to reimburse the self-insured employer for the amount of all benefits improperly received. The County argues that the Commission's order finding an absence of fraud denies it a particular benefit under the Act (i.e. reimbursement for money improperly paid to Respondent) and thus entitles it to appellate review. The court disagrees.
Although the Workers' Compensation Act fails to define the term "benefit," this court attributes significance to the fact that the "benefits" set forth in Subtitle 6 of Title 9 conceive of an award accruing in favor of a covered employee, not a self-insured employer. See MD. CODE ANN., LAB. & EMPL. § 9-601, et seq.
Even if the term "benefit" is held to be ambiguous in this context, the Maryland Court of Appeals has repeatedly held that "[The Workers' Compensation Act] is to be construed as liberally in favor of injured employees as the Act's provisions will permit so as to effectuate its benevolent purpose as remedial social legislation. Any uncertainty in the meaning of the statute should be resolved in favor of the claimant." Lovellette v. Mayor and City Council of Baltimore, 297 Md. 271, 282, 465 A.2d 1141, 1148 (1983).
In light of these considerations, the court finds that the Commission neither granted nor denied a benefit under the Act, as envisioned by the legislature. It *219 merely found that no fraud on the part of the claimant or her counsel had been proven. Accordingly, the May 1, 2007, order was not a "final decision" for purposes of appellate review.
DISCUSSION
I.
Before addressing the parties' contentions, it is helpful to review relevant portions of the Labor and Employment Article and Insurance Article of the Maryland Code.
L.E. § 9-310.1 and L.E. § 9-310.2 state, in part:
§ 9-310.1. Benefits wrongfully obtained; reimbursement; interest.
(a) Reimbursement.In any administrative action before the Commission, if it is established by a preponderance of the evidence that a person has knowingly obtained benefits under this title to which the person is not entitled, the Commission shall order the person to reimburse the insurer, self-insured employer, the Injured Workers' Insurance Fund, the Uninsured Employers' Fund, or the Subsequent Injury Fund for the amount of all benefits that the person knowingly obtained and to which the person is not entitled.
§ 9-310.2. Referral of certain fraud cases to Insurance Fraud Division; reports.
(a) Referral of certain fraud cases to Insurance Fraud Division.In any administrative action before the Commission, if it is established by a preponderance of the evidence that a person knowingly affected or knowingly attempted to affect the payment of compensation, fees, or expenses under this title by means of a fraudulent representation, the Commission shall refer the case on the person to the Insurance Fraud Division in the Maryland Insurance Administration.
L.E. § 9-1106 is also pertinent. It provides:
§ 9-1106. False claims.
(a) Prohibited act.A person may not knowingly affect or knowingly attempt to affect the payment of compensation, fees, or expenses under this title by means of a fraudulent representation.
(b) Penalties.A person who violates this section, on conviction:
(1) is subject to the penalties of § 7-104 of the Criminal Law Article; and
(2) may not receive compensation, fees, or expenses under this title.
Notably, L.E. § 9-1106 "is a criminal statute ...." Kelly v. Consolidated Delivery Co., 166 Md.App. 178, 188, 887 A.2d 682 (2005), cert. denied, 393 Md. 161, 900 A.2d 206 (2006). Thus, "before the Commission may enforce the penalty" under L.E. § 9-1106(b)(2), the claimant must be convicted by a court, "as the Commission is without the power to convict anyone." Id.[6]
L.E. § 9-737, which is central to this case, states:
§ 9-737. Judicial ReviewAuthorized.
An employer, covered employee, dependent of a covered employee, or any other interested person aggrieved by a decision of the Commission, including the Subsequent Injury Fund and the Uninsured Employers' Fund, may appeal from the decision of the Commission provided the appeal is filed within *220 30 days after the date of the mailing of the Commission's order by:
1) filing a petition for judicial review in accordance with Title 7 of the Maryland Rules ....
Md.Code (2003 Repl.Vol., 2008 Supp.), § 2-401 of the Insurance Article ("Ins.") provides:
§ 2-401. Definitions.
(a) In general.In this subtitle the following words have the meanings indicated.
(b) Fraud Division."Fraud Division" means the Insurance Fraud Division in the Administration.
(c) "Insurance fraud" means:
(1) a violation of Title 27, Subtitle 4 of this article;
(2) theft, as set out in §§ 7-101 through 7-104 of the Criminal Law Article;
(i) from a person regulated under this article; or
(ii) by a person regulated under this article or an officer, director, agent, or employee of a person regulated under this article; or
(3) a violation of § 9-1106 of the Labor and Employment Article ....
Ins. § 2-405 sets forth the general powers and duties of the Division. It states, in part:
§ 2-405. General powers and duties of Fraud Division.
The Fraud Division:
(1) has the authority to investigate each person suspected of engaging in insurance fraud;
(2) if appropriate after an investigation:
(i) shall refer suspected cases of insurance fraud to the Office of the Attorney General or appropriate local State's Attorney to prosecute the person criminally for insurance fraud;
* * *
(iv) shall notify the Workers' Compensation Commission of suspected cases of insurance fraud referred to the Office of the Attorney General or appropriate local State's Attorney under subparagraph (i) of this paragraph that involve the payment of compensation, fees, or expenses under the Workers' Compensation Law ....
Some legislative history is also useful. L.E. § 9-310.1, initially House Bill 673, became effective on October 1, 1993. See 1993 Md. Laws, Ch. 171. The Bill amended L.E. § 9-1106 ("False claims") to "increase the penalty for the purpose of deterring the abuse of the workers' compensation benefits system, and to provide the Commission with the authority to order an individual wrongfully obtaining benefits to reimburse the payor of those benefits." Kelly, 166 Md.App. at 186, 887 A.2d 682. Although both amendments, as originally proposed, were to be included in L.E. § 9-1106, the reimbursement provision was ultimately set forth in a separate statute, codified at L.E. § 9-310.1. Id. at 186-87, 887 A.2d 682.
An analysis of HB 673, prepared by the House Economic Matters Committee, stated that the Bill "requires the Commission to order the person to reimburse the insurer, self-insured employer ... if the evidence indicates benefits were fraudulently obtained. The reimbursement must include the benefits received and costs incurred." The title to Chapter 171, Laws of 1993, states: "Workers' Compensation-False Claims-Penalty and Reimbursement."[7] The bill was proposed
*221 FOR the purpose of altering the penalty for violating the prohibition against knowingly obtaining or attempting to obtain compensation to which a person is not entitled; providing that if it is established by a preponderance of the evidence that a person knowingly obtained any benefits to which the person was not entitled, the Workers' Compensation Commission shall order the person to reimburse the amount of the benefits; providing that an order of reimbursement shall include a certain interest; and generally relating to false claims under the workers' compensation law.
As we explained in Kelly, 166 Md.App. at 188, 887 A.2d 682, under L.E. § 9-310.1 the Commission "has the authority ... to hold a hearing for the purpose of determining whether a fraud has been committed, and to order reimbursement of any benefits obtained by fraud." However, Kelly did not discuss L.E. § 9-310.2.
L.E. § 9-310.2 was first introduced as Senate Bill 639 on February 6, 2004.[8]See 2004 Md. Laws, Ch. 471. It became effective on July 1, 2004. Id. SB 639 also contained changes to Ins. § 2-401, which defines "Insurance Fraud." Initially, when the changes were proposed, Ins. § 2-401(c)(3) stated that insurance fraud included "knowingly obtaining benefits to which a person is not entitled under § 9-310.1 of the Labor and Employment Article." When the Bill was adopted, however, the language referring to L.E § 9-310.1 was deleted and L.E. § 9-1106 was added to the definition. See page 17, supra, quoting Ins. § 2-401(c)(3).
We turn to the parties' contentions.
II.
The County maintains that Willis wrongfully obtained compensation benefits, and for that reason it asked the Commission to refer the matter to the Division, pursuant to L.E. § 9-310.2. In its view, appellee's "omission of the December [2001] injury from the information she submitted [in 2002] with her claim for workers' compensation benefits directly impacted the finding of [a] causal relationship between her work-related injury in July 2001 and the surgery she underwent in 2005, along with the accompanying temporary total disability benefits." It argues that the Commission's denial of the County's request for referral to the Division is subject to judicial review "as a final order of the Commission," because it "is a final substantive disposition of the case." In this regard, the County relies on L.E. § 9-737, which permits an appeal by an employer who is aggrieved by a decision of the Commission.
According to the Employer, the circuit court improperly applied a "narrow interpretation" of L.E. § 9-737 that "effectively adds language to the statute by relying upon the grant or denial of a benefit, rather than the aggrievement of a party." It argues: "Not only does the statute fail to limit judicial review to grants or denials of benefits to an employee, but the cases interpreting [L.E. § 9-737] support the ability of the employer to obtain judicial review." The County elaborates: "The reference to a `benefit' as part of the appealable order has served as a mechanism to distinguish a final decision from the various interim decisions that the Commission *222 may make regarding procedural or other issues." So long as a decision is "equivalent" to the grant or denial of a benefit, argues appellant, it satisfies the requisites for review.
Moreover, appellant suggests that its Petition concerned benefits; it contends that it was entitled toand soughtreimbursement of workers' compensation benefits that appellee "wrongfully obtained." The County asserts:
[B]enefits had been awarded and paid to the employee. The challenge to the propriety of that award had an effect on whether the employee could retain those benefits or would have to reimburse the County for some or all of the compensation paid. When the Commission determined that the employee had not obtained the workers' compensation benefits wrongly, that decision was a final order that disposed of the pending issues before the Commission and had the effect of granting the benefits that the County questioned.
Further, the County argues:
[T]he Commission's determination that no fraud occurred created a direct impact on the employerabsent the finding of fraud, the employee keeps the benefits awarded, even though they may have been wrongfully obtained through the incomplete information available to the County. The Commission's decision was not in the County's favor, and the County has the right to challenge that decision in the Circuit Court. The evaluation of the evidence under the fraud section necessarily accompanies the analysis of the evidence for purposes of ordering a reimbursement of benefits. The Circuit Court should have heard testimony and argument on appeal from the Commission in this case.
Noting that L.E. § 9-310.1 (regarding reimbursement) and L.E. § 9-310.2 (regarding fraud) are interrelated, with similar "evidentiary thresholds," the Employer asserts: "Although the County filed a form requesting a hearing for referral to the Maryland Insurance Fraud Division, this did not limit the scope of the issue before the Commission in a manner that excluded consideration of the reimbursement provision of the law."[9] It states:
[T]he same testimony and evidence could lead the Commission to find fraud or to determine that, although fraud was not shown, the benefits were wrongfully obtained by virtue of omitting evidence that affected the finding of causation.... Once the Commission determined to hold a hearing, it was obligated to refer the matter to the Insurance Fraud Division if the evidence established that a misrepresentation had been made and was the basis for an award. Similarly, the Commission was obligated to order reimbursement if the evidence established that the benefits were wrongfully obtained. No particular filing was required to preserve this particular aspect of the Commission's authority, and it is properly before this Court as one of the aspects of the case that is subject to review by the Circuit Court.
The Employee insists that the Commission's Order was not reviewable because it did not grant or deny a benefit, as contemplated under the Workers' Compensation Act. She characterizes as "simplistic" appellant's position that "the word `benefit' merely serves `as a mechanism to distinguish a final decision from the various interim decisions' ...." Appellee elaborates:
*223 In fact, the decision of the Commission that formed the basis of this appeal was not based at all on either party seeking benefits. The Claimant was not seeking specific benefits and the County was not denying specific benefits or seeking back specific benefits. The sole issue raised by the County was the request that the Commission refer the matter to another state agency.[ ]
In a footnote, appellee points out that, even if the issue raised by the County concerned L.E. § 9-310.1, "no evidence was introduced at the hearing as to what benefits were `knowingly obtained' [to] which the claimant was not entitled. As such, another hearing would have been necessitated to determine those benefits subject to reimbursement. This would leave the first hearing having not granted or denied a benefit from which the claimant could have appealed."
We reject the County's argument that an action under L.E. § 9-310.2 (referral to the Division) is tantamount to an action under L.E. § 9-310.1 (reimbursement). Nor would an action under L.E. § 9-310.2 necessarily determine the question of entitlement to reimbursement, so as to constitute the grant or denial of a benefit. Nevertheless, we agree that the Commission's decision was a final, appealable order, from which the County had the right to seek judicial review. We explain.
In analyzing appellant's attempt to characterize its claim under L.E. § 9-310.2 as an action under L.E. § 9-310.1, we consider the well settled principles of statutory interpretation. "The overarching rule is that, in construing statutes, our primary goal is always to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by a particular provision ..." Opert v. Criminal Injuries Compensation Bd., 403 Md. 587, 593, 943 A.2d 1229 (2008) (quoting Barbre v. Pope, 402 Md. 157, 172, 935 A.2d 699 (2007))(citing Dep't of Health v. Kelly, 397 Md. 399, 419-20, 918 A.2d 470 (2007), and Gen. Motors Corp. v. Seay, 388 Md. 341, 352, 879 A.2d 1049 (2005)) (internal quotations omitted).
In our effort to effectuate the Legislature's intent, we give the words of a statute their ordinary and usual meaning. City of Baltimore Dev. Corp. v. Carmel Realty Assocs., 395 Md. 299, 318, 910 A.2d 406 (2006); Ridge Heating, Air Conditioning and Plumbing, Inc. v. Brennen, 366 Md. 336, 350, 783 A.2d 691 (2001). If the language is clear and unambiguous, we ordinarily "need not look beyond the statute's provisions and our analysis ends." Barbre, 402 Md. at 173, 935 A.2d 699; see also Thomas v. State Ret. & Pension Sys., 184 Md.App. 240, 249, 964 A.2d 733 (2009). In addition, "an interpretation should be given to the statutory provisions that does not lead to absurd consequences." Anderson v. The Gables, 404 Md. 560, 571-72, 948 A.2d 11 (2008); see Chesapeake Charter, Inc. v. Anne Arundel Co. Bd. of Educ., 358 Md. 129, 135, 747 A.2d 625 (2000)(stating that an appellate court may also consider "`the consequences resulting from one meaning rather than another, and adopt that construction which avoids an illogical or unreasonable result, or one which is inconsistent with common sense.'") (citation omitted).
Further, we are obligated to construe the statute as a whole, so that all provisions are considered together and, to the extent possible, reconciled and harmonized. Navarro-Monzo v. Washington Adventist, 380 Md. 195, 204, 844 A.2d 406 (2004); see also Gwin v. Motor Vehicle Admin., 385 Md. 440, 462, 869 A.2d 822 (2005) ("`[W]e do not read particular language in a statute in isolation or out of context [but construe it] in light of the *224 Legislature's general purpose and in the context of the statute as a whole.'") (citation omitted); Gordon Family P'ship v. Gar on Jer, 348 Md. 129, 138, 702 A.2d 753 (1997) (Where "appropriate," we interpret a provision "in the context of the entire statutory scheme of which it is a part."). If "`reasonably possible'" we read a statute "`so that no word, phrase, clause or sentence is rendered surplusage or meaningless,'" Del Marr v. Montgomery Co., 169 Md.App. 187, 207, 900 A.2d 243 (2006) (citations omitted), aff'd, 397 Md. 308, 916 A.2d 1002 (2007), or "superfluous or redundant." Blondell v. Baltimore City Police Dep't., 341 Md. 680, 691, 672 A.2d 639 (1996); see Collins v. State, 383 Md. 684, 691, 861 A.2d 727 (2004); Eng'g Mgmt. Servs., Inc. v. Md. State Highway Admin., 375 Md. 211, 224, 825 A.2d 966 (2003); Mayor & Council of Rockville v. Rylyns Enters., Inc., 372 Md. 514, 551, 814 A.2d 469 (2002).
With these principles in mind, we look to the statutory text of L.E. § 9-310 and its plain meaning. To be sure, L.E. § 9-310.1 and L.E. § 9-310.2 are interrelated. Yet, the provisions are not synonymous. A request under L.E. § 9-310.2 for a referral to the Division is clearly not the same as a request for reimbursement of benefits wrongfully obtained by the employee, as set forth in L.E. § 9-310.1. If the County's position were correct, there would have been no reason for the Legislature to enact two distinct statutory provisions; one of the provisions necessarily would be rendered superfluous, which is at odds with the principles of statutory construction.[10]
Our construction of these two provisions is strengthened by the observation that the text of L.E. § 9-310.2 is broader than the text of L.E. § 9-310.1. Under L.E. § 9-310.2, the Commission is required to refer the matter to the Division, even if the claimant never actually obtained any benefits by fraud, so long as the evidence establishes a knowing attempt to do so. In contrast, under L.E. § 9-310.1 the employer would be entitled to recover the disputed benefits paid to the claimant only upon a finding that benefits were actually but wrongfully obtained. In other words, L.E. § 9-310.1 does not include conduct that amounts to attempt.
Therefore, we are not persuaded by appellant's back door attempt to cast this matter as an action to recover benefits paid to appellee. Appellant's claim under L.E. § 9-310.2 was not an action to recover benefits under L.E. § 9-310.1, merely because appellant could have sought to recover benefits if it had prevailed under L.E. § 9-310.2. Moreover, appellant is mistaken in its contention that if it had prevailed under L.E. § 9-310.2, it automatically would have been entitled to prevail under L.E. § 9-310.1, because the scope of § 9-310.2 is broader than § 9-310.1. This is not the end of our analysis, however.
As noted, the right to judicial review of a decision by the Commission is governed by L.E. § 9-737. Under L.E. § 9-737, an employer "aggrieved by a decision of the Commission" may appeal to the circuit court, "provided the appeal is filed within 30 days after the mailing of the Commission's order." The cases that discuss L.E. § 9-737 and its predecessor, Article 101, § 56, indicate that a "decision" must be a "final decision or order in a *225 case," rather than an interim order. See Montgomery Co. v. Ward, 331 Md. 521, 526, 629 A.2d 619 (1993).
In Great American Ins. v. Havenner, 33 Md.App. 326, 364 A.2d 95 (1976), decided prior to the enactment of L.E. § 9-310.1 and L.E. § 9-310.2, this Court set forth a definition of a "`final order' or `final action,' within the ambit of the Workmen's Compensation Law ...." Id. at 332, 364 A.2d 95. It stated that a final order "means an order or award made by the Commission in the matter then before it, determining the issues of law and of fact necessary for a resolution of the problem presented in that particular proceeding and which grants or denies some benefit under the [Workers' Compensation] Act." Id. (emphasis in original). Notably, it can include an interim order, under certain circumstances.
In Havenner, the Commission found that the employee's back injury was sustained in the course of his employment, and awarded him temporary total disability benefits. Id. at 327, 364 A.2d 95. The employer-insurer noted an appeal, alleging that the Commission had "... not justly considered all of the facts ... and ... [had] misconstrued the law and facts ...." Id. at 328, 364 A.2d 95. The employee claimed that the circuit court lacked jurisdiction over the subject matter because the Commission's order "was interlocutory `and not a final order.'" Id. (quoting the employee). The circuit court agreed with the employer-insurer.
On appeal, we considered whether "an award of [TTD is] a `final' order" for purposes of the right to judicial review. Id. at 327, 364 A.2d 95. We held that the award of TTD was a final, appealable order, because the decision determined all the issues then before the Commission, and it conferred a benefit on the claimant. Id. at 332, 364 A.2d 95. The Court's analysis, id. at 328-29, 331, 364 A.2d 95, provides guidance:
Unquestionably, Md. Ann.Code art. 101, § 56 [predecessor to L.E. § 9-737] confers the right upon a "... person feeling aggrieved by any decision of the Commission to appeal to the circuit court of the county[ ] ... having jurisdiction over the place where the accident occurred or over the person appealing from such decision ...." The Court of Appeals, however, has, by rule, made it perspicuous that only "final action" of the Commission is appealable. Md. Rule B1 a [predecessor to Rule 7-201].
The obvious question then is what is meant by "final action" or "final order," as that term is applied to appeals to the circuit court from decisions of the Workmen's Compensation Commission.
In Liggett & Meyers Tobacco Company v. Goslin, 163 Md. 74, 160 A. 804 (1932), the Court, referring to Md. Ann. Code art. 101, § 56 a said:
"... [T]he appeal allowed by the statute... is not from the findings or opinion of the commission but from its `decision.' And by `decision' is obviously meant the order by which it disposes of the case." 163 Md. at 78, 160 A. at 806.
This Court, in Flying "A" Service Station v. Jordan, [17 Md.App. 477, 302 A.2d 650 (1973) ], stated:
"A decision of the Commission which an aggrieved party is entitled to have reviewed by a Court must be an operative order which has the effect of granting or denying some benefit under the Workmen's Compensation law. Most often, such a decision is reached by giving effect to multiple findings, but it is the ultimate decision or order, not each individual finding, which is the basis for judicial review. Obviously, in a review of the correctness *226 of a decision or order, each finding that contributed to the final result is examined, and one incorrect finding may make the result incorrect. But the appeal is from the result, rather than from each of its separate elements." (Emphasis supplied). 17 Md.App. at 480-81, 302 A.2d at 653.
Big Vein Coal Co. [v. Leasure, 192 Md. 435, 64 A.2d 563 (1949) ] was concerned with the appeal from an order of the Commission granting leave to file an amended claim. The Court of Appeals held that such an order was interlocutory and went on to restate the law that:
"The judgment must be final before this Court has any jurisdiction to hear the appeal. Statutory provisions for appeal from, or review of, orders of administrative tribunals have generally been construed as applicable, not to interlocutory orders, but only to final orders." 192 Md. at 437, 64 A.2d at 564.
There can be no serious question but that the Commission in the Big Vein case did not pass an operative order which had the effect of granting or denying some benefit under the Workmen's Compensation Act to either Big Vein or the claimant, Leasure. The granting of the privilege to file an amended claim did not adjudicate any issue of law or fact. At most, it merely set the stage for an orderly presentation of the evidence to the Commission of the entire claim and not a fragmented part thereof.
* * *
Although the remedy of permanent disability is yet to be determined, temporary total or temporary partial disability awards are independent rights arising from the common remedy of workmen's compensation which continue until the claimant reaches maximum improvement....
The Court was undoubtedly mindful of the economic impact of a decision that would have held to the contrary. It said, id. at 331-32, 364 A.2d 95:
Under Maryland law, payments of compensation made pursuant to an award of the commission, even though reversed on appeal, may not be recovered from the claimant, St. Paul Fire and Marine Ins. Co. v. Treadwell, 263 Md. 430, 283 A.2d 601 (1971). To hold that an award of temporary disability (total or partial) may not be appealed would subject an employer-insurer to the hazard of paying an award which might amount to a large sum of money and render the employer-insurer unable to recover the expenditure if the courts determine the award was erroneous....
In our view, the cases since Havenner that refer to the grant or denial of "benefits," in the context of appealability, are not controlling here, because of the particular statutory provision at issue in this case, enacted a few years ago. As we shall see, the cases discussed below recognized that workers' compensation cases generally concern the grant or denial of benefits, and demonstrate that if a decision is not essential to the disposition, it is not appealable. Conversely, a final, substantive decision of the Commission is appealable, as is an interim decision, if it pertains to an award or denial of a benefit.
In Murray Int'l. Freight Corp. v. Graham, 315 Md. 543, 555 A.2d 502 (1989), Graham hauled freight for Murray International Freight Corporation ("Murray"). Although the Commission determined that Graham was an employee of Murray, it determined that he did not sustain an accidental injury in the course of his employment, and denied his compensation claim. *227 Id. at 546, 555 A.2d 502. Graham did not appeal. Instead, he filed suit against Murray to recover workers' compensation premiums that the company deducted from his pay. Id. The District Court entered judgment for Graham and the trucking company appealed, alleging that Graham was an independent contractor and not an employee. The circuit court affirmed.
On appeal, the Court of Appeals considered whether Murray was collaterally estopped from relitigating the Commission's determination of Graham's employment status, i.e., whether he was an independent contractor or an employee of Murray. Id. at 545, 555 A.2d 502. The Court held that collateral estoppel did not bar Murray's claim, because "the fact-finding sought to be relitigated was not essential to the Commission's decision," and Murray could not have appealed from the Commission's order denying Graham's request for workers' compensation benefits. Id. at 552, 555 A.2d 502.
The Murray Court quoted Havenner, 33 Md.App. at 332, 364 A.2d 95, for the proposition that, for "purposes of appealability," a final order is "`an order or award made by the Commission in the matter then before it, determining the issues of law and of fact necessary for a resolution of the problem presented in that particular proceeding and which grants or denies some benefit under the Act.'" Id. at 553, 555 A.2d 502 (emphasis omitted). It explained that "[a] `benefit' ... means a grant of an award under Article 101 [predecessor to L.E. Title 9], or something equivalent thereto ...." Id. at 553 n. 6, 555 A.2d 502. The Court held that a "determination of the employment issue was not necessary to a `resolution of the problem presented' by Graham's compensation claim." Id. Thus, it was not a final order as to that issue, and the employer could not appeal from the Commission's finding that Graham was Murray's employee.
Paolino v. McCormick & Co., 314 Md. 575, 579, 552 A.2d 868 (1989), also provides guidance. Paolino, an employee of McCormick & Company ("McCormick"), injured her back and petitioned the Commission for benefits. The Commission awarded her permanent partial disability payments. Id. at 577, 552 A.2d 868. Thereafter, Paolino had a spinal fusion and sought temporary total disability for the period of her hospitalization. Id. at 578, 552 A.2d 868. McCormick opposed the claim, stating that Paolino no longer worked for McCormick and that her claim was time barred. The Commission denied the claimant's request, despite its determination that limitations did not bar her claim. Id. Paolino sought judicial review in the circuit court, and McCormick cross-appealed as to limitations. The circuit court granted partial summary judgment for Paolino on limitations, but later rejected her appeal of TTD, and entered a judgment for McCormick. Nevertheless, McCormick appealed the limitations issue to this Court, which found in its favor. Id.
The Court of Appeals remanded with instructions for this Court to dismiss the appeal. It quoted Havenner for the proposition that an appealable, final order of the Commission must grant or deny a benefit under the Workers' Compensation law. Id. at 583, 552 A.2d 868. In its view, the Commission's ruling as to limitations did not confer a "benefit," and therefore that finding was not appealable. The Court concluded that the limitations issue "was an interlocutory determination that disposed of nothing in a final sense; it merely kept alive Paolino's temporary total disability claim." Id. at 584, 552 A.2d 868.
More recently, in Griggs v. C & H Mech. Corp., 169 Md.App. 556, 905 A.2d 402 (2006), C & H Mechanical Corporation ("C *228 & H") and its insurer sought judicial review of the Commission's decision to deny its motion for a rehearing as to an order awarding benefits to an employee, Griggs. The employee filed a motion to dismiss. Id. at 562, 905 A.2d 402. After the circuit court denied the motion, Griggs appealed. Id. He argued that the "petition for judicial review should have been dismissed because (1) it challenge[d] only the Commission's... denial of appellees' motion for a rehearing, rather than the ... order awarding workers' compensation; (2) the [denial of the motion for rehearing] [was] not a final appealable order because it [did] not grant or deny some benefit under the workers' compensation laws; and (3) it [was] too late to petition for review of the... decision [granting him workers' compensation benefits]." Id. at 563, 905 A.2d 402.
This Court rejected Griggs's argument. Id. We were of the view that a challenge to the Commission's denial of the motion for rehearing was also a challenge to the award of benefits to Griggs. Id. at 564, 905 A.2d 402. The Court held that an employer is entitled to judicial review of the circuit court's denial of its request for a rehearing concerning an order of benefits to the employee. Id. We reasoned that "both the statutes and case law make clear that the `decision' being challenged on appeal is the final substantive disposition of the workers' compensation claim." Id.
The cases discussed above must be reconciled with L.E. § 9-737, titled "Judicial Review," and considered in the context of the issues involved in those cases. L.E. § 9-737 expressly permits an employer "aggrieved by a decision of the Commission" to appeal, without any limitation restricting the right of appeal to cases granting or denying "benefits." As we have said, to the extent that the Commission makes a decision not essential to the ultimate disposition, such as in Paolino and Murray, such decisions are not final and appealable. In contrast, the award or denial of compensation benefits, even on a temporary basis, is appealable. But, these cases do not necessarily foreclose an appeal under the circumstances attendant here, concerning a statute enacted long after the decisions were rendered in Havenner, 33 Md.App. 326, 364 A.2d 95, Murray, 315 Md. 543, 555 A.2d 502, and Paolino, 314 Md. 575, 552 A.2d 868. By its terms, the Legislature conferred a statutory right on the Commission to refer fraud cases to the Division, pursuant to L.E. § 9-310.2. The Commission's denial of the employer's request for a referral to the Division fully and finally resolved the question of whether the employer showed, by a preponderance of evidence, that Willis "knowingly affected or knowingly attempted to affect the payment of compensation, fees, or expenses ... by means of a fraudulent representation ...." Moreover, L.E. § 9-737 is not ambiguous, and thus we need not look beyond the statute to glean the legislative intent. Bd. of License Comm'rs for Charles Co. v. Toye, 354 Md. 116, 122, 729 A.2d 407 (1999); see Kaczorowski v. Mayor & City Council of Baltimore, 309 Md. 505, 513, 525 A.2d 628 (1987) (stating that when a statute is not ambiguous, we generally will not look beyond its language). The plain language of L.E. § 9-737 allows an aggrieved employer to note a timely appeal.
Notably, when the Legislature enacted L.E. § 9-310.1 and L.E. § 9-310.2, it did not signal an intent to preclude judicial review of decisions rendered by the Commission under those provisions. Cf. Maryland-Nat'l Capital Park and Planning Comm'n v. Anderson, 395 Md. 172, 188, 189, 909 A.2d 694 (2006) (concluding that a not guilty finding under the Law Enforcement Officer's Bill of Rights is not appealable *229 by the agency because § 3-108(a)(3) of the Public Safety Article "expressly states that `[a] finding of not guilty terminates the action,'" and noting: "If the Legislature intended for `not guilty' findings to be reviewable, it could have included language to express that intention, rather than stating that the action is terminated."). Indeed, the denial of the right to judicial review would come close to vesting unchecked power in the Commission with respect to matters under L.E. § 9-310.2, and could potentially thwart the underlying legislative purpose of that provision.
We are mindful that "the Workers' Compensation Act is to be construed as liberally in favor of injured employees as the Act's provisions will permit so as to effectuate its benevolent purpose as remedial social legislation." Lovellette v. Mayor and City Council of Baltimore, 297 Md. 271, 282, 465 A.2d 1141 (1983). See also Uninsured Employers' Fund v. Danner, 388 Md. 649, 659, 882 A.2d 271 (2005) ("Because this case involves the Workers' Compensation Act, we ... endeavor to interpret its provisions liberally, where possible, in order to effectuate the broad remedial purpose of the statutory scheme."); Livering v. Richardson's Rest. & PMA, 374 Md. 566, 574, 823 A.2d 687 (2003) ("The Act essentially is remedial, social legislation designed to protect workers and their families from various hardships that result from employment-related injuries."); Mayor and City Council of Baltimore City v. Johnson, 156 Md.App. 569, 594, 847 A.2d 1190 (2004) ("As we consider the statutory scheme and the specific provisions that are at issue here, we are mindful of the broad social and remedial purposes that undergird the Act."), aff'd, 387 Md. 1, 874 A.2d 439 (2005).
Yet, the Legislature enacted L.E. § 9-310.1 and L.E. § 9-310.2 to discourage fraud, and to deter employees from abusing the privileges afforded under the Workers' Compensation Act. These sections were intended to protect employers/insurers and the public by helping to assure the integrity of the workers' compensation system. As we have said, that purpose would be thwarted without judicial review of the Commission's decision, whether the decision happened to grant or deny a referral request based on alleged fraud. An interpretation of L.E. § 9-737, to permit judicial review of decisions under L.E. § 9-310.2, does not run counter to the benevolent purpose of the Act.
For these reasons, we shall reverse the decision of the circuit court and remand for further proceedings.
JUDGMENT OF THE CIRCUIT COURT FOR MONTGOMERY COUNTY REVERSED. CASE REMANDED TO THE CIRCUIT COURT FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID BY APPELLEE.
NOTES
[1] In our view, the question, as phrased, does not accurately capture the issue presented, because the Employer did not file a claim for reimbursement. This is discussed, infra.
[2] Our summary of the facts derives largely from the evidence presented at the hearing held by the Commission on April 17, 2007.
[3] On February 26, 2006, the County sent appellee a form titled "Termination of Temporary Total Disability Benefits," informing her that her last compensation check would include benefits through February 23, 2006. It explained that her benefits were being terminated because she missed an "independent medical exam appointment on 2/24/06."
[4] According to the report, in 2003 Willis "began to complain of some lower back complaints and left leg sciatica." She continued to see Dr. Higgins for physical therapy through 2004. On March 31, 2005, she saw Dr. Montague Blundon, an orthopedic surgeon. On April 11, 2005, appellee had an MRI "showing possible tears of the medial meniscus and some degenerative changes" in her left knee. On May 11, 2005, Dr. Blundon recommended arthroscopic surgery of the left knee. On August 8, 2005, appellee saw Dr. Stephen Michaels, who suggested a second "operative procedure on the left knee." As of March 31, 2006, appellee was going to physical therapy with Dr. James Clarke and continuing to see her primary care physician, Dr. Harding.
[5] Hill's testimony was consistent with his earlier "Affidavit on Behalf of Valerie Willis Before the Maryland Workers' Commission Hearing Examiner," filed on February 2, 2007.
[6] The Legislature enacted HB 236 in 1994. It amended L.E. § 9-1106 to its current version. Kelly, 166 Md.App. at 187, 887 A.2d 682. See 1994 Md. Laws, Ch. 540.
[7] In Suter v. Stuckey, 402 Md. 211, 231, 935 A.2d 731 (2007), the Court observed: "The context of a statute is an important aid to our determination of Legislative purpose." The Court noted that the context is "informed by `a bill's title and function paragraphs ....'" Id. (citation omitted).
[8] Initially, the proposed language was to be added to L.E. § 9-310.1. These additions were later struck and reworded as L.E. § 9-310.2.
[9] The County points out that "the Commission website contains no specific form for seeking reimbursement under Lab. & Empl. § 9-310.1."
[10] We pause to observe that appellant utilized the Commission's form for a request for referral to the Fraud Division, under L.E. § 9-310.2. According to appellant, there was no form for reimbursement under L.E. § 9-310.1. We are not aware of any rule requiring an employer to use a form provided by the Commission in order to bring a claim under L.E. § 9-310.1. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536962/ | 979 A.2d 81 (2009)
2009 ME 95
In re CODY T.
Docket: Pen-08-719.
Supreme Judicial Court of Maine.
Submitted on Briefs: July 29, 2009.
Decided: September 1, 2009.
C. Peter Bos, Esq., Gray & Palmer, Bangor, ME, for the mother.
Margaret Shalhoob, Esq., Bangor, ME, for the father.
Janet T. Mills, Atty. Gen., Nora Sosnoff, Asst. Atty. Gen., Augusta, ME, for the Maine Department of Health and Human Services.
Wayne P. Doane, Esq., Law Offices of Wayne P. Doane, Exeter, ME, for Guardian ad litem.
Panel: SAUFLEY, C.J., and ALEXANDER, LEVY, SILVER, MEAD, and GORMAN, JJ.
ALEXANDER, J.
[¶ 1] The mother and father of Cody T. appeal from the judgment of the District Court (Bangor, Gunther, J.) terminating their parental rights pursuant to 22 M.R.S. § 4055(1)(B)(2) (2008). The mother and father assert that the evidence is insufficient to support, by clear and convincing evidence, the finding of parental unfitness. *82 Additionally, the father asserts that service by publication in Maine and other unsuccessful efforts to notify him in advance of the jeopardy hearing violated his rights to due process. We affirm the judgment as to the mother. We vacate the judgment as to the father. The issues regarding each parent are different and will be addressed separately.
I. THE MOTHER
[¶ 2] The record includes evidence to support the court's findings, by clear and convincing evidence, that the mother has failed to make a good faith effort to rehabilitate and address her problems, or even acknowledge a need for rehabilitation. See 22 M.R.S. § 4055(1)(B)(2)(b)(iv). The record also supports the court's findings, by clear and convincing evidence, that the mother is unable or unwilling to protect Cody T. from jeopardy and that she is not able to take responsibility for the child and that these circumstances are unlikely to change within a time reasonably calculated to meet the child's needs. See 22 M.R.S. § 4055(1)(B)(2)(b)(i), (ii). The record also supports the court's findings, by clear and convincing evidence, that termination of the mother's parental rights is in the child's best interests. See 22 M.R.S. § 4055(1)(B)(2)(a). Accordingly, the judgment terminating the mother's parental rights will be affirmed. See In re Marcus S., 2007 ME 24, ¶¶ 6-7, 916 A.2d 225, 227.
II. THE FATHER
A. Case History
[¶ 3] The mother and father lived in Texas when Cody was born in November 2004. The mother and father had separated by May 2005. After the separation, the father apparently had limited contact with Cody. The record contains very little evidence regarding the father's parenting of Cody or of father-son interactions.
[¶ 4] In January 2006, the mother married another man and, in May 2006, she, her new husband, and Cody moved to Maine and began living with the new husband's mother. The mother did not tell the father that she and Cody were leaving or where they were going. The record indicates that the father was quite upset after the mother and Cody disappeared with the new husband. The mother also failed to tell any members of the father's extended family in Texas that she and Cody were leaving or where they were going.
[¶ 5] At some point in mid- to late 2006, after Cody and his mother left Texas, the father was incarcerated in Oklahoma, apparently for drug-related offenses. There is no indication in the record that the father's incarceration was in any way related to this case, to his relationship with people involved in this case, or to any offense that related to injury or risk to the health and welfare of a child. It was ultimately represented that the father would be expected to be released from incarceration in December 2008.
[¶ 6] After they moved to Maine, the relationship between the mother and her new husband deteriorated as a result of mental health issues, substance abuse, and domestic violence. These issues, and the difficulties in addressing them, ultimately led to the termination of the mother's parental rights.
[¶ 7] The Department of Health and Human Services (DHHS) became involved with the family in early 2007, ultimately filing a petition for a preliminary protection order in May 2007. In its petition, DHHS identified the father, but asserted that, according to the mother, he was then incarcerated somewhere in Texas. Based upon the facts asserted in that petition, the *83 court found Cody to be in immediate risk of serious harm and granted custody of Cody to DHHS, which placed Cody with the new husband's mother. The mother later waived her right to a summary preliminary hearing, and Cody remained in his placement with the new husband's mother.
[¶ 8] Jeopardy was found with respect to the mother in September 2007, and the court entered an order for a rehabilitation and reunification plan for the mother. See 22 M.R.S. § 4041 (2008).
[¶ 9] DHHS then initiated efforts to locate and notify the father in Texas. Because those efforts were unsuccessful, DHHS petitioned the court for service by publication. M.R. Civ. P. 4(g). The petition was granted. The father was then served by publication in the Penobscot Times, a small newspaper that circulates in Penobscot County. The record is unclear as to why service by publication was sought to be accomplished through publication in the Penobscot Times rather than the much more widely circulated Bangor Daily News. However, because service by publication through either newspaper would have been unlikely to have accomplished service upon and notice to an individual thought to be incarcerated, and whose family was known to be, in Texas we need not address that issue further.
[¶ 10] After the father was considered to have been served by publication, the court found jeopardy with respect to the father in January 2008. See 22 M.R.S. § 4035 (2008). The jeopardy finding was based on abandonment. See 22 M.R.S. § 4002(6)(C) (2008).
[¶ 11] When the jeopardy order was issued, the father still was not aware of the child protective proceeding or of the whereabouts of his son. Sometime in the spring of 2008, the father and his family learned that Cody was in Maine and was the subject of a child protective proceeding. The father then obtained court-appointed counsel and filed a motion to vacate the jeopardy order and its finding of abandonment.
[¶ 12] The court held a hearing on the motion to vacate in August 2008, at which the father's sister appeared and testified. Following the hearing, the court found that: (1) the father had not received actual notice of the jeopardy proceeding; (2) he had been incarcerated in Oklahoma at all relevant times; (3) the mother had taken the child to Maine without advising the father or the father's family of the child's whereabouts; and (4) the father had rebutted the court's prior factual finding of abandonment. However, the court denied the father's motion to vacate the jeopardy order. The court determined that even though the father had demonstrated a good excuse for failing to appear at the jeopardy hearing, he had not shown a "meritorious defense" to the jeopardy proceeding. The court concluded that, despite of the lack of notice to the father, jeopardy would have been found with regard to him in any event because his incarcerated status would have prevented him from caring for the child during the course of the child protection proceeding. Significantly, the court also noted in its findings that the father did have "competent relatives" who would have been able to care for the child.
[¶ 13] DHHS filed a petition for termination of the parental rights of both parents. The court conducted hearings on the termination of parental rights petition and for review of proper placement for the child on September 19 and November 20, 2008. At all stages of this hearing, the father was represented by counsel. The father also participated by telephone for a small portion of the hearing. In addition, the father's sister and her husband appeared *84 in person and testified at the November 20 hearing. Counsel for the father advised the court that the father was to be released from incarceration in Oklahoma on December 12, 2008.[1]
[¶ 14] At the hearing, the father, through counsel and through the testimony of his sister, supported a kinship placement with the sister and her family and a delay of three months in the termination proceeding to allow development of evidence of the relationship between the father and Cody once the father had been released from incarceration. The father's sister testified that she was a substitute teacher and her husband was a full-time corrections officer in Texas. She also testified that she and her husband had two children in their home and that they were willing and able to provide a stable and supportive living environment for Cody.
[¶ 15] The testimony also indicated, as found by the court, that had Cody remained in Texas in a location known to the father's relatives, the relatives would have facilitated his visiting with the father while the father was incarcerated. However, because the mother had taken Cody from Texas and not advised the father or his family of the location, the father and his family had no opportunity for contact with Cody for more than two years after the time that he was taken from Texas.
[¶ 16] The father's sister also testified that she and her husband had come to Maine prepared, if ordered by the court, to accept a placement of Cody with them and return with him to their home in Texas.
[¶ 17] On the day after the close of the termination hearing, November 21, 2008, the court entered an extensive judicial review order that removed Cody from the custody of DHHS, ended Cody's placement in Maine, and granted custody of the child to the father's sister and her husband. The result of this order was that the father's sister and her husband were able to return to Texas with Cody, who has since resided with them. The findings and conclusions in the court's supplemental order and review findings dated November 21, 2008, are fully supported by the record developed in these proceedings.
[¶ 18] Two weeks later, on December 5, 2008, one week before the father's anticipated release from incarceration, the court issued its termination order, terminating the rights of both parents. Most of the findings in the order were directed to the difficult circumstances of the mother. The findings supporting termination of the father's parental rights, on the grounds that he was not able to take responsibility for the child within a time necessary to meet the child's needs, were rather limited. The totality of the findings relating to the father's parental fitness were as follows:
[The father] has been in prison from mid-2006 until the present. The evidence shows no misconduct toward his son, but he has a history of abusing drugs and a history of antisocial behavior. He is also, through no fault of his own, a stranger to his son.... [The father] is not presently able to meet Cody's needs [of immediate security and stability]. (To a certain extent he supported his sister and brother-in-law as caregivers in his stead.)
[¶ 19] The findings regarding parental fitness were supported by a footnote which indicated that "[h]is prison sentence would have prevented day to day contacts without the move to Maine, but regular visits *85 would have been possible, and his family would have made sure they happened."
[¶ 20] The other findings discussing the father related to Cody's best interest. The court stated that Cody considered the mother's estranged husband to be his father and that he would have difficulty accepting someone else as his father, that he needed immediate and extremely competent parenting with security and stability, and that he could not have his parenting arrangements changed again, after the recent shift in custody to the father's sister and her family.
[¶ 21] The court then noted that:
Had [the father] been available a month ago, he would have been given more consideration, but the one relocation to the [father's sister's family] is all that the child can stand.... [The father] was not, by clear and convincing evidence, capable of taking responsibility for Cody within the time necessary for meeting the child's needs.
[¶ 22] These findings were reflective of the record, which contained very little evidence regarding the father's past relationship with the child and his fitness to parent the child or to become a proper parent.
[¶ 23] From this decision, the father appeals, asserting that: (1) he had insufficient notice of the jeopardy proceeding and that failure to enable his participation in the jeopardy proceeding violated his rights to due process; and (2) there is insufficient evidence to support termination of his parental rights.
B. Legal Analysis
[¶ 24] Our review of the court's findings in this case must be guided by several well-established propositions of law.
[¶ 25] First, a parent of a child has a fundamental right to parent that child and to maintain a parental relationship free from state interference absent a court finding that the parent is, in some respect, unfit and State involvement in the parental relationship is necessary to avoid harm to the child. See In re Robert S., 2009 ME 18, ¶ 13, 966 A.2d 894, 897-98; Rideout v. Riendeau, 2000 ME 198, ¶ 18, 761 A.2d 291, 299.
[¶ 26] Second, findings supporting termination of parental rights must be based on clear and convincing evidence. 22 M.R.S. § 4055(1)(B)(2).
[¶ 27] Third, a party with a clear and convincing evidence burden of proof may prevail only if, considering all of the evidence, the fact-finder can arrive at "an abiding conviction that the truth of [the] factual contentions are highly probable." Taylor v. Comm'r of Mental Health & Mental Retardation, 481 A.2d 139, 153 (Me.1984) (quotation marks omitted).
[¶ 28] Fourth, a parent's incarceration, standing alone, does not provide grounds for the termination of parental rights. Adoption of Hali D., 2009 ME 70, ¶ 2, 974 A.2d 916, 917; see also In re Randy Scott B., 511 A.2d 450, 455 (Me. 1986); In re Daniel C., 480 A.2d 766, 768-69 (Me.1984). In considering the parental fitness of an incarcerated parent, the court's focus is not on "the usual parental responsibility for physical care and support of a child, but upon the parent's responsibility" or capacity "to provide a nurturing parental relationship using the means available." Adoption of Hali D., 2009 ME 70, ¶ 2, 974 A.2d at 917 (quoting in part In re Daniel C., 480 A.2d at 769).
[¶ 29] Here, while the record contains minimal evidence that the father, as the court found, may have a history of drug abuse and anti-social behavior, there is no evidence that the father was ever harmful to Cody or any other minor child. *86 The court did find that the father has become a stranger to Cody, but the court emphasized that this was through no fault of the father. The fault for this rests with the mother, who removed Cody from Texas to Maine and kept the father and the father's family unaware of the child's whereabouts.
[¶ 30] It is notable that the court has now ordered a placement of Cody in Texas with his father's sister's family. In that placement, a protected re-establishment of the parental relationship between the father and Cody could be facilitated. Of note also, the court found that had Cody been in Texas, rather than in Maine, the father's family would have facilitated regular visits between Cody and his father. Of further note is the fact that the father's reported release date was only one week after issuance of the termination order.
[¶ 31] In these circumstances, neither the court's findings, nor the record upon which those findings are based, can support a determination, by clear and convincing evidence, that the father is an unfit parent or that, with support through the court-ordered kinship placement, the father, now released from incarceration, cannot provide a nurturing parental relationship with his child once the relationship with the child can be re-established. Further, considering the recent significant change in the child's home life, there is no evidence that fostering a re-established relationship with his father would promote greater harm to Cody. Accordingly, we must conclude that the court's finding of parental unfitness with respect to the father, in this case, is not sufficiently supported by clear and convincing evidence in the record. Therefore, the judgment regarding termination of parental rights of the father must be vacated.
[¶ 32] With this result, we need not address the issue of sufficiency of notice of the jeopardy hearing.
The entry is:
1. Judgment terminating the mother's parental rights affirmed.
2. Judgment and supplemental order regarding placement and custody of the child affirmed.
3. Judgment terminating the father's parental rights vacated. Remanded for further proceedings consistent with this opinion. We express no opinion regarding the appropriate forum for conduct of any further proceedings after remand.
NOTES
[1] A home study prepared by the Texas Department of Family and Protective Services also indicated a December 2008 release date. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536973/ | 979 A.2d 836 (2009)
Gene STILP, Appellant
v.
Dennis O'BRIEN, Speaker of the Pennsylvania House of Representatives; Joseph Scarnati, President Pro Tempore of the Pennsylvania Senate; and Edward G. Rendell, Governor of the Commonwealth of Pennsylvania, Appellees
Cross-Appeal of Joseph Scarnati, President Prothonotary Tempore of the Pennsylvania Senate (@ No. 87 MAP 2007).
Nos. 80 and 87 MAP 2007
Supreme Court of Pennsylvania.
July 28, 2009.
ORDER
PER CURIAM.
AND NOW, this 28th day of July, 2009, the order of the Commonwealth Court is VACATED and Appellant's complaint is dismissed. Appellant has failed to establish standing based on taxpayer status pursuant to the requirements set forth in Pittsburgh Palisades Park, LLC v. Commonwealth, 585 Pa. 196, 888 A.2d 655, 661 (2005); Consumer Party of Pennsylvania v. Commonwealth, 510 Pa. 158, 507 A.2d 323, 328 (1986); and Application of Biester, 487 Pa. 438, 409 A.2d 848 (1979).
Justice SAYLOR files a dissenting statement.
Justice SAYLOR, (dissenting).
I would affirm the judgment of the Commonwealth Court in full, as I believe that Appellant has standing to pursue his constitutional claims in view of this Court's analysis in Pennsylvanians Against Gambling Expansion Fund v. Commonwealth, 583 Pa. 275, 877 A.2d 383 (2005), but I also agree with the Commonwealth Court's determination that such claims lack merit.
Although I have previously espoused a broader view of taxpayer standing than that adopted by a majority of this Court, see Stilp v. Commonwealth, 596 Pa. 62, 76-77, 940 A.2d 1227, 1235-36 (2007) (Saylor, J., concurring), I recognize that the Court has now determined that the factors discussed in Appeal of Biester, 487 Pa. 438, 445, 409 A.2d 848, 852 (1979), must all be present before taxpayer standing will be recognized. See Stilp, 596 Pa. at 72, 940 A.2d at 1233. Under that formulation, a taxpayer has standing to challenge a governmental action if: "(1) the governmental action would otherwise go unchallenged; (2) those directly and immediately affected by the complained-of matter are beneficially affected and not inclined to challenge the action; (3) judicial relief is appropriate; (4) redress through other channels is unavailable; and (5) no other persons are better situated to assert the claim." Id. (citing Pittsburgh Palisades Park, LLC v. Commonwealth, 585 Pa. 196, 207, 888 A.2d 655, 662 (2005)).
Even under this more stringent test, however, I would find that Appellant has taxpayer standing to assert violations of Article III in the enactment of Act 155 of 2006. See, e.g., Sprague v. Casey, 520 Pa. 38, 43-44, 550 A.2d 184, 187 (1988) (recognizing taxpayer standing to assert a constitutional challenge to the manner of a judicial election, given the special circumstances involved). Indeed, I find relevant the Commonwealth Court's observation that
but for [Appellant]'s challenge, the enactment of Act 155 would go unchallenged because the very individuals who enacted the legislation are not likely to challenge the constitutionality of the *837 process by which they enacted Act 155. [Additionally], those directly and immediately affected by the "unlimited free drinks at casinos" provision are the casinos and the players receiving free drinks. Both are beneficially affected and, thus, would not be inclined to challenge the law.
Stilp v. O'Brien, No. 8 M.D.2007, slip op. at 6 (Pa.Cmwlth. July 5, 2007). The above points appear indisputable (to me at least) and the majority does not presently undertake to explain why they are wrong. In light of the above, the first and second requirements are met. Additionally, there is little doubt that judicial relief would be appropriate if, in fact, Appellant's claims were meritorious, see, e.g., Pennsylvanians Against Gambling Expansion Fund v. Commonwealth, 583 Pa. 275, 877 A.2d 383 (2005); City of Phila. v. Commonwealth, 575 Pa. 542, 838 A.2d 566 (2003), thus satisfying the third prong. As for the fourth, there is evidently no channel by which Appellant may obtain relief other than in a judicial forum. Finally, while there may be other taxpayers who are equally well suited to assert the claims, it is difficult to see how any may be better suited than Appellant. Thus, I would find that the fifth requirement is satisfied as well.
As for the merits of Appellant's constitutional challenge, I would affirm based upon the analysis set forth by the Commonwealth Court majority, see Stilp v. O'Brien, No. 8 M.D.2007, slip op. at 7-11. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536935/ | 979 A.2d 760 (2009)
Sarah EVERITT
v.
GENERAL ELECTRIC COMPANY and another.
No. 2008-763.
Supreme Court of New Hampshire.
Argued: May 14, 2009.
Opinion Issued: August 7, 2009.
*761 Thomas Craig, P.A., of Manchester (Thomas E. Craig and David Woodbury, on the brief, and Mr. Woodbury orally), for the plaintiff.
Sulloway & Hollis, P.L.L.C., of Concord (Edward M. Kaplan and Melissa M. Hanlon, on the brief, and Mr. Kaplan orally), for the defendants.
DUGGAN, J.
The plaintiff, Sarah Everitt, appeals an order of the Superior Court (McGuire, J.) granting summary judgment to the defendants, General Electric Company (GE) and Bruce A. Hawkom. We affirm.
This is the second time this matter has come before us. A detailed account of the underlying facts of this case can be found in our previous decision, Everitt v. General Electric Company, 156 N.H. 202, 932 A.2d 831 (2007). We recite only those facts pertinent to this appeal.
On November 1, 2003, the plaintiff was injured when the vehicle in which she was a passenger was struck by another vehicle, driven by Jeremiah Citro. Citro was an employee of GE's Hooksett plant, but was not on duty at the time of the accident. The day prior to the accident, a Friday, Citro was sent home by a GE company nurse after appearing confused and disoriented. He was instructed not to return to work until the following Monday.
Despite this instruction, Citro appeared for work the next day, the day of the accident. Upon his arrival, his presence was brought to the attention of Hawkom, a supervisor on duty at that time. Hawkom reminded Citro that he was told not to return to work until Monday. According to Hawkom, the defendant appeared disheveled and his speech was slurred. Although Citro agreed to leave, he failed to do so, and Hooksett police were called to remove him from the premises. Citro, however, left before the police arrived.
Within hours Citro again arrived at the gates of the GE plant, where he was detained by security personnel and Hooksett police were summoned. The responding police officers conducted several field sobriety tests, and ultimately determined that Citro could safely drive. Approximately two hours later, the motor vehicle accident involving Citro and the plaintiff occurred.
The plaintiff instituted suit against GE and Hawkom asserting that each owed her a duty of care to prevent Citro from operating his motor vehicle on the day of the accident. The defendants moved for summary judgment, which the trial court granted. After her motion for reconsideration was denied, the plaintiff filed this appeal.
When reviewing a trial court's grant of summary judgment, we consider the affidavits and other evidence, and inferences properly drawn from them, in the light most favorable to the non-moving party. Belhumeur v. Zilm, 157 N.H. 233, 235, 949 A.2d 162 (2008). If our review of *762 the evidence does not reveal any genuine issue of material fact, and if the moving party is entitled to judgment as a matter of law, we will affirm the trial court's decision. Id. We review the trial court's application of the law to the facts de novo. Maloney v. Badman, 156 N.H. 599, 602, 938 A.2d 883 (2007).
On appeal, the plaintiff first argues that GE voluntarily assumed a duty of care towards her by adopting a guideline or policy requiring that impaired employees not be allowed to drive. The policy, titled "Reasonable Suspicion/Reasonable Cause Guidelines," outlines the procedure that should be followed when a manager suspects that an employee is impaired. The relevant portion of the policy provides:
The manager must ESCORT the employee to the medical clinic. An impaired employee should never be allowed to drive, to protect the employee and others and to avoid being held liable for any accidents that occur. Security may need to be alerted to help control a belligerent employee.
Another section of the policy states that after a positive alcohol or drug test result,
the employer should arrange transportation for the employee off of the premises. Under no circumstances should an employee be allowed to drive. Taxis or family members can be used to transport [the] employee off the premises. If the employee insists on leaving the premises before transportation can be arranged, the supervisor should call security and the employee should be informed that local police will be contacted.
The defendants dispute that this policy is applicable to GE's Hooksett plant, and argue that, even if applicable, the policy does not impose a legal duty upon them to detain Citro and prevent him from driving. The plaintiff, however, contends that the applicability of this policy, as well as its effect upon the duty owed to her, is a question of material fact and, thus, it was error for the trial court to grant summary judgment to the defendants.
"Claims for negligence rest primarily upon a violation of some duty owed by the offender to the injured party." Walls v. Oxford Management Co., 137 N.H. 653, 656, 633 A.2d 103 (1993) (quotation omitted). Absent a duty, there is no negligence. Id. Whether a duty exists in a particular case is a question of law. Id. Further, we recognize that duty is an "exceedingly artificial concept." Id. (quotation omitted). Therefore,
when charged with determining whether a duty exists in a particular case, we necessarily encounter the broader, more fundamental question of whether the plaintiff's interests are entitled to legal protection against the defendant's conduct. The decision to impose liability ultimately rests on a judicial determination that the social importance of protecting the plaintiff's interest outweighs the importance of immunizing the defendant from extended liability.
Belhumeur, 157 N.H. at 236-37, 949 A.2d 162 (quotation and brackets omitted).
Assuming, without deciding, that the policy applies to GE's Hooksett plant and, further, that the policy was not followed in dealing with Citro on the day of the accident, we conclude that the mere existence of this policy did not create a duty of care to the plaintiff. Although we have never before addressed this precise issue, numerous jurisdictions have found that the adoption of an internal corporate policy to deal with situations involving an impaired employee does not give rise to a duty to the general public. See, e.g., Angnabooguk v. State, 26 P.3d 447, 452 (Alaska 2001) (finding internal rules and guidelines did *763 not create a duty of care); Morgan v. Scott, 2009 WL 1438905, *3 (Ky. May 21, 2009) (rejecting argument that adoption of an internal guideline and subsequent failure to follow it automatically leads to liability); Premo v. General Motors Corp., 210 Mich.App. 121, 533 N.W.2d 332, 333 (1995) (finding internal policy did not create duty to protect public as a matter of public policy); Estate of Catlin v. General Motors Corp., 936 S.W.2d 447, 451 (Tex.Ct. App.1996) (stating "mere creation of an internal policy" does not create a duty); Killian v. Caza Drilling, Inc., 131 P.3d 975, 982 (Wyo.2006) (noting that creation of a standard of care and duty are not synonymous).
For example, in Estate of Catlin, the Texas Court of Appeals found that the adoption of a policy prohibiting the consumption of alcohol on an employer's premises with certain exceptions, and the failure to follow such policy, did not create a legal duty. Estate of Catlin, 936 S.W.2d at 451. In that case, an employee of Fluor Daniel became intoxicated at a "fish fry" on company property following a company softball game. Id. at 448-49. The employee left company grounds and, after consuming more alcohol at a bar, caused a motor vehicle accident resulting in Catlin's death. Id. at 449. At that time, Fluor Daniel had "a safety policy which forbade the consumption of alcohol on company property except at company sponsored events," and instituted formal procedures to be followed when there would be alcohol at such an event, which were not followed on this occasion. Id. at 449-50. Catlin's estate sued Fluor Daniel, arguing that, by creating this policy, it "assumed the responsibility to control consumption of alcohol on its premises and subsequent driving by its employees." Id. at 451. The court disagreed, stating: "We conclude that the mere creation of an internal policy regarding consumption of alcohol on the premises, whether or not the fish fry was a `company function,' does not create a duty as set forth in [prior case law]." Id. The court noted that "[m]ore is required" to impose a duty. Id.
Similarly, Premo involved an intoxicated General Motors employee who had allegedly been drinking while on duty and, immediately after, caused a motor vehicle accident in which Premo was injured. Premo, 533 N.W.2d at 332. Premo alleged that General Motors "had a policy or `practice, procedure and/or custom' of not allowing employees to leave the plant in their automobiles while intoxicated, but instead detaining them and arranging alternative transportation" home. Id. Premo thus argued that, by instituting this policy, General Motors had assumed a duty to prevent the intoxicated employee from driving in his intoxicated state. Id. at 333. The court disagreed, finding that General Motor's internal policy did not, as a matter of public policy, amount to an assumption of a duty to protect the public at large. Id. The court recognized the "significant and compelling public policy reasons" supporting its conclusion, stating: "To impose liability upon an employer who, by means of work rules, policies, etc. undertakes to address the problem of alcohol use and/or abuse is clearly against public policy and would encourage employers to abandon all efforts which could benefit such employees in order to avoid future liability." Id. The court thus concluded that the relationship between the parties was too remote to obligate General Motors to protect Premo. Id.
We find these cases persuasive, and likewise conclude that the mere existence of an internal policy setting forth procedures to deal with an impaired employee does not, standing alone, create a duty of care to the public at large. We agree with the Premo court that the public policy reasons *764 supporting our conclusion are significant and compelling. As it recognized, "[a]lcohol and substance abuse is a serious societal problem causing significant human suffering and economic loss." Id. The public is better served by having the problem addressed with policies such as the one at issue here. In this case, any relationship that may have existed between the parties is far too remote to give rise to a duty of care to the plaintiff.
The plaintiff argues that our case law, namely, VanDeMark v. McDonald's Corp., 153 N.H. 753, 904 A.2d 627 (2006), "clearly constitutes an endorsement of the doctrine that a corporation may assume a duty to third parties which will thereafter be binding upon it." The plaintiff's reliance on VanDeMark is misplaced. In that case, an overnight custodian of a McDonald's restaurant who was an employee of the franchisee, Colley/McCoy, was seriously injured when two intruders entered the restaurant. VanDeMark, 153 N.H. at 755, 904 A.2d 627. At the time of the event, McDonald's Corporation had adopted a "Quality, Service, Cleanliness (QSC) Play Book," which included some guidelines on safety and security systems. Id. The injured employee sued McDonald's Corporation, and, after summary judgment was granted to McDonald's, appealed arguing that, by adopting the QSC, it had assumed a duty to ensure that Colley/McCoy followed those security measures. Id. at 757, 904 A.2d 627. We upheld the trial court's decision to grant summary judgment because Colley/McCoy was not required to employ the QSC security measures as a condition of being a franchisee. Id. at 758-59, 904 A.2d 627. Because McDonald's had not made any affirmative attempt to provide security to the franchisee's employees, it had not assumed a duty to the injured employee. Id. at 759, 904 A.2d 627.
The plaintiff infers that, had McDonald's Corporation mandated the QSC security measures, a duty would have arisen between it and the injured employee. The plaintiff contends that this inference supports a finding that there was a duty in this case. We disagree. Even assuming we would have found a duty to the injured employee had the security measures been mandatory, VanDeMark does not stand for the proposition that a corporation assumes a duty to protect the public every time it adopts a policy involving the protection of an employee. Although we recognized that a voluntarily assumed duty may create liability to third parties, see Restatement (Second) of Torts § 324 A (1965), it is neither automatic nor mandatory that an internal policy, even one creating a duty to an employee, would extend to the public. Therefore, GE's policy does not, in and of itself, impose a duty to protect the plaintiff.
The plaintiff next argues that the defendants owed her a duty of care under Restatement (Second) of Torts sections 317 and 319, as each section "create[s] and define[s] the special relationship between GE, Hawkom and Citro which demand action by GE and Hawkom to protect" the plaintiff. We disagree.
Section 317 of the Restatement provides:
A master is under a duty to exercise reasonable care so to control his servant while acting outside the scope of his employment as to prevent him from intentionally harming others or from so conducting himself as to create an unreasonable risk of bodily harm to them, if
(a) the servant
(i) is upon the premises in possession of the master, ... or
(ii) is using a chattel of the master, and
*765 (b) the master
(i) knows or has reason to know that he has the ability to control his servant, and
(ii) knows or should know of the necessity and opportunity for exercising such control.
Restatement (Second) of Torts § 317 (1965). Section 319 provides: "One who takes charge of a third person whom he knows or should know to be likely to cause bodily harm to others if not controlled is under a duty to exercise reasonable care to control the third person to prevent him from doing such harm." Id. § 319.
The plaintiff argues that, although the accident occurred outside of GE's property and did not involve any GE chattel, the defendants nonetheless had a duty to control Citro and prevent him from driving because they had the ability to do so, and should have known it was necessary. However, even assuming, without deciding, that such a duty arose under the circumstances of this case, the defendants fulfilled that duty. It is undisputed that the defendants twice contacted the Hooksett police as a result of Citro's presence. It is further undisputed that, as a result of the defendants' contact, and roughly two hours prior to the accident, a Hooksett police officer conducted several field sobriety tests and determined that Citro was capable of driving. The defendants were entitled to rely upon the officer's judgment in this regard. Further, the plaintiff has not cited, nor are we able to find, anything to suggest that some further action was required by the defendants. Any duty on the part of the defendants to control Citro ended when the police officers took charge of Citro.
Because the defendants fulfilled their duty to control, if any, the trial court did not err in granting them summary judgment.
Affirmed.
BRODERICK, C.J., concurred; BROCK, C.J., retired, specially assigned under RSA 490:3, concurred. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536969/ | 979 A.2d 332 (2009)
410 N.J. Super. 1
Bertram MARTIN, Plaintiff,
v.
Adrianne MARTIN, Defendant.
DOCKET NO. FM-03-1172-03.
Superior Court of New Jersey, Chancery Division, Family Part, Burlington County.
Decided April 24, 2009.
*333 Bertram Martin, plaintiff pro se.
Dwaine Williamson, for defendant.
HAAS, J.S.C.
This case involves the interpretation of a September 1, 1998 amendment to N.J.S.A. 2A:17-56.9a which has never before been addressed in a published opinion.
The parties were divorced on January 22, 2004, and a dual final judgment of divorce, with a property settlement agreement, was filed on that same date. The parties have two children, W. who was born on November 7, 1991, and V. who was born on July 4, 1993. Under their agreement, the parties shared joint custody of the children and they equally shared parenting time. The parties agreed that neither would pay child support to the other so long as they continued to equally share parenting time.
Plaintiff subsequently began having less parenting time with the children and defendant filed a post-judgment motion to establish child support. A Title IV-D support order was entered on June 24, 2005. Pursuant to this order, plaintiff was required to pay defendant $98 per week in child support. Defendant received a cost-of-living adjustment on May 29, 2007, and plaintiff's support obligation is now $104 per week.
Over three years have passed since the entry of the original order, and defendant has now filed a motion seeking an increase in child support. Before such a request is considered, a party must normally demonstrate that specific and substantial changed circumstances have occurred since the time of the governing order which would warrant a modification of support. Lepis v. Lepis, 83 N.J. 139, 151, 416 A.2d 45 (1980). Defendant is unable to make such a showing here. However, in Doring v. Doring, 285 N.J.Super. 369, 666 A.2d 1388 (Ch.Div.1995), the court held that child support orders are subject to review by a court every three years regardless of whether there has been a change of circumstances since the time of the prior order. As discussed below, this ruling was based upon the pre-1998 amendment version of N.J.S.A. 2A:17-56.9a. Defendant cites Doring and asserts that, because three years have passed since the June 24, 2005 order, she is entitled to have a mandatory court review of child support and discovery of plaintiffs financial information.
As here, the Doring decision is frequently cited in situations where a party is unable to show the type of "changed circumstances" required by Lepis. The problem is that the statute upon which the Doring decision was based, N.J.S.A. 2A:17-56.9a, was amended in 1998 to eliminate the automatic three-year court review provision. Yet, because the 1998 amendment has not been addressed in a subsequent published decision, parties continue *334 to seek the three-year court review of child support orders discussed in Doring.
At the time Doring was decided in 1995, federal law required that, in order for a state to receive federal funding for its Title IV-D child support program, "the state must have in effect laws requiring the periodic review of all Title IV-D child support orders." Id. at 372, 666 A.2d 1388, citing 42 U.S.C.A. § 666. Accordingly, our Legislature had enacted N.J.S.A. 2A:17-56.9a. This statute provided in relevant part:
At least once every three years all IV-D orders for child support payments shall be subject to review in accordance with the rules promulgated by the IV-D Agency in consultation with the Supreme Court. Such review should take into account any changes in the financial situation or related circumstances of both parties and whether the order of child support is in full compliance with the child support guidelines.
Relying upon the clear language of this statute, the Doring court properly found that all child support orders are subject to a triennial review by a court, regardless of whether there has been a change of circumstances since the time of the prior order.
However, after the Doring decision was issued, the Legislature amended the statute. L. 1998, c. 1, (N.J.S.A. 2A:17-56.9a) now provides in relevant part:
At least once every three years, unless the State has developed an automated cost-of-living adjustment program for child support payments, the parties subject to a Title IV-D support order shall be provided notice of their right to request a review, which shall be conducted in accordance with the rules promulgated by the State IV-D agency in consultation with the Supreme Court. Such review shall take into account any changes in the financial situation or related circumstances of both parties and whether the order of child support is in full compliance with the child support guidelines. [Emphasis added.]
On July 10, 1998, the New Jersey Supreme Court adopted Rule 5:6B. This provides that all child support orders entered modified, or enforced after the effective date of this rule [September 1, 1998] shall provide that the child support will be adjusted every two years to reflect the cost of living. This adjustment is based on the consumer price index. Before any adjustment is made, the parties are provided with notice of the proposed adjustment and are given the opportunity to contest the adjustment within thirty days of their receipt of the notice. The rule specifically provides that the parties retain the right to seek a modification of child support orders based on changed circumstances.
Thus, child support orders are no longer subject to automatic court reviews every three years. Instead, the child support amount is automatically adjusted every two years to reflect the cost of living, with each party having an opportunity to contest the adjustment. Pursuant to Rule 5:6B, such contests are limited to situations (1) where an obligor's income has not increased at a rate at least equal to the rate of inflation or (2) where the order itself provides for an alternative periodic cost-of-living adjustment. Otherwise, parties may contest a cost-of-living adjustment or seek a modification of a prior child support order only by showing that such a modification is warranted based upon changed circumstances. The mere passage of time since the entry of the child support order is not a sufficient reason to request that a court review the order or require that the parties exchange financial information.
*335 Applying the 1998 amendment to N.J.S.A. 2A:17-56.9a and Rule 5:6B to the case at hand, defendant's request for a modification of child support based upon the passage of three years since the time of the entry of current child support order will not be considered. Defendant remains eligible for the administrative cost-of-living adjustments afforded to her under Rule 5:6B. However, in order to seek a court review of child support, defendant must establish that there has been a substantial change of circumstances since the time of the last order. Because she has failed to make this necessary showing here, defendant's motion is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537157/ | 27 B.R. 530 (1982)
In re George R. KLEPPINGER, Sr., Debtor.
Lorraine KLEPPINGER, Plaintiff,
v.
George R. KLEPPINGER, Sr., Defendant.
Bankruptcy No. 5-81-00787, Adv. No. 5-82-0024.
United States Bankruptcy Court, M.D. Pennsylvania.
August 18, 1982.
*531 W.J. Krencewicz, Shenandoah, Pa., for Lorraine Kleppinger.
Joseph Velitsky, Summit Hill, Pa., for debtor George Kleppinger.
OPINION AND ORDER
THOMAS C. GIBBONS, Bankruptcy Judge:
In this action we determine the dischargeability of a debt under 11 U.S.C. § 523(a)(4) of the Bankruptcy Code. That section provides that a discharge in bankruptcy does not relieve an individual debtor from any debt for fraud or defalcation while acting in a fiduciary capacity, embezzlement or fraud.
The daughter of the debtor, Sharon Kleppinger, died as a result of injuries sustained in a car accident occurring in 1975. The debtor, as Sharon's personal representative, commenced a wrongful death action in the Court of Common Pleas of Schuylkill County, Pennsylvania, on behalf of himself and Sharon's mother whom the debtor had previously divorced. The jury awarded a verdict of $9,000.00, which entitled Mrs. Kleppinger to a $3,000.00 share. The debtor failed to pay Mrs. Kleppinger and has not accounted for the funds. He filed for bankruptcy on October 6, 1981.
Section 523 of the Bankruptcy Code provides that certain debts of individuals are excepted from a discharge in bankruptcy. Section 523(a)(4) states that "(a) discharge under section 727, 1141, or 1328(b) of this title does not discharge an individual from any debt for fraud or defalcation while acting in a fiduciary capacity, embezzlement, or larceny." In objecting to the dischargeability of a debt the burden of proof is on the party seeking the exception to discharge. Schlecht v. Thornton, 544 F.2d 1005, 1006 (9th Cir.1976); Household Finance Corp. v. Danns, 558 F.2d 114, 116 (2d Cir.1977). The exceptions to discharge are narrowly construed against the creditor and in favor of the debtor. In Re Vickers, 577 F.2d 683, 687 (10th Cir.1978). In this action the plaintiff contends that the debt is not dischargeable since it arose through the defalcation of the defendant while he was acting in a fiduciary capacity.
Pennsylvania's Rules of Civil Procedure provide who is entitled to bring an action for wrongful death in the state. Excluding exceptions which are not pertinent here, Rule 2202(a) provides that "an action for wrongful death shall be brought only by the personal representative of the decedent for the benefit of those persons entitled by law to recover damages for such wrongful death." The term fiduciary under Pennsylvania law "(i)cludes personal representatives, guardians, and trustees, whether domiciliary or ancillary, individual or corporate, subject to the jurisdiction of the orphans' court division." 20 Pa.Cons.Stat. § 102. Although the debtor is arguably not subject to the jurisdiction of the orphans' court division, see Pozzuolo Estate, 433 Pa. 185, 249 A.2d 540 (1969), we nonetheless find that he is a fiduciary. Due to the *532 non-exhaustive nature of the list of fiduciaries enumerated in § 102 this result is not precluded. Our finding that the debtor is a fiduciary is supported by the Pennsylvania Rules of Civil Procedure governing wrongful death actions which indicate that the interests of beneficiaries under such actions are paramount to the interests of the representatives bringing suit. Rule 2202(a) ("an action for wrongful death shall be brought only by the personal representative of the decedent for the benefit of those persons entitled by law to recover damages for such wrongful death," (emphasis added)); Rule 2203(a) (providing for the removal of a plaintiff in a wrongful death action who fails to protect adequately the interests of the beneficiaries of a potential award); Rule 2206(d) (providing that after a court ordered apportionment of damages in a wrongful death action the defendant may pay the judgment award to the plaintiff who shall hold the funds as trustee for the beneficiaries).
Although we have established that the debtor was a fiduciary, a determination of the non-dischargeability of a debt under the pertinent provisions of § 523(a)(4) also requires a finding of defalcation. Defalcation includes the failure by a fiduciary to account for money he received in his fiduciary capacity. Aetna Insurance Company v. Byrd (In Re Byrd), 15 B.R. 154, 156 (Bkrtcy. E.D.Va.1981); Rhode Island Lottery Commission v. Cairone (In Re Cairone), 12 B.R. 60, 63 (Bkrtcy.D.R.I.1981); Johnson v. Gramza (In Re Gramza), 13 B.R. 733, 735 (Bkrtcy.E.D.Wis.1981). At trial the debtor did not present any testimony explaining his failure to pay Mrs. Kleppinger her $3,000.00 share of the judgment award. Consequently, the debtor falls squarely within the language of § 523(a)(4) and the $3,000.00 debt will be ordered non-dischargeable.
This opinion constitutes findings of fact and conclusions of law pursuant to Bankruptcy Rule 752. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1743255/ | 289 Wis. 2d 549 (2006)
710 N.W.2d 725
2006 WI App 31
SAMUELS RECYCLING CO. v. CONTINENTAL CAS. CO.
No. 2004AP001730.
Court of Appeals of Wisconsin.
January 26, 2006.
Unpublished opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537412/ | 797 A.2d 1270 (2002)
2002 ME 82
PEOPLES HERITAGE SAVINGS BANK
v.
Rodney E. PEASE et al.
Supreme Judicial Court of Maine.
Submitted On Briefs: April 18, 2002.
Decided: May 21, 2002.
*1272 Philip K. Jordan, Houlton, for plaintiff.
Constance L. Pease, Orrington, Rodney E. Pease, Brewer, for defendants.
Panel: CLIFFORD, RUDMAN, DANA, ALEXANDER, CALKINS, and LEVY, JJ.
DANA, J.
[¶ 1] Rodney and Constance Pease[1] appeal from the District Court's (Bangor, Russell, J.) entry of a default judgment against Constance and summary judgments against Rodney on Peoples Heritage Savings Bank's foreclosure complaint and on Rodney's counterclaim. The Peases contend that the court erred in entering a default judgment against Constance because she was not served properly. The Peases also contend that the court erred in entering the summary judgments because: a Peoples agent illegally notarized the mortgage deeds, there are genuine issues of material fact regarding whether Peoples entered into and then breached a renegotiated agreement with the Peases, and there are genuine issues of material facts as to whether Peoples correctly stated the amount required to cure the defaults on the loans. We affirm the entry of the default judgment and vacate the summary judgments in part.
I. BACKGROUND
[¶ 2] The Peases and Peoples executed five notes secured by mortgage deeds on May 31, 1991; July 26, 1991; August 30, 1994; January 6, 1995; and August 22, 1995. All mortgage deeds were notarized by Peoples employees.
[¶ 3] The Peases failed to make a number of payments, and in June of 2000, Peoples sent them, for each note, a notice of default and a notice of their right to cure by paying the amount of the arrearage. The notice for the August 22, 1995, loan stated that the arrearage in monthly payments was $7,944.75, that no other charges or fees applied, and that the total due was $9,036.76. None of the other notices included mathematical inconsistencies, but the notice for the July 26, 1991, loan reported the arrearage in monthly payments and the total amount due to cure the default as $9,036.76.
[¶ 4] Rodney sent a letter to Peoples in which he disputed the amount due on each loan and requested verification of the debts. Peoples sent the Peases a letter *1273 outlining options available to avoid foreclosure if they acted before July 28, 2000. The three options were: (1) a forbearance agreement mortgaging all the Peases' real property to the bank, (2) payment of the full amount demanded, or (3) signing over their deeds for liquidation in lieu of foreclosure. The bank filed its foreclosure complaint on all five notes on July 28.
[¶ 5] Thomas M. Davis, an employee in the Recovery Department of Banknorth Group, Inc.,[2] sent letters dated August 8 to the Peases verifying an agreement that he had reached with them to pay off the August 30, 1994, and August 22, 1995, loans with $570 and $575 monthly payments beginning on August 15, 2000. A summons for each of the Peases was served by hand to Rodney at the parties' Brewer address on August 15, 2000. Two days later, Peoples sent the Peases a check for $1390 representing a refund of the Peases' payments on the three loans not renegotiated with Davis. Peoples stated that it would accept a full lump sum payment only.
[¶ 6] Acting pro se, Rodney filed an answer and counterclaim; Constance did not sign the answer, although it purports to be the answer of both Peases. The counterclaim alleges that Peoples supplied inaccurate information, failed to credit payments, and breached its new agreement. The counterclaim seeks money damages, the discharge of all liability to Peoples, costs, and interest.
[¶ 7] Peoples moved for a summary judgment on its complaint, attaching a statement of material facts supported by copies of the notes, mortgages, and notices authenticated by the affidavit of Catherine E. Melville, Assistant Vice President of Peoples. Rodney, again purporting to act for himself and Constance, opposed the motion with a statement of facts that disputed the amounts stated in the notices of default, and provided the details of the new agreement with Davis. He provided copies of the letters Davis sent to the Peases confirming their agreement. These documents were presented as exhibits attached to Rodney's affidavit, which fails to include a statement that it is based on personal knowledge.
[¶ 8] Although Peoples did not file a reply statement of material facts,[3] it did provide a "statement of facts" in its responsive memorandum of law that includes the statement that Davis lacked the authority to bind the bank. Peoples attached the affidavit of Nicholas H. Penfield, Assistant Vice President of Peoples, in which he avers that the bank returned checks numbered 1555 and 1556 tendered pursuant to the Peases' agreement with Davis; the attached letter submitted to establish this fact, however, purports to return payments tendered by checks numbered 1558, 1559, and 1560, on the three notes not renegotiated by Davis.
[¶ 9] The court held a hearing on November 21, 2000, at which Rodney presented a document entitled "SPECIAL POWER OF ATTORNEY," purporting to authorize Rodney to represent both himself and Constance in the foreclosure proceeding. The form lists Rodney and Constance's address in Brewer. The court entered a summary judgment against Rodney, and a default judgment against Constance because Rodney may not legally represent her in court.[4] Rodney moved for findings of fact and conclusions of law, *1274 but the court denied the motion. Rodney appealed to the Superior Court (Penobscot, Hjelm, J.), which dismissed his appeal for lack of a final judgment on the counterclaim.
[¶ 10] After the case was remanded to the District Court, Peoples moved for a summary judgment on the counterclaim based on the Penfield affidavit. Peoples did not submit a statement of material facts with its motion on the counterclaim.[5] Rodney filed an opposition to the motion and included a statement of disputed facts with supporting documentation. The statement is identical to the statement submitted in opposition to the motion on the complaint, except that it also includes statements that the bank employees supplied erroneous information and that the Peases paid some interest. The account histories Rodney submitted acknowledge that the Peases made some interest payments on each loan, but the account statements reveal that they were nonetheless thousands of dollars in arrears on the May 31, 1991, and January 6, 1995, loans at the time of foreclosure.[6] The Peases did not submit account statements disclosing whether they were in arrears on the other three loans. Peoples responded to Rodney's affidavit paragraph by paragraph and referred to pleadings and exhibits submitted in connection with the motion for summary judgment on the complaint. The court entered a summary judgment. Rodney appeals from the entry of the summary judgments and Constance appeals from the entry of the default judgment in this consolidated appeal. The court amended the Docket Sheet to reflect Constance's Orrington address on the day she filed her notice of appeal.
II. DISCUSSION
A. Default Judgment Against Constance
[¶ 11] Constance contends that Peoples failed to serve a summons on her at her Orrington residence, which is her dwelling house and usual place of abode, and that she had no knowledge of the action until December 10, 2001. She also contends that Rodney attended the November 21, 2000, hearing with her power of attorney but that she was unrepresented at the hearing because the court did not permit Rodney to represent her.
[¶ 12] Peoples contends that it properly served Constance's summons by handing it to Rodney, a person of appropriate age and discretion, at the Peases' Brewer address. According to Peoples, the power of attorney form Rodney presented to the court listed his and Constance's address in Brewer, and the record suggests Constance knew about the court proceedings and failed to appear personally or through counsel. Finally, Peoples contends that Constance waived this issue by failing to allege a defense of insufficient service of process pursuant to M.R. CIV. P. 12.
[¶ 13] The foreclosure statute provides that "[s]ervice of process on all parties in interest and all proceedings must be in accordance with the Maine Rules of Civil Procedure." 14 M.R.S.A. § 6321 (Supp.2001); see also LaFosse v. Champagne, 2000 ME 81, 750 A.2d 1254. The Rules permit service upon a competent adult by leaving a copy of it "at the individual's dwelling house or usual place of abode with some person of suitable age and discretion then residing therein ...." M.R. CIV. P. 4(d)(1). A defense of insufficient service of process must be raised in a responsive pleading or by motion or it is not preserved. M.R. CIV. P. 12(b) & (h).[7]
*1275 [¶ 14] The court did not err in entering a default judgment against Constance because Constance had actual notice of the foreclosure,[8] service was made in hand to her spouse, and she failed to file a motion to dismiss for insufficient service. See 1 Field, McKusick & Wroth, Maine Civil Practice, § 4.5 at 69 (2d ed. 1970) ("If the defendant has received actual notice by the method of service used, the court should hesitate in finding the service insufficient for some technical noncompliance with Rule 4(d)(1)."). We affirm the entry of the default judgment.
B. Summary Judgments
1. Notarizations
[¶ 15] Rodney contends that Peoples employees notarized the mortgage deeds in violation of 4 M.R.S.A. § 954 (1989). Peoples contends that its employees acted legally because neither of them were parties to the instrument individually or as bank representatives.
Section 954 provides, in pertinent part:
Any notary public who is a[n] ... employee of a bank or other corporation may take the acknowledgment of any party to any written instrument executed to or by such corporation .... It shall be unlawful for any notary public to take the acknowledgment of an instrument by or to a bank .... of which he is a[n] ... employee where such notary is a party to such instrument, either individually or as a representative of such bank ....
[¶ 16] The statute does not prohibit a bank employee from taking the acknowledgment on a mortgage deed to the bank unless the notary is a party to the instrument individually or as a bank representative. Because the Peases alone executed the mortgage deeds, the bank employees who signed as notaries and witnesses were not "part[ies] to such instrument[s]" either individually or as Peoples representatives. The statute prevents bank employees from notarizing their own signatures; it does not prevent them from notarizing the signatures of borrowers on mortgage deeds. The documents were validly notarized.
2. Davis's Apparent Authority
[¶ 17] Rodney contends that he entered into an agreement with Peoples, through Davis, that Peoples has not honored. According to Rodney, the complaint was not served until August 15, 2000, after the parties had already reached an agreement regarding two of the loans.
[¶ 18] Peoples contends that Davis lacked the authority to enter into negotiations with the Peases. According to Peoples, Davis lacked express or apparent authority because Peoples had already informed the Peases in writing that they were not to make any further payments and provided a list of their options. Peoples contends that it refused to accept the Peases' checks, returning them within ten days in compliance with 14 M.R.S.A. § 6204 (Supp.2001), and making clear that *1276 Davis lacked the authority to bind the bank to an agreement with them.
[¶ 19] Section 6204 provides, in pertinent part:
The acceptance, before the expiration of the right of redemption and after the commencement of foreclosure proceedings of any mortgage of real property, of anything of value to be applied on or to the mortgage indebtedness by the mortgagee ... constitutes a waiver of the foreclosure, unless an agreement to the contrary in writing is signed by the person from whom the payment is accepted or, with regard to foreclosures commenced by civil action ... unless the bank returns the payment to the mortgagor within 10 days of receipt....
The mortgagee and the mortgagor may enter into an agreement to allow the mortgagor to bring the mortgage payments up to date with the foreclosure process being stayed as long as the mortgagor makes payments according to the agreement. If the mortgagor does not make payments according to the agreement, the mortgagee may, after notice to the mortgagor, resume the foreclosure process at the point at which it was stayed.
[¶ 20] Whether an agency relationship exists is a question of fact. Steelstone Indus., Inc. v. N. Ridge Ltd. P'ship, 1999 ME 132, ¶ 12, 735 A.2d 980, 983. A person has apparent authority to act for a principal if the principal knowingly permits the agent to exercise authority or holds the agent out as possessing authority. Id. at ¶ 13. Thus, the principal's conduct must cause a party reasonably to believe a person acts as an agent of the principal. Id.
[A]pparent authority can be created by appointing a person to a position, such as that of manager or treasurer, which carries with it generally recognized duties; to those who know of the appointment there is apparent authority to do the things ordinarily entrusted to one occupying such a position, regardless of unknown limitations which are imposed upon the particular agent.
RESTATEMENT (SECOND) OF AGENCY § 27 cmt. a (1958). An agent has apparent authority to do what an employee in his position would customarily do, if the third party knows of his position with the principal, but not of what the employer actually authorized him to do in that position. Id. cmt. d. For instance, a teller for a savings and loan association has apparent authority to bind the association by accepting tender of a late payment. Sav. & Loan Ass'n of Bangor v. Tear, 435 A.2d 1083, 1085 (Me.1981).
[¶ 21] The letters from Davis suggest that, notwithstanding Peoples' earlier letter listing the Peases' options, Davis agreed to a new payment schedule for two of the five loans at issue in the present case. This evidence gives rise to genuine issues of material fact regarding whether Davis acted for Peoples in forming a new contract and whether Peoples breached the agreement if it was made.[9] The court erred in granting the summary judgments on these two notes, especially because the evidence did not establish that the checks tendered on the two renegotiated loans were refused or the proceeds returned. As to the two notes negotiated by Davis, we vacate the court's summary judgments on the complaint and on the counterclaim for breach of contract.
*1277 3. Accuracy of statements
[¶ 22] Rodney contends that the affidavit accompanying the motion for summary judgment on the complaint demonstrates that Peoples' records inconsistently report the amounts due on the loans. He further contends that on three of the loans, he and Constance were required to make interest payments only, which they did.
[¶ 23] As to the summary judgment entered on its complaint, Peoples contends that Rodney failed to produce any documentary evidence setting forth a genuine issue of material fact regarding the amounts due on his loans. Peoples further contends that many of Rodney's statements are overly general and not presented in affidavit form because he does not aver personal knowledge. As a result, Peoples contends that Rodney has admitted the facts listed in its statement of material facts, which support the court's judgment.
[¶ 24] As to the summary judgment entered on the counterclaim, Peoples contends that Rodney failed to show that there was a genuine issue for trial. According to Peoples, Rodney merely reproduced the evidence from the first motion and added "random copies of account history on all the loans, all of which predate the Complaint for Foreclosure."
[¶ 25] An affidavit submitted in opposition to a motion for summary judgment must show affirmatively that it is based on the affiant's personal knowledge. Bahre v. Liberty Group, Inc., 2000 ME 75, ¶ 12, 750 A.2d 558, 561 (citing M.R. Civ. P. 56(e)). If it is apparent from the content of an affidavit that the affiant had personal knowledge of the facts averred, the court will consider the affidavit and the documents attached to it. Casco N. Bank, N.A. v. Estate of Grosse, 657 A.2d 778, 781 (Me.1995). If a party fails to object to an improper affidavit as unsupported by the affiant's personal knowledge, the issue is not preserved for appellate review. Biette v. Scott Dugas Trucking & Excavating, Inc., 676 A.2d 490, 495 (Me.1996).
[¶ 26] Peoples has failed to preserve this issue on appeal because, although it challenged the specificity and relevance of the statements and materials Rodney submitted, it did not raise the issue of his personal knowledge in the District Court. Even if the issue were preserved, however, Rodney's affidavit reveals that he had personal knowledge of his dealings with Peoples and of the documents that he submitted with his affidavit.
[¶ 27] Nonetheless, Rodney has failed to produce evidence establishing the inaccuracy of Peoples' calculations, other than the clerical error in one notice of default, which Rodney does not contend was perpetuated in the judgment. He has failed to offer any comprehensive evidence of what he has paid or actually owes on the accounts. On this issue, the court did not err because Rodney failed to raise a genuine issue of material fact regarding the amount of damages.
The entry is:
Default judgment against Constance affirmed. Summary judgment on the complaint vacated as to the notes executed on August 30, 1994, and August 22, 1995, but in all other respects, affirmed. Summary judgment on the counterclaim vacated as to the breach of contract claim on the notes executed on August 30, 1994, and August 22, 1995, but in all other respects, affirmed. Remanded to the District Court for further proceedings consistent with this opinion.
NOTES
[1] The other named defendant, Jeffrey Small, d.b.a. Electrical Installation and Design, is not a party to this appeal.
[2] The parties do not dispute that Davis is an employee of Peoples.
[3] The Peases do not challenge this procedural deficiency on appeal.
[4] See 4 M.R.S.A. § 807 (Supp.2001) (entitled "Unauthorized practice of law").
[5] The Peases do not challenge this procedural deficiency on appeal.
[6] Rodney's affidavit introducing his exhibits on the counterclaim avers that he has personal knowledge.
[7] Rule 12 provides, in pertinent part:
(b) ... Every defense, in law or fact, to a claim for relief in any pleading ... shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: ... (5) insufficiency of service of process ....
(h) Waiver or Preservation of Certain Defenses.
(1) A defense of ... insufficiency of service of process is waived ... (B) if it is neither made by motion under this rule nor included in a responsive pleading or an amendment thereof ....
[8] Although Constance contends that she lacked notice of this foreclosure proceeding before December of 2001, it is clear from the "special power of attorney" she signed that she had actual notice of the foreclosure proceeding before the November 21, 2000, hearing.
[9] If the parties entered into a new and valid contract, the bank's return of the checks within ten days of receipt has no effect because the foreclosure proceeding based on the original (superseded) agreements is stayed unless and until the Peases default on the new agreement. 14 M.R.S.A. § 6204. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537003/ | 27 B.R. 465 (1983)
In re Glenn Samuel RATLIFF, and Peggy Marie Ratliff, Debtors.
Bankruptcy No. 81-01732-R.
United States Bankruptcy Court, E.D. Virginia, Richmond Division.
February 9, 1983.
*466 John B. Mann, Levit & Mann, Richmond, Va., for debtors.
W. Griffith Purcell, Purcell, Cherry, Kerns & Abady, Richmond, Va., for creditors.
MEMORANDUM OPINION
BLACKWELL N. SHELLEY, Bankruptcy Judge.
This matter comes on upon the filing by Glenn Samuel Ratliff and Peggy Marie Ratliff, the debtors herein, of an application to reopen their bankruptcy case for the purpose of scheduling Sonja Lezoche and Lisa Lezoche as creditors and for the purpose of adding additional items of personal property in the possession of Sonja Lezoche. Upon the filing by the Lezoches of an objection to the application to reopen the debtors' case and after hearing and upon the submission of briefs, this Court makes the following determination.
STATEMENT OF THE FACTS
The Ratliffs filed their petition in bankruptcy with this Court on October 9, 1981, and received their discharge in bankruptcy on January 26, 1982. This Court closed the debtors' case on February 12, 1982, and they filed their application to reopen the case on June 1, 1982. Peggy Ratliff separated from her husband in November, 1980, and shared a house with Sonja Lezoche from November, 1980, to February, 1981. Peggy Ratliff testified that Sonja Lezoche invited her to move into her house in Amelia County, Virginia, and asked only that she purchase her own food and pay one-half of the cost of the utilities. Mrs. Ratliff stated Mrs. Lezoche told her she did not need to pay rent. Mrs. Ratliff remained with Mrs. Lezoche until February 27, 1981, at which time she and Glenn Ratliff relocated to Tuscon, Arizona for approximately four months. Before Mrs. Ratliff left for Tuscon, she sold Mrs. Lezoche her equity in her house trailer for the amount of $3,000.00. She also sold Mrs. Lezoche three horses and tack for a promissory note in the amount of $1,000.00. In addition she left at Mrs. Lezoche's house a number of items of personal property including an exercise bike, two automobiles, two dump trucks, two trailers, two motorcycles, and numerous other miscellaneous items. On the day they received their discharge in bankruptcy, the Ratliffs filed suit in Amelia County General District Court to recover 15 of those items valued at $7,500.00. The value assigned in the warrant to several of the properties including the dump trucks and the automobiles substantially exceeded the values assigned those same properties in the debtors' bankruptcy petition. Furthermore, several of the items listed in the Ratliff's detinue warrant were omitted from the debtors' bankruptcy petition. Mrs. Ratliff testified she did not list those items in her bankruptcy petition because she thought Mrs. Lezoche had disposed of them.
The Lezoches filed a counterclaim for rent against the Ratliffs and subsequently filed a counterclaim for the reclamation of funds paid for the purchase of the mobile home. The Amelia County General District Court, on April 27, 1982, granted judgment for the Lezoches on the counterclaims. Shortly thereafter, on May 28, 1982, the Ratliffs filed the application herein to reopen their bankruptcy case to list in their bankruptcy schedules these debts. Mrs. Ratliff testified that she did not know of the existence of these debts until the Lezoches filed their counterclaims.
CONCLUSIONS OF LAW
Whether a court should open a bankruptcy case remains a matter of discretion and courts have developed the "exceptional circumstances test" to determine in which instances they should use their equitable discretion to reopen a case. In re Fortin, 3 B.C.D. 72, 73 (Bkrtcy.S.D.N.Y.1977). The exceptional circumstances test requires that ". . . the case be a no-asset one, that there be no fraud or intentional laches; and that the creditor was omitted through mistake or inadvertence." In re Benak, 374 F.Supp. *467 499, 500 (D.Neb.1974). See also, In re Souras, 19 B.R. 798 (Bkrtcy.E.D.Va.1982).
11 U.S.C. § 350(b) provides that "[a] case may be reopened in the Court in which such case was closed to administer assets, to accord relief to the debtor, or for other cause." Bankruptcy Rule 515 which implements this section also recognizes that relief to a debtor is a proper cause for reopening a bankruptcy case. It is clear that the adding of additional creditors, whose debts may be dischargeable in bankruptcy, accords relief to the debtors.
This Court believes that the debtors' omission of these creditors was not intentional, and that it is reasonable to assume that the debtors would not have instituted the litigation in the General District Court of Amelia County if they thought it would precipitate counterclaims with potential liabilities in excess of the value of their own cause of action. It was only as a result of the counterclaims that their knowledge of the indebtedness arose. All of this occurred subsequent to the granting of the discharge in bankruptcy. The debtors' listing of the value of the assets at one amount in their petition and at a much higher amount in their detinue action in the General District Court does not in and of itself indicate fraud. The debtors overvalued their assets in the detinue warrant in order to recover as much as possible for their claim against the Lezoches. If they had recovered more than they claimed, they could have amended their homestead deed to show the greater valuation up to the limit allowed under the Commonwealth of Virginia's exemption statutes. Debtors may amend their homestead deeds to increase the stated value of exempt property even after filing their bankruptcy petitions. See, In re Waltrip, 260 F.Supp. 448 (E.D.Va. 1966).
The debtors failed to include in their bankruptcy petition certain property which they included in their detinue warrant filed in the General District Court. This oversight is an insufficient basis for this Court to deny the debtors the right to amend their schedules to include these creditors considering the insignificance of the assets which were excluded, the debtors' explanation of their non-inclusion, and the overriding policy of bankruptcy law to provide debtors with fresh starts in life. See, Local Loan Company v. Hunt, 292 U.S. 234, 244, 54 S.Ct. 695, 699, 78 L.Ed. 1230 (1934).
11 U.S.C. § 523(a) provides that a discharge under § 727 does not discharge an individual debtor from any debt
(3) neither listed nor scheduled under section 521(1) of this title, with the name, if known to the debtor, of the creditor to whom such debt is owed, in time to permit
(A) if such debt is not of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim, unless such creditor had notice of actual knowledge of the case in time for such timely filing; or
(B) if such debt is of a kind specified in paragraph (2), (4), or (6) of this subsection, timely filing of a proof of claim and timely request for a determination of dischargeability of such debt under one of such paragraphs, unless such creditor had notice or actual knowledge of the case in time for such timely filing and request. . . .
A review of the case file reflects that creditors were advised not to file proofs of claim and that at a subsequent time, if the estate appeared to have assets available for liquidation, creditors would be notified to file claims. No notification has yet been made in this proceeding. Thus with respect to § 523(a)(3)(A), the time for filing proofs of claim has not expired.
Section 523(a)(3)(B) is modified by § 523(c). Section 523(c) states that a debtor shall be discharged from debts specified in paragraphs (2), (4), or (6) of subsection (a) of this section unless on request of the creditor and after notice and hearing, the Court determines that debt to be excepted from discharge under one of those paragraphs. Bankruptcy Rule 409 as amended by Interim Rule 4003 requires creditors to file complaints to determine the dischargeability of debts within ninety days after the *468 date set for the first meeting of creditors although courts may shorten that period by as much as sixty days. The record of this proceeding reflects that said ninety day period has expired, however, § 523(c) excludes from that time limitation any exception to dischargeability provided by § 523(a)(3)(B). If Sonja Lezoche or Lisa Lezoche had no notice or actual knowledge of the bankruptcy case and have causes of action arising under § 523(a)(2), (4), or (6) the savings provisions of § 523(a)(3)(B) and 523(c) are available to them even though a timely scheduled creditor would now be barred from filing a complaint under § 523(a)(2), (4), or (6).
For the foregoing reasons, it is the opinion of this Court that the Ratliffs' application to reopen their bankruptcy case for the purpose of scheduling Sonja Lezoche and Lisa Lezoche as creditors should be allowed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536919/ | 979 A.2d 969 (2009)
Joseph PIETROPAOLO, Sr. and Rosa F. and Joseph Pietropaolo, Jr. and Landscape Contractor, Inc., Appellants
v.
The ZONING HEARING BOARD OF LOWER MERION TOWNSHIP.
No. 2173 C.D. 2008
Commonwealth Court of Pennsylvania.
Argued June 11, 2009.
Decided August 19, 2009.
*972 Mark S. Pearlstein, Wayne, for appellants.
Sean P. Flynn, Bridgeport, for appellee.
BEFORE: SIMPSON, Judge, LEAVITT, Judge, and FLAHERTY, Senior Judge.
OPINION BY Judge SIMPSON.
In this appeal, Joseph Pietropaolo, Sr., Rosa F. Pietropaolo and Joseph Pietropaolo, Jr., Landscaping Contractor, Inc. (collectively, Applicants), ask whether the Zoning Hearing Board of Lower Merion Township (ZHB) erred in denying their appeal from an enforcement notice that required Applicants to cease using their residentially-zoned property for a landscape contractor business. Applicants argue the ZHB erred in denying their appeal where the use of a garage on the property and the operation of the landscaping business are a continuation of a lawful nonconforming use. Alternatively, they assert the ZHB erred in denying their variance by estoppel request where the Township acquiesced to their use and where the ZHB granted such relief to a similarly situated landowner. Discerning no error in the ZHB's decision, we affirm.
Joseph Pietropaolo, Sr. and his wife Rosa own the property located at 355 East County Line Road in Ardmore, Lower Merion Township (subject property). The subject property is zoned R-6A Residential and is improved with a single family dwelling, a detached four-bay garage and a paved driveway. The Pietropaolo's son, Joseph Pietropaolo, Jr., lives in a dwelling on the subject property with his wife. Pietropaolo, Jr. also uses the garage and paved driveway in connection with a landscaping business. It is that use, the extent of which is described more fully below, which is at issue here.
This matter originated by virtue of a letter dated September 14, 2007, from the Township Zoning Officer to Applicants, which indicated the use of the subject property for a landscaping business was not permitted in the R-6A district. The zoning officer sent the letter in response to a complaint by Applicants' neighbor, Anna Sachs (Objector).[1]
*973 In October 2007, Applicants appealed the zoning officer's determination to the ZHB, claiming the activities relating to the landscaping business were entitled to continue as a nonconforming use. Alternatively, Applicants asserted they were entitled to a variance by estoppel because they openly conducted the landscaping business on the subject property for 38 years without Township interference. A hearing on Applicants' appeal ensued before the ZHB.
After hearing, the ZHB denied Applicants' appeal and their request for a variance by estoppel. In its opinion, the ZHB made the following findings.
Joseph Pietropaolo, Jr. testified he currently operates a residential landscape contracting business from the subject property for homes in the Eastern Main Line area. The landscaping operation lasts from mid-March to mid-December. During the winter, Pietropaolo, Jr. operates a smaller-scale snow-plowing operation.
The work day for Pietropaolo Jr.'s business begins and ends at the subject property, where the vehicles and equipment are stored and where the employees meet and prepare the equipment for the day's work.
The equipment used for the business includes Pietropaolo Jr.'s pickup truck, his father's truck, a dump truck, a trailer, hand-operated leaf blowers, push blowers, three walk-behind mowers, a rider mower, a leaf loader and a variety of hand tools and supplies. Including the Pietropaolos, the business is comprised of four full-time employees. During the spring and fall seasons, up to three additional employees may be added.
A typical workday on the subject property begins when Pietropaolo Sr. arrives in his truck at 6:30 a.m. to prepare the equipment for the day's work. He opens the garage, retrieves the gas cans and leaves the subject property to fill them at a local gas station. The other employees arrive around 7:00 a.m. They connect the trailer to the pickup truck and load the riding mowers, push mowers and other equipment and tools required for the day's work. They depart the subject property at approximately 7:30 a.m. The employees return to the subject property at approximately 3:30 p.m., unload the trailer and store the equipment, including the dump truck, inside the garage bays. Pietropaolo, Jr. testified the loading of the mowers does not necessarily occur everyday. Depending on the weather, the mowers may remain "pre-loaded" on the trailer for several consecutive days. Reproduced Record (R.R.) at 79a. On bad weather days, the mowers may have to be unloaded and loaded from the trailer as they cannot remain outside.
The Pietropaolos perform maintenance and minor equipment servicing inside the garage. This includes lubricating and changing the oil in the machines, and sharpening and grinding the blades for the mowers, usually on the weekends.[2]
Pietropaolo, Sr. testified Applicants' operation has been conducted in the same basic manner and intensity since 1969, when he first purchased the subject property.
Arcolino Bianco testified on behalf of Applicants with regard to the use of the subject property prior to its purchase by Pietropaolo, Sr. Bianco was born in 1923 and lived in the neighborhood of the subject *974 property until 1950 (with the exception of a three-year stint in the armed services). After 1950, Bianco moved to Havertown, but his family continued to live in a house in the immediate neighborhood of the subject property. Bianco has been a frequent visitor to that neighborhood since 1950. He testified the garage has been on the subject property since at least 1930, when it was the only structure on the site. The owners of the subject property at that time, the Finocchios, rented out the garage to two truckers and an individual with a car. One of the Finocchios also stored his car there. After Thomas Finocchio built a house on the subject property in 1948, the garage continued to be used for the storage of two trucks and two automobiles. The automobiles were owned by the Finocchios. According to Bianco, it was not until the Pietropaolos purchased the subject property that a landscaping business began to operate from the property.
Objector testified in opposition to Applicant's appeal. Since August 2001, Objector resided at the property adjacent to the subject property. Objector testified that when she first moved in, she spoke to Pietropaolo, Jr. about the landscaping business conducted on the subject property. According to Objector, Pietropaolo, Jr. stated the business had been there a long time and was grandfathered in by the Township. Objector did not question Pietropaolo, Jr.'s statement until recent disputes between the neighbors prompted her to ask the zoning officer to investigate.
Objector presented 22 photographs and testified regarding the impact of the landscaping business on the enjoyment of her property. She stated the pickup trucks come in and out of the subject property several times each day early in the morning. The dump truck is often parked outside the garage, and the business has spilled over to the garage on the property at 357 East County Line Road, which is also owned by Pietropaolo, Sr. The mowers must be started to move them onto the trailer, a very noisy operation according to Objector. Objector also testified the five employees (sometimes more) commonly engage in loud conversations and shouting in the morning. On the weekends, Pietropaolo, Sr. sharpens the mower blades on a grinding stone for several hours, also a loud operation.
As to the issues presented in Applicants' appeal, the ZHB rejected Applicants' primary contention that the landscaping business constitutes the continuation of a lawful nonconforming use.
Specifically, based on the evidence presented, the ZHB determined the landscaping business constituted a "non-permitted change in use." ZHB Op. at 5, R.R. at 298a. The ZHB stated when the garage on the subject property began to be used for the storage of two trucks and two cars sometime before 1930, the subject property was zoned for business use, which permitted a "private or minor garage." Id. The ZHB noted "minor garage" was then defined as "a building, not a Private Garage, one story in height, used for the storage of automobiles and not used for making repairs thereto." Id. The ZHB stated in 1939, the subject property was rezoned to its current R-6A classification; as a result, the use of the subject property for a minor garage became nonconforming at that time.
The ZHB further stated, like most zoning ordinances, the Lower Merion Township Zoning Ordinance (zoning ordinance) protects only the use that existed on the date the use became nonconforming. Here, the ZHB determined, the protected, lawful nonconforming use in 1939 was the storage of two trucks and two automobiles (one of which was owned by the former owners of the subject property). The *975 ZHB noted Bianco's testimony that the garage was used only for that purpose until 1950. In that year, having built a house on the site two years earlier, the owner of the subject property took over a second garage bay for his own personal usea permitted use under the zoning ordinance. Thus, the ZHB determined, from 1950 until Pietropaolo Sr. purchased the subject property in 1969, the only lawful nonconforming use was the storage of two trucks in the garage. The ZHB stated there was no evidence that any other type of business activity was conducted on the subject property by the truck owners, such as loading equipment, gathering employees, storing tools or servicing equipment.
The ZHB determined the landscaping business does not constitute the continuation of a prior nonconforming use, but is a prohibited change in use. Specifically, the ZHB found Applicant's use is qualitatively different from the prior use of two garage bays for vehicle storage. The ZHB set forth several distinguishing facts, described more fully below, in support of this determination. Moreover, the ZHB stated, Objector's photographic evidence proved the landscaping business expanded to the adjacent property at 357 East County Line Road. The ZHB stated, although this property is also owned by Pietropaolo, Sr., Applicants did not obtain a required special exception to expand onto that property. As such, the ZHB determined this expanded use was clearly prohibited.
As to Applicants' alternative variance by estoppel claim, the ZHB determined Applicants did not prove all the elements required to obtain such relief by clear, precise and unequivocal evidence. In short, the ZHB determined Applicants did not prove that: the Township actively acquiesced to their business use of the subject property; that Applicants innocently relied on the validity of the use; that Applicants made substantial expenditures in reliance on their belief that the business use would be permitted by the Township; or, the denial of the variance would cause unnecessary hardship. Applicants' appealed the ZHB's order to the Court of Common Pleas of Montgomery County (trial court).
Without taking additional evidence, the trial court affirmed. As to whether Applicants' business constitutes the continuation of a nonconforming use, the trial court stated the ZHB properly determined the current landscaping business constituted a change in use from the nonconforming "minor garage" use. The trial court stated the evidence established Applicants are using the subject property as the center of an active business operation rather than passively storing vehicles as the prior owners did. The trial court stated, prior to Applicants' purchase of the subject property, trucks were stored in the garage, but that was the full extent of any commercial use. Currently, however, Applicants are using the garage as a storage area for contracting equipment, as a staging area for employees to gather daily to load and unload vehicles and equipment, and as a workspace to service and maintain landscaping equipment. The trial court agreed with the ZHB that these additional activities constitute a change in use rather than a continuation of an existing use. Thus, the trial court concluded the ZHB properly determined that Applicants' landscaping business was not the continuation of a lawful nonconforming use.
As to Applicants' variance by estoppel claim, the trial court stated the ZHB properly determined Applicants did not meet their burden to satisfy any of the elements necessary to obtain such relief. For these reasons, the trial court affirmed the ZHB's order. Applicants now appeal to this Court.
*976 Because the parties presented no additional evidence after the ZHB's decision, our review is limited to determining whether the ZHB committed an abuse of discretion or an error of law. Good v. Zoning Hearing Bd. of Heidelberg Twp., 967 A.2d 421 (Pa.Cmwlth.), appeal denied, ___ Pa. ___, 973 A.2d 1008 (2009).
On appeal, Applicants argue the ZHB erred in denying their appeal where the evidence showed the use of the garage on the subject property and the operation of the landscaping business represent the continuation of a lawful nonconforming use. Alternatively, they assert the ZHB erred in denying their request for a variance by estoppel where the Township acquiesced in their use and where the ZHB granted a variance by estoppel request from a similarly situated landowner.
At the outset, we note, this Court may not substitute its interpretation of the evidence for that of the ZHB. Taliaferro v. Darby Twp. Zoning Hearing Bd., 873 A.2d 807 (Pa.Cmwlth.), appeal denied, 585 Pa. 692, 887 A.2d 1243 (2005). It is the function of a ZHB to weigh the evidence before it. Id. The ZHB is the sole judge of the credibility of witnesses and the weight afforded their testimony. Id. Assuming the record contains substantial evidence, we are bound by the ZHB's findings that result from resolutions of credibility and conflicting testimony. Id.
Additionally, a ZHB is the entity responsible for the interpretation and application of its zoning ordinance, and its interpretation of its own ordinance is entitled to great deference from a reviewing court. Smith v. Zoning Hearing Bd. of Huntingdon Borough, 734 A.2d 55 (Pa. Cmwlth.1999). The basis for the judicial deference is the knowledge and expertise a ZHB possesses to interpret the ordinance it is charged with administering. Id.
I. Continuation of Non-Conforming Use
Applicants first argue they are entitled to continue their landscaping business activities because the subject property has been continuously used for commercial purposes, namely, the storage of commercial equipment, since the 1930's when a "storage house" was a permitted use under the applicable zoning ordinance. Applicants assert their use of the subject property for the storage of landscaping equipment continues the "storage house" use that started around 1930 and became a nonconforming use in 1939 upon the enactment of the zoning ordinance. We disagree.
A lawful, nonconforming use of a property is a use predating a subsequent prohibitory zoning restriction. Hafner v. Zoning Hearing Bd. of Allen Twp., 974 A.2d 1204 (Pa.Cmwlth.2009). The right to maintain a nonconforming use is only available for uses that were lawful when they came into existence and which existed when the ordinance took effect. Id. It is the burden of the party proposing the existence of such a use to establish both its existence and legality before the enactment of the ordinance at issue. Id. "This burden includes the requirement of conclusive proof by way of objective evidence of the precise extent, nature, time of creation and continuation of the alleged nonconforming use." Jones v. Twp. of N. Huntingdon Zoning Hearing Bd., 78 Pa. Cmwlth. 505, 467 A.2d 1206, 1207 (1983) (emphasis added).
"The manner of use and the dates of its existence are questions of fact on which a reviewing court defers to the fact-finder; however, the legality of a use is a question of law over which our review is plenary." Hafner, 974 A.2d at 1211 (emphasis added).
*977 As to the limitations on the protections afforded nonconforming uses, in Hanna v. Board of Adjustment of Borough of Forest Hills, 408 Pa. 306, 183 A.2d 539 (1962), our Supreme Court stated:
The use of property which the ordinance protects, or freezes, is the use which was in existence at the time of the passage of the ordinance or the change of a use district but it offers no protection to a use different from the use in existence when the ordinance was passed. The latter does not render the ordinance invalid. The nonconforming use which is within the orbit of protection of the law and the Constitution is the nonconforming use which exists at the time of the passage of the zoning ordinance or the change in a use district under a zoning ordinance, not a new or different nonconforming use. . . .
Id. at 313-14, 183 A.2d at 543-44 (citations omitted) (emphasis in original).
However, this rule is subject to the doctrine of natural expansion, which gives a landowner the right to expand "as required to maintain economic viability or to take advantage of increases in trade" so long as the expansion is not detrimental to the public welfare, safety and health. Smalley v. Zoning Bd. of Middletown Twp., 575 Pa. 85, 99, 834 A.2d 535, 543 (2003) (citations omitted).
As Applicants correctly note, the doctrine of natural expansion does not require a proposed use be identical to the nonconforming use. Rather, the proposed use must be sufficiently similar so as not to constitute a new or different use. Limley v. Zoning Hearing Bd. of Port Vue Borough, 533 Pa. 340, 625 A.2d 54 (1993) (proposed public restaurant and bar similar to existing use as private social club); Pappas v. Zoning Bd. of Adjustment of City of Phila., 527 Pa. 149, 589 A.2d 675 (1991) (pizza restaurant with seating for 40 customers similar to existing use as sandwich shop with limited customer seating that sold primarily take-out food); U. Providence Twp. Appeal, 414 Pa. 46, 198 A.2d 522 (1964) (proposed day camp and swim club similar to existing use as amusement park); Mutimer Co. v. Wagner, 376 Pa. 575, 103 A.2d 417 (1954) (proposed machinery sales office similar to existing use as real estate sales office).
A nonconforming use cannot be limited to the precise magnitude which it existed on the date when the zoning ordinance was adopted. Limley. However, there is no constitutionally protected right to change a nonconforming use to another use not allowed by the zoning ordinance, nor may an additional nonconforming use be appended to an existing nonconformity. Hager v. W. Rockhill Twp. Zoning Hearing Bd., 795 A.2d 1104 (Pa.Cmwlth.2002).
Here, the ZHB determined Applicants did not prove their landscaping business constituted the continuation or reasonable expansion of the lawful, nonconforming use for the passive storage of vehicles; rather, the ZHB found the activities conducted on the subject property constituted an impermissible change in use to an active business operation.
Specifically, the ZHB found when the garage on the subject property began to be used for the storage of two trucks and two cars sometime before 1930, the subject property was zoned for business use, which permitted, among other things, a "minor garage" ("a building, not a Private Garage, one story in height, used for the storage of automobiles and not used for making repairs thereto.") See ZHB Op. at 5; R.R. at 298a (emphasis added). The ZHB further found in 1939, the subject property was rezoned R-6A Residential, and, as a result, the use of the subject property for a minor garage became non-conforming *978 at that time. Id. The ZHB noted, like most zoning ordinances, the Township's zoning ordinance protects only the use that existed on the date the use became nonconforming. See Zoning Code § 155-99 A.
Based on the evidence presented, the ZHB determined the lawful nonconforming use of the subject property in 1939 consisted of the storage of two trucks and two automobiles. The ZHB stated there was no evidence that any other business activity was conducted by the truck owners such as loading equipment, gathering employees, storing tools or servicing equipment. As a result, the ZHB determined the landscaping business did not constitute the continuation of a nonconforming use, but rather, represented a prohibited change in use. Notably, the ZHB stated:
Here, the [ZHB] finds that [Applicants'] use is qualitatively different from the prior use of two garage bays for vehicle storage. . . .
The differences between the prior use and the present landscaping business are manifest. While the trucks stored on the [subject] [p]roperty prior to 1969 might have been owned by a construction company, there is no evidence that any other construction equipment was stored there, that any staging or loading of material or equipment was done on the [subject] [p]roperty by employees of the company, or that any business activity connected to the construction company was conducted there. [Applicants], on the other hand, use the garage and driveway: (1) for a staging area for employees to gather daily and to periodically load motorized equipment onto multiple vehicles, (2) for a workspace to service and maintain landscaping equipment, and (3) for the outside storage of equipment. The addition of these kinds of activities constitutes a change in use, rather than a permitted continuation or reasonable expansion of the prior nonconforming use.
ZHB Op. at 7; R.R. at 299a-300a (citations omitted).
In light of the ZHB's findings regarding these significant, qualitative differences, and recognizing the burden is on the landowner to establish the existence and continuation of a prior nonconforming use, Hafner; Jones, we cannot conclude the ZHB abused its discretion in determining Applicants' business use is different, and, thus, not a continuation of the prior, nonconforming storage use.
This determination is confirmed by reference to case law. In Watson v. Zoning Hearing Board of West Hanover Township, 90 Pa.Cmwlth. 646, 496 A.2d 878 (1985), this Court, speaking through Judge Craig, counseled that when seeking to decide whether an application involves a new use or an extension of an existing one, the Court must look to the applicable zoning ordinance's structure as the chief guide with respect to how uses are categorized for the particular municipality. The Court therefore looked at how a contracting use was defined in the current ordinance to determine how local lawmakers intended to limit that use.
Following that approach here, we previously acknowledged that a "minor garage" was originally defined as a building for storing automobiles and not used for making repairs. Similarly, the current zoning ordinance defines a "Storage Garage" as "A building, not a public or private garage, used solely for the storage of motor vehicles (not trucks) but not for the sale, service, or repair of motor vehicles." Zoning Code § 155-4, GARAGE(3) (emphasis added).
Under these definitions, storage is permitted inside the structure, not outside, and no inside activities beyond storage are *979 included. Given these definitions, we agree that a use involving significant and at times daily activity outside the garage is a use different than a "minor garage" or "storage garage." No error is evident in the ZHB's determination.
Our conclusion is also consistent with this Court's decision in Bevans v. Township of Hilltown, 72 Pa.Cmwlth. 227, 457 A.2d 977 (1983). Speaking for the Court, Judge Craig evaluated the change from the nonconforming parking of two pick-up trucks and a flatbed truck to a use involving outside parking of more trucks, repair of trucks, daily assembly of workers, warmup of trucks at the beginning of the day and returning of the trucks at the end of the day. The fact-finder's determination that use of property was a different use was upheld. Bevans is dispositive here.
While Applicants may naturally expand the inside storage to include more vehicles, and perhaps different types of vehicles and items that attach to vehicles, their activities would need to be similar to a vehicle storage use. Natural expansion would be limited to the structure in the absence of broader municipal approval.
Also, Applicants are entitled to pursue a use similar to a "storage garage" or "minor garage." Limley. A "public garage" may be such a similar use which could permit other activities inside the structure.[3] However, as to activities outside the structure, Applicants must prove they are accessory to the motor vehicle storage use inside. Further, a "Parking Facility" or a "Parking Structure" could be a similar use, but neither of these uses is defined to include any activity beyond parking.[4] In short, a review of the Zoning Code fails to reveal any use similar to a "storage garage" which would allow all the activities in all the locations which Applicants currently pursue.
Of further note, the ZHB found Objector's photographic evidence proved the landscaping business expanded onto the adjacent property owned by Pietropaolo, Sr. The ZHB stated that although Pietropaolo, Sr. owns that property, such expansion requires an applicant to apply for and obtain a special exception, and Applicants failed to do so here. See Zoning Code § 155-99(B). Applicants do not dispute this determination.[5]
*980 II. Variance by Estoppel
Alternatively, Applicants assert they are entitled to a variance by estoppel based on the fact they have used the subject property for their landscaping business activities for 38 years without Township interference. Further, Applicants maintain they are entitled to the benefit of a nearly identical case decided by the ZHB in which the ZHB granted a variance by estoppel to a similarly-situated landowner. See In re Appeal of Richard Kaller Appeal No. 3163 (1991); See Ex. A-9; R.R. at 204a.
There are five factors relevant to whether a ZHB should grant a variance by estoppel.
Such variances are appropriate when a use does not conform to the zoning ordinance and the property owner establishes all of the following: (1) a long period of municipal failure to enforce the law, when the municipality knew or should have known of the violation, in conjunction with some form of active acquiescence in the illegal use; (2) the landowner acted in good faith and relied innocently upon the validity of the use throughout the proceeding; (3) the landowner has made substantial expenditures in reliance upon his belief that his use was permitted; and (4) denial of the variance would impose an unnecessary hardship on the applicant.
Borough of Dormont v. Zoning Hearing Bd. of Borough of Dormont, 850 A.2d 826, 828 (Pa.Cmwlth.2004) (citations omitted). For Applicants to prevail under a variance by estoppel theory, they must prove the essential factors by clear, precise and unequivocal evidence. Springfield Twp. v. Kim, 792 A.2d 717 (Pa.Cmwlth.2002).
Here, the ZHB determined Applicants did not satisfy any of the required factors. Upon review, no error is apparent in the ZHB's rejection of Applicants' variance by estoppel claim.
Perhaps the most glaring deficiency in Applicants' variance by estoppel claim is their failure to prove denial of the variance would result in unnecessary hardship. In order to establish unnecessary hardship, an applicant must show more than a mere economic or personal hardship. Dormont. To accomplish this, "[t]he applicant must prove that the hardship is unique to the property, and that the zoning restriction sought to be overcome renders the property practically valueless." Id. at 828 (emphasis added).
Here, Applicants did not prove the requisite hardship. More particularly, although denial of the variance may result in some economic loss, as the ZHB noted, Pietropaolo, Jr. and his wife reside on the subject property, and the garage on the subject property can be used for storage. Clearly, denial of the variance would not render the subject property valueless. Thus, the ZHB did not err in determining denial of Applicants' variance by estoppel request would not cause unnecessary hardship.
In addition to Applicants' failure to prove unnecessary hardship, the ZHB determined Applicants did not show the Township actively acquiesced to their business use. More particularly, the ZHB stated:
[T]here was no . . . evidence that the Township actively acquiesced in the [Applicants'] business use of the [subject] [p]roperty. [Applicants] testified to receiving a letter about the business from *981 an unidentified zoning official and to an earlier conversation about storing equipment with an unidentified Township employee, but they could not produce any letter or identify the employee or his position. [N.T. 38-39, 70-71] Although the [ZHB] allowed this hearsay testimony, it does not rise to the level of clear, precise and unequivocal evidence required to support an estoppel against the Township. Moreover, the Township's mere failure to issue a citation for many years does not constitute active acquiescence. There must have been an affirmative act, such as issuing a permit, for this element to be satisfied. Skarvelis v. Zoning Hearing Board of Borough of Dormont, 679 A.2d 278 (Pa. Cmwlth.1996).
ZHB Op. at 8-9; R.R. at 301a-02a (footnote omitted). The record supports the ZHB's determination. R.R. at 61a-62a; 93a-94a.
Moreover, the ZHB correctly set forth the law with regard to the active acquiescence required by a municipality in order for an applicant to prevail on a variance by estoppel claim. Indeed, in cases where this Court granted a variance by estoppel, the municipalities did not passively stand by. Rather, they committed an affirmative act, for example, granting a building permit or reasonably leading a landowner to conclude his use was lawful. See, e.g., Knake v. Zoning Hearing Bd. of Dormont, 74 Pa.Cmwlth. 265, 459 A.2d 1331 (1983) (variance by estoppel granted where borough failed to act for 44 years, knew the use was impermissible for 27 years, and issued a building permit for the impermissible use); Three Rivers Youth v. Zoning Bd. of Adjustment of City of Pittsburgh, 63 Pa.Cmwlth. 184, 437 A.2d 1064 (1981) (inaction by municipality for seven years plus issuance of building permit by municipality and reliance by landowner on zoning officer's interpretation of regulation); Twp. of Haverford v. Spica, 16 Pa. Cmwlth. 326, 328 A.2d 878 (1974) (inaction by municipality for 36 years and issuance of building permit where municipality knew of intended construction). Thus, Applicants arguments on this point fail.
Further, the ZHB determined Applicants did not prove innocent reliance on the validity of their use. Again, we agree. In Kim, we explained:
One who undertakes to make use of real estate for commercial purposes without inquiring as to whether the use is permitted by the municipality's zoning ordinance, does so at his own peril. The purchaser's duty to inquire is not limited to whether a particular use is permitted but, by implication, must also encompass an inquiry into the limitations placed on the manner in which the property may be used, e.g., a recreational vehicle park was a permitted use but not for permanent residences.
Id. at 722 (citation omitted) (emphasis in original).
Here, the ZHB found, although Pietropaolo, Sr. claimed to have spoken to someone in the Township about the use of the subject property, he could not identify the person or state what his position was. ZHB Op. at 9, R.R. at 302a. The ZHB further found Pietropaolo, Sr. did not he testify that he informed this individual that staging, maintenance, and preparation for a landscape business would be conducted on the subject property. Id. Pietropaolo, Sr. merely stated he was a landscape contractor and asked whether he could "keep his equipment" on the subject property. Id.; R.R. at 94a. The Township employee allegedly said "yes." Id. The ZHB determined this testimony was insufficient to constitute clear, precise and unequivocal evidence of innocent reliance on the validity of the use for the subject property for a *982 landscape business. No error is apparent in the ZHB's determination. Kim.
In short, Applicants did not prove at least three of the essential factors necessary to obtain a variance by estoppel by clear, precise and unequivocal evidence. Thus, no error is apparent in the ZHB's denial of Applicants' variance by estoppel request.
Furthermore, as for Applicants' reliance on the ZHB's prior decision in Kaller, in which the ZHB granted an applicant a variance by estoppel, as the Township notes, the ZHB's decision to grant a variance in an earlier case does not mandate approval of Applicants' request here. Indeed, in Appeal of deBotton, 81 Pa.Cmwlth. 513, 474 A.2d 706, 711 (1984), this Court explained:
[T]he fact that earlier variances were granted in the [applicable zoning] district does not necessarily dictate the approval of another application, for variances are granted on a case-by-case basis and then only when the applicant proves that the ordinance imposes upon him a unique hardship and that the approval of the variance will not have an adverse impact on the health, safety and welfare of the general public.
See also Swemley v. Zoning Hearing Bd. of Windsor Twp., 698 A.2d 160, 163 (Pa. Cmwlth.1997) ("Just because a board has granted a variance to one property-owner, it need not grant a variance to another similarly situated property-owner.")
Perhaps more importantly, a review of the ZHB's prior decision in Kaller, reveals that the case is factually distinguishable from Applicants' case. See R.R. at 240a-44a. Indeed, in Kaller, the Township actively acquiesced to the applicant's business use by, among other things, issuing a permit for construction of a garage on an adjacent property owned by the applicant, which housed offices for the applicant's business. R.R. at 240a. The ZHB made no such finding here. Also, in Kaller, the ZHB specifically determined that denial of the variance would create unnecessary hardship. As explained above, the ZHB made a contrary finding here. Therefore, we reject Applicants' assertions on this point.
For the foregoing reasons, we affirm.
ORDER
AND NOW, this 19th day of August, 2009, the order of the Court of Common Pleas of Montgomery County is AFFIRMED.
NOTES
[1] Applicants note that Objector's complaint about their landscaping business occurred shortly after Objector received complaints from neighbors, including Pietropaolo, Jr., about several birdfeeders installed on Objector's property. Reproduced Record (R.R.) at 173a-74a; 185a.
[2] The snowplowing operation involves just the two Pietropaolos. They attach plows, which are stored outside, to their pickup trucks and leave the subject property for their assigned destinations. This may occur at any hour, depending on the time and severity of the storm.
[3] A "Public Garage" is defined as "A building, not a private or storage garage, used solely for the storage, sale, service or repair of motor vehicles." Zoning Code § 155-4, GARAGE (2). Section 155-87.21(B)(19) of the Zoning Code addresses uses accessory to nonresidential/commercial uses.
[4] Zoning Code § 155-4 defines "Parking Facility" as "A facility providing either off-street parking and/or parking in a structure." "Parking Structure" is defined as "A parking garage located above ground and/or underground consisting of one or more levels; not surface parking." But see Zoning Code § 155-87.21(B)(8) (nonresidential/commercial uses include commercial parking facility that is pedestrian oriented in both design and scale).
[5] Moreover, contrary to Applicants' argument that the nonconforming use of the subject property for vehicle storage fell within the prior zoning ordinance's undefined "storage house" classification, the ZHB determined the appropriate classification was a "minor garage." Our review of the Township's first zoning ordinance reveals a "storage house" was a permitted use when the subject property was zoned for business use prior to 1939. More particularly, the ordinance enumerated 19 permitted uses in a business district, including: "11. Storage house; stable, express, carting or hauling office or station; ice manufacturing; yard for storage and sale of coal or building materials." R.R. at 212a. Given our deferential review of the ZHB's interpretation of its zoning ordinance, see Smith v. Zoning Hearing Board of Huntingdon Borough, 734 A.2d 55 (Pa.Cmwlth. 1999), and the facts presented here, no error is apparent in the ZHB's determination that the prior use was more aptly categorized as a "minor garage" rather than a "storage house" (which, given its context, would seem to indicate more of a warehouse-type use). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536861/ | ROBERT BURNS, Defendant Below-Appellant,
v.
STATE OF DELAWARE, Plaintiff Below-Appellee.
No. 64, 2008
Supreme Court of Delaware
Submitted: July 31, 2009
Decided: August 17, 2009
Before STEELE, Chief Justice, HOLLAND, BERGER, JACOBS, and RIDGELY, Justices, constituting the Court en Banc.
ORDER
HENRY DuPONT RIDGELY, Justice
This 17th day of August 2009, it appears to the Court that:
(1) Defendant-Appellant Robert Burns appeals his Superior Court conviction of three counts of rape second degree, two counts of unlawful sexual contact second degree and one count of continuous sex abuse of a child. Burns initially raised three arguments on appeal. First, he contended that the trial court abused its discretion when it refused to declare a mistrial following certain inappropriate testimony. Second, he contended that the trial court erred when it refused to conduct an in camera review of the complainants' statements made in therapy regarding the facts underlying the charges. Third, he contended that the trial court erred when it refused to provide the jury, upon defense request, a copy of each complainant's statement to the Child Advocacy Center. In an earlier Opinion, we concluded that the Superior Court did not abuse its discretion either in denying Burns' mistrial motion or in refusing to provide the jury access to the victims' video-taped statements we found, however that the trial court erred in denying Burns' request for an in camera review of the victims' therapist records and remanded.[1] Burns now appeals from the Superior Court's Report of July 6, 2009 addressing, on remand, its in camera review of the alleged victims' therapy records. Burns contends that in determining that those records contained no information that would probably have changed the outcome of the trial, the trial court failed adequately to respond to our order. We find no merit in Burns's argument and affirm.
(2) In early April 2006, Tina and Sara Ames[2] came forward with claims that they had been inappropriately touched by their uncle, Robert Burns. The "touching" occurred between two and four years earlier, a period during which the girls would occasionally spend the night at Burns's house. After the girls revealed this information to their parents, the police were called and each girl had a separate interview with the Child Advocacy Center ("CAC") at the A.I. DuPont Hospital for Children. Prior to the CAC interview, the victims' mother asked them to prepare notes so they would remember everything at the interview. These notes were destroyed by the girls after their CAC interviews.
(3) Burns was arrested on May 22, 2006 and was indicted on five counts of rape in the second degree and one count of continuous sexual abuse of a child against each of the two minor victims. The indictment was subsequently amended at trial, reducing the five counts of rape in the second degree regarding Tina to five counts of unlawful conduct in the second degree.
(4) On December 15, 2006, Burns requested the complainants' therapist records. The State objected and Burns moved pursuant to Superior Court Criminal Rule 17 to compel an in camera review of statements or notes of statements made by the complainants in discussing the facts of the case with their therapist. The court denied Burns's motion to compel.
(5) After a six-day trial, the jury reached a verdict. As to the offenses involving Tina Ames, the jury acquitted Burns of four counts of unlawful sexual contact in the second degree and one count of continuous sexual abuse of a child, but was unable to reach a verdict on the remaining count of unlawful sexual contact. As to the offenses involving Sara Ames, the jury found Burns guilty of three counts of rape in the second degree, two counts of the lesser included offense of unlawful sexual contact in the second degree, and one count of continuous sexual abuse of a child. Following trial, Burns moved for a new trial, which the Superior Court denied.[3] Burns was then sentenced to forty-one years at Level V, suspended after thirty-five years for two years of probation.
(6) Burns appealed his conviction to this Court, contending, inter alia, that the Superior Court erred in denying his request to review the girls' therapist's notes in camera. We affirmed on the other issues raised, but found that the trial court abused its discretion by denying Burns's request. We concluded, pursuant to the United States Supreme Court's decision in Pennsylvania v. Ritchie,[4] that Burns was entitled to a new trial "only if information in the victim's therapy records would have changed the outcome of the trial." Accordingly, we remanded, instructing the "Superior Court [to] conduct an in camera review, and determine whether the information in the victims' therapy records would probably have changed the outcome of Burns's trial."[5] We retained jurisdiction.
(7) On remand, Burns moved for an order allowing his counsel inspect the victims' therapy records, subject to the restrictions of a protective order. Burns argues that the purpose of the motion was to enable his counsel to assist the trial court in discerning what information was needed for impeachment purposes. The trial court denied the motion. Burns then sent the trial court an unsolicited summary of the trial testimony, which was intended to highlight for the trial court the witness testimony Burns felt was important to the court's determination.
(8) In its report following remand, the Superior Court's response included the following:
The Superior Court has conducted a review of the records, during which the Court consulted with the therapist to determine the meaning of certain abbreviations and to discern handwriting that was not clear. The Court also considered each aspect of the defense submission. Based upon the foregoing, the Court finds that there is no information in the victims' therapy records that would probably have changed the outcome of the trial.[6]
(9) Burns contends that the Superior Court's report fails adequately to comply with this Court's order. He argues that the paragraph is conclusory and provides no insight into: (i) what the trial court reviewed; (ii) the factual findings of the trial court; (iii) the legal conclusions of the trial court; (iv) the "therapist's qualifications (to discern whether the privilege even exists); or (v) the reasons the trial court decided that nothing in the therapy records was relevant to any of the areas of impeachment identified in Burns's summary. He asserts that the trial court was required to create a record and make a decision so that this Court can conduct a proper review on appeal.
(10) In our previous Opinion, we ordered the Superior Court to: (1) "conduct an in camera review"; and (2) "determine whether the information in the victims' therapy records would probably have changed the outcome of Burns' trial."[7] We explained that "[i]f the Superior Court so finds, then it shall vacate the convictions and order a new trial. If, however, the Superior Court finds that the information would not have changed the outcome, then the convictions shall stand. In either case, the Superior Court shall report its findings to this Court within sixty days of the date of this Opinion."[8]
(11) The record shows that the Superior Court complied with our instructions upon remand. The trial court specifically stated that it "conducted a review of the records, during which the Court consulted with the therapist to determine the meaning of certain abbreviations and to discern handwriting that was not clear."[9] The Superior Court explained that it "considered each aspect of the defense submission."[10]
(12) We agree with the Superior Court that Burns was not entitled to receive the records in order to assist the trial court in determining whether they contained any factual statements that could be necessary for impeachment. In Ritchie, the United States Supreme Court found that a neutral tribunal was competent to evaluate the records in camera without the need for disclosure to the seeking party. Indeed, that Court expressly rejected the notion that defense counsel is entitled to view the otherwise privileged documents, finding that a defendant's interest "in ensuring a fair trial can be protected fully by requiring that the [privileged documents] be submitted only to the trial court for in camera review. Although this rule denies [a defendant] the benefits of an `advocate's eyes,' we note that the trial court's discretion is not unbounded."[11] In our prior Opinion in this case, we adopted Ritchie as the rule in Delaware and granted the precise relief the United States Supreme Court found to be appropriate.
NOW, THEREFORE, IT IS ORDERED that the judgment of the Superior Court is AFFIRMED.
NOTES
[1] See Burns v. State, 968 A.2d 1012, 1014 (Del. 2009).
[2] Pseudonyms have been assigned to the two complainants by the parties.
[3] See State v. Burns, No. 0605017137 (Del. Super. Ct. Sept. 11, 2007).
[4] 480 U.S. 39 (1987).
[5] Burns, 968 A.2d at 1026.
[6] State v. Burns, Del. Super., No. 0605017137 (July 6, 2009) (Report to the Supreme Court) [Hereinafter Superior Court Report on Remand.].
[7] Burns, 968 A.2d at 1026.
[8] Id.
[9] Superior Court Report on Remand at 1-2.
[10] Id. at 2.
[11] Ritchie, 480 U.S. at 60. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536868/ | 207 B.R. 594 (1997)
In re CHI-MAR FOODS, INC., Debtor.
THREE "S" FARMS, INC., and Bruce de'Medici, as Chapter 7 Trustee of Chi-Mar Foods, Inc., Plaintiffs,
v.
PLYMOUTH CAPITAL LTD., Oxford Capital Corporation, Oxford Capital USA, Inc., Victoria Nowakowski, Business & Capital Development, Ltd., and Richard Woods, Defendants.
Bankruptcy No. 96 B 21560, Adversary No. 96 A 01718.
United States Bankruptcy Court, N.D. Illinois, Eastern Division.
April 15, 1997.
*595 Scott N. Schreiber, Stuart M. Widman, Anne L. Sarkinen, Much, Shelist, Freed, Denenberg, Ament, Bell & Rubenstein, P.C., Chicago, IL, for Plymouth Capital Ltd., Oxford Capital Corp.
Douglas Lipke, Robert J. Patton, Vedder, Price, Kaufman & Kammholz, Chicago, IL, for Three "S" Farms, Inc.
Bruce E. de'Medici, Chicago, IL, for Trustee.
Susan G. Castagnoli, Naperville, IL, for Chi-Mar Foods, Inc.
MEMORANDUM OPINION
RONALD BARLIANT, Bankruptcy Judge.
This action was brought by Three "S" Farms, Inc., ("Farms") and the Chapter 7 Trustee against several financing companies holding security interests in the debtor's accounts receivables. In Count I of the complaint, Farms alleges that it possesses a superior lien in the debtor's receivables by reason of a trust created by the Packers and Stockyard Act ("PSA"). 7 U.S.C. § 197. The problem with the action is that the PSA only creates a trust in sales of "live poultry" by a "live poultry dealer." The debtor did not buy or sell "live poultry"; it dealt with only dead chickens. The defendants, recognizing this distinction, moved to dismiss Count I for failure to state a claim. For the reasons set forth below that motion is granted.
DISCUSSION
The PSA provides:
All poultry obtained by a live poultry dealer, by purchase in cash sales or by poultry growing arrangement, and all inventories of, or receivables or proceeds from such poultry or poultry products derived therefrom, shall be held by such live poultry dealer in trust for the benefit of all unpaid cash sellers or poultry growers of such poultry, until full payment has been received by such unpaid cash sellers or poultry growers, unless such live poultry dealer does not have average annual sales of live poultry, or average annual value of live poultry obtained by purchase or by poultry growing arrangement, in excess of $100,000. 7 U.S.C. § 197(b)
The PSA clearly defines a "live poultry dealer" as "a person engaged in the business of obtaining live poultry by purchase or under a poultry growing arrangement for the purpose of either slaughtering it or selling it for slaughter by another . . ." 7 U.S.C. § 182(10).
Farms has not alleged that the debtor was a "live poultry dealer" or that it sold the debtor "live poultry." The only allegation in the complaint implicating "live poultry" was Farms' allegation that "[u]pon Debtor's order to Three S Farms for poultry, poultry products and inventories, Three S Farms would order the same from its suppliers. Certain of these suppliers either raised live poultry or had contracts to raise live poultry." Complaint ¶ 21.
In its response to the motion to dismiss, Farms concedes that it did not sell live poultry to the debtor. It contends that this fact is irrelevant. Rather, Farms' theory is that somewhere there are live poultry growers or unpaid cash sellers of live poultry who were not paid as a result of the debtor not paying Farms for the poultry products (dead chickens). According to Farms' interpretation of the PSA, "a floating pool of trust assets was created because Plaintiff's suppliers, cash sellers and poultry growers remain unpaid and notice was filed to preserve the trust." Response at p. 5. The problem with the *596 argument is that it goes beyond the express terms of the PSA.
A claim arises under the PSA only if four requirements have been met:
1) a live poultry dealer was involved;
2) the live poultry was purchased in cash sales or by a poultry growing arrangement;[1]
3) the claim is limited to only the "live poultry activities of the live poultry dealer;"
4) written notice was given by the "unpaid cash seller or poultry grower" within 30 days of the final date for making payment filed with the Secretary of Agriculture.
Farms has failed to satisfy even one of the elements: 1) the debtor did not deal in live poultry; Farms did not sell live poultry to the debtor; 2) there is no allegation that the debtor obtained product from Farms by cash sales;[2] 3) none of the debtor's activities involved live poultry; (see Bunting, Jr. v. Perdue, Inc. 611 F. Supp. 682 (E.D.N.C.1985) (defendant's de minimis sales of live poultry did not subject its entire business to the PSA; here there are no allegations that the debtor even had de minimis dealings with live poultry) and 4) the required notice was not given. Farms relies on the filing of this complaint on August 23, 1996, as satisfying the notice requirement.[3] Even assuming that the one notice of all unpaid transactions satisfied the requirements of the PSA, Farms was not the party required to give the notice. The PSA clearly states that it is the "unpaid cash seller or poultry grower" who is to give the notice. If it is Farms' suppliers were the "unpaid cash seller or poultry grower," then they are the ones who should have given the notice.
Farms attempts to extend the reach of the PSA by arguing that its suppliers "either raised or had contracts to raise the live poultry." ¶¶ 14, 23. But that would only mean that Farms' suppliers had claims against it under the PSA, and that a trust was created in Farms' inventories, receivables and proceeds, not the debtor's.[4]
Farms argues that "a floating pool of trust assets was created because Plaintiff's suppliers, cash sellers and poultry growers remain unpaid and notice was filed to preserve the trust." Response at p. 5. Farms contends that it "does not seek to recover money for itself but instead seeks payment for these unpaid growers or cash sellers for the money due and owing to them."[5] Response at p. 4. According to Farms interpretation of the PSA, the "floating trust" included the inventory, receivables and proceeds from the sale of what was once live poultry sold to it. So when Farms sold its inventory to the debtor, even if it was then dead chickens, it was still proceeds subject to the trust and they can trace those proceeds to the debtor's inventory and its receivables.
Farms has taken the term "floating trust" out of context and attempted to apply it in a manner not contemplated by the statute. For instance in JSG Trading Corp. v. Tray-Wrap, Inc., 917 F.2d 75 (2nd Cir.1990) the court determined that a "floating trust" is created by the Perishable Commodities *597 Act (which is almost identical to the PSA). 7 U.S.C. § 499e(c)(2). However the floating trust is only meant to apply to all proceeds, whether segregated or commingled, that are received by the dealer, i.e., in the context of the PSA the "live poultry dealer," not to proceeds received at other levels of the commercial chain.
There is nothing in the language of the statute that would support extending the PSA to the extent urged by Farms. If that were the case then anyone who dealt in poultry in any form, including retail outlets, would be subject to claims that its assets were part of a PSA trust. Several courts interpreting the Act have refused to extend the Act beyond its express terms. See Bunting; Wilson v. Gold Kist, Inc., 1991 U.S. Dist. LEXIS 16564, *12 (S.D.Ga.1991) ("Although the Plaintiffs imply that Gold Kist acted `with respect to live poultry' because the final step of commercial egg production is the sale of the `spent' hens for slaughter, these salvage sales are too far removed from the alleged unlawful practices to bring this suit within the ambit of the Act.") This Court agrees and will, therefore, grant the defendants' motion to dismiss Count I of the complaint.
An Order will be entered in accordance with this opinion.
NOTES
[1] There is no contention that a poultry growing arrangement existed.
[2] A "cash sale" is defined by the Act as a sale "in which the seller does not expressly extend credit to the buyer." § 197(e).
[3] In its response, Farms attached a notice that was sent to the Secretary of Agriculture by Federal Express. The notice was not attached to the complaint, nor did it allege notice was given. So even if mailing the notice constitutes "filing," the complaint is fatally deficient on its face.
[4] The cases cited by Farms are distinguishable. In Central Trust v. B & L Leasing, 669 F. Supp. 828 (S.D.Ohio 1987) the funds in dispute were clearly proceeds subject to the PSA as the defendant was in the business of slaughtering livestock sold to it. In the Roxford Foods Litigation cases the principal parties to the dispute, Purina and Roxford, had a contract for a "poultry growing arrangement" which gave rise to Purina's trust claims under the Act. Tracing of the trust funds was then permitted to a person with knowledge of Purina' trust fund claims. In this case, however, the trust was never created because Farms did not sell live poultry to the debtor and the debtor did not deal with live poultry.
[5] This also raises a question of Farms "standing" to make claims on behalf of the "unpaid growers or cash sellers." This Court need not address that issue since it has concluded that Farms has failed to allege a claim under the PSA. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1743264/ | 710 N.W.2d 259 (2005)
STATE v. WEBSTER.
No. 04-1691.
Court of Appeals of Iowa.
December 7, 2005.
Decision without published opinion. Affirmed. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536941/ | 979 A.2d 920 (2009)
COMMONWEALTH of Pennsylvania, Appellee
v.
Jameen WARREN, Appellant.
No. 1981 EDA 2008
Superior Court of Pennsylvania.
Submitted February 2, 2009.
Filed August 10, 2009.
*921 Scott D. Galloway, Media, for appellant.
George M. Green, Assistant District Attorney, and William R. Toal, III, Assistant District Attorney, Media for Commonwealth, appellee.
BEFORE: BENDER, ALLEN, and FITZGERALD,[*] JJ.
OPINION BY FITZGERALD, J.:
¶ 1 Appellant, Jameen Warren, appeals from the order entered in the Delaware County Court of Common Pleas, dismissing his first petition filed pursuant to the Post Conviction Relief Act ("PCRA"), 42 Pa.C.S. §§ 9541-46. Appellant and counsel have also filed separate petitions to remand for appointment of new counsel. We hold that PCRA counsel may not justify *922 his failure to argue certain issues by claiming those issues are without merit, and then argue broadly that an evidentiary hearing was warranted without specifying what issues merited a hearing. Accordingly, we vacate the order, dismiss Appellant's pro se petition, and grant counsel's petition to remand for the appointment of new counsel.
¶ 2 After a jury trial, Appellant was convicted of second-degree murder, three counts of robbery, robbery of a motor vehicle, and related charges. On November 21, 2005, Appellant was sentenced to life imprisonment for second-degree murder, and an aggregate term of twenty to forty years' imprisonment for the remaining charges. On direct appeal, this Court affirmed the judgment of sentence. Appellant did not seek allowance of appeal with the Pennsylvania Supreme Court.
¶ 3 On December 17, 2007, Appellant filed the instant PCRA petition, pro se. Current PCRA counsel was appointed on December 31, 2007, and Appellant filed an amended PCRA petition through counsel on January 31, 2008. On May 1, 2008, the PCRA court issued a notice of intent to dismiss Appellant's petition without a hearing. On June 4, 2008, the PCRA court dismissed the petition.
¶ 4 Appellant timely filed this appeal on June 26, 2008. After counsel filed a brief on Appellant's behalf on December 1, 2008, Appellant filed a pro se petition for remand on April 20, 2009, in which he challenged counsel's effectiveness, alleging that counsel's brief was incomplete. In an April 30, 2009 order, this Court instructed counsel to respond to Appellant's pro se petition to remand pursuant to Commonwealth v. Battle, 879 A.2d 266 (Pa.Super.2005), and Commonwealth v. Lawrence, 408 Pa.Super. 9, 596 A.2d 165 (1991). On May 28, 2009, counsel filed the instant application for remand, responding to Appellant's claim of ineffectiveness.
¶ 5 In Battle, this Court outlined the procedure for addressing pro se allegations of ineffective assistance of current counsel:
We begin by reviewing our well established procedures for handling documents filed pro se by represented appellants. These procedures are guided by our Supreme Court's holding that there is no constitutional right to hybrid representation, neither on appeal, nor at trial. [Commonwealth v.] Ellis, 534 Pa. [176,] 180, 626 A.2d [1137,] 1139 [(1993)]. When an appellant who is represented by counsel files a pro se petition, brief, or motion, this Court forwards the document to his counsel. 210 Pa.Code § 65.24; Ellis, 534 Pa. at 180, 626 A.2d at 1139. If the brief alleges ineffectiveness of appellate counsel, counsel is required to petition this Court for remand. Ellis, 534 Pa. at 180, 626 A.2d at 1139; Lawrence, 596 A.2d at 168. In the petition for remand, counsel must cite appellant's allegations of ineffectiveness and provide this Court with an evaluation of those claims. Commonwealth v. Blystone, [] 617 A.2d 778, 782 ([Pa.Super.] 1992); Lawrence, 596 A.2d at 168. This Court will then determine whether or not a remand for appointment of new counsel is required, based on our review of counsel's petition and the record. Blystone, 617 A.2d at 782; Lawrence, 596 A.2d at 168.
We stress that this Court does not review the pro se brief, but rather reviews counsel's analysis of the issues raised pro se. Blystone, 617 A.2d at 782; Lawrence, 596 A.2d at 168. The process has similarities to the procedures required of appointed counsel who seeks to withdraw from representing an appellant, based on a determination that the issues *923 for appeal are totally frivolous. See Anders v. California, 386 U.S. 738, 87 S. Ct. 1396, 18 L. Ed. 2d 493 (1967) (describing the requirements of an Anders brief, which must be filed when appointed counsel seeks to withdraw from a direct appeal based on a determination that the issues presented are wholly frivolous); Commonwealth v. Finley, [ ] 550 A.2d 213 ([Pa.Super.] 1988) (en banc) (describing the requirements of a Finley letter, which must be filed when appointed counsel seeks to withdraw from a collateral appeal filed under the Post-Conviction Relief Act).
Battle, 879 A.2d at 268-69 (footnote omitted).
¶ 6 When counsel files a petition to remand for appointment of new counsel, "[i]n effect, counsel is seeking to withdraw from the claims he declines to raise on behalf of his client, and therefore should undertake an analysis similar to that he would employ if he were to file a Finley brief with this Court." Commonwealth v. Jette, 947 A.2d 202, 205 (Pa.Super.2008). Thus, in his petition for remand, counsel must: (1) "list each claim the petitioner wishes to have reviewed, and detail the nature and extent of counsel's review of the merits of each of those claims[;]" and (2) "set forth ... an explanation of why the petitioner's issues are meritless[.]" Commonwealth v. Friend, 896 A.2d 607, 615 (Pa.Super.2006).
¶ 7 Although we generally do not review pro se filings, we note that in his petition to remand, Appellant alleges counsel's brief was incomplete, and therefore counsel was ineffective. The pro se petition is vague in asserting exactly how the brief was incomplete, stating only: "The Brief submitted on said day is incomplete, thereby, making both the Brief and Appellate Counsel Ineffective by denying a meaningful appellate review by this Honorable Court." Pro se Petition for Remand, filed 4/20/09. Though Appellant's pro se petition fails to specify how the brief was incomplete, we infer, based on Appellant's amended PCRA petition and counsel's petition for remand, that Appellant objects to the brief because, although it includes the issues raised in the amended PCRA petition, it argues only, "[Did] the [PCRA] court [err] in denying [Appellant's] amended [PCRA] petition without allowing him the opportunity of an evidentiary hearing?" Appellant's Brief at 10. We agree with Appellant.
¶ 8 Appellant raised four issues in his amended PCRA petition: (1) trial counsel was ineffective for failing to file a pre-trial motion to suppress Appellant's statement; (2) trial counsel was ineffective for failing to file a pre-trial motion requesting a change of venue due to publicity; (3) trial counsel was ineffective for failing to employ the service of an expert to testify about the effects of crack cocaine in reference to Appellant's statement and actions; and (4) trial counsel was ineffective for failing to request a jury instruction which would have allowed the jury to weigh the voluntariness of the confession.[1] On appeal, counsel did not raise these issues, instead raising the sole issue of whether the PCRA court erred in denying Appellant's PCRA petition without an evidentiary hearing.
¶ 9 Counsel's petition for remand addresses Appellant's claim that his brief was incomplete by addressing each of the four issues raised in the amended PCRA *924 petition. Counsel's Petition for Remand, filed 5/28/09, at 3. Counsel's rationale for not raising these issues in his appellate brief echoes the reasoning employed by the PCRA court in dismissing Appellant's claims. See PCRA Ct. Op., 10/15/08, at 4-5 (finding: (1) trial counsel was not ineffective for failing to pursue suppression of Appellant's statement when counsel had filed a motion to suppress and vigorously litigated the issue; (2) trial counsel was not ineffective for failing to pursue a change of venue due to alleged pretrial publicity when there is no support in the record of any unusual publicity at the time of trial;[2] (3) trial counsel was not ineffective for failing to present an expert to testify on the effects of crack cocaine when there is no evidence in the record that Appellant was under the influence of crack when he made his statement; and (4) trial counsel was not ineffective for failing to request a jury instruction concerning how to weigh the voluntariness of Appellant's statement when the jury had received nearly four pages of instruction concerning how to gauge the voluntariness of his confession). In his petition for remand, counsel uses the same reasoning to explain why he did not raise these issues in the appellate brief.
¶ 10 In filing a petition to remand for appointment of new counsel, counsel must: (1) "list each claim the petitioner wishes to have reviewed, and detail the nature and extent of counsel's review of the merits of each of those claims[;]" and (2) "set forth... an explanation of why the petitioner's issues are meritless[.]" See Friend, supra; see also Jette, 947 A.2d at 205 ("[W]hen seeking withdrawal of representation, PCRA counsel is required to detail the nature and extent of his review."). Instantly, although counsel explained why the issues were meritless, he failed to detail the nature and extent of his review of the merits sufficiently. After review, we find counsel's issue on appeal illogical when considered in the context of his petition to remand.
¶ 11 "[T]he PCRA court can decline to hold a hearing if there is no genuine issue concerning any material fact and the petitioner is not entitled to post-conviction collateral relief, and no purpose would be served by any further proceedings." Commonwealth v. Taylor, 933 A.2d 1035, 1040 (Pa.Super.2007). Ultimately, the PCRA court found: "None of the four issues raised in [Appellant's] petition create a genuine issue of fact, and all of them fail as a matter of law. Thus, no purpose would have been served by holding an evidentiary hearing." PCRA Ct. Op., 10/15/08, at 4.
¶ 12 Counsel employs the same rationale used by the PCRA court in disposing of Appellant's claims to justify why he did not include these claims in Appellant's brief. Inexplicably, counsel then argues in his appellate brief that the PCRA court erred in not granting an evidentiary hearing on those claims. Appellant's Brief at 12. In other words, counsel's petition for remand appears initially to support the PCRA court's opinion that "no purpose would be served by holding an evidentiary hearing." See PCRA Ct. Op., supra. It is axiomatic, then, that counsel cannot refrain from raising issues because he believes them to be without merit, then rely on those same issues as the underlying grounds for requesting *925 an evidentiary hearing. In effect, counsel either has failed to raise and preserve claims of merit on appeal, or he raises a frivolous claim in the sole issue on appeal. Compare Jette, 947 A.2d at 205 (observing that counsel must undertake Finley-type analysis of claims appellant wishes to raise upon filing petition for remand), with Taylor, 933 A.2d at 1040 (noting that PCRA evidentiary hearing is not necessary if no genuine issue of material fact exists). In either event, counsel is not satisfying his duty, to his client in the former, and to this Court in the latter. Accordingly, we hold that PCRA counsel may not raise a bald claim on appeal that his client was entitled to an evidentiary hearing, then summarily reject the underlying claims he raised in the amended PCRA petition.
¶ 13 In conclusion, we are not satisfied that Appellant has had the benefit of effective counsel. Therefore, upon remand, Appellant is entitled to the appointment of new counsel within thirty days of the filing date of this opinion. Newly appointed counsel shall examine Appellant's original and amended PCRA petitions, consult with Appellant to determine the claims he wishes to raise, and investigate those claims thoroughly, along with any other claims of arguable merit. Newly appointed counsel shall then either re-file current counsel's amended PCRA petition or file a new PCRA petition.
¶ 14 Order vacated. Appellant's pro se petition dismissed. Counsel's petition to remand for appointment of new counsel granted. Case remanded with instructions. Jurisdiction relinquished.
NOTES
[*] Former Justice specially assigned to the Superior Court.
[1] The amended PCRA petition is not included in the certified record. We note that the docket sheet reflects it was filed, but it was not numbered or listed. We are able to determine that these were the issues raised by relying on the PCRA court opinion, counsel's brief, and counsel's petition for remand.
[2] The trial court explains its rationale for denying this claim, noting that it reviewed the record and found no evidence of any unusual publicity, nor did Appellant submit any documents, exhibits, or affidavits at any time in support of his contention. However, in his petition to remand, counsel refutes this claim by asserting baldly that there was no unusual publicity. He makes no note of having reviewed the record, cites no authority, and dismisses the contention in two brief sentences. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2631309/ | 249 P.3d 468 (2011)
STATE
v.
BANKS.
Nos. 103100, 103101.
Court of Appeals of Kansas.
April 8, 2011.
Decision Without Published Opinion
Affirmed. | 01-03-2023 | 11-01-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857798/ | Affiliated
IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-006-CV
AFFILIATED CAPITAL CORPORATION AND ACRG JOINT VENTURE,
APPELLANTS
vs.
COMMERCIAL FEDERAL BANK AND RYAN MORTGAGE COMPANY,
APPELLEES
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT
NO. 437,570, HONORABLE MARY PEARL WILLIAMS, JUDGE PRESIDING
Affiliated Capital Corporation and ACRG Joint Venture, appellants, (hereinafter
collectively "the Venture"), bring this appeal from a summary judgment in favor of Commercial
Federal Bank and Ryan Mortgage Company, appellees (hereinafter referred to collectively as "the
Bank"). After a dispute arose over a loan transaction, the Venture sued the Bank on claims of
usury, breach of contract, breach of a duty of good faith, violation of the Deceptive Trade
Practices-Consumer Protection Act (DTPA), (1) and unfair collection tactics. The district court
granted two partial summary judgments in favor of the Bank, which were incorporated into a final
summary judgment ordering that the Venture take nothing. We agree with the district court's
actions in regard to the summary judgments and will affirm the final judgment.
FACTUAL BACKGROUND
In 1983, the Venture entered into a construction loan agreement with the Bank for
$6,405,000 to construct an apartment complex in Austin, Texas. This agreement also covered
permanent financing on the apartment complex. The loan agreement was evidenced by a
promissory note (the "Note") and secured by both a deed of trust on the property and an
assignment of rents. The Note was part of a bond program established by the Austin Housing
Financing Authority to facilitate the building of multi-family housing. The Authority used the
proceeds of a bond sale to fund large loans to banks who would subsequently make smaller loans,
under the program guidelines, to developers of multi-family projects.
In February and March of 1986, the Venture failed to make payments on the Note.
After receiving a notice of possible foreclosure for default, the Venture wrote the Bank requesting
to prepay the remaining balance of the loan. The Bank responded that the note did not allow
prepayment prior to December 1992, and that the Bank would not waive the Note provisions
because of its bond agreement with the Austin Housing Financing Authority. The Bank suggested
that the Venture try to use government securities to serve as substitute collateral. From April
through August, the Venture again failed to make payments under the Note. In August, the Bank
accelerated the Note for default, demanding payment of the balance due and the prepayment
penalty. However, by August the Venture was no longer able to prepay the balance of the loan,
so the Bank foreclosed. The Venture then filed this suit against the Bank.
NOTE PROVISIONS
Only a few of the note provisions are at issue in this case; they are set forth below
for the sake of clarity. The provisions at issue concern prepayment, acceleration, interest after
default, and the usury savings clause. The pertinent portions of the no-prepayment clause and
prepayment-penalty provisions read as follows:
No prepayment of the note shall be allowed prior to December 21, 1992. After
such date the undersigned shall have the right to prepay, in whole or in part, the
unpaid balance of principal. . . . In the event of any prepayment, voluntary, by
acceleration or otherwise or if for any reason the full stated principal amount of
this Note is not paid as scheduled to maturity, including by failure of the
undersigned to request or qualify for advances, a prepayment charge calculated in
the manner set forth on Exhibit "A" shall be imposed.
Exhibit "A" was a schedule of prepayment penalties listed in decreasing order. The first penalty
was equated with a prepayment occurring before December 21, 1982, and the decreasing amounts
of the penalty were scheduled to prepayments before each following June 1 and December 1, until
December 1, 2002.
The provisions governing default, including interest on default and acceleration on
default, state:
Upon default hereunder . . . at the option of the holder of this note, all amounts
then unpaid under this note . . . shall bear interest at the lesser of sixteen and eight
tenths percent (16.8%) per annum, or the maximum rate permitted by law . . . and
in addition the holder may, at its option, declare immediately due and payable the
entire principal sum together with all interest accrued and owing thereon, plus any
other sums payable at the time of such declaration pursuant to this note, the Loan
Agreement, the Deed of Trust, and any other instrument securing the note.
Finally, the usury savings clause reads:
All agreements between the maker hereof and the holder hereof . . . are expressly
limited so that in no contingency or event whatsoever shall the amount paid, or
agreed to be paid, to the holder hereof for the use, forbearance, or detention of the
covenant or obligation contained herein, exceed the maximum amount permissible
under applicable law.
PROCEDURAL HISTORY
In response to the Venture's petition, the Bank filed a motion for partial summary
judgment. The district court granted the motion with respect to the usury claim against the Bank
and with respect to the duty-of-good-faith and breach-of-contract claims against Ryan Mortgage
Company. (2) The district court granted the Bank's second motion as to the breach-of-contract,
breach-of-duty-of-good-faith, and DTPA claims. Those judgments disposed of all issues, except
a claim of unfair collection tactics which the parties non-suited, without prejudice, to allow for
the entry of a final judgment incorporating the two former partial summary judgments. None of
the orders specifies the basis for granting summary judgment.
STANDARD OF REVIEW
A trial court should grant a motion for summary judgment only if the movant
establishes by competent summary judgment evidence that there is no genuine issue of material
fact to be decided and that the movant is therefore entitled to judgment as a matter of law. Nixon
v. Mr. Property Mgt. Co., 690 S.W.2d 546, 548 (Tex. 1985). The movant has the burden of
demonstrating that no genuine issue of material fact exists. Id. A defendant moving for summary
judgment is required to prove that as a matter of law the plaintiff has no cause of action, that is,
that there is no genuine issue of material fact as to one or more of the essential elements of the
plaintiff's cause of action. Citizens First Nat'l Bank v. Cinco Exploration Co., 540 S.W.2d 292,
294 (Tex. 1976). Where the order does not give a specific basis for granting the judgment, the
non-movant, on appeal, must show why each ground asserted in the motion is insufficient to
support the order. Rogers v. Ricane Enters., Inc., 772 S.W.2d 76, 79 (Tex. 1989); McCrea v.
Cubilla Condo. Corp., 685 S.W.2d 755, 757 (Tex. App. 1985, writ ref'd n.r.e.).
The Venture presents general points of error complaining that the district court
improperly granted summary judgment in the Bank's favor. These points preserve for argument
all possible grounds, presented in the response, upon which the motion should have been denied.
See City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979); Malooly
Bros., Inc. v. Napier, 461 S.W.2d 119, 121 (Tex. 1970).
DISCUSSION AND HOLDING
A. Usury Claim
Based on the Note, the Venture asserts two bases for its usury claim: 1) the Bank
actually charged usurious interest; and 2) the Bank contracted for usurious interest. In appealing
the summary judgment on this issue, the Venture asserts no disputed fact issues. (3) Instead, the
Venture contends that the district court erred as a matter of law in granting the Bank's motion for
summary judgment on this claim.
The Venture contends the Bank actually charged usurious interest by charging the
prepayment penalty on the accelerated amount of the Note. The Venture contends that this penalty
was usurious, in fact, because it can only be construed as applying to forbearance on the total
accelerated amount, as a separate contract. Under this theory, had the Venture paid the amount
due the day after acceleration, the penalty amount of $171,957.96 would have been viewed as one
day's interest on the amount owed, which would have been unlawful. (4) Therefore, the Venture
contends that neither the spreading doctrine nor the savings clause of the original Note could be
applied to this penalty.
In support of this contention the Venture cites Crider v. San Antonio Real Estate,
Building & Loan Ass'n, 35 S.W.1047 (Tex. 1896); General Motors Corp. v. Uresti, 553 S.W.2d
660 (Tex. Civ. App. 1977, writ ref'd n.r.e.); and Moore v. Sabine National Bank 527 S.W.2d
209 (Tex. Civ. App. 1975, writ ref'd n.r.e.). Although these cases are not directly on point, this
Court finds no Texas cases dealing with similar prepayment penalties; therefore we will examine
the Venture's cited cases to determine if they are persuasive.
General Motors involved consumer credit installment contracts and defined its
terms based on article 5069-7.04 of the Texas Revised Civil Statutes and cases under the federal
consumer credit guide. General Motors, 553 S.W.2d at 663. The case at bar is not a consumer
credit case. Further, General Motors interpreted the availability, after acceleration, of a refund
credit of time-price differential which applied only to voluntary prepayment. That case held that
no voluntary prepayment could happen after acceleration. Id. We find the case distinguishable.
Under the terms of the Note in this case, the penalty applies not only on the event of voluntary
prepayment but also on any event preventing the loan from maturing as originally scheduled.
Moore, likewise, is distinguishable. It deals only with the concept of when a
charge for unearned interest had been made. Moore, 527 S.W.2d at 211. Charging for unearned
interest is not at issue in this case.
The next authority upon which the Venture bases its usury claim is Crider. That
case involved a loan which was declared in default after three or more installments were past due.
Pursuant to the contract, the entire remaining principal on the notes as well as the outstanding
interest already due were demanded and that entire amount was charged interest at the highest
lawful rate. The interest charged thus exceeded the legal rate for the outstanding principal alone.
The Texas Supreme Court found that, according to the parties' contract, the continuing interest
on an unpaid amount due after maturity (default triggering maturity) would be charged against a
new obligation consisting of the combined outstanding interest and principal. The amount of this
new obligation saved the contract from being usurious. Crider, 35 S.W. at 1048. Those facts
likewise are distinguishable from the case at bar.
In this case, the Note applies the prepayment penalty as a one-time charge in the
event of either voluntary prepayment, prepayment by acceleration, or failure to qualify for or
request construction advances. Thus, the penalty is not for continuing forbearance of payment
of the accelerated sum after acceleration but, rather, is designed to compensate the lender for
interest that will not be earned due to the failure of the Note to go to maturity. This intent is
shown not only by the language of the Note but by the fact that Exhibit "A" sets the penalty
amount based on the amount of time by which the initial loan was shortened, not the amount of
time during which the accelerated sum is unpaid. Indeed, the Note contains another provision,
set forth above, which provides for payment of interest on the matured obligation in the event of
default. The interest-on-default clause is analogous to the continuing-interest provision at issue
in Crider.
We hold that Crider does not require us to characterize the prepayment penalty as
interest on a new obligation created by acceleration. Instead, the terms of the Note suggest that
the sum is more properly construed as a penalty to mitigate the loss of the originally contracted
interest on the initial loan, and as such the penalty is susceptible to the application of the spreading
doctrine and the savings clause in the Note. Cf. Dixon v. Brooks, 678 S.W.2d 728, 731 (Tex.
App. 1984, writ ref'd n.r.e.) (late charge that is (1) a one time charge, (2) for an indefinite term,
(3) payable on delinquency, and (4) unaffected by length of time before late payment received is
added to the interest on the principal and spread to determine if it is usurious).
The Venture cites Fisher v. Westinghouse Credit Corp., 760 S.W.2d 802 (Tex.
App. 1988, no writ), in its brief and relied heavily on that case in oral argument. We find no
application of the result in that case to the case at bar. Fisher itself says that, where a note is
accelerated, spreading can be applied to a late charge to save a loan from being usurious. Fisher,
760 S.W.2d at 806. We agree with that statement of the law. However, the decision in Fisher
against the credit company resulted from the failure of the credit company to properly plead
acceleration, creating a question as to whether the penalty charged might have been interest on
the late installment-interest payments. Interest on interest would not have been spreadable across
the underlying principal and therefore could have been usurious. Id. at 806-807. No similar fact
situation arises in this case.
We hold that application of the spreading doctrine and the savings clause to the
prepayment penalty prevents the penalty, as charged, from being usurious.
The Venture's second basis for its usury claim is the effect of a "hypothetical
failure" by the Venture to have qualified for even the first advance under the loan. That event
would have triggered the prepayment penalty under the terms of the Note. The Venture argues
that the amount of the penalty would have been considered interest on the small portion of the
principal originally advanced and would have been in excess of the legal rate.
The Venture claims that the possibility of this contingency, although it never
occurred, makes the Note usurious on its face and cannot be avoided by the savings clause in the
Note which calls for a rebate of any amount of interest which would be usurious. That is not the
law of this state. The law requires all provisions of a contract to be given full effect, and a
provision that calls for the actual reduction of the interest paid, down to a legal amount, saves a
contract from being usurious on its face. See Nevels v. Harris, 102 S.W.2d 1046, 1049 (Tex.
1937).
We hold that the district court correctly granted the Bank's partial motion for
summary judgment as to the usury claim. Point of error one is overruled.
B. Other Claims
The Venture alleged three other causes of action against the Bank. All three causes
depended on the meaning given to the no-prepayment and acceleration clauses set forth above.
In separate points of error as to each remaining cause, the Venture contends that the Note is
ambiguous, requiring a fact finder to determine its meaning and precluding the district court from
granting summary judgment.
Whether a contract is ambiguous is a question of law for the court looking at the
contract as a whole. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). If the contract can be
given only one reasonable and certain meaning it is not ambiguous as a matter of law. Id. at 394.
The court in construing the contract must look at the entire writing and try to harmonize all
provisions so that none is rendered meaningless. Id.; Universal C.I.T. Credit Corp. v. Daniel,
243 S.W.2d 154, 158 (Tex. 1951). This Court finds that based on the summary judgment record,
the district court could infer a reasonably certain meaning from reading the contract.
The only reasonably certain meaning of the no-prepayment provision of the Note
that will harmonize with the provisions allowing for acceleration and demand in the event of
default is to construe the no-prepayment language as relating only to voluntary prepayment, as the
Bank argues. Following the sentence, in the note, that no prepayment shall be allowed prior to
December 21, 1992, the next sentence says, "After such date the undersigned shall have the right
to prepay." Further in that same clause, the notice requirements are given for the "undersigned"
to be allowed to prepay. The undersigned on the Note was ACRG Joint Venture, by its partners.
The Bank, as maker, was not one of the undersigned. Therefore, it is reasonable to construe the
Note so that the prohibition against prepayment applies to the Venture, not the Bank. Nor does
this interpretation fail to give purpose to the prepayment penalty schedule, since the penalties
called for on dates prior to December 1992 would apply in the event of either default and
acceleration or failure of the Venture to qualify for construction advances.
Conversely, to find all prepayment impermissible, even at the demand of the
lender, would render the default and acceleration clauses meaningless. Alternatively, finding that
the prepayment penalties for years prior to 1992 set forth in Exhibit "A" authorized voluntary
prepayment would render the no-prepayment language meaningless. Therefore, either of the
Venture's requested interpretations would fail to harmonize one of the clauses in the Note.
The Bank's suggested construction of the Note provides a clear and certain meaning
and leaves no ambiguity for a trier of fact to decide. The district court could have properly
construed the note as the Bank requested in its motion for summary judgment. For the purpose
of determining the remaining points of error, we will use that construction.
1. Breach-of-Contract Claims
In its third point of error, the Venture contends that the district court erred in
granting summary judgment on its breach-of-contract claims relating to the Bank's refusal to allow
prepayment of the loan and to the Bank's subsequent action accelerating the loan for default. The
Bank's motion for summary judgment urged that there was no breach of contract because the
terms of the Note prohibit prepayment before December 21, 1992, and allow for acceleration on
default.
Under the Bank's construction of the Note's terms, which the district court could
have followed, neither of the Bank's actions provide the basis for a claim for breach of contract
as a matter of law. We agree. Accordingly, this point of error is overruled.
2. Breach-of-Duty-of-Good-Faith Claims
In its fourth point of error, the Venture contends that the district court erred in
granting the Bank partial summary judgment as to the Venture's breach-of-the-duty-of-good-faith
claim. Since that court could construe the meaning of the Note, no fact issue remained regarding
the rights of the Bank, only questions of law.
There can be no breach of the duty of good faith merely by a party's acting in strict
accordance with the terms of a contract. See English v. Fisher, 660 S.W.2d 521, 522 (Tex.
1983). The Note gives the Bank the right to deny prepayment prior to 1992. The Venture argues
that the reason given by the Bank for refusing to accept prepayment was shown to be false.
However, when acting in accord with the Note as written, the reason given is irrelevant. (5)
The Bank's right to refuse prepayment is absolute under the terms of the Note; no
reason was required. See Adolph Coors Co. v. Rodriguez, 780 S.W.2d 477, 483 (Tex. App.
1989, writ denied) (where an act is neither required under the terms of the contract, nor grows
out of those terms, no duty of good faith can be extended to the refusal to perform those acts).
Therefore, the explanation given for the refusal to allow prepayment cannot form the basis for a
cause of action.
The Venture further claims that the Bank acted dishonestly by accelerating the note
after offering the Venture a chance to substitute collateral. The Bank offered uncontroverted
summary judgment evidence that while the Venture was attempting to substitute collateral the loan
fell further in default and acceleration was judged to be necessary. There is no controverting
evidence either that the Bank waived acceleration or any other option available under the Note for
default, or that the Note was not in default. No basis for any claim of dishonesty in fact arises
from the Bank's enforcement of its rights under the Note. This point of error is overruled.
3. DTPA Claims
The Bank addressed the DTPA claims in its second motion for partial summary
judgment. The grounds asserted in the motion were: 1) no issues as to any material facts existed
and defendants were entitled to judgment as matter of law; 2) as a matter of law no material
misrepresentation or nondisclosure regarding the terms of the Note was made as alleged in the
petition; and 3) as a matter of law, the Bank did not engage in unconscionable actions as alleged
in the petition. The Venture contends in its second point of error that the district court erred in
granting this motion because genuine issues of material fact existed.
In its petition, the Venture asserts claims under four sections of the DTPA. (6) The
first claim was under DTPA section 17.46(b)(5), which becomes a consumer action under section
17.50(1). The Venture alleged that the Bank misrepresented the characteristics of the goods
purchased by representing that they could be retained by prepayment of the debt along with a
prepayment penalty at any time. Under DTPA section 17.46(b)(23), the Venture alleged failure
to disclose that the apartment complex could be "taken away" despite tender of prepayment and
the penalty listed on Exhibit A to the Note. Then, under DTPA section 17.46(b)(12), the Venture
alleged the Bank misrepresented the rights, remedies, and obligations of the loan documents.
These claims were based on the language of the Note that is part of the summary
judgment evidence. There is no evidence in the summary judgment record of separate
representations as to prepayment, acceleration, or interest. These claims are resolved as a matter
of law by a construction of the Note that prohibits voluntary prepayment prior to December 1992.
Given that construction, the Note contained the disclosure that the apartment complex could be
foreclosed in event of default despite a prior offer of prepayment. This was the non-disclosure
which the Venture alleged. Where there is uncontroverted evidence that the disclosure was made,
summary judgment is proper as a matter of law. The representations alleged as misrepresentations
are merely assertions of the Bank's desire to stand by the terms of the Note as construed by the
Bank. Enforcing rights provided for by contract does not violate DTPA section 17.46(b)(12).
See Ogden v. Dickinson State Bank, 662 S.W.330, 333 (Tex. 1983) (holding there was no
violation of section 17.46(b)(12) when a bank foreclosed for partial default since the contract lien
gave the bank that right). Therefore, the district court properly found that none of these three
DTPA claims precluded granting summary judgment for the Bank.
The Venture's final claim under the DTPA is that the Bank acted unconscionably
by taking "irrational and oppressive actions" to prevent payment of the Note, depriving the
Venture of the value of its investment in the property. The Venture alleges "this" created a gross
disparity in value as prohibited by DTPA Section 17.50(a)(3). We will regard "this" as referring
to the acceleration and foreclosure on Venture's investment property. The Bank's actions, even
if oppressive, fail to give rise to a DTPA claim.
The statement of the claim confuses the nature of the transaction between the Bank
and the Venture. The Venture did not contract to buy property, materials, or an apartment
complex from the Bank; rather, the Venture contracted to borrow money from the Bank using the
completed project as security for the loan. The Venture received its loan of more than six million
dollars from the Bank and paid interest on the use of the money while the loan was outstanding.
When the Venture defaulted on the loan, the Bank foreclosed upon the security to satisfy the
outstanding value of the loan, as allowed by the Note.
Hypothetically, gross disparity in this type of transaction would require evidence
that the Venture was prevented from using the money borrowed despite paying the costs of
borrowing, or that the Venture had sustained a similar inequity in its bargain. The evidence here
is to the contrary. The Venture received the use of the money to build the apartment complex.
Receipt of a return on an investment in the apartment complex was not part of the benefit
contracted for between the Bank and the Venture. Therefore, the Venture's failure to receive that
benefit cannot form the basis of any DTPA claim against the Bank.
Further, the only controverting evidence of gross disparity is in the Venture's own
interrogatory answers. These answers are not proper summary judgment evidence on behalf of
the Venture. See Keever v. Hall & Northway Advertising, Inc., 727 S.W.2d 704, 705 (Tex. App.
1987, no writ).
Since there was no genuine issue of material fact as to gross disparity, and since
there was no basis for this DTPA claim as a matter of law, this claim could not preclude granting
of summary judgment for the Bank.
None of the DTPA claims raises any question of fact not resolved by the
construction of the Note. Given the construction of the Note properly available to the district
court, we hold that as a matter of law summary judgment on the DTPA claims was proper. This
point of error is overruled.
CONCLUSION
This Court holds that there were no issues of material fact which, as a matter of
law, would allow the Venture to prevail on at least one essential element of each of its causes of
action. We, therefore, affirm the district court's final judgment incorporating the two orders
granting partial summary judgment.
Mack Kidd, Justice
[Before Justices Powers, Jones and Kidd; Justice Powers not participating]
Affirmed
Filed: July 1, 1992
[Publish]
1. Tex. Bus. & Com. Code Ann. §§ 17.41-17.63 (1987 & Supp. 1992).
2. In the Bank's first motion for partial summary judgment, Ryan asserted a separate
defense of agency to the usury, breach-of-contract, and breach-of-duty-of-good-faith claims.
3. In fact, the Venture had requested summary judgment in its favor on this issue in an
earlier motion. The trial court denied that request before the Bank presented its own motion.
4. According to the Venture's figures, the outstanding balance at the time of acceleration
was $6,395,460.78. Under its theory, the manner for calculating legal interest for one day at
18% is as follows: $6,395,460.78 x .18 = $1,151,182.74 divided by 365 days = $3,153.93 x
1 day = $3,153.93 as legal interest. That amount is considerably less than $171,957.96 (the
amount of the penalty).
If spreading is allowed, however, the penalty amount, $171,957.96, is added to all other
interest charged over the life of the loan, $3,387,161.23, for a total of $3,559,119.19, and this
total is compared to the highest legal rate the Bank could have charged over the time the loan
was outstanding, May 4, 1983, to July 7, 1987. At the highest lawful rate of 18%, the
summary judgment evidence shows that the Bank could have lawfully charged up to
$4,200,550.82, an amount greater than the sum of the interest and penalty actually charged.
5. The Venture's reliance on Printing Center of Texas v. Supermind Publishing Company,
669 S.W.2d 779 (Tex. App. 1984, no writ), is misplaced. That case dealt with rejection of
non-conforming goods. With non-conforming goods, the buyer's right to reject must be based
on the non-conformity, not on a desire to escape the bargain. The reason for rejection must be
given in good faith. Id. at 784. However, the rights at issue in this case are not conditional.
6. This Court is aware that in pure loan transactions the DTPA does not apply because a
borrower of money is not considered a consumer within the DTPA definition. See Riverside
Nat'l Bank v. Lewis, 603 S.W.2d 169, 174-5 (Tex. 1980). There may be a legitimate question
as to whether this case involves a pure loan transaction and is therefore not covered at all by
the DTPA. However, this issue was not raised in the Bank's motions for summary judgment
and so cannot be considered by this Court as a basis for upholding the trial court's judgment. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1536999/ | 27 B.R. 801 (1983)
In re MORRISTOWN LINCOLN-MERCURY, INC., Debtor.
FIRST STATE BANK, Plaintiff,
v.
MORRISTOWN LINCOLN-MERCURY, INC., Richard Stair, Jr., Trustee, and Bank of Commerce of Morristown, Tennessee, Defendants.
and
Richard STAIR, Jr., Trustee, Third-Party Plaintiff,
v.
HAMILTON BANK OF MORRISTOWN and Ford Motor Credit Company, Third-Party Defendants.
Bankruptcy No. 3-81-01889, Adv. No. 3-82-0306.
United States Bankruptcy Court, E.D. Tennessee.
February 23, 1983.
*802 Morrison, Morrison & Morrow, Kenneth E. Morrow, Knoxville, Tenn., for plaintiff.
Stone & Hinds, P.C., George F. Legg, Knoxville, Tenn., for third-party defendant Ford Motor Credit Co.
MEMORANDUM
CLIVE W. BARE, Bankruptcy Judge.
At issue is the priority of two competing claims to a dealer reserve account maintained by Ford Motor Credit Company (Ford Credit) in conjunction with its former association with the debtor automobile dealership, Morristown Lincoln-Mercury, Inc. The reserve account consists of funds withheld by Ford Credit contemporaneously with its purchase of retail installment contracts from the debtor. Plaintiff First State Bank (Bank) contends the account represents an account receivable, contract right, or general intangible, Tenn.Code Ann. § 47-9-106 (1979), of the debtor subject to its security interest perfected on February 18, 1981. Denying the account represents either a contract right or general intangible, Ford Credit contends the funds in the account are proceeds, Tenn.Code Ann. § 47-9-306 (1979), from the sales of automobile inventory subject to its purportedly previously perfected security interest of July 27, 1964. Two alternative arguments are also offered by Ford Credit: (1) the controverted fund is an account receivable subject to a security interest of Ford Credit perfected previous to the creation of the Bank's security interest; (2) the controverted fund is money in which only Ford Credit has a perfected security interest since it has possession of the account funds.[1]
I
The facts under which the competing interests of the plaintiff Bank and Ford Credit arose are undisputed. Morristown Lincoln-Mercury, Inc. filed its chapter 11 bankruptcy petition on December 17, 1981. Four weeks thereafter the debtor's case was converted to chapter 7. The debtor's ordinary course of business included the sale of new and used inventory motor vehicles. Ford Credit provided financing for the debtor's customers, from time to time, by purchasing retail installment contracts from the debtor for the amount due under the customer's contract less a discount. Additionally, pursuant to its financing agreement with the debtor, Ford Credit withheld three percent (3%) of the purchase proceeds due the debtor and deposited the withheld funds in a separate and distinct "Dealer Proceeds Withheld Account." The purpose *803 of this reserve account was to provide security for all obligations of the debtor to Ford Credit and its subsidiaries. The balance of the account was $39,177.15 when the debtor's bankruptcy petition was filed. Despite the liquidation of other collateral, the claims of the Bank and Ford Credit against the debtor's estate each exceed the balance in the "Dealer Proceeds Withheld Account."
In consideration for the Bank's $500,000.00 loan, the debtor executed its note and a combined financing statement and security agreement, dated November 10, 1980. Debtor granted the Bank a security interest in its machinery, equipment, inventory, raw materials then owned or thereafter acquired and in
[a]ll accounts receivable, accounts, notes, drafts, acceptances, and other forms of obligations and receivables now or hereafter received by or belonging to Debtor for goods sold by Debtor . . . and all rights of the Debtor earned or yet to be earned under contracts to sell, or to render services, or any other contract rights, choses in action or general intangibles, of every kind whatsoever.
The debtor warranted the collateral offered was absolutely owned by the debtor, free and clear of any lien or other encumbrance.
The financing statement actually filed by the Bank with the Tennessee Secretary of State on February 18, 1981, recites in part:
This financing statement covers the following types (or items) of property: All machinery, equipment (excluding licensed motor vehicles), furniture and fixtures; all inventory parts, all accounts receivable, including contract rights, and general intangibles; now owned, to be acquired, and hereafter acquired.
The validity of the documents supporting the secured claim of the Bank is not at issue.
Ford Credit relies upon several agreements to support its claim of priority to the funds in the reserve account. Without exception, the agreements relied upon by Ford Credit predate both the execution of the Bank's combined financing statement and security agreement and the recordation of its financing statement.
An application for financing, dated August 2, 1962, submitted by the debtor to Ford Credit provides in material part: "[Ford Credit] shall, at all times, have a right to offset and apply any and all credits, monies or properties of [Morristown Lincoln-Mercury, Inc.] in [Ford Credit's] possession or control against any obligations of [Morristown Lincoln-Mercury, Inc.] to [Ford Credit]." A statement of trust receipt financing, identifying Ford Credit as an entruster and the debtor as trustee, was filed with the Tennessee Secretary of State on September 7, 1962.
The original UCC financing statement from the debtor to Ford Credit was recorded on July 27, 1964, in the office of the Tennessee Secretary of State. The statement covers:
New and used motor vehicles, tractors, trailers, semi-trailers, mobile homes, farming implements . . . and equipment and accessories or replacement parts of any of the above.
Chattel paper.
Automotive service parts and accessories and all other inventory.
Accounts receivable and factory credits. (Emphasis added).
Notably, the financing statement does not cover either contract rights or general intangibles. The statement does provide that proceeds of collateral are covered. Continuation statements have been timely filed to continue the effectiveness of the original financing statement.[2] However, the evidence in this case does not include a security agreement executed contemporaneously with the original financing statement.
The debtor executed an assignment, dated September 21, 1971, assigning to Ford Credit "[a]ll credits due and to become due *804 to [Morristown Lincoln-Mercury, Inc.] from Ford Motor Company or any of its subsidiaries or affiliates." Ford Credit is a subsidiary of Ford Motor Company.
A wholesale security agreement, dated September 28, 1973, executed by the debtor's attorney-in-fact in favor of Ford Credit has also been submitted as evidence. This agreement recites in relevant part:
As security for the payment of all such advances [for wholesale financing] heretofore and hereafter made, and for the observance and performance of all other obligations of [Morristown Lincoln-Mercury, Inc.] to Ford Credit in connection with the wholesale financing of the Merchandise for [Morristown Lincoln-Mercury, Inc.], [Morristown Lincoln-Mercury, Inc.] hereby grants to Ford Credit a purchase money security interest in the Merchandise, now owned or hereafter acquired, and in the proceeds of any sale or other disposition thereof.
The final documents relied upon by Ford Credit are the 1979 edition of its "Automotive Finance Plans for Ford Motor Company Dealers" and three receipts, acknowledging receipt of a copy of the "Automotive Finance Plans" manual current on the date of the various receipts. (The receipts are dated March 22, 1964, June 17, 1974, and June 15, 1979.) Each receipt provides that all time sale contracts submitted by the debtor to Ford Credit shall be governed by the terms of the retail plan of the manual pertaining to financing plans. The 1979 manual contains the following provision in a section entitled "How Ford Credit Purchases Retail Contracts."
Purchase Price
Ford Credit purchases acceptable retail installment contracts from the Dealer at discounts established from time to time by Ford Credit with the Dealer. Ford Credit pays or credits to the Dealer the face value of each contract purchased less Ford Credit's discount charge and any payments that Ford Credit may make for the Dealer for insurance or otherwise. The amount so payable to the Dealer is known as "Dealer Proceeds." Ford Credit may withhold a portion of the Dealer Proceeds as security for all of the Dealer's obligations to Ford Credit and its subsidiaries. (Emphasis added).
Periodically, Ford Credit pays to the Dealer (without interest) the amount by which the sum in the Dealer Proceeds Withheld account exceeds a specified amount. If the Dealer substantially discontinues submitting contracts to Ford Credit for purchase, Ford Credit may discontinue payment of the excess in the Dealer's Proceeds Withheld account until all of the Dealer's obligations to Ford Credit and its subsidiaries have been paid in full.
The Bank contends the reserve account represents a contract right of the debtor. This contention appears to be supported by the provision of the 1979 manual entitling the debtor to periodic payments from the dealer reserve account of the excess of the amount specified by the parties as a minimum balance.[3]
As a fundamental position, Ford Credit insists the funds in the reserve account are identifiable proceeds subject to its prior perfected security interest in the debtor's motor vehicle inventory. Secondarily, Ford Credit maintains the reserve account represents an account receivable assigned to it by the debtor under the terms of the September 21, 1971, assignment. Ford Credit contends its previously recorded original financing statement and continuation statements prompted further inquiry, which would have disclosed the assignment interest of Ford Credit in the controverted funds, by an interested party. Thirdly, Ford Credit claims the terms of the debtor's application for financing, dated August 2, 1962, created a security interest in monies of the debtor in its possession. Since it has possession of the funds, Ford Credit contends it is thus the only party with a perfected security interest in the contested fund.
*805 II
Questions of priority between or among conflicting security interests in the same collateral are governed by Tenn.Code Ann. § 47-9-312 (Supp.1982). The section is inapplicable, however, unless the competing claimants have valid security interests. The initial task of the court, therefore, is to determine whether Ford Credit and the Bank each have a security interest in the funds in the dealer reserve account. Assuming they do, the court must also determine if either party perfected its interest and, if so, when.
Although Ford Credit relies upon several different agreements, the most important of these are the September 21, 1971, assignment and the wholesale security agreement dated September 28, 1973. Significantly, the terms of the assignment assign to Ford Credit "[a]ll credits due and to become due" to the debtor, Morristown Lincoln-Mercury, Inc., from Ford Motor Company or any of its subsidiaries or affiliates. In effect, since Ford Credit is a subsidiary of Ford Motor Company, the assignment creates a security interest in favor of Ford Credit in any credits then currently or prospectively owed by Ford Credit to the debtor. The wholesale security agreement unequivocally granted Ford Credit a security interest in the debtor's merchandise, including after-acquired merchandise, and the proceeds from the sale thereof.
The original financing statement, previously recorded on July 27, 1964, and the May 28, 1969, continuation statement, served to perfect Ford Credit's security interest in the debtor's automobile inventory and proceeds thereof.[4] But, considering the description of the collateral in its previously recorded financing statement, it is questionable whether the security interest of Ford Credit created by the assignment is perfected by filing. However, it is also questionable whether filing by Ford Credit was necessary to perfect the security interest in the credits assigned by the debtor. Tenn.Code Ann. § 47-9-302 (1979) provides in part:
(1) A financing statement must be filed to perfect all security interests except the following:
. . . .
(e) an assignment of accounts or contract rights which does not alone or in conjunction with other assignments to the same assignee transfer a significant part of the outstanding accounts or contract rights of the assignor. . . .
In contrast to the various agreements supporting Ford Credit's interest, the interest of the Bank is quite simple. Its security agreement, in relevant part, encompasses accounts receivable and other forms of obligations, including those after-acquired, and all contract rights or general intangibles of the debtor. The Bank's financing statement, omitting any reference to "other forms of obligations," is more circumspect. Although the Bank does have a security interest in the disputed funds, its interest is unperfected unless the dealer reserve account may be characterized as an account receivable, contract right, or general intangible of the debtor.
In support of its claim to priority, Ford Credit cites Biggins v. Southwest Bank, 490 F.2d 1304 (9th Cir.1973). Peterson Ford, an automobile dealership, and Southwest Bank were parties to a financing agreement substantially similar to the agreement between the debtor herein and Ford Credit. Southwest Bank withheld three percent of the total proceeds paid for Peterson Ford's chattel paper and deposited the withheld proceeds in a dealer reserve account maintained at Southwest Bank. Various conditional sales contracts and flooring agreements executed by Peterson Ford were assigned to Southwest Bank pursuant to their previous financing agreement. The flooring agreements granted to Southwest Bank a security interest in the motor vehicles described therein and the proceeds of the sale thereof. The financing statement filed by Southwest Bank covered "[s]ales and *806 service of new and used automobiles" and the proceeds therefrom. The statement did not expressly cover the dealer reserve account. Within four months of the bankruptcy petition date of Peterson Ford, Southwest Bank debited the dealer reserve account by set-off against antecedent obligations of the bankrupt to Southwest Bank. In an action commenced by the trustee in bankruptcy to recover the value of the offset funds and other property allegedly preferentially transferred, Southwest Bank contended it was entitled to both a statutory banker's lien and a common law right of set-off. The Ninth Circuit concluded the set-off against the dealer reserve account was not preferential because the account was an "integrated element of the collateral securing the inventory financing agreement . . . duly perfected by the proper filing of . . . [a] financing statement. . . ." Biggins v. Southwest Bank, 490 F.2d at 1312. The court in Biggins tacitly determined the funds in the dealer reserve account were proceeds in which Southwest Bank had a perfected security interest.
As previously noted, Ford Credit contends the funds at issue represent proceeds from the debtor's inventory subject to its prior perfected security interest. This contention is based on the following argument. When the debtor sold an automobile from inventory on an installment basis, the debtor received chattel paper from its buyer. The chattel paper represented identifiable proceeds of the sale in which Ford Credit's security interest continued. The discount sale of the chattel paper (representing an installment contract), to Ford Credit by the debtor was also a sale of proceeds. "In that this was a sale of proceeds, the purchase price of the contracts was itself further proceeds identifiable in a chain directly from the sale of the original inventory vehicle in which Ford Credit had a perfected security interest." Post-Trial Brief of Ford Motor Credit Company at 5.
"Proceeds" is defined to include "whatever is received when collateral or proceeds is sold, exchanged, collected or otherwise disposed of." Tenn.Code Ann. § 47-9-306(1) (1979). And, a security interest generally does continue in any identifiable proceeds when collateral subject to a perfected security interest is sold. Tenn.Code Ann. § 47-9-306(2) (1979). Furthermore, Tenn.Code Ann. § 47-9-306(4) (1979) recites in material part:
In the event of insolvency proceedings instituted by or against a debtor, a secured party with a perfected security interest in proceeds has a perfected security interest:
. . . .
(b) in identifiable cash proceeds in the form of money which is not commingled with other money or deposited in a bank account prior to the insolvency proceedings. . . .
The interest of Ford Credit in the proceeds of the debtor's inventory was perfected. These funds have at all times been in Ford Credit's possession and under its control. Since the filed financing statement covering the original collateral also covers proceeds, Ford Credit's security interest in the proceeds of the debtor's automobile inventory has been continuously perfected since September 28, 1973, a date more than seven years previous to the creation of the Bank's security interest.
Assuming arguendo the Bank has a perfected security interest, it appears Ford Credit is entitled to priority because both parties assert perfection by filing and Ford Credit filed first. Tenn.Code Ann. § 47-9-312(5)(a) (Supp.1982). However, Ford Credit's 1973 security agreement only secures the payment of advances made to the debtor in connection with wholesale financing, and there is no differentiation in the record between the wholesale financing and non-wholesale financing claims of Ford Credit. Although it is most improbable that the claims secured by the 1973 wholesale security agreement have been satisfied, the court may not indulge in such a presumption.[5] In any event, the absence of *807 any differentiation is inconsequential to the court's decision because the court substantially concurs in one of the alternative arguments of Ford Credit.
The Bank's assertion of priority is founded upon its contention the dealer reserve account is either an account, contract right, or general intangible of the debtor. Each of these terms is specifically defined:
"Account" means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper. "Contract right" means any right to payment under a contract not yet earned by performance and not evidenced by an instrument or chattel paper. "General intangibles" means any personal property (including things in action) other than goods, accounts, contract rights, chattel paper, documents and instruments.
Tenn.Code Ann. § 47-9-106 (1979).
Given these specific definitions, it is apparent the reserve account is neither an "account" nor a "contract right" of the debtor. The three percent in proceeds withheld by Ford Credit from the purchase price paid to the debtor for chattel paper does not represent proceeds of an "account" between the debtor and a retail customer. The debtor's right to receive payment from its retail customer was evidenced by chattel paper. Thus, no "account" existed between the debtor and its retail customer because a right to receive payment evidenced by chattel paper is expressly excluded from the definition of an "account." The funds in the dealer reserve account also do not represent proceeds of an "account" as between the debtor and Ford Credit. Since any right of the debtor in the funds is not the result of the debtor's sale or lease of any goods to Ford Credit or the rendering of any service to Ford Credit, any obligation of Ford Credit to the debtor involving the withheld proceeds is not an "account." The reserve account also does not represent a contract right.[6] The debtor had already performed and earned the right to payment from its retail customer. There was no contemplation on the part of the debtor and Ford Credit that some future performance pursuant to any contract between them would create an "account" triggering an obligation on Ford Credit's part to the debtor. Instead, the money in the reserve account was withheld by Ford Credit from dealer proceeds pursuant to a financing arrangement, pre-existing the Bank's interest, designed to secure any obligation of the debtor to Ford Motor Company or its subsidiaries. The withheld proceeds in the reserve account are quite simply money which belonged to the debtor.
Finally, the money in the reserve account should not be categorized as a general intangible. Examples of general intangibles cited in the official comment to Tenn.Code Ann. § 47-9-106 (1979) are copyrights, goodwill, literary rights, patents, rights to performance, and trademarks. Money is not mentioned in the comment. Furthermore, the definition of "general intangibles" is amended in the 1972 version of Uniform Commercial Code § 9-106: "General intangibles means any personal property (including things in action) other than . . . money." The amendment of the definition was necessary, according to the UCC draftsmen, to preclude a determination that a security interest in money may be perfected by filing. Accordingly § 9-304 and § 9-305 of the 1972 version of the Uniform Commercial Code were also amended to make it quite clear that a security interest in money must be perfected by possession. The reason for the 1972 amendment of *808 § 9-304 is succinctly stated: "The change in subsection (1) corrects an inadvertent omission in the 1962 Text, and makes clear that a security interest in money cannot be perfected by filing."
This discussion of general intangibles and the method of perfection of a security interest in money highlights the reasons for the court's conclusion Ford Credit is entitled to the funds in the disputed account, even if it is assumed the debtor's wholesale financing obligations to Ford Credit are satisfied. The debtor's rights in the funds at issue were assigned to Ford Credit under the provisions of the September 21, 1971, assignment. The funds in the account are money. The security interest of Ford Credit in the money in the reserve account is perfected by virtue of its possession of the debtor's money. The Bank's interest in the funds is unperfected since it never had possession of the funds.
The court realizes the Tennessee legislature has not enacted the 1972 Uniform Commercial Code revisions cited herein. However, the 1962 version of the Code enacted in Tennessee does not contain a provision governing the perfection of a security interest in money. If confronted with the issue of the method necessary to perfect a security interest in money, the court believes the Tennessee Supreme Court would recognize the stated reasons for the 1972 changes in the Code and hold that possession is necessary to perfect a security interest in money.
The court's decision is distinguishable from a previous determination involving "factory holdbacks." In re J & J Auto Sales, Inc., 9 U.C.C.Rep.Serv. 909 (Bkrtcy.E. D.Tenn.1971), involved a pre-bankruptcy agreement between Chrysler Motors Corporation and the bankrupt dealer in which Chrysler agreed to pay to the bankrupt two percent (2%) of the wholesale cost of each car sold at retail by the bankrupt. Commercial Credit Corporation provided the wholesale financing of the bankrupt's inventory (automobiles). The wholesale security agreement between Commercial and the bankrupt granted a security interest in the bankrupt's merchandise and proceeds from the disposition thereof. Commercial's financing statement covered inventory and the proceeds thereof. When Commercial learned the bankrupt had sold inventory without accounting for the proceeds, it required the bankrupt to execute an assignment of the bankrupt's interest in all credits due or to become due from Chrysler, including factory holdbacks. No financing statement was filed based upon this assignment. The bankrupt's petition in bankruptcy was filed within seventy-five (75) days of the assignment to Commercial. This court determined the factory holdbacks were not proceeds derived from the sale of motor vehicles in which Commercial had a perfected security interest.[7] The security interest of Commercial was only perfected in the bankrupt's inventory and proceeds thereof. Proceeds represent a substitute for the original collateral; factory holdbacks were not included among the original collateral.
The distinction between the factory holdbacks in J & J Auto Sales, Inc. and the funds at issue is readily apparent. The former simply were not proceeds from the sale of inventory, whereas the funds at issue are dealer proceeds from the sale of inventory subject to Ford Credit's perfected security interest.
This Memorandum constitutes findings of fact and conclusions of law, Bankruptcy Rule 752.
NOTES
[1] This adversary proceeding was commenced when First State Bank filed its complaint requesting an abandonment by the trustee in bankruptcy of twenty-five motor vehicles and other collateral allegedly subject to the Bank's prior security interest. The original defendants were Bank of Commerce of Morristown, Morristown Lincoln-Mercury, Inc., and Richard Stair, Jr., trustee in bankruptcy. When the trustee discovered Ford Motor Credit Company and Hamilton Bank of Morristown had filed financing statements claiming security interests in some of the same property claimed as collateral by the Bank, the trustee filed a third-party complaint naming Ford Motor Credit Company and Hamilton Bank of Morristown as third-party defendants. A judgment adjudicating the rights of the competing secured parties and the trustee in bankruptcy was entered by this court on July 27, 1982. However, the court specifically reserved determination with respect to the rights of Ford Motor Credit Company to the dealer reserve account proceeds at issue herein and to $1,099.28 in cash proceeds until a further hearing upon the request of any party. Ford Credit filed a motion on October 4, 1982, requesting a hearing to determine the priority and extent of its security interest in the dealer reserve account proceeds. Decision was reserved after trial of the issue on November 30, 1982. The parties have had an opportunity to brief the issues, and the court is prepared to enter its decision. Presumably, an agreement was reached with respect to the $1,099.28 in cash proceeds since no party has requested a determination by the court of the right to those funds.
[2] Continuation statements complying with the requirements of Tenn.Code Ann. § 47-9-403(4) (Supp.1982) were timely filed by Ford Credit on the following dates: May 28, 1969; May 2, 1974; June 21, 1979.
[3] This amount is not disclosed in the record before the court.
[4] A financing statement is effective even though it is filed before either the execution of a corresponding security agreement or the attachment of a security interest. Tenn.Code Ann. § 47-9-402(1) (1979).
[5] Ford Credit has filed six proofs of claim and two amended proofs of claim in the debtor's bankruptcy case.
[6] The 1972 version of the Uniform Commercial Code § 9-106 has been amended to eliminate the term "contract right." An unearned right to payment for goods sold or leased or for services rendered not evidenced by an instrument or chattel paper is an "account" under the amended provision. The statement of "Reasons for 1972 Change" provides in part that the term contract right has proved troublesome by creating a "proceeds" problem in cases in which contract rights become accounts by virtue of performance and in cases in which the secured party inadequately described its collateral in a financing statement by merely claiming "accounts" or "general intangibles" when the financing statement should have included a claim for "contract rights."
[7] Commercial did not assert the assignment was excepted from the filing requirements of Article 9 by Tenn.Code Ann. § 47-9-302(1)(e). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537009/ | 27 B.R. 669 (1982)
In re SKINNER LUMBER CO., INC., Debtor.
Kevin CAMPBELL, Trustee, Plaintiff,
v.
KIMBERLY CLARK CORP., Defendant.
Bankruptcy No. BK 81-01528, Complaint No. 82-0262.
United States Bankruptcy Court, D. South Carolina.
September 2, 1982.
*670 H. Flynn Griffin, III, Walterboro, S.C., for plaintiff.
Fred Thompson, III, Charleston, S.C., for defendant.
MEMORANDUM AND ORDER
J. BRATTON DAVIS, Bankruptcy Judge.
In this adversary proceeding the trustee seeks to set aside, under 11 U.S.C. § 547(b),[1] an alleged preferential transfer made by Skinner Lumber Company (Skinner) to Kimberly Clark Corp. (Kimberly Clark).
The parties, by and through their respective attorneys, stipulated the relevant facts of the case.
FACTS
On July 17, 1981, ninety-one days before Skinner filed its petition for relief under Chapter 7 of the Bankruptcy Code (11 U.S.C. § 701 et seq.), Skinner issued and mailed a check in the amount of Eight Thousand Five Hundred Twenty-nine and 08/100 ($8,529.08) Dollars to Kimberly Clark. Thereafter, but within ninety days before Skinner filed its petition for relief, Kimberly Clark received the check and deposited it in its bank account. The check was subsequently paid by the bank.
ISSUE
The issue is whether there has been a transfer within ninety days of Skinner's filing its petition for relief. In order to resolve the issue it must be determined when the "transfer" occurs in a transaction involving a standard check written on the debtor's general checking account.
DISCUSSION AND CONCLUSION
The parties have stipulated that if the transfer occurred within the ninety day period, the transfer is voidable by the trustee under § 547(b).
A transfer in a transaction involving a check written on the debtor's account is made when the check is paid by the debtor's bank. In re Duffy, 6 B.C.D. 88, 3 B.R. 263, 1 C.B.C.2d 641, (Bkrtcy.S.D.N.Y., 1980).
In Duffy the debtor mailed a check dated August 3, 1979 to one of his creditors. The check was paid by the drawee bank on August 6, 1979. Ninety-one days after the check was dated and eighty-eight days after the check was paid, the debtor filed a voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The trustee in bankruptcy brought suit to have the payment avoided. The Court avoided the transfer as preferential holding that,
A payment of a debt by check is a transfer of property is manifestly expressed in the broad definition of `transfer' under the Bankruptcy Code, 11 U.S.C. § 101(40). It is clear that payment of the *671 debt did not occur when the debtor delivered the post-dated check to Avis. A check itself does not vest in the payee any title to or interest in the funds held by the drawee bank. See UCC § 3-409. The check is simply an order to the drawee bank to pay the sum stated and does not constitute a transfer and delivery of the fund until it is paid. The date of payment, and not the date of delivery, is crucial in determing when the preferential transfer occurred. Klein v. Tabatchnick, 610 F.2d 1043 (2d Cir.1979); In re Lyon, 121 Fed. 723 (2d Cir.1903).
In re Duffy, 6 B.C.D. at 89, 3 B.R. at 265, 1 C.B.C.2d at 643.
In the bankruptcy case of Carmack v. Zell (In re Mindy's, Inc.), 17 B.R. 177, 5 C.B.C.2d 1451, (Bkrtcy.S.D.Ohio 1982) in which the trustee sought to avoid certain lease payments under 11 U.S.C. § 547,
There was some disagreement as to whether or not the dates on the various checks should be deemed the date of transfer of the funds, or whether or not the date upon which such checks were paid by the debtor's bank would be deemed the time of transfer. The Court hereby finds that under the provisions of section 547(e)(1)(b) of the Bankruptcy Code, the time of transfer is deemed to be the time of payment of the check, and thus, for purposes of this case, the date the check was paid would be deemed to be the date upon which a transfer of the debtor's property was made.
17 B.R. at 178-179, 5 C.B.C.2d at 1453.
McClendon v. Cal-Wood Door (In re Wadsworth Building Components, Inc.), 10 B.R. 662 (Bkrtcy.D.Idaho 1981) also deals with a check which is dated prior to the ninety day period and paid by the bank within the ninety day period. There the debtor issued a check dated November 28, 1979 to a creditor. The check was dishonored because the debtor lacked sufficient funds in its account. Subsequently, the check was paid by the drawee bank on February 14, 1980. The debtor filed for relief under the Bankruptcy Code on April 4, 1980. The court held that the transfer was made on February 14, 1980 within the ninety day period and was, therefore, subject to avoidance by the trustee under § 547(b).
In Klein v. Tabatchnick 610 F.2d 1043 (2d Cir.1979), a bankruptcy case, the Second Circuit Court of Appeals held that a transfer of funds is not made until the check is paid by the drawee bank. In Klein the trustee attempted to avoid a preferential transfer under section 60 of the Bankruptcy Act. The debtor, J.N.T., had borrowed One Hundred Thousand and 00/100 ($100,000.00) Dollars from Emmer. After the debtor received the check, he apparently changed his mind about the transaction, tore the signature off the check and returned it to Emmer. The trustee sought to avoid the returning of the check as a preferential transfer. The court, holding that the return of the check was not on account of an antecedent debt, said:
We agree with the District Judge that J.N.T. owed no antecedent debt to Emmer which he, as a creditor, could have proved in J.N.T.'s bankruptcy proceedings. The check itself was merely a request to the drawee bank to pay J.N.T. One Hundred Thousand and 00/100 ($100,000.00) Dollars; it did not operate as an assignment of these funds to J.N.T. Garden Check Cashing Service, Inc. v. First National City Bank, 25 A.D.2d 137, 141-42, 267 N.Y.S.2d 698, aff'd, 18 N.Y.2d 941, 277 N.Y.S.2d 141, 223 N.E.2d 566 (1966). Prior to the cashing of the check, there was simply no obligation owing to Emmer for which he could have had a recovery.
Id. at 1049.
The cases mentioned above, and others (see Itule v. Luhr Jensen & Sons, Inc. (In re Sportsco, Inc.), 7 B.C.D. 1025, 12 B.R. 34 (Bkrtcy.D.Ariz.1981)) rely on § 3-409 of the Uniform Commercial Code, which has been enacted in S.C.Code § 36-3-409 (1976), to support their position. Section 3-409 provides simply that, "(1) A check or other draft does not of itself operate as an assignment of any funds in the hands of the drawee available for its payment, . . .". In *672 other words, the writing of a check does not amount to a transfer of funds, but is merely an order to the drawee bank to pay the sum stated. The transfer occurs at the time the check is paid by the drawee bank.[2]
The parties here stipulated that if the Court holds that the transfer was made within the ninety day period, the trustee would be entitled to a judgment setting aside the transfer. It is the decision of this Court that the transfer occurred within the proscribed ninety day period and that the trustee is entitled to a judgment in the amount of Eight Thousand Five Hundred Twenty-Nine and 08/100 ($8,529.08) Dollars.
ORDER
THEREFORE, IT IS ORDERED, ADJUDGED AND DECREED that the transfer of the funds to Kimberly Clark be voided, and the Plaintiff, Kevin Campbell, trustee, have a judgment against the Defendant, Kimberly Clark Corp., in the amount of Eight Thousand Five Hundred Twenty-nine and 08/100 ($8,529.08) Dollars.
AND IT IS SO ORDERED.
NOTES
[1] 11 U.S.C. § 547(b): Except as provided in subsection (c) of this section, the trustee may avoid any transfer of property of the debtor
(1) to or for the benefit of a creditor;
(2) for or on account of an antecedent debt owed by the debtor before such transfer was made;
(3) made while the debtor was insolvent;
(4) made
(A) on or within 90 days before the date of the filing of the petition; or
(B) between 90 days and one year before the date of the filing of the petition, if such creditor, at the time of such transfer
(i) was an insider; and
(ii) had reasonable cause to believe the debtor was insolvent at the time of such transfer; and
(5) that enables such creditor to receive more than such creditor would receive if
(A) the case were a case under Chapter 7 of this title;
(B) the transfer had not been made; and
(C) such creditor received payment of such debt to the extent provided by the provisions of this title.
[2] There is some authority that the transfer is made at some time prior to the check's being paid by the drawee bank. In the case of Thomas W. Garland, Inc. v. Union Electric Co., 19 B.R. 920 (Bkrtcy.E.D.Mo.1982) the Court held that a transfer was made when the check was received by the debtor. However, the Garland decision is based on an interpretation of section 547(c)(2) of the Bankruptcy Code. The current dispute involves the interpretation of section 547(b)(e) of the Bankruptcy Code. Even if the Garland decision were applicable, it would be a minority view which this Court is not inclined to follow. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537012/ | 979 A.2d 250 (2009)
187 Md. App. 584
MI BONG HONG
v.
CHONG CHIN CHA.
No. 0507, September Term, 2008.
Court of Special Appeals of Maryland.
August 31, 2009.
*251 George F. Obrecht, III (Obrecht and Obrecht, on brief), Sevrna Park, for Appellant.
David F. Clinnin, Towson, for Appellee.
Panel: HOLLANDER, ZARNOCH and KEHOE, JJ.
KEHOE, J.
Mi Bong Hong ("Ms. Hong") appeals a judgment entered against her in favor of Chong Chin Cha ("Ms. Cha") by the Circuit Court for Anne Arundel County in the amount of $104,795.26.
Background
The instant appeal is the second time the parties' case has been before this Court. The parties' first appellate journey resulted in an unreported opinion by a panel of this Court authored by Judge Kenney. Mi Bong Hong v. Chong Chin Cha, et al., No. 2115, September Term, 2005 (filed June 18, 2007) ("Cha I"). We set forth the Cha I panel's statement of facts, supplementing it as necessary.
This case involves what the parties and witnesses refer to as a "Korean money club."[1] According to the evidence *252 at trial, individuals purchase "shares" in such clubs for a predetermined amount payable in monthly installments. The members of the club meet once a month. At the meeting, the organizer of the club, referred to in this case as the "president," collects the members' monthly installments and conducts a lottery. The lottery "winner" is entitled to the monthly payments collected at the next month's meeting. The meetings continue until each share owner has received a monthly payout.
In some clubs, after a member has received a payout, they pay an additional monthly fee or, as referred to in this case, an "interest" payment, in addition to their regular monthly share payment. This additional payment is some incentive for members to receive a later payout.
*253 Ms. Hong has organized numerous money clubs during the last thirty years. She testified that such clubs are a common means for Korean immigrants to borrow capital for business or personal investment.
Ms. Cha has participated in several of Ms. Hong's other money clubs. She also has borrowed money from Ms. Hong outside of the money clubs. Ms. Hong organized the money club giving rise to this case in 2000. When the club began in June 2000, Ms. Cha owed Ms. Hong $65,000 in personal loans. Ms. Cha joined the money club with the intent of using her payout to repay the debt to Ms. Hong.
In this club, the monthly payment on a share was $2,000. Payments ordinarily were made at the monthly meetings, but sometimes Ms. Hong would collect the payments from the members prior to the meeting. The parties disagree on whether interest payments were required.
Ms. Hong, as the president, was entitled to the first payout. She, however, agreed that Ms. Cha would receive the first monthly payout to satisfy Ms. Cha's debt to her. Ms. Hong, in turn, would take Ms. Cha's payout when Ms. Cha later won the monthly lottery. An October 20, 2000 memorandum written by Ms. Hong memorializes that, on June 26, 2000, Ms. Cha received a club payout of $86,000. From the $86,000, Ms. Cha paid Ms. Hong $65,000 in repayment of Ms. Cha's debt.
This case centers around whether Ms. Cha purchased not one but two, shares in the club. She claims that not only did she pay for the share that yielded the initial payout that enabled her to repay her debt to Ms. Hong, but that she also paid for a second share.
The last monthly meeting of the club was in February 2004. Ms. Cha filed suit in March 2004, and an amended complaint in July 2004.[] She alleged that she had paid $2,000 per month for the second share from June 2000 to February 2004, and that she expected to receive the February 2004 monthly payout. She averred that Ms. Hong refused to pay her the second payout because Ms. Cha's sister owed Ms. Hong money. Ms. Cha pleaded four counts: (1) breach of express contract; (2) breach of implied contract; (3) breach of fiduciary duty; and (4) accounting. She sought $104,000 in compensatory damages, and $500,000 in punitive damages.
Id., slip op. at 3-5.
After a four day bench trial, the circuit court issued a memorandum opinion and judgment. Preliminarily, the circuit court found that Ms. Hong entered into a separate contract with each club member for each share that the member purchased; that the terms of each contract were established by the club rules announced by Ms. Hong at the club's initial meeting; and that Ms. Cha purchased two shares.
With regard to Ms. Cha's contract for the second share, the circuit court found:
The terms of the parties' second contract provided that, if Ms. Cha made the monthly payments on her second share, she would receive the payout on that share in an amount equal to $2,000 times the number of club members. The contract also required Ms. Cha to pay $500 interest per month after she received the payout. . . .
The evidence established that Ms. Cha breached the terms of that contract by failing to perform her duty to pay the monthly fee on her second share. Unfortunately, the parties' contract (that is, Ms. Hong's rules as modified) did not specify the parties' rights, duties, remedies *254 or penalties in the event of Ms. Cha's failure to make full and timely payments. There was no evidence, however, that the contract allowed Ms. Hong to unilaterally refuse to make some kind of payout to Ms. Cha. The plaintiff made significant, if untimely and incomplete, payments to Ms. Hong toward the second share. Ms. Hong did not pay that money to another member and presumably kept it. Defendant will realize an unconscionable windfall and Ms. Cha will incur an unconscionable penalty if Defendant retains that money. Because we cannot divine from the parties' agreement, what remedy, if any, they provided for the circumstance, we cannot enter a judgment in favor of Ms. Cha under this breach of contract claim. Accordingly, Ms. Cha has no adequate remedy of law and, therefore, we consider her equity claim (accounting) below. (Emphasis added.)
As to Count II (breach of implied contract), the circuit court found:
Count II fails for the same reasons as. . . Count I. . . . . Assuming there was an implied contract with Ms. Hong, there was no clear understanding of what would happen if Ms. Cha made some but not all payments under her second share.
The circuit court entered judgment on Ms. Hong's behalf on the breach of fiduciary duty count.
Finally, with regard to Count IV (accounting), the circuit court first found that the evidence established a confidential relationship between Ms. Hong and Ms. Cha. It concluded that it had the equitable power to decree the payment of the amount found to be due from the plaintiff to the defendant. The circuit court continued:
The evidence established that from June, 2000 to December, 2003, Ms. Cha paid $191,000.00 into the club. Of that amount, $107,000.00 was paid towards the first share; that is, $2,000.00 for the June 2000 meeting plus $2,500.00 for each of the 42 subsequent meetings. The remaining $84,000.00 represents payments for the second share. We will enter judgment in that amount as a fair and equitable remedy to plaintiff's claim for an accounting.
Although plaintiff claims that she is entitled also to the interest other club members paid before the December, 2000 meeting, she failed to carry her burden of proof on this claim. The evidence was simply too conflicting and did not demonstrate by a preponderance that club members received interest payments as part of the payout. We will, however, award pre-judgment interest calculated at the legal rate calculated from January 1, 2004, which comes to $8,400.00. (Emphasis added.)
The circuit court entered judgment accordingly. Ms. Hong appealed the court's judgment, and Ms. Cha filed a cross-appeal.
Ms. Hong raised two issues that are pertinent to the instant case:
1. Did the circuit court clearly err in finding that Ms. Cha had paid for a second "share" in the money club?
2. Did the circuit court err in ruling for Ms. Cha in her action for an accounting?
On cross-appeal, Ms. Cha presented two pertinent issues:
1. Did the circuit court err in failing to include the amount of $20,000.00 in interest payments made by club members in the judgment for [Ms. Cha]?
2. Did the circuit court err in entering judgment for [Ms. Hong] on [the contract counts] because the agreement *255 between the parties did not specify a remedy for breach of contract?[2]
The Cha I panel affirmed the circuit court's disposition of the breach of fiduciary duty counts. Id., slip op. at 41.
With regard to the accounting claim, the panel held that a confidential relationship is not dependent upon the existence of a valid contract, id. at 34, and that "the evidence support[ed] the circuit court's finding that Ms. Cha placed special confidence in Ms. Hong, and that a confidential relationship existed." Id. at 35. Judge Kenney explained:
[A]n accounting "is a restitutionary remedy based upon avoiding unjust enrichment. In this sense, it reaches monies owed by a fiduciary or other wrongdoer, including profits produced by property which in equity and good conscience belonged to the plaintiff." Slip Opinion 27, quoting J. Eichengrun, Remedying the Remedy of Accounting, 60 Ind. L.J. 463 (1985).
However, the panel was unable to reconcile the circuit court's finding, made in conjunction with Ms. Cha's accounting claim, that she had made $84,000 in monthly payments on the second share with its finding, made in conjunction with the breach of contract claims, that the evidence established that Ms. Cha failed to perform her duty to make the monthly payments. Similarly, the panel was unable to reconcile the circuit court's conclusion, made in conjunction with its ruling on the accounting claim, that "[t]he evidence was simply too conflicting and did not demonstrate by a preponderance that club members received interest payments" with the circuit court's finding, made in conjunction with its ruling on the contract claims, that the contracts obligated members to pay interest after they had received their payouts. The Cha I panel vacated the circuit court's judgment as to the express and implied contract counts and the accounting count and remanded the case to the circuit court so that it could resolve these inconsistencies. Id., slip op. at 41.
On October 26, 2007, the circuit court conducted a hearing on remand. The circuit court issued a memorandum opinion on April 16, 2008, to "modif[y], clarif[y] and supplement[]" its previous opinion. The circuit court stated that Ms. Cha purchased two shares in a money club operated by Ms. Hong. The circuit court addressed the inconsistency in its previous findings with regard to the obligation of club members to pay interest:
A preponderance of the evidence demonstrated that Club members were required to make monthly $500.00 "interest" payments after receiving a payout. Those payments were in addition to the regular payments of $2,000.00.
With regard to the second share, the court found:
Ms. Cha made undesignated payments totaling $84,000.00 to Ms. Hong. There was no understanding between the parties as to which of Ms. Cha's various payments was intended to constitute the $2,000.00 payments and what, if any, constituted $500.00 interest payments. However, it is sufficient for purposes of the judgment we enter herewith to find, as we do, that Ms. Cha's undesignated payments totaled $84,000.00.
The circuit court stated that "it is apparent that there was simply no binding contract *256 between the parties." Further, the circuit court stated:
Assuming arguendo that the parties entered into a contract, express or implied, Ms. Cha's failure to make timely and complete payments constituted a material breach of that contract. The club members were entitled to receive their payout when the monthly lottery drawing occurred. The success of the Club depended upon each participant to pay his/her installment at or before the drawing. Ms. Cha's failure to make timely payments placed the success of the club at risk and exposed its members to financial loss.
The circuit court reiterated its finding that Ms. Cha did not have a remedy arising out of express or implied contract. Accordingly, the circuit court once again entered judgments in favor of Ms. Hong on Counts I and II of the amended complaint.
With regard to the accounting claim, the circuit court found that Ms. Hong had served as "`[p]resident' of several money clubs over three decades, determining their rules, collecting member's payments, conducting the lotteries and distributing the payouts. Indeed, she operates as a private bank in the Korean community." It said:
The parties had a confidential relationship in which Ms. Cha placed special confidence in Ms. Hong, who was significantly more sophisticated than Ms. Cha. Ms. Hong had previously loaned significant amounts of money to Ms. Cha, allowed her to participate in the money clubs, not only for Ms. Cha's benefit but also as a means to reimburse these loans to Hong. Ms. Cha, in turn, placed her confidence in Ms. Hong and reasonably presumed that Ms. Hong would not act inconsistently with her interest.
With regard to the money club before us, Ms. Hong kept no reliable or readily available record of the $84,000.00 she collected from Ms. Cha (or similar payments collected from the other members) during the many months that the club was active. Ms. Hong withheld monies from Ms. Cha's payouts to satisfy unrelated debts owed to Ms. Hong by Ms. Cha and her sister. Ms. Hong kept no discernable record of: the date or amount of each payment made by Ms. Cha; the allocation of those payments to the first or second share; and the designation of those payments as regular or interest payments. Ms. Hong also provided no receipts for payments made by Ms. Cha. We note that Ms. Hong determined the club rules (which she did not reduce to writing) and administered its assets (of which she distributed no periodic statement). The evidence demonstrated differences in members' interpretations of their rights and duties. Perhaps more than other members, Ms. Cha relied upon the experience of Ms. Hong to treat her fairly. Under those circumstances, grounds for an accounting claim were proven.[3]
*257 The circuit court ruled that Ms. Cha was entitled to reimbursement of the $84,000.00 that she paid to Ms. Hong for the second share, together with pre-judgment interest totaling $20,795.26. The circuit court entered judgment accordingly and this appeal followed.
Question Presented
Appellant presents a single issue:
Did the circuit court err in awarding judgment for Ms. Cha on the accounting claim in the full amount she claimed she paid for the second share where the court rejected the contract claims on the basis of its specific findings that Ms. Cha's payments were "incomplete", and that she "fail[ed] to perform her duty to pay the monthly fee on her second share", and that assuming arguendo a contract existed, her "failure to make timely and complete payments constituted a material breach of that contract precluding her right to enforce its terms"?
For the reasons discussed below, we find that the circuit court did not err.
Standard of Review
We review the circuit court's factual findings using a clearly erroneous standard. Maryland Rule 8-131(c). As the Court of Appeals explained in Murphy v. 24th Street Cadillac Corp., 353 Md. 480, 497, 727 A.2d 915 (1999):
We have consistently interpreted the clearly erroneous standard to require the appellate courts to "consider the evidence produced at trial in a light most favorable to the prevailing party." Geo. Bert. Cropper, Inc. v. Wisterco, 284 Md. 601, 620, 399 A.2d 585 (1979). So long as substantial evidence is presented to support the trial court's determination, the appellate court is bound by the trial court's factual findings and they will not be disturbed on appeal. Id; Ryan v. Thurston, 276 Md. 390, 391-92, 347 A.2d 834 (1975); Delmarva Drilling Co. v. Tuckahoe Shopping Center, Inc., 268 Md. 417, 424, 302 A.2d 37 (1973). "The trial court is not only the judge of a witness' credibility, but is also the judge of the weight to be attached to the evidence." Thurston, 276 at 392, 347 A.2d 834.
In contrast, reviewing courts do not pay deference to a trial court's rulings on matters of law. Garfink v. Cloisters at Charles, Inc., 392 Md. 374, 383, 897 A.2d 206 (2006).
Discussion
The appellant devotes a great deal of her brief to the issue of Ms. Cha's right to a remedy in contract in light of the circuit court's findings that Ms. Cha failed to make timely and complete payments on the second share. In this appeal, Ms. Cha does not contest the circuit court's ruling against her on the contract counts. Therefore, *258 we need not address appellant's contentions on this score.
With regard to the remaining issue, Ms. Hong contends:
Ms. Cha's burden at trial was to produce competent material evidence legally sufficient to sustain her claim that she paid for two shares. She failed to meet that burden, as the trial court's specific findings of fact make clear. Those findings foreclose the accounting claim as well.
* * * * * *
The trial court's award on the accounting claim was predicated on the court's conclusion that a confidential relationship existed between the parties, thus creating a duty for Ms. Hong to account to Ms. Cha for her payments. However, if such a confidential relationship existed, it would have existed only in relation to payments Ms. Cha actually made toward the alleged second share. The trial court found that Ms. Cha's payments were "sporadic" and so "untimely" and "incomplete" as to constitute a material breach of the contract, if one existed, thus "precluding her right to enforce its terms." Ms. Hong would have no duty to account for payments Ms. Cha did not make, and as earlier pointed out, the court did not and, on the evidence, could not quantify the payments she did make. Hence there was no legal or equitable basis for an accounting and, consequently, no predicate upon which to award the ancillary money judgment. (Emphasis in original.)
Appellant's arguments are not persuasive.
As previously noted, the Cha I panel held that a confidential relationship was not dependent upon the existence of a valid contract, Slip Opinion 34, and that a confidential relationship existed between Ms. Hong and Ms. Cha. Id. at 35. The rulings in the first appeal constitute the law of case and, as such, are binding upon the litigants. Scott v. State, 379 Md. 170, 183, 840 A.2d 715 (2004) ("[O]nce an appellate court rules on a question presented on appeal, litigants and lower courts become bound by the ruling, which is considered the law of the case."); Goldstein & Baron Chartered v. Chesley, 375 Md. 244, 253, 825 A.2d 985 (2003). Thus, for the purpose of this appeal, the confidential relationship between Ms. Cha and Ms. Hong has been conclusively established and the existence vel non of an enforceable contract between the parties is irrelevant.
Appellant's contention that Ms. Hong's duties to Ms. Cha arising out of their confidential relationship "would have existed only in relation to payments Ms. Cha actually made towards the alleged second share" is correct in the context of the issues raised in this appeal. Ms. Hong argues that she would have no duty to account for payments that Ms. Cha did not make, which is also correct, and that the court did not and, on the evidence, could not, quantify the payments she did make. The last two statements are incorrect.
The circuit court explicitly found in both its 2005 opinion and its 2008 opinion that Ms. Cha paid $84,000.00 to Ms. Hong for her second share in the club. As the circuit court observed, there was sharply conflicting testimony as to the amount of Ms. Cha's payments. While the paucity of written records and language barriers made the circuit court's fact-finding duties especially difficult, we conclude that there was substantial evidence to support the circuit court's conclusion that Ms. Cha paid $84,000 towards her second share.
The most significant support for the circuit court's finding is Ms. Cha's own testimony. Ms. Cha testified that she paid *259 $4,500 for 41 months, $4,000 for one month, and $2,500 for one month, totaling $191,000.00. Ms. Hong's testimony contradicted Ms. Cha's. However, there is additional evidence to support the circuit court's finding that Ms. Cha paid $84,000 towards the second share. This evidence either corroborated in part Ms. Cha's version of events or undermined Ms. Hong's credibility.
The parties signed a memorandum on October 20, 2000. In translation, the memorandum[4] stated:
On June 25, 2000 we began our gye with $86,000. Used $65,000 for debt payment. The remainder was $21,000. In June $5,000 (gye money $4,000 and $1,000 as interest) was given. From July to October, gye money $10,000 given. Total $15,000 given. Subtracting $15,000 from the remaining $21,000 leaves $6,000. Cha Chang In took $6,000 in cash. It was promised that the check of $65,000 as surety would be returned at the end of the gye term.
Ms. Hong and Ms. Cha both testified about the meaning of the memorandum. Ms. Cha testified that the June payment of $5,000 represented payments of $2,000 per share for two shares plus the additional interest payment. Ms. Hong testified the $4,000 June payment was not for payments toward a second share, but that "[t]he $4,000 was the June payment. Also, the one before this club she had joined and also that club, which she dropped five months later, and she owed me $2,000 in that club." As translated, the memorandum is hardly a model of clarity but it does not support Ms. Hong's version of events. Similarly, Ms. Cha testified that the $10,000 represented four months of payments for one share, but that she continued to pay $2,000 each month, in addition to the prepaid $10,000, for the dues on her second share. Ms. Hong testified that the $10,000 was Ms. Cha's total payments for the four months of July through October. Ms. Hong could not explain why, if Ms. Cha only had one share at $2,000 per month, the $10,000 would not have paid for five months' dues:
I kept trying to remember what . . . happened that $10,000. I don't know whether we miscalculated a month or something; she had some kind of balance due because we have so many transactions between and I could not really clearly remember."
Aside from the transactions referenced in the memorandum, the bulk of the club payments were unrecorded (or, if recorded, Ms. Hong's practice was to destroy the records after each meeting).
Ms. Hong testified that sometimes she would go to Ms. Cha's store to pick up her payment. The payments were usually in cash and in a brown paper bag. Ms. Hong testified that the bag usually contained $2,000 or less, and that on the few occasions when the payment exceeded $2,000, the excess was to repay a debt to Ms. Hong. Kyong Sang Kang, one of Ms. Cha's employees, contradicted Ms. Hong's testimony on this point. Ms. Kang testified that Ms. Cha would sometimes entrust her with the bag to give to Ms. Hong. Ms. Kang testified that she counted the money, and the bag contained $4,500 representing payments of $2,000 per share for two shares, as well as an additional $500 interest payment on the first share that Ms. Cha had already received.
The circuit court's findings as to the amount paid by Ms. Cha on the second share were also based upon a favorable assessment of her credibility:
*260 In short, the evidence with regard to whether Ms. Cha paid all, most or very few of the payments on her second share was conflicting. However, it is the conclusion of this Court that Ms. Cha made payments on that share totaling $84,000.00. We make that conclusion for several reasons. Ms. Cha had previously participated in clubs with Ms. Hong, considered Ms. Hong a friend and the only meaningful vehicle to finance family business projects and appeared, in court, to be somewhat intimidated by Ms. Hong. Ms. Cha had no motive to fabricate this lawsuit with its substantial risk of failure. Had she fabricated her claim, she likely would have also fabricated documentation to support her venture. Finally, as we have said, Ms. Hong created and operated this club; she collected, safeguarded and distributed the money. Yet Ms. Hong could not definitively establish to this Court's satisfaction when the plaintiff and/or her sister made payments on a second share and when they did not.
"The trial court is not only the judge of a witness' credibility, but is also the judge of the weight to be attached to the evidence." Ryan v. Thurston, supra, 276 Md. at 392, 347 A.2d 834. The finding by the circuit court that Ms. Cha paid $84,000.00 for the second share was not clearly erroneous.
JUDGMENT AFFIRMED; APPELLANT TO PAY COSTS.
NOTES
[1] A Korean money club or "gye" (sometimes transliterated as "gwae", "kye" or "keh") is a rotating credit group. A rotating credit group:
typically consists of a small number of people (ten to thirty), who periodically contribute money to a pot. At the beginning of each period, one member takes the pot. Members determine the recipient by lottery or bidding. Failure to make timely payments and other breaches result in nonlegal sanctions such as criticism that, carried along the channels of gossip, injures the defaulter's reputation and may lead to social ostracism. When everyone has taken one pot, the group dissolves.
Eric A. Posner, The Regulation of Groups: The Influence of Legal and Nonlegal Sanctions on Collective Action, 63 U. Chi. L.Rev. 133, 169 (1996).
In Korea, gyes are:
financial clubs with a social element dating back thousands of years. Gye members contribute funds, typically on a monthly basis, to a pool to accumulate large sums for children's education and weddings, travel or the purchase of major appliances. Members typically share a common connection through family, neighborhood, employment or school background. When a member's turn comes, they are entitled to use the accumulated funds.
Lown, Jean M. and Ju, In-Sook, Adapting Western Financial Education And Counseling Models For Use In South Korea, Association for Financial Counseling and Planning Education, Volume 11(1), p. 64 (2000); available at http://www.afcpe.org/publications/journal-articles.php?volume= 111 & article= 199.
Traditionally, gyes were an important means of building and maintaining community ties in Korean society, and were sometimes formed for social, not financial, reasons. The oldest existing gye, which dates back to the mid-fifteenth century, began as a study group of young noblemen preparing for state examinations. Today, their descendants still meet quarterly to discuss philosophy and political ideals. Eun-joo, Lee, Dabakhoe Savings Group is Latest Gye Gone Bad, JoongAng Daily, December 2, 2008 (available at http:// joongangdaily.joins.com/article/view.asp? aid=2898049).
With the advent of Western-style financial institutions in Korea, the importance of gyes has decreased in that country. Nonetheless, at least until recently, they played a significant role in Korean society: in 1993, 20% of the population of South Korea participated in gyes and it was estimated that, in 1998, gyes and similar social groupings accounted for 13% of the total assets of urban Korean families. Lown and Ju, supra, 65.
Gyes play an important role in providing financing for Korean Americans; in 1999, it was estimated that 80% of Korean households in the United States participated in at least one gye and that, in the Washington, D.C. metropolitan area, approximately $100 million was held by gyes at any given time. Lan Cao, Looking at Communities and Markets, 74 Notre Dame L.Rev. 841, 878 (1999).
Many other cultures also have a tradition of rotating credit groups that are analogous to gyes. Counterparts include "cundina" (Mexico); "tanamoshi" (Japan), and "esusu" (West Indies and West Africa); "hui" (China and Viet Nam); "tong ting" (Cambodia) and "ekub" ("Ethiopia"). Id. at 874. Likes gyes, these groups have played a significant role in fostering the economic development of immigrant communities in the United States. Id. at 879.
As gyes and other rotating credit associations have traditionally served as an informal but efficient means of raising capital by groups who traditionally have limited access to conventional financing, they have attracted a significant amount of scholarly attention. See, e.g. Gao, supra n. 129 and sources cited therein; Posner, supra.
[2] Ms. Hong also raised issues pertaining to Ms. Cha's standing and the lack of a necessary party. Ms. Cha also argued that the circuit court erred in dismissing the breach of fiduciary duty count. None of these are relevant to this appeal.
[3] The analytical approach employed by the circuit court, namely, to ascertain the specific terms of the gye from evidence from the participants, to treat the participants of the gye as having a contract with the organizer, and to impose equitable remedies in order to avoid unjust enrichment, is consistent with the extremely sparse authority from other jurisdictions pertaining to revolving credit associations. See Heylin v. Yil, 30 Haw. 606, 608-609 (1928) (terms of a tanamoshi must be determined on a case-by-case basis; case remanded for that purpose); Okada v. Akahoshi, 29 Haw. 719, 732-733 (1927) (participant in a tanamoshi is entitled to enforce its terms and obtain return pledged collateral). In contrast, Professor Cao advocates limiting judicial intervention in revolving credit association disputes to matters involving fraud, lack of capacity and similar issues. Cao, supra, 899.
Other than the two Hawaiian cases cited above, our research discloses only two other reported appellate decisions involving gyes or similar revolving credit groups. Two decisions of the Supreme Court of the Territory of Guam pertain to collection actions in which the plaintiffs sought to enforce post-dated checks. The defendant alleged that the checks were intended to evidence his promise to reimburse the plaintiffs for plaintiff's payments to a failed gye organized by the defendant's wife. Yang v. Hong, 1998 WL 376357 (Guam Terr. 1998); Kim v. Hong, 1998 WL 817699 (Guam Terr. 1997). Neither of these cases involves the legal duty of a gye organizer to a participant.
Professors Cao and Posner both attribute the lack of litigation phenomenon to strong social pressures for participants to fulfill their obligations in order to maintain their reputations within their ethnic communities. Posner, supra, 170; Cao, supra, 882-883.
[4] The memorandum is in Korean. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537027/ | 979 A.2d 184 (2009)
187 Md. App. 470
Karlos WILLIAMS
v.
STATE of Maryland.
No. 2645, September Term, 2007.
Court of Special Appeals of Maryland.
August 27, 2009.
Brian L. Zavin (Nancy S. Forster, Public Defender, on brief), for Appellant.
Edward J. Kelley (Douglas F. Gansler, Atty. Gen., on brief), for Appellee.
Panel: DAVIS, WOODWARD, RAYMOND G., THIEME JR. (Retired, Specially Assigned), JJ.
*185 THIEME, J.
In 2002, appellant, Karlos Williams ("Williams"), was convicted, after a jury trial in the Circuit Court for Baltimore County, of two counts of first degree assault, one count of first degree burglary, and related charges. The court imposed a total sentence of 35 years. In 2007, Williams filed a Motion to Correct Illegal Sentences ("Motion to Correct"). From the denial of his Motion to Correct, Williams presents two questions for our review:
I. Did the trial court err by imposing sentences for first degree assault that exceeded the sentences that the court could have imposed for robbery, which was nolle prossed by the State,[1] and robbery with a dangerous and deadly weapon, of which Williams was acquitted?
II. Did the trial court err by imposing upon Williams separate sentences for burglary and assault?
For the reasons that follow, we shall vacate Williams's sentence of 25 years for first degree assault of Rochelle Ambrose ("Ambrose"), and remand with instructions that he be re-sentenced on that count to no more than twenty years. In all other respects, we shall affirm the judgment of the circuit court.
Facts and Proceedings
On August 18, 2001, Ambrose was inside her home, "sitting on [her] bed [and] talking on [her] phone[.]" The door to Ambrose's home "was unlocked[,] because [her] son [David B. (`David'), who was eight years old] was playing" outside. After Ambrose heard someone running up her stairs, Williams and another man entered her room and put "guns in [her] face." Williams "told [Ambrose] to drop the phone" and asked: "Where is the stuff?" After Ambrose told Williams: "I don't know what you're talking about[,]" Williams ordered the other man to "go outside and get [Ambrose's] son[.]"
After the other man brought David to Ambrose's room, Williams and the other man pointed their guns at Ambrose and David. Williams asked: "Where is it?" Ambrose again stated: "I don't know what you're talking about[.]" After Ambrose began to cry, Williams told her to "shut up[,]" and hit her in the side of her head with the handle of his gun. On Williams's order, the other man taped Ambrose and David's mouths, hands, and feet with duct tape.
As the other man went downstairs and through Ambrose's things, Williams, pointing his gun at Ambrose and David, went through the things in her room. About ten to fifteen minutes later, the man downstairs "hollered" to Williams: "Come on, let's go." Removing Ambrose's driver's license and Social Security card from her purse, Williams told Ambrose: "If I hear anything about you calling the police, I'm going to kill your son[.]" Taking a fan from Ambrose's room, Williams and the other man exited her home through a sliding door.
"[F]umbling with [her] hands until [she] was able to break out" of the duct tape, Ambrose untaped herself and David. After waiting three days because she "was scared that something was going to happen[,]" Ambrose called police.
Williams was subsequently charged with robbery with a dangerous and deadly weapon, simple robbery, first degree *186 assault of David, first degree assault of Ambrose, burglary, theft, and handgun offenses. At Williams's trial, the State, prior to jury deliberations, dismissed the charge of simple robbery.
After deliberating, the jury convicted Williams of first degree assault of David, first degree assault of Ambrose, and first degree burglary. The jury acquitted Williams of robbery with a dangerous and deadly weapon and two handgun offenses. At sentencing, the court imposed a sentence of 25 years for first degree assault of David, a concurrent sentence of 25 years for first degree assault of Ambrose, and a consecutive sentence of ten years for first degree burglary.
On October 22, 2007, Williams filed the Motion to Correct. He contended that his sentences for first degree assault were illegal because they "exact[ed] a more severe and unanticipated penalty than that which could have been imposed if the prosecution. . . had been successful in proving robbery." Because "the [']flagship crime['] governing the sentence to be imposed . . . was [simple] robbery[,]" Williams claimed, "the maximum possible sentence that could be imposed [for] Williams'[s] conviction[s] of assault was . . . ten years[.]" Williams further asserted that because "the elements of the assaults are included in the burglary[,]" his sentence for burglary was required to merge with his sentences for assault.
On December 10, 2007, the court denied the Motion to Correct.
I.
Williams contends that the court erred in imposing a sentence of 25 years for each count of first degree assault, because the sentence "placed [Williams] in a worse position than if he had been convicted of either of the greater offenses" of simple robbery or robbery with a dangerous or deadly weapon. "Had the jury . . . convicted . . . Williams of robbery with a dangerous [or deadly] weapon," he claims, "the . . . court could have sentenced him to up to [twenty] years for the offense[,][2] but could not have imposed separate sentences for the assaults of . . . Ambrose and her son, the latter offenses being incidental to, and included within, the former." "[H]ad the jury convicted . . . Williams only of simple robbery," he asserts, "the maximum sentence [that he] could have received was [fifteen] years[.]"[3] Williams maintains that "the fact that [he] was fortunate enough not to be convicted of the greater offenses should not have been to his detriment." See Simms v. State, 288 Md. 712, 723, 421 A.2d 957 (1980).
In Simms, the Court of Appeals addressed the question of "whether, when a defendant is charged with a greater offense and a lesser included offense which carries a higher maximum penalty, and when he is acquitted of the greater and convicted of the lesser, [he can] properly receive a more severe sentence than could have been imposed had he been convicted of the greater charge." Id. at 719, 421 A.2d 957 (emphasis in original). Simms was tried on charges of assault with intent to rob and simple assault, which, "under *187 the prosecution's evidence and theory of the case, . . . were based upon the same acts." Id. at 715, 421 A.2d 957. After Simms was convicted of simple assault, but acquitted of assault with intent to rob, the court sentenced Simms to twelve years' imprisonment. Id. at 716-17, 421 A.2d 957.
On appeal, Simms "contended that because the maximum punishment for assault with intent to rob [was] ten years, [his] sentence of twelve years for the lesser included offense of simple assault was improper." Id. at 717, 421 A.2d 957. Vacating Simms's sentence, the Court of Appeals stated:
To uphold the twelve year [sentence] under these circumstances would be to sanction an extreme anomaly in the criminal law. It would permit [Simms] to be punished more severely because of an acquittal on a charge. He would have fared better if he were less successful or had pled guilty to the greater charge of assault with intent to rob.
Furthermore, Simms . . . received something more severe than the maximum for which he was prosecuted. When the State decided to charge assault with intent to rob as well as simple assault based on the same acts, and to proceed to trial on both charges, the State was . . . seeking a conviction carrying a maximum possible sentence of ten years' imprisonment. . . . Under these circumstances, it is unfair to permit the State to exact a more severe and unanticipated penalty than that which could have been imposed if the prosecution had been wholly successful.
Id. at 723-24, 421 A.2d 957 (citations omitted). See also Dixon v. State, 364 Md. 209, 248-49, 772 A.2d 283 (2001) (where, after first trial, court imposed sentence of ten years for greater offense of attempted voluntary manslaughter and twenty years for lesser included offense of first degree assault, and State dismissed charge of attempted voluntary manslaughter at retrial, court's sentence of twenty years for first degree assault after retrial was illegal, because court was required to merge original first degree assault conviction into conviction for attempted voluntary manslaughter).
We reach a similar conclusion here. Although the maximum punishment for robbery with a dangerous and deadly weapon is twenty years, Williams was sentenced to 25 years for first degree assault of Ambrose, a lesser included offense of robbery of Ambrose with a dangerous and deadly weapon. See Gerald v. State, 137 Md.App. 295, 312, 768 A.2d 140 (2001) (merging a conviction for first degree assault into a conviction for robbery with a dangerous and deadly weapon). Because Williams received something more severe than the maximum for which he was prosecuted, it would be unfair to permit the State to exact a more severe and unanticipated penalty from him than that which could have been imposed if the State had been wholly successful. See Simms, 288 Md. at 724, 421 A.2d 957. Hence, we vacate Williams's sentence for first degree assault of Ambrose, and direct the court on remand to re-sentence Williams on that count to no more than twenty years.
The State contends that, because "there was evidence from [which] the jury could infer that [Ambrose] was assaulted in the first degree based on conduct separate and distinct from the conduct that established the . . . robbery" with a dangerous and deadly weapon, the offenses do not merge. This contention is unpersuasive. Williams's charging document is ambiguous as to the particular act for which he was charged with first degree assault of Ambrose. See Gerald, 137 Md.App. at 312, 768 A.2d 140 (a conviction for first *188 degree assault merges into a conviction for robbery with a dangerous and deadly weapon when the charging document is ambiguous as to the particular act alleged to have constituted first degree assault). Moreover, the court did not instruct the jury as to "how the assault and robbery charges related to one another, how they differed, and what the jury needed to find to convict under both charges." Id. (citations omitted). In light of the court's failure to give curative instructions, and the ambiguity of Williams's charging document, we must resolve the question of whether the charges of robbery and assault of Ambrose were based upon the same conduct in Williams's favor. Id. ("[A]ny ambiguity in [a charging document] or as to how the jury understood the charges must be resolved in [the defendant's] favor." (citation omitted)).
Although we agree with Williams that we are required to merge his conviction for first degree assault of Ambrose into the offense of robbery of Ambrose with a dangerous and deadly weapon, we do not agree that we are required to merge his convictions for first degree assault into the offense of simple robbery. "In Maryland, the required evidence test is usually used to determine whether two offenses arising out of the same act merge." Marquardt v. State, 164 Md.App. 95, 148, 882 A.2d 900 (2005) (citations omitted). "The focus is on the [']elements of each offense; if all of the elements of one offense are included in the other offense, so that only the latter offense contains a distinct element or distinct elements, the former merges into the latter.[']" Id. (quoting State v. Jenkins, 307 Md. 501, 517, 515 A.2d 465 (1986)).
Here, Williams was charged with first degree assault, which can be committed in two ways: by "intentionally caus[ing] or attempt[ing] to cause serious physical injury to another[,]" or by "commit[ting] an assault with a firearm[.]" Md.Code (1957, 1996 Repl.Vol., 2000 Supp.), Art. 27, Section 12A-1, recodified as CL Section 3-202(a). Williams was also charged with simple robbery, which, at the time, we defined as "the felonious taking and carrying away of the personal property of another, from his person or in his presence, by violence or putting in fear . . . or, more succinctly, as larceny from the person, accompanied by violence or putting in fear[.]" West v. State, 312 Md. 197, 202, 539 A.2d 231 (1988) (citations omitted). Accord Martin v. State, 174 Md.App. 510, 516, 922 A.2d 598 (2007). Neither the element of an intentional cause or attempt to cause serious physical injury nor the use of a firearm is included in the offense of simple robbery. Hence, Williams's convictions for first degree assault do not merge into the offense of simple robbery.
We further conclude that Williams's conviction for first degree assault of David does not merge into the offense of robbery of Ambrose with a dangerous and deadly weapon. Because each of these offenses were committed against a different victim, they are separate and distinct. See Borchardt v. State, 367 Md. 91, 148, 786 A.2d 631 (2001) ("[T]he unit of prosecution for the crime of robbery is the individual victim from whose person or possession property is taken by the use of violence or intimidation."), cert. denied, 535 U.S. 1104, 122 S.Ct. 2309, 152 L.Ed.2d 1064 (2002). Moreover, because Williams took nothing in which David had ownership, custody, or a legal interest, Williams did not rob David. See Miles v. State, 88 Md.App. 248, 259, 594 A.2d 634 (1991) ("In order to be the victim of a robbery, a person must therefore either own, have custody of, or otherwise have a legal interest in the property."). Hence, we do not *189 vacate Williams's sentence for first degree assault of David.
II.
Williams contends that the court "erred in imposing separate sentences" for his convictions for first degree assault and first degree burglary. Conceding that the offenses do not merge under the required evidence test, see Marquardt, supra, 164 Md.App. at 148, 882 A.2d 900, he claims that the court "should have merged the offenses under the rule of lenity[,] because the convictions arose out of a single transaction[,] and there is no indication by the General Assembly of an intent to punish a defendant separately for the offenses in such a situation."
In Marquardt, we stated:
The required evidence test is the threshold standard for determining when two offenses merge, but, in addition,
we have applied as a principle of statutory construction the "rule of lenity," which "provides that doubt or ambiguity as to whether the legislature intended that there be multiple punishments for the same act or transaction [`"]will be resolved against turning a single transaction into multiple offenses.["'"]
Williams, 323 Md. [312,] 321, 593 A.2d 671 [(1991) (quoting White v. State, 318 Md. 740, 744, 569 A.2d 1271 (1990) (quoting Bell v. United States, 349 U.S. 81, 84, 75 S.Ct. 620, 99 L.Ed. 905 (1955)))]. . . . "[I]f we are unsure of the legislative intent in punishing offenses as a single merged crime or as distinct offenses, we, in effect, give the defendant the benefit of the doubt and hold that the crimes do merge." Monoker v. State, 321 Md. 214, 222, 582 A.2d 525 (1990) [(citations omitted)]. The relevant inquiry when applying the rule of lenity is "whether the two offenses are `of necessity closely intertwined' or whether one offense is `necessarily the overt act' of the other." Pineta v. State, 98 Md. App. 614, 620-21, 634 A.2d 982 (1993) (quoting [Johnson v. State, [56 Md.App. 205, 215, 467 A.2d 544 (1983)]) (emphasis in Pineta).
Marquardt, 164 Md.App. at 149-50, 882 A.2d 900 (footnotes omitted).
Here, Williams committed first degree burglary when he broke and entered Ambrose's home with the intent to commit theft or a crime of violence.[4] Because the burglary was complete before Williams assaulted Ambrose and David, the burglary was not an "overt act" of the assaults. Id. at 150, 882 A.2d 900. Moreover, the language of the statutes defining the offenses does not indicate any "doubt or ambiguity as to whether the legislature intended that" the offenses be punished distinctly. Id. at 149, 882 A.2d 900. Hence, we conclude that the offenses do not merge under the rule of lenity.
SENTENCE FOR FIRST DEGREE ASSAULT OF ROCHELLE AMBROSE VACATED. JUDGMENT OTHERWISE AFFIRMED. CASE REMANDED TO THE CIRCUIT COURT FOR BALTIMORE COUNTY FOR FURTHER PROCEEDINGS CONSISTENT WITH THIS OPINION. COSTS TO BE PAID ONE-HALF BY APPELLANT AND ONE-HALF BY BALTIMORE COUNTY.
NOTES
[1] Rule 4-247(a) states: "The State's Attorney may terminate a prosecution on a charge and dismiss the charge by entering a nolle prose-qui on the record in open court." (Italics added.)
[2] Md.Code (1957, 1996 Repl.Vol., 2000 Supp.), Art. 27, Section 487(b), recodified as Md.Code (2002), Section 3-403(b) of the Criminal Law Article ("CL"), stated that a person who committed or attempted to commit robbery with a dangerous or deadly weapon was "subject to imprisonment not exceeding [twenty] years."
[3] Md.Code (1957, 1996 Repl.Vol., 2000 Supp.), Art. 27, Section 486(d), recodified as CL Section 3-402(b), stated that a person who committed or attempted to commit a robbery was "subject to imprisonment not exceeding [fifteen] years."
[4] Md.Code (1957, 1996 Repl.Vol., 2000 Supp.), Art. 27 Section 29, recodified as CL Section 6-202, stated that "[a] person [who] break[s] and enter[s] the dwelling of another with the intent to commit theft or a crime of violence . . . is guilty of the felony of burglary in the first degree[.]" | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537044/ | 27 B.R. 734 (1983)
In re Leonard Robert REDEKER, a/k/a Leonard R. Redeker, Barbara Ellen Redeker, a/k/a Barbara E. Redeker, Debtors.
Bankruptcy No. 82-40434.
United States Bankruptcy Court, D. Kansas.
February 11, 1983.
*735 Jan W. Leuenberger, Topeka, Kan., for debtors.
Thomas A. Krueger, Emporia, Kan., for Olpe State Bank.
Lloyd C. Swartz, Topeka, Kan., trustee.
ORDER
JAMES A. PUSATERI, Bankruptcy Judge.
The instant chapter 13 petition was filed May 13, 1982. On August 20, 1982 the Olpe State Bank (OSB) objected to confirmation of the debtors' plan stating in part:
6. To the extent that it is determined that the Olpe State Bank is unsecured, the Bank is entitled to a discount factor based upon a fifty-two week treasury bill rate, on the date the petition is filed.
On September 3, 1982 OSB filed a motion requesting:
. . . the contract rate of interest for that portion of the indebtedness determined to be secured and an appropriate discount factor based upon fifty-two (52) week treasury bill rate on the date that the Debtors filed the Chapter 13 Petition for that portion of the indebtedness determined unsecured.
OSB filed a claim in this proceeding on July 2, 1982 (claim number 5) and amended its claim on August 27, 1982. Both claims are in the amount of $249,800.00. OSB filed the claim as secured, asserting that the security was based in part on a real estate mortgage executed on April 30, 1982, but not recorded until May 30, 1982, after the chapter 13 petition was filed. On January 19, 1983, the trustee filed a complaint to set aside the filing and the mortgage under his avoiding powers of 11 U.S.C. § 544(a)(3). That complaint is set for trial on March 1, 1983.
There is some confusion on the part of OSB as to the rates of interest it will receive if the debtors' chapter 13 plan is confirmed.
The parties appear to assume that the trustee's avoidance complaint will be successful and the Court will assume for the purposes of this opinion that OSB's mortgage will be set aside.
Without a valid mortgage, OSB's claim will be partially secured to personal property, and partially an unsecured claim. There is a dispute concerning the amount of the secured portion of the claim, but it has been *736 narrowed down to $170,060.00-$177,627.28, and an unsecured claim of $72,172.72-$79,740.00.
The debts owing to OSB are represented by two notes. The first in the amount of $145,800.00 plus interest, is secured by Livestock, Grain, Feed, Farm Machinery, Equipment, and "assignment of Life Insurance Policies." The second in the amount of $104,000.00 plus interest is secured by the real estate mortgage of April 30, 1982 that the Court will assume is to be successfully avoided.
Each note states it "will secure" other indebtedness. Thus, each is cross-collateralized and there is no unilateral right to "elect" cross-collateralization by OSB. OSB has one claim with a total debt of $249,800.00, and total security worth between $170,060.00 and $177,627.28.
The debtors have nonexempt property of a value in excess of all the claims against them, and thus in a chapter 7 proceeding the unsecured creditors would receive 100% of their claims.
The issue before the Court is what discount rate must be applied to OSB's secured and unsecured claim.
The Court begins with the proposition that unmatured interest such as the future interest provided for in a promissory note is not an allowed claim in bankruptcy. 11 U.S.C. § 502(b)(2). A creditor's claim consists of the principal it is owed as of the date the bankruptcy petition is filed plus any matured interest on the principal, that is, interest that accrued up to the date the bankruptcy petition was filed.
The only creditor entitled to have unmatured contract interest included in its claim is an oversecured creditor under 11 U.S.C. § 506(b).
In chapter 13 cases, the Court has ruled that a discount rate based on an annual interest rate must be applied to secured claims to give the secured creditor the "present value" of its claim pursuant to 11 U.S.C. § 1325(a)(5).
In In Re Jewell, 25 B.R. 44 (Bkrtcy. D.Kan.1982), this Court held that the discount rate in chapter 13 cases would be based on the interest rate established by the sale of 52 week treasury bills. Prior to the Jewell decision, secured creditors received a discount rate based on a 10% interest rate. The Court stated in Jewell:
. . . this ruling applies only to the objecting creditors in the instant bankruptcy cases, and to creditors of debtors filing petitions on or after September 2, 1982.
Id. at 46. The Court intended that those creditors who had objected to the 10% rate, claiming it was an improper rate, prior to the date the Jewell decision was rendered, would be governed by the Jewell decision and would receive a Jewell-based discount rate. All other secured creditors in cases filed before September 2, 1982 would receive the standard rate of 10%.
Both before and after the Jewell decision, this Court has allowed secured creditors their contract rate of interest as a discount rate to the extent the secured creditor is oversecured and would be entitled to contract interest under 11 U.S.C. § 506(b). Thus, where a creditor is owed $100,000, the contract calls for 18% A.P.R. interest, and the debt is secured by property valued at $125,000.00, the creditor in the chapter 13 case would be paid its claim of $100,000.00, with the contract rate of interest as a discount rate, not on the entire claim, but only to the extent its claim is oversecured.
In the instant case, OSB is not oversecured. Its claim is $249,800.00 and the property securing its claim is worth considerably less. Thus, OSB will not receive its contract rate of interest on any portion of its claim.
This case was filed before September 2, 1982. Furthermore, OSB did not request a discount rate based on a T-bill rate of interest and did not object to the discount rate of 10% claiming it was an improper rate prior to August 17, 1982, the date the Jewell decision was rendered. Thus, OSB will receive a 10% discount rate on its secured claims based on this Court's holding in In Re Jewell.
*737 OSB has also requested a discount rate on the unsecured portion of its claim. Payments to satisfy unsecured claims are governed by § 1325(a)(4) which provides that unsecured claims are paid,
the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date;
11 U.S.C. § 1325(a)(4). The phrase "the value as of the effective date of the plan" appears in both § 1325(a)(4) and § 1325(a)(5)(B)(ii). This is the language requiring that creditors receive the present value of a stream of payments. Under § 1325(a)(4) the debtor must pay unsecured creditors the value of what they would receive in a chapter 7 case, and this amount paid in chapter 13 must receive a discount rate to satisfy the present value concept of § 1325(a)(4).
Therefore, the Court holds that in a chapter 13 case, unsecured creditors will receive a discount rate on the portion of their claims that would be satisfied in a chapter 7 liquidation proceeding. In a chapter 7 proceeding unsecured non-priority creditors filing timely claims generally have equal priority to payments, 11 U.S.C. § 726(a)(2), and share pro rata in the distribution. 11 U.S.C. § 726(b). Thus, in the chapter 13 proceeding, the unsecured creditor's pro rata share that it would receive in a chapter 7 liquidation must also receive a discount rate.
In this case, all unsecured creditors would receive a 100% distribution, satisfying their unsecured claims in full. Therefore, in satisfaction of its unsecured claim, OSB will receive a discount rate based on an interest rate. The Court holds that those unsecured creditors who are entitled to a discount rate will receive the same discount rate as secured creditors receive under In Re Jewell. In the instant case, OSB's secured claim is subject to a discount rate based on a 10% interest rate under Jewell, and thus OSB's unsecured claim is likewise subject to a discount rate based on a 10% interest rate. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536951/ | 27 B.R. 853 (1983)
In re ZEUS AMERICA MANAGEMENT CONSULTANTS, INC., Debtor.
No. 82-00578.
United States Bankruptcy Court, N.D. Ohio, W.D.
February 24, 1983.
David A. Zeitzheim, Oak Harbor, Ohio, trustee in bankruptcy.
*854 WALTER J. KRASNIEWSKI, Bankruptcy Judge.
ORDER
This matter is before the Court upon the motion of the Trustee in Bankruptcy, David A. Zeitzheim, for an order allowing him to travel to Florida to investigate possible interests of the Debtor's estate in a movie production company, or alternatively, to hire a private investigator for such purpose. The former request is denied both as unnecessary and improper. The latter is denied due to its insufficiency.
First, considering the Trustee's motion for an order permitting him to travel to Florida for the purpose of investigating possible estate assets, it should be noted that collecting estate assets and investigating the financial affairs of the debtor are undeniably duties of the trustee under 11 U.S.C. § 704. Indeed, failure of the trustee to properly perform his duties may be grounds for his removal from the panel of trustees, or result in personal liability to the estate and its creditors for failure to act. See, Tiller, Personal Liability of Trustees and Receivers in Bankruptcy. 53 Am. Bankr.L.J. 75 (Winter 1979). The trustee should understand these duties and, consistent with the changed role of the bankruptcy judge under the Bankruptcy Code, act independently and without court supervision in performing these duties. Under the Code the judge is no longer a supervisor and advisor for trustees, but an impartial arbitrator of disputes which are properly brought before him.
Also, implicit in the Trustee's request for permission to travel to Florida is the attempt to gain prior court approval and review of the compensability of the Trustee's time and expenses for such venture. The determination of the compensability of such a venture should, however, under 11 U.S.C. § 330, only be undertaken after the completion of such services, after notice to all parties in interest and a hearing, and then only for reasonable compensation for actual, necessary services and expenses.
In sum, the Trustee's motion for an order to permit him to travel to Florida is improper and unnecessary under the Bankruptcy Code, both since it attempts to involve the judge in trustee supervision and case administration, and it seeks prior determination of the compensability of the Trustee's time and expenses. It is, therefore, denied.
Alternatively, the Trustee seeks court approval to hire a private investigator to conduct an investigation of the Debtor's interests in Florida. In contrast to the previous request for permission to travel to Florida, hiring a professional person under 11 U.S.C. § 327 does require prior court approval which should be given if the Court finds that it is reasonably necessary to the administration of the estate. See 2 Collier on Bankruptcy ¶ 327.01 at 327-3 (15th ed. 1982).
The present motion is, however, deficient under §§ 327 and 328 of the Bankruptcy Code in the following respects:
1. Neither an individual nor his qualifications are specified;
2. There is no statement relating to whether the individual holds or represents an interest adverse to the estate;
3. There is no statement as to whether or not the individual is a disinterested person as defined in § 101(13) of the Code; and
4. There has been no statement relating to the proposed terms and conditions of his employment (including total amounts to be spent).
In conclusion, the Trustee's motion (more properly application) to employ an investigator is insufficient in detail to permit court approval. If resubmitted in proper form it will again be considered by the Court.
For the foregoing reasons, it is hereby,
ORDERED that the Trustee's motion for an order to permit him to travel to Florida and to have an investigator appointed be, and hereby is denied. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919437/ | 660 So. 2d 819 (1995)
STATE of Louisiana
v.
Charles E. MARSHALL.
Nos. 81-KA-3115, 94-KH-0461.
Supreme Court of Louisiana.
September 5, 1995.
*821 Elizabeth W. Cole, New Orleans, Charles Marshall, Pro Se, Michael Ward, New Orleans, for applicant.
Richard P. Ieyoub, Attorney General, Harry F. Connick, District Attorney, Mark D. Pethke, New Orleans, Karen E. Godail, Metairie, David L. Arena, New Orleans, for respondent.
WATSON, Justice.[1]
In July of 1981, an Orleans Parish jury found Charles E. Marshall guilty of armed robbery and attempted first degree murder. The trial judge denied a motion for new trial and sentenced Marshall to consecutive terms of 99 years imprisonment for armed robbery and 50 years imprisonment for attempted first degree murder. This is the direct appeal *822 of Marshall's 1981 convictions. La. Const. art. 5, § 5(E).
Although Marshall's appeal was originally placed on the Court's 1983 docket, action on a motion for evidentiary hearing and motion for new trial disrupted the appeal schedule. The district court held an evidentiary hearing ordered by this Court, but failed to rule on the motion for new trial. In 1993, when Marshall appealed the denial of a motion to correct an illegal sentence, his appeal's limbo status was revealed.
FACTS AND PROCEDURAL HISTORY
On August 8, 1980, at approximately 10:30 p.m., two men entered the Fast Pik Food Store in New Orleans, Louisiana. One walked to the back of the store while the other entered the check-out line. When the second man reached the check-out counter, he pulled a waistband gun and told the cashier, Kenneth Duchmann, "this is a holdup" and "to stick the money in the bag." Duchmann told the gunman not to shoot and he would give him the money. Although Duchmann had a gun underneath the counter, he reached for a bag instead. When Duchmann did so, the gunman fired, striking Duchmann once in the head. After the shot, the other man jumped over the counter, took the money from the register and placed it in a bag. The two men then left the store and got into a vehicle driven by a third man.
Police reports placed under seal until this appeal show that Weldon Hills confessed to a number of armed robberies, including the Fast Pik robbery, and named Charles Marshall as an accomplice. When Marshall was identified by other robbery victims, police obtained a search warrant and an arrest warrant. Marshall was arrested April 8, 1981, and made an oral confession to the Fast Pik robbery: Marshall said he shot the cashier in the head when the gun "went off." Marshall was charged with armed robbery and attempted first degree murder. Hills was later adjudicated incompetent to stand trial and was committed to a forensic facility.
On June 2, 1981, Marshall's defense counsel filed a discovery motion seeking all exculpatory evidence discovered in the investigation. In a Bill of Particulars, the defense questioned "[w]as the defendant identified as a perpetrator of the crime, and, if so, when, where, and under what circumstances was the defendant identified, and by whom?"
The state answered it had no exculpatory evidence and that Marshall had been identified in a photo line-up April 6, 1981, by Duchmann. The state disclosed that Marshall had also been identified in photo line-ups on July 13, 1981, by Duchmann's nephew, Donald Vinson, who worked as a stockboy at the Fast Pik, and on July 14, 1981, by Rocklyn Rose, who had been working behind the counter with Duchmann on the night of the robbery.
On June 5, 1981, the defense filed a supplemental motion for discovery which specifically requested information as to: (1) the names of any other persons arrested in connection with the case; (2) the dates of these arrests; (3) whether any of these persons made statements which would exculpate Marshall; (4) whether any other person had been charged with this crime; (5) whether any one admitted to having committed this crime; and (6) whether any person had been identified by the victim as the perpetrator of this crime.
The state answered that Weldon Hills had been arrested on April 2, 1981; no one had made exculpatory statements; the state had no exculpatory evidence; no one else had been charged with the crime; only Marshall and Hills had confessed to committing the crime; and Duchmann had not identified anyone else as the perpetrator of the crime.
At a pretrial suppression hearing, an officer disclosed that Duchmann had been shown an earlier photo line-up in August of 1980 and had made an identification from that set of photos. When the court ordered the state to amend its answers to discovery, the state informed the court "[w]e will be happy to leave this identification out," signifying it would not rely on Duchmann's identification of Marshall at trial.
At trial held July 21, 1981, Duchmann related the events of the robbery. Duchmann did not identify Marshall in court as the gunman. On cross-examination, Duchmann admitted he could not identify his assailant. Regarding previous identifications, Duchmann *823 testified that he had twice been shown pictures, but was unable to make an identification.
Duchmann's nephew, Donald Vinson, a 13-year-old stockboy working in the Fast Pik on the night of the robbery, testified that he saw the gunman from 3-5 feet away in pretty bright lighting. Vinson said he had positively identified Marshall's picture in a photo line-up in July of 1981 and he identified Marshall in-court as the gunman.
Rocklyn Rose, who was also working in the Fast Pik and was standing next to Duchmann when Duchmann was shot, testified he saw the gunman from 2-4 feet away in very good lighting. He also identified Marshall as the gunman in a July 1981 photo line-up and in-court.
Police officers testified that Marshall confessed to the crime, indicating that "the gun went off". The confession was not recorded. A surveillance videotape, which recorded the robbery from a camera mounted over the check-counter, was played for the jury. Duchmann, Vinson and Rose testified the gunman had worn a baseball cap; Duchmann testified the gunman also had on sunglasses but took them off during the robbery. The police photographer testified regarding his unsuccessful attempt to create still photographs from the videotape.
Marshall admitted making the statement to police but denied committing the crime. He stated he told the officers what he had read in the newspaper concerning the robbery. He maintained he was not the videotaped gunman. Marshall testified he confessed because the police had threatened to charge his girlfriend and her sister with the crime. Marshall's girlfriend, Ruby Perkins, and her sister, Joanne Patterson, corroborated that police officers had threatened them with arrest.
The jury returned unanimous verdicts on both counts. After conviction but before sentencing, Marshall's counsel filed a motion for new trial on August 4, 1981. The motion asserted that the state had withheld exculpatory evidence; specifically, that prior to Marshall's arrest, another person was arrested and identified by the victim as the perpetrator of the crime. The district court denied the motion for new trial August 5, 1981. The next day, Marshall was sentenced to consecutive terms of 99 years for the armed robbery conviction and 50 years for the attempted first degree murder conviction, to be served at hard labor without benefit of parole, probation, or suspension of sentence.
In December of 1981, Marshall filed a notice of intent to appeal, a motion to quash, and an assignment of errors. This Court assigned the appeal number 81-KA-3115. Briefs were filed and the appeal was placed on the regular docket with argument set for February 25, 1983.
On July 20, 1982, Marshall filed in this Court a motion for a new trial and a motion to remand for an evidentiary hearing. In his motion, Marshall argued that another individual, James Dorsey, arrested a few days after the crime, had confessed; that Dorsey had named an accomplice, other than Marshall; and that the District Attorney was aware of this information through the New Orleans Police Department.
On September 3, 1982, this Court granted Marshall's motion with the following order:
Granted. The matter is remanded for a hearing on a motion for a new trial based on newly discovered evidence.
This Court did not issue a ruling directly responsive to Marshall's motion for new trial.
The district court held an evidentiary hearing January 26, 1983, and ruled that the prosecution's files contained no exculpatory material. The district court denied Marshall's motion to have the state produce the police report. The district court ordered evidence, including police reports, to be sealed and made part of the record for appeal. Perhaps considering that it had already ruled on a motion for new trial on August 5, 1981, the district court did not explicitly rule on Marshall's motion for new trial which had been filed in this Court in July, 1982.
Based on the district court's ruling on the lack of exculpatory evidence in the prosecution's files and its refusal to order them produced, Marshall sought writs. This Court removed the appeal from its docket and denied *824 Marshall's application with the following language:
Denied. In the event a new trial is not granted, relator may reurge these arguments on appeal. The sealed evidence shall be preserved for this purpose.
State v. Marshall, 429 So. 2d 172 (La.1983). The language of this order indicates the Court believed that the district court still might rule on the motion for new trial; if not, Marshall would be entitled to appellate review.
Due to an evident lack of counsel diligence, Marshall did not seek appellate review of his conviction. Instead, Marshall filed a pro se motion for production of documents and a post-conviction application in district court. Marshall did not seek review after the district court denied his requests. Finally, in April of 1993, Marshall filed a motion to correct an illegal sentence in district court and sought review of its denial.
This Court assigned the writ number 94-KH-0461. Upon realizing the procedural posture of the case, the Court ordered the district court to appoint counsel and revived Marshall's appeal.[2]State v. Marshall, 94-0461 (La. 7/1/94), 639 So. 2d 1180. Appointed counsel's motion to unseal the evidence in the district court record was granted. Counsel raises three assignments of error: (1) the state withheld exculpatory evidence; (2) Marshall's convictions and sentences violate double jeopardy prohibitions; and (3) the trial judge imposed constitutionally excessive sentences.
Marshall's first assignment of error is based on appointed counsel's review of the sealed evidence unavailable to Marshall's trial counsel. The sealed record reveals that the state failed to disclose exculpatory evidence and falsely responded to pretrial discovery requests.
According to a supplemental police report dated August 13, 1980, police received an anonymous tip August 11, 1980, that James Dorsey and Timothy Jackson had robbed a Church's Fried Chicken restaurant and that Dorsey drove a 1968 Pontiac Bonneville, black over yellow or gold. Realizing that the vehicle was the same as the Fast Pik robbery getaway vehicle, police obtained pictures of Dorsey and Jackson and created a photo line-up. Duchmann identified James Dorsey as one of the perpetrators of the Fast Pik robbery. Duchmann stated: "I'LL NEVER FORGET THAT FACE UNTIL I DIE."
A warrant was issued for Dorsey's arrest August 12, 1980. Dorsey was arrested and confessed to the Fast Pik robbery, naming Larry Holmes as the gunman and a third man as an accomplice. According to Dorsey, both he and Holmes stood in the check-out line. Holmes produced a gun and demanded money when he reached the counter. Dorsey stated Holmes and the cashier argued and Holmes then shot the cashier. When the cashier fell to the floor, Dorsey jumped over the counter and took the money. Dorsey and Holmes then ran to his car.
The police report completed the night of the robbery describes the gunman as 5'8", 200 lbs. A supplemental police report describes the wanted subject, Larry Holmes, as 5'8" to 5'10", 200 lbs.
A physical line-up for the Fast Pik robbery was held August 27, 1980, with James Dorsey and Larry Green. (It is unknown if this is an alias for Larry Holmes; the reported physical characteristics are dissimilar. Green is described as 5'5" and 137 lbs.) Duchmann identified two fill-ins as the robbery perpetrators. Two witnesses who did not testify at trial both identified Larry Green. Neither Vinson nor Rose identified Dorsey as a robbery participant.
The police report completed the night of the robbery indicated that two witnesses saw *825 the getaway car, a 1969 gold Pontiac Bonneville, license number 574B007[3]. Neither of these witnesses testified at trial. Police determined that the license plate was stolen. Dorsey's car, impounded at the time of his arrest, was a 1968 black over gold Pontiac Bonneville, license number 204B179. When asked by police why the license plate on his car did not match the getaway car, Dorsey explained another man had changed the license plate in order to perpetrate a robbery.
On August 29, 1980, the District Attorney's office refused charges against Dorsey. The screening action form gave no reasons for the refusal.
The state concedes this evidence should have been disclosed to the defense. State's Brief, p. 5. The state argues, however, that the non-disclosed evidence is not material enough to warrant a new trial.
LAW AND DISCUSSION
Brady Error
The state's failure to disclose material evidence favorable to a criminal defendant implicates more than the defendant's discovery rights; the prosecutor has an affirmative duty to disclose such evidence under the Fourteenth Amendment's Due Process Clause. Failure to reveal this evidence implicates the defendant's right to a fair trial. U.S. v. Agurs, 427 U.S. 97, 96 S. Ct. 2392, 49 L. Ed. 2d 342 (1976); State v. Ortiz, 567 So. 2d 81 (La.1990); State v. Falkins, 356 So. 2d 415 (La.1978), cert. denied, 439 U.S. 865, 99 S. Ct. 190, 58 L. Ed. 2d 175 (1978).
Brady v. Maryland, 373 U.S. 83, 87, 83 S. Ct. 1194, 1196-1197, 10 L. Ed. 2d 215 (1963) held "the suppression by the prosecution of evidence favorable to an accused upon request violates due process where the evidence is material either to guilt or to punishment, irrespective of the good faith or bad faith of the prosecution." See State v. Knapper, 579 So. 2d 956 (La.1991); State v. Rosiere, 488 So. 2d 965 (La.1986). Agurs made clear that, even in the absence of a request, the government is not free from all obligations to disclose and distinguished three situations in which a Brady claim arises: (1) where undisclosed evidence demonstrates that the prosecution's case included perjured testimony that the prosecution knew or should have known was perjured; (2) where the prosecution fails to respond to a defense request for specific exculpatory evidence; and (3) where the prosecution fails to disclose exculpatory evidence requested in a general manner, or not requested at all. Agurs, 427 U.S. at 103-107, 96 S. Ct. at 2397-2399.
U.S. v. Bagley, 473 U.S. 667, 676, 105 S. Ct. 3375, 3380, 87 L. Ed. 2d 481 (1985), held there was no distinction between exculpatory evidence and impeachment evidence under Brady. See State v. Ortiz, supra. Bagley abandoned the second and third distinctions of Agurs and established that, regardless of whether a request is made, "evidence is material 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., 473 U.S. at 682, 105 S. Ct. at 3383. A reasonable probability was defined as "a probability sufficient to undermine confidence in the outcome." Id., see also Knapper, 579 So.2d at 959; Rosiere, 488 So.2d at 970-971.
Kyles v. Whitley, ___ U.S. ___, 115 S. Ct. 1555, 131 L. Ed. 2d 490 (1995), emphasizes four aspects of materiality under Bagley. First, "a showing of materiality does not require demonstration by a preponderance that disclosure of the suppressed evidence would have resulted ultimately in the defendant's acquittal (whether based on the presence of reasonable doubt or acceptance of an explanation for the crime that does not inculpate the defendant)." Id., ___ U.S. at ___, 115 S.Ct. at 1566. Kyles explained that the meaning of "reasonable probability" of a different result "is not whether the defendant would more likely than not have received a different verdict with the evidence, but whether in its absence he received a fair trial, understood as a trial resulting in a verdict worthy of confidence." Id. (emphasis supplied). A "reasonable probability" of a different result is shown when the state's *826 suppression of evidence "undermines confidence in the outcome of the trial." Id.
Second, materiality is not a sufficiency of the evidence test. "A defendant need not demonstrate that after discounting the inculpatory evidence in light of the undisclosed evidence, there would not have been enough left to convict. The possibility of an acquittal on a criminal charge does not imply an insufficient evidentiary basis to convict." Id. After all, a Brady violation is shown, not by "demonstrating that some of the inculpatory evidence should have been excluded, but by showing that the favorable evidence could reasonably be taken to put the whole case in such a different light as to undermine confidence in the verdict." Id.
Third, "once a reviewing court applying Bagley has found constitutional error there is no need for further harmless-error review." Id. Kyles maintains that even if a harmless-error analysis were applicable, a Bagley error could not be treated as harmless since "a reasonable probability that, had the evidence been disclosed to the defense, the result of the proceeding would have been different, ... necessarily entails the conclusion that the suppression must have had substantial and injurious effect or influence in determining the jury's verdict." Id. (citations omitted).
Finally, materiality must be considered "in terms of suppressed evidence considered collectively, not item-by-item." Id. at ___, 115 S.Ct. at 1567. It is not enough for reviewing courts to consider the impact of each item of exculpatory evidence standing alone; the cumulative effect of the suppressed evidence must be considered. The Constitution does not demand that prosecutors utilize open-file discovery in criminal cases and not every failure to disclose helpful evidence constitutes a constitutional violation. While this leaves prosecutors with discretion, the United States Supreme Court cautions that with this discretion comes a corresponding burden. Id.
On the one side, showing that the prosecution knew of an item of favorable evidence unknown to the defense does not amount to a Brady violation, without more. But the prosecution, which alone can know what is undisclosed, must be assigned the consequent responsibility to gauge the likely net effect of all such evidence and make disclosure when the point of "reasonable probability" is reached. Id.
The United States Supreme Court held that a prosecutor has a duty to learn of any favorable evidence known to anyone acting on the government's behalf, including the police. But whether or not this obligation is met, the prosecutor is still responsible for failing to disclose "known, favorable evidence rising to a material level of importance." Id., at ___ _ ___, 115 S. Ct. at 1567-1568.
The issue is whether the exculpatory evidence is material under the Brady-Bagley-Kyles line of cases. Evidence is material only if it is reasonably probable that the result of the proceeding would have been different had the evidence been disclosed to the defense. A reasonable probability is one which is sufficient to undermine confidence in the outcome. Bagley, 473 U.S. at 682, 105 S. Ct. at 3383. This Court must provide a cumulative evaluation of the suppressed evidence, keeping in mind that Marshall does not have to show that, with the addition of the suppressed evidence, his trial would have resulted in acquittal or that there would be an insufficiency of the evidence to support a conviction. Marshall need only show that "disclosure of the suppressed evidence to competent counsel would have made a different result reasonably probable." Kyles, ___ U.S. at ___, 115 S.Ct. at 1569.
Marshall's defense was that he was not the man who robbed the Fast Pik and shot Kenneth Duchmann; moreover, his confession was coerced to protect his girlfriend and her sister. Thus, a primary issue for the jury was the credibility of the eyewitness testimony. The suppressed evidence would have shown that Duchmann had made a strong identification of another man, Dorsey, from a photo line-up just days after the robbery and shooting. The evidence also would have shown, however, that Duchmann was unable to pick Dorsey out of a physical line-up, and instead picked two fill-ins. The only conclusion to be drawn from this information is that Duchmann was unable to identify *827 the man who robbed and shot him. Although Duchmann had identified Marshall in a separate photo line-up, that information was not presented to the jury. Instead, Duchmann admitted at trial that he was unable to make an identification. This is consistent with the information the suppressed evidence would have imparted. The suppressed evidence did not impeach eyewitness testimony. Compare Kyles, ___ U.S. at ___, 115 S.Ct. at 1569-1571.
The facts that Dorsey confessed to the crime and that the getaway vehicle was linked to him are exculpatory for Marshall only to a point. Dorsey's confession that he took the money did not preclude Marshall's participation as the gunman. The jury was presented with the information that Marshall and another man entered the Fast Pik, that Marshall told Duchmann to give him money, that Marshall fired at Duchmann, and that another man jumped over the counter and took the money. Marshall and this other man ran out of the store where, presumably, another person waited in the getaway vehicle. This evidence did not create a reasonable doubt about Marshall's criminal participation. State v. Square, 433 So. 2d 104, 108 (La.1983).
In addition, the suppressed evidence shows the state did not have a strong case against Dorsey. Despite Duchmann's strong photo identification of Dorsey, Duchmann was unable to pick Dorsey out of a physical line-up. Dorsey's confession, which included an argument between the cashier and the gunman and the fact that the gunman and his accomplice stood together, differed from the facts of the robbery and shooting related by every other person, including Marshall. The suppressed evidence shows Dorsey was not identified as a robbery participant by either eyewitness who was in the store during the robbery nor by any of the eyewitnesses standing outside who did not testify at trial.
The fact that Dorsey named another person, not Marshall, as the shooter is obviously exculpatory evidence. It fails to constitute material evidence in this case, however, because confidence in the outcome of trial is not undermined by its disclosure. Both Vinson and Rose identified Marshall as the shooter after seeing him from a few feet away during the robbery and shooting. Marshall confessed to the crime. A videotape of the robbery and shooting showing the shooter was played for the jury.[4] It is not reasonably probable that the result of the proceeding would have been different had evidence that Dorsey named another as the shooter been disclosed to the defense. This conclusion remains even after a cumulative review of the suppressed evidence. Marshall is not entitled to a new trial on this ground.
Marshall also claims entitlement to a new trial because the suppressed evidence shows the prosecution relied on false or perjured testimony at trial. Agurs. Rudimentary principles of justice are offended when a prosecutor deceives a court by knowingly presenting false evidence. Justice is similarly offended when the prosecutor, although not soliciting false evidence, allows it to go uncorrected. Giglio v. U.S., 405 U.S. 150, 153, 92 S. Ct. 763, 766, 31 L. Ed. 2d 104 (1972). "A conviction obtained by the knowing use of perjured testimony is fundamentally unfair, and must be set aside if there is any reasonable likelihood that the false testimony could have affected the judgment of the jury." Agurs, 427 U.S. at 103, 96 S. Ct. at 2397. A lower standard of materiality exists for these violations because they corrupt the truth-seeking function of the trial process. Id., 427 U.S. at 104, 96 S. Ct. at 2397; see Kirkpatrick v. Whitley, 992 F.2d 491 (5th Cir.1993).
At trial, Duchmann testified regarding prior identifications as follows:
Q. When did you first make an identification of the person who shot you?
A. I was shown pictures twice, I could not exactly say yes or no.
Q. You were shown pictures twice?
A. Yes.
Q. When was this?
A. I can't remember exactly dates, but I know after I got out of the hospital about three days later they showed me *828 pictures and then another time in the District Attorney's Office.
Q. The first time you were shown pictures about three days after you were shot, did you make an identification at this time?
A. I can't say yes or no because I was not positive.
Q. Did you make an identification of someone at that time?
A. The first time?
Q. Yes.
A. Yes sir. No.
Q. You did not make an identification the first time?
A. No.
Q. This was three days after you were shot? And you made no identification at that time?
A. No.
Q. Did you have another occasion to try and identify someone?
A. Yes.
Q. Where was that?
A. I don't know if it was the Detectives or the District Attorney's Office.
Q. When was that, sir?
A. June or July.
Q. At that time did you make an identification?
A. No.
Q. You did not make one at that time either?
A. No.
Tr. 44-46.
In fact, the suppressed police reports show that Duchmann made a positive identification of James Dorsey in a photographic line-up three days after the robbery and shooting. He also made two other identifications. He identified two fill-ins at a physical line-up August 27, 1980, and he picked Marshall's photo at a photo line-up April 6, 1981. When Duchmann testified falsely at trial, the prosecutor remained silent.
The effect of this information has been discussed under the heavier burden of Bagley materiality. The false testimony hid the fact that Duchmann made several identifications of different persons. The appropriate conclusion is that Duchmann could not identify his assailant. Duchmann subsequently admitted at trial that he was unable to make an identification. Thus, there is no reasonable likelihood that the false testimony affected the jury's judgment. Marshall is not entitled to a new trial on this ground.
Double Jeopardy
Both the United States and Louisiana Constitutions protect a defendant from double jeopardy, which includes multiple punishments for the same offense. U.S. Const. amend. V; La. Const. art. I, § 15; State v. Coody, 448 So. 2d 100 (La.1984). Marshall was convicted of attempted first degree murder in violation of LSA-R.S. 14:27 and 14:30 with armed robbery as the underlying felony and of armed robbery in violation of LSA-R.S. 14:64. The trial court imposed the maximum sentence allowable for each crime, 50 years for attempted first degree murder and 99 years for armed robbery. The court ordered the sentences to be served consecutively without the benefit of probation, parole or suspension of sentence.
The state concedes the prohibition against double jeopardy does not permit Marshall to be punished for both attempted first degree murder during an armed robbery and armed robbery. State's Brief, p. 7; see State ex rel. Adams v. Butler, 558 So. 2d 552 (La.1990); State v. Smith, 600 So. 2d 919 (La.App. 4 Cir.1992), writ denied 625 So. 2d 1031 (La. 1993); State v. Jackson, 548 So. 2d 57 (La. App. 3 Cir.1989).
Where multiple punishment has been erroneously imposed, this Court has vacated the conviction and sentence of the less severely punishable offense and affirmed the conviction and sentence of the more severely punishable offense. See State ex rel. Adams v. Butler, 558 So. 2d 552 (La.1990); State v. Doughty, 379 So. 2d 1088 (La.1980).
Although in some cases the Court has vacated the sentences of both convictions and remanded for resentencing in order to ensure that the original sentencing scheme will be maintained, see Adams; State v. Dubaz, 468 So. 2d 554 (La.1985), that is not *829 necessary in this case. Marshall received the maximum sentence for both convictions; it is clear the trial judge did not structure a scheme of interdependent sentences. Accordingly, the conviction and sentence for attempted first degree murder will be vacated; the conviction and sentence for armed robbery are affirmed.
Excessive Sentence
Marshall complains that the district court imposed unconstitutionally excessive sentences by sentencing him to the maximum allowable for each offense to be served consecutively. Since the Court has already found that Marshall's conviction and sentence for attempted first degree murder must be vacated, the only remaining issue is whether Marshall's 99 year sentence for armed robbery is unconstitutionally excessive.
The Louisiana Constitution prohibits the imposition of excessive punishment. La. Const. art. I, § 20. The statutorily prescribed penalty for armed robbery is imprisonment at hard labor for not less than five years and for not more than 99 years, without benefit of parole, probation or suspension of sentence. LSA-R.S. 14:64. A sentence may violate a defendant's constitutional right against excessive punishment even if it is within the statutory limit. State v. Sepulvado, 367 So. 2d 762 (La.1979). To determine whether a particular sentence is excessive, this Court must decide whether it is so disproportionate to the severity of the crime as to shock the senses of justice. State v. Bonanno, 384 So. 2d 355 (La.1980).
At the time of Marshall's conviction in 1981, LSA-C.Cr.P. art. 894.1 provided that a sentence of imprisonment should be imposed if a defendant had been convicted of a felony if there was undue risk that another crime would be committed during a suspended sentence or probation, if the defendant was in need of correctional treatment or a custodial environment, or if a lesser sentence would deprecate the seriousness of the defendant's crime. LSA-C.Cr.P. art. 894.1(A). While the district court had great discretion in imposing sentence, the statute listed factors to consider in determining whether probation or a suspended sentence was appropriate. LSA-C.Cr.P. art. 894.1(B). Finally, the statute directed that a district court "state for the record the considerations taken into account and the factual basis therefor in imposing sentence." LSA-C.Cr.P. art. 894.1(C).
This Court must ensure that Marshall's sentence was individualized and tailored to him and the particular offense he committed. State v. Lathers, 414 So. 2d 678 (La.1982). Although not every aggravating and mitigating circumstance needs to be articulated, the record must show the sentencing court adequately considered the sentencing guidelines. Id.
The sentencing transcript shows the district court considered Marshall's age and prior record. Marshall had two prior convictions for aggravated battery and simple burglary. The district court specifically mentioned review of the videotape and the circumstance that the victim was shot as the factual basis for the sentence. While a more detailed recitation would have been more helpful, the record provides the Court with an adequate basis for review. See State v. Douglas, 389 So. 2d 1263 (La.1980). The videotape would have shown that Marshall placed several persons' lives in jeopardy during the armed robbery and shot Duchmann in the head. That Duchmann lived is fortuitous and not, as Marshall argues, a mitigating circumstance.
Comparison of this crime with other armed robberies shows that a 99 year sentence for an armed robbery where the victim is seriously wounded is not excessive or grossly disproportionate to the seriousness of the crime. See Douglas, 389 So.2d at 1267-1268; State v. Grillette, 588 So. 2d 1338 (La.App. 2 Cir.1991); State v. Collins, 557 So. 2d 269 (La.App. 4 Cir.1990); State v. Wright, 535 So. 2d 765 (La.App. 2 Cir.1988); State v. Clark, 499 So. 2d 332 (La.App. 4 Cir.1986); State v. Weeks, 449 So. 2d 1158 (La.App. 2 Cir.1984); State v. Wilson, 452 So. 2d 773 (La.App. 4 Cir.1984). This assignment of error has no merit.
*830 CONCLUSION
While the state suppressed exculpatory evidence it should have disclosed to Marshall prior to trial, a cumulative review of the suppressed evidence shows it did not constitute material evidence which would necessitate a new trial. Marshall received a sentence which violates double jeopardy principles. Therefore, the conviction and sentence for attempted first degree murder are vacated, the conviction and sentence for armed robbery are affirmed. The 99-year sentence for armed robbery is not excessive under the facts of this case.
VACATED IN PART; AFFIRMED IN PART.
LEMMON, J., not on panel. Rule IV, § 3.
NOTES
[1] Judge Morris A. Lottinger, Jr., Court of Appeal, First Circuit, participating as Associate Justice Pro Tempore, in place of Associate Justice James L. Dennis.
[2] The Court granted Marshall's motion with the following language:
Granted. Relator's application is granted for the sole purpose of consolidating it with his pending appeal in No. 81-KA-3115. The district court is ordered to appoint counsel for relator for purposes of reviving that appeal. The district court shall provide this court with notice of the appointment of counsel at which time new briefing notices will issue for purposes of providing counsel the opportunity to supplement the briefs previously filed. The court will then redocket the case for argument and decision according to its customary procedures.
[3] Although an evidence technician's report notes that the vehicle was gray, all other police reports and narratives describe the Bonneville as gold, or black over gold or yellow.
[4] The videotape is no longer in the record. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919443/ | 660 So. 2d 588 (1995)
The CITY OF MONTGOMERY and the City Council of the City of Montgomery
v.
The WATER WORKS AND SANITARY SEWER BOARD OF the CITY OF MONTGOMERY (Two Cases).
Carl EDWARDS and Mildred Duncan Ralph
v.
The CITY OF MONTGOMERY and the City Council of the City of Montgomery.
The WATER WORKS AND SANITARY SEWER BOARD OF the CITY OF MONTGOMERY
v.
The CITY OF MONTGOMERY and the City Council of the City of Montgomery.
1930314, 1930419, 1930472, 1930528.
Supreme Court of Alabama.
March 31, 1995.
*589 Donald V. Watkins, P.C., Montgomery, Joe R. Whatley, Jr., and Sam H. Heldman, and Peter H. Burke, of Cooper, Mitch, Crawford, Kuykendall & Whatley, Birmingham, for appellants City of Montgomery and its city council.
Alvin T. Prestwood and Thomas B. Klinner of Capouano, Wampold, Prestwood & Sansone, P.A., Montgomery, for appellees/cross appellants Carl Edwards and Mildred Duncan Ralph.
Robert E. Sasser and Dorothy Wells Littleton, of Sasser & Littleton, P.C., Montgomery, *590 for appellee/cross appellant Water Works and Sanitary Sewer Board of the City of Montgomery.
On Application for Rehearing
MADDOX, Justice.
The opinion of December 16, 1994, is withdrawn and the following is substituted therefor.
On application for rehearing, the Water Works and Sanitary Sewer Board contends that when this Court wrote its original opinion it misunderstood the procedural posture of this case. The Board's primary argument in support of its application is that this Court was under the erroneous impression that the trial court declared Act No. 93-704, Ala. Acts 1993, unconstitutional. In order to clear up any confusion regarding this Court's understanding of the issues presented on appeal, we substitute this modified opinion, to address this question raised on the application for rehearing; we have also reviewed each of the other issues raised on the application for rehearing, and we are convinced that the application should be overruled.
The legal question presented by this appeal is whether a water and sewer board, created by a municipality as a public corporation, is a "municipal board, committee, or like body" within the meaning of Act No. 93-704, Ala.Acts 1993, an Act applicable to Class 3 municipalities which authorizes those municipalities to alter the membership of municipal boards, committees, or like bodies.[1]
The trial court, in a declaratory judgment action, held that Act No. 93-704 did not apply to the City of Montgomery, a Class 3 municipality, and further held that if the Act did apply, it would be unconstitutional because it would violate the provisions of Section 45 of the Constitution of Alabama 1901. We reverse and remand.
Act No. 93-704 was adopted by the Legislature in 1993, and provides that in Class 3 municipalities every "municipal board, committee, or like body" shall (unless directed otherwise by the municipal body) have a number of members on each board, committee or like body, equal to the number of members of the municipal governing body.[2]
The City of Montgomery is a Class 3 municipality. The Montgomery City Council, on July 20, 1993, enacted Ordinance No. 28-93 ("the Ordinance") to implement the provisions of the Act. There are nine members of the Montgomery City Council. The Ordinance provided in Section 1 that 17 boards, and all boards thereafter created, would have nine members, as specified in the Act. On July 21, 1993, the day after the Ordinance was adopted, the Water Works and Sanitary Sewer Board of the City of Montgomery (hereinafter "Water and Sewer Board"), filed a declaratory judgment action against the City of Montgomery and the City Council of the City of Montgomery (hereinafter "the City),[3] seeking: (1) a declaration that the Act had no application to the Water and Sewer Board and (2) an injunction prohibiting the City from appointing additional members to its board of directors. Carl Edwards, a resident citizen of Elmore County and a member and beneficial recipient of the Employees' Retirement System of the City of Montgomery, and Mildred Duncan Ralph, a resident of the City and County of Montgomery and a *591 taxpayer, filed a motion to intervene and a complaint of intervention, seeking declaratory and injunctive relief. The trial court granted their motion to intervene.
After holding a hearing and taking testimony, the trial court held that the phrase "municipal board, committee, or like body" did not include the Water and Sewer Board. The trial court further held that "[i]f this Court were to construe the Act so as to apply to the Water Board and the additional Alabama public corporations whose boards of directors are either elected or appointed by the Montgomery City Council, the Act would be rendered unconstitutional in that it would amend the pre-existing authorizing legislation for these public corporations without having identified these statutes in its text either by their number or by quoting from their language," and that "[s]uch a result would create a direct violation of Article IV, Section 45 of the Constitution of Alabama....." The trial judge permanently enjoined the City from taking any action to implement the provisions of the Act with regard to the following public corporations: (a) the Water and Sewer Board (the appellee here); (b) the Industrial Development Board; (c) the Montgomery Housing Authority; and (d) the Montgomery Airport Authority. The City appealed, contending that the trial court erred in declaring that the Act was not applicable to the City of Montgomery and that if it were held to be applicable to the City of Montgomery it would be unconstitutional. The Water and Sewer Board and the intervenors, Carl Edwards and Mildred Duncan Ralph, cross-appealed, asserting that if this Court holds that public corporations are "municipal boards, committees, or like bodies" within the meaning of the Act, then the Act violates the "one subject" and "clear expression" requirements of Section 45 of the Alabama Constitution of 1901 and is unconstitutionally vague and uncertain under the provisions of Section 6 of the Constitution of 1901 and the Fourteenth Amendment to the United States Constitution.
In view of the Water and Sewer Board's argument in its brief that the scope of the bill "probably caught legislators sleeping at the time of its passage, or that it probably deceived or confused them," we have examined the legislative history of Act No. 93-704 to find from the House and Senate Journals some information concerning the bill's history during its legislative journey. We, of course, have no other legislative history that would help us to better understand the purpose of the legislation and the underlying public policy reasons that caused the Legislature to adopt Budget Isolation Resolutions to assist in the passage of this Act and to place the bill on special order calendars in both Houses of the Legislature during the final days of the Session.[4]
The City argues that the purpose of the Act was "to enhance democracy in the functioning of municipal boards, committees, and like bodies in Class 3 municipalities." There *592 is no indication in the House or Senate Journals of any contrary purpose.[5]
The basic position of the City could be summarized as follows: The City claims that Act No. 93-704 is constitutional. The City argues that the Legislature has the power to alter the number of members of the boards of public corporations such as the Water and Sewer Board, the Industrial Development Board, the Montgomery Housing Authority, and the Montgomery Airport Authority, even though those boards were initially formed only by an affirmative resolution of the municipal governing body, and even though the members of each board were appointed by the City.
The City contends that these entities, even though public corporations, are included within the phrase "municipal board, committee, or like body," because, the City says, the phrase, given its ordinary meaning, applies to all entities created by the City, the members of which are appointed by the City and which obtain significant benefits from being affiliated with the City.
To determine whether the City is correct, we must apply settled rules of statutory construction. This Court has stated the rule as follows:
"The fundamental rule of statutory construction is to ascertain and give effect to the intent of the legislature in enacting the statute. Words used in a statute must be given their natural, plain, ordinary, and commonly understood meaning, and where plain language is used a court is bound to interpret that language to mean exactly what it says. If the language of the statute is unambiguous, then there is no room for judicial construction and the clearly expressed intent of the legislature must be given effect."
IMED Corp. v. Systems Engineering Assocs. Corp., 602 So. 2d 344, 346 (Ala.1992).
The City argues that the term "municipal board" as used in the Act, which applies only to Class 3 municipalities, must refer to all of those boards that are appointed by the governing body of the municipality pursuant to Section 3.07(e) of the Mayor-Council Act, which is also applicable to Class 3 municipalities. Because all such boards are appointed by the governing body of the municipality, says the City, they are logically called "municipal boards."
"A municipal board or department ... may ordinarily be created by the state or by the municipal corporation, and may be a public corporation disconnected with the government of the municipal corporation or it may be merely a department of the city." McQuillin, Municipal Corporations § 2.30, at 176 (3d ed. 1987).
Although the question this Court was dealing with did not involve the membership of a municipal board, this Court has held in an earlier case that a public corporation formed by a municipality is a "governmental entity" for purposes of a statutory cap on damages that can be recovered. In Guntersville Housing Authority v. Stephens, 585 So. 2d 887 (Ala.1991), this Court held that the Guntersville Housing Authority is a "governmental entity" as defined by Ala.Code 1975, § 11-93-1, and is, therefore, subject to the effect of § 11-93-2, which limits the amounts of tort damages and the amount of money under settlements of tort claims that can be recovered against "governmental entities." The basis for the Court's holding was as follows:
"As stated, a `housing authority' is defined as a `public body organized as a body corporate and politic.' § 24-1-22(1). We hold that, because § 11-93-1(1) specifically includes `municipal [and] county public corporations' in the enumeration of various governmental entities, the Guntersville Housing Authority is a governmental entity and falls within the intended scope of § 11-93-2, which limits the amount of damages and settlement money recoverable against a governmental entity." *593 585 So.2d at 888. A similar result was reached in Opinions of the Justices, No. 45, 235 Ala. 485, 179 So. 535 (1938), where this Court held that real property owned by a housing authority is not subject to ad valorem taxes, because the authority is a governmental agency. In Opinions of the Justices, No. 45, this Court stated, "When the city is performing a governmental function, it is none the less so because it is done by the instrumentality of some administrative agency, such as a board, commission, or even a corporation set up for that purpose, created by or for the city's use in that connection." 235 Ala. at 486, 179 So. at 536. This Court stated further, "The mere fact that it is a corporation does not deprive it of the qualities of a governmental agency, nor of the immunities of the government for which it operates." Id. The City contends that this language from Opinions of the Justices, No. 45 is practically dispositive of the issue presented in this appeal. In other words, it argues, the phrase "board, committee, or like body" used in the Act is almost perfectly parallel to "board, commission, or ... corporation," the phrase used by this Court in Opinions of the Justices, No. 45. In Roberts v. Fredrick, 295 Ala. 281, 328 So. 2d 277 (1976), this Court held that a housing authority is an administrative agency of the city. In several instances, this Court has declared the status of boards like the ones in this case to be that of municipal government agencies. See International Union of Operating Engineers, Local Union No. 321 v. Water Works Board, 276 Ala. 462, 163 So. 2d 619 (1964) (the Birmingham Water Works is a "public agency" and therefore lacks the legal authority to enter a collective bargaining agreement with a labor organization); see Marshall Durbin & Co. v. Jasper Utilities Bd., 437 So. 2d 1014 (Ala.1983) (city utilities board acts as an agent of the municipality); see State ex rel. Richardson v. Morrow, 276 Ala. 385, 162 So. 2d 480 (1964) ("officer of any municipality" includes a member of the board of directors of the Water Works and Gas Board of the City of Cordova). Based upon these cases, the City contends that the trial court erred in distinguishing between incorporated and unincorporated entities of the City.
On the other hand, the Water and Sewer Board and the intervenors contend that a public corporation, such as the Water and Sewer Board, is not within the term "municipal board, committee, or like body" as that term is used in the Act. They agree with the trial court's finding that "the legislature has not once referred to the Water Board as a `municipal board, committee, or like body,' [and has not] amended legislation affecting the water board through reference to `Class 3 municipalities.'" They argue that the plain language of the Act should be interpreted and that the Act makes no reference to "public corporations" or to the number of "directors" on their governing boards. They contend that this Court has recognized the Water and Sewer Board as a "public corporation" separate and independent from the City. See East Montgomery Water, Sewer & Fire Protection Authority v. Water Works & Sanitary Sewer Board of the City of Montgomery, 474 So. 2d 1088, 1091 (Ala.1985). They contend that there is an ambiguity in the phrase "municipal board, committee, or like body," and that the failure of the Legislature to specifically refer to public corporations should be interpreted to mean that the Legislature did not intend to include them within the broad phrase "municipal board, committee, or like body."
The appellees ask that this Court, in determining legislative intent, to consider the Act's potential effect on the current and future operations of the Water and Sewer Board, in addition to the potential impact on financial stability. For example, the Water and Sewer Board says that its revenue bonds are rated by the bond rating guidelines of Standard & Poor's Municipal Finance Criteria. Its rating, it says, is the result of several subjective factors, including the continuity of management assured by the Water and Sewer Board's composition of directors who serve rotating six-year terms, the election of the directors by the City Council without regard to district lines, and the Water and Sewer Board's ability to set rates for financial reasons, without political control. The appellees argue that the ordinance implementing the Act will undoubtedly result in lower bond ratings because it calls for the directors of the Water and Sewer Board to *594 serve shorter terms (four years) and to be appointed by the City Council from districts.
It is clear that the Legislature intended to legislate broadly. This is evidenced by the use of such broad language as the phrase "municipal board, committee, or like body." The Act merely allows for Class 3 municipalities to increase the number of members serving on a "municipal board, committee, or like body." This language seems to include a board of a municipal agency such as the Water and Sewer Board, irrespective of the fact that the Water and Sewer Board is a public corporation. It has been held that a water and sewer board is an administrative agency and performs city functions. See International Union of Operating Engineers, Local Union No. 321 v. Water Works Board, 276 Ala. 462, 463, 163 So. 2d 619, 620 (1964). Although the Water and Sewer Board is a corporation, it is so organized to perform its functions as an agency of the City. Accordingly, such a board is treated in the same light as the City itself. See State ex rel. Richardson v. Morrow, 276 Ala. 385, 162 So. 2d 480 (1964). A member of the Water and Sewer Board could be considered an officer of the City. See Roberts v. Fredrick, 295 Ala. 281, 328 So. 2d 277 (1976). The mere fact that an administrative agency is organized as a corporation does not necessarily deprive it of the qualities of a governmental agency. See Opinions of the Justices, No. 45, 235 Ala. 485, 179 So. 535, 536 (1938). Therefore, this Court concludes that by using broad language in the Act, the Legislature evidenced an intent to include any instrumentality by which a city performs its governmental functions. "The intent of the body which enacted the legislation `should not be defeated by narrow construction based on nice distinctions in the meaning of the words.'" Service Realty & Ins. Co. v. Klinefelter, 470 So. 2d 1172, 1175 (Ala.1985).
As stated above, the members of the Water and Sewer Board are already appointed by the City Council. By interpreting the Act to allow the City to increase the number of members on the Water and Sewer Board, this Court does not need to consider whether that interpretation increases the amount of political control the City Council will have over the boards affected by its ordinance. Those decisions are policy decisions that have been made by the legislative branch of the State Government.
As noted earlier, the City says that the purpose of the legislation was to "to enhance democracy in the functioning of municipal boards, committees, and like bodies in Class 3 municipalities." Because we find the purpose of the Act was to obtain broader representation of the community on the boards of public corporations, and because the Legislature, in passing the Act, determined that broader representation on such boards would be desirable, then we cannot, and should not, construe the Act so as to thwart this legislative purpose. The Act is limited to Class 3 municipalities, which include only Montgomery and Huntsville. The Act does not apply to any other public corporations or other governmental entities. Because of the limited scope of the bill that became Act No. 93-704, the Legislature may have treated the bill differently than if it had applied to all municipalities in the state. We judicially know that it is not uncommon for the Legislature to classify municipalities differently. We consider such classifications and questions arising from such classifications to be primarily political questions.
The cross-appellants, the Water and Sewer Board and the intervenors, while arguing strongly that the Water and Sewer Board is not a "municipal board, committee, or like body," alternatively argue that if it is held to be within that phrase, then the Act violates both the United States Constitution and the Constitution of Alabama. The Board says that the Act is amendatory rather than merely an Act to repeal existing laws, and as an amendatory act violates the provisions of § 45 of the Alabama Constitution; in making this argument they adopt essentially the findings made by the trial court in its memorandum opinion. They argue that the title of the Act does not give proper notice of the compulsory nature of the nine-member-board requirement and that the Act will unconstitutionally amend Ala.Code 1975, § 11-50-313(a), without having identified that statute *595 in its text either by number or by quoting from its language.
Section 11-50-313(a), in pertinent part, provides as follows:
"[T]he governing body of any municipality which has heretofore or hereafter authorized the creation of a corporation as provided in this article may, at its option, increase the board of directors from three to five members to serve according to all the conditions and terms set forth in this article."
The cross-appellants maintain that it is well settled that repeal by implication is not favored in Alabama. This Court has held that in order for a statute to impliedly repeal a previous statute, the degree of conflict required between the statutes is irreconcilability. City of Tuscaloosa v. Alabama Retail Association, 466 So. 2d 103, 106 (Ala.1985). If it is possible to reconcile different acts under a reasonable construction, then all of the acts should be given effect. Sand Mountain Bank v. Albertville National Bank, 442 So. 2d 13, 19 (Ala.1983). The cross-appellants maintain that reconciliation of the Act and § 11-50-313(a) is possible if the Act is construed so as not to apply to public corporations. We disagree.
The cross-appellants also argue that if the Act is construed so as to apply to public corporations, then it violates the "one subject" requirement of § 45, because each public corporation is established by and operates under its own legislation and has been established for a unique purpose and empowered with special authority.[6] We find this argument to be without merit also. The title to the Act is specific enough. It reads: "An Act Relating to Class 3 municipalities; to further provide for the number of members of municipal boards, committees, or like bodies." The Water and Sewer Board argues that the Act, to be applicable to it, would have to at least refer to a municipal public corporation. As we have pointed out above, we cannot accept this argument. The title, if it read that way, might have given more notice of the scope of the Act, but it is not constitutionally infirm because it did not.
The cross-appellants also argue that the Act is unduly vague and overbroad. They say that there is no instruction in the Act as to the length of the terms of any new directors, the rotation of such terms, or even the number of new directors the City Council may add in its sole discretion. They contend that the vagueness of the Act is demonstrated by the City Council's passage of the Ordinance, which they maintain clearly exceeds the intent of the Legislature because, they say, it purports to alter the staggering and lengths of terms of board members, the methods of appointment of board members, and various other statutory mandates.
The legislative mandate in the Act relates only to the number of members who serve on the Boards. If the purpose of the legislation was "to enhance democracy in the functioning of municipal boards, committees, and like bodies in Class 3 municipalities," as the City argues, and if the City is seeking to carry out that legislative purpose, it is difficult to see how carrying out the intent of the Legislature would create great difficulties or confusion. Of course, an Act, constitutional on its face, could be unconstitutional in its application, and problems could develop that might cause the Legislature to more fully consider and address the issue in view of our holding, but we cannot agree with the trial court that the Act would violate § 45 of the Constitution if public corporations are covered by its provisions.
We reach this conclusion by setting out how we interpret Section 45 as it relates to this Act. Section 45 mandates that "[e]ach law shall contain but one subject, which shall be clearly expressed in its title ...; and no law shall be revived, amended, or the provisions thereof extended or conferred, by reference to its title only; but so much thereof as is revived, amended, extended, or conferred, shall be re-enacted and published at length." The Act does not "repeal" the laws applicable to public corporations. The Act merely makes a reasonable and measured *596 change in the number of board members of such corporations. The Legislature stated that the Act would govern, "any law to the contrary notwithstanding." This Court has recognized that the Legislature may amend or repeal laws by implication without expressly reciting the affected law in the new Act:
"There is no rule which prohibits the repeal by implication of a special or specific act by a general or broad one. The question is always one of legislative intention, and the special or specific act must yield to the later general or broad act, where there is a manifest legislative intent that the general act shall be of universal application notwithstanding the prior special or specific act."
Buskey v. Mobile County Bd. of Registrars, 501 So. 2d 447, 452 (Ala.1986) (quoting 50 Am.Jur. Statutes, § 564, as quoted in Connor v. State, 275 Ala. 230, 153 So. 2d 787 (1963)). We find in this case such a "manifest legislative intent that the general act shall be of universal application."
We have carefully studied each of the arguments that the Water and Sewer Board makes to sustain the judgment of the trial court declaring that the Act did not apply to the Water and Sewer Board and that if it were held to apply to the Water and Sewer Board it would be unconstitutional. Some of these arguments were sufficient to convince the trial judge that the Act did not apply to the Water and Sewer Board.
We hold that the trial court erred in declaring that Act No. 93-704 did not apply to the Water and Sewer Board. In view of that holding, we address the constitutional question presented by the Water and Sewer Board: whether the Act, if held to be applicable to it, is unconstitutional. On the constitutional question, we restate what we said in Moore v. Mobile Infirmary Association, 592 So. 2d 156 (Ala.1991), where we stated the rule of law applicable when this Court is considering whether a particular statute is constitutional:
"In reviewing the constitutionality of a statute, we `approach the question with every presumption and intendment in favor of its validity, and seek to sustain rather than strike down the enactment of a coordinate branch of the government.' Alabama State Federation of Labor v. McAdory, 246 Ala. 1, 9, 18 So. 2d 810, 815 (1944)."
592 So.2d at 159. As to whether an Act violates the "single subject" requirement of § 45, this Court stated in Thomas v. Niemann, 397 So. 2d 90, 92-93 (Ala.1981):
"As we have so often said, § 45 should not be construed so as to handicap the legislative process. The constitutional purpose in requiring single subject legislation is [laudable] but has been met when the separate provisions of a bill are germane to the bill's general purpose."
Accordingly, we hold that Act No. 93-704, construed to apply to boards of municipal public corporations in Class 3 municipalities, does not violate the "one subject" and "clear expression" requirements of § 45 of the Constitution of 1901 and is not unconstitutionally vague under § 6 of the Constitution of 1901 or the Fourteenth Amendment to the United States Constitution.
Based on the foregoing, we reverse the judgment of the trial court and remand this cause for further proceedings consistent with this opinion.
ORIGINAL OPINION WITHDRAWN; OPINION SUBSTITUTED; REVERSED AND REMANDED; APPLICATION OVERRULED.
SHORES, INGRAM,[7] COOK and BUTTS,[8] JJ., concur.
HOUSTON, J., dissents.
HOUSTON, Justice (dissenting).
I agree with the trial judge, Judge Randall Thomas. Municipal corporations are not included within the designation "municipal *597 board, committee, or like body." Municipal corporations are created by compliance with state statutes that provide for the number of directors and for the method of their selection. The number of directors and the method of their selection must comply with the certificate of incorporation and with the enabling legislation. If the legislature wishes to change the enabling legislation, it certainly has the power to do so; however, Act No. 93-704 did not change it. If the legislature meant for it to do so, then the legislature ran afoul of Article IV, § 45, of the Constitution of Alabama of 1901. I would affirm; therefore, I dissent.
NOTES
[1] When the Act was enacted, there were only two Class 3 municipalities in the State, Montgomery and Huntsville.
[2] Specifically, the Act provides:
"Section 1. In any Class 3 municipality, any law to the contrary notwithstanding, the number of members who shall serve on any existing or future municipal board, committee, or like body, shall be the same as the number of members on the municipal governing body unless the municipal governing body by a two-thirds vote of the total membership of the municipal governing body shall provide for a greater or lesser number of members.
"Section 2. The provisions of this act are severable. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains.
"Section 3. All laws or parts of laws which conflict with this act are repealed.
"Section 4. This act shall become effective immediately upon its passage and approval of the Governor, or upon its otherwise becoming a law."
[3] The complaint also named Attorney General James H. Evans as a defendant; however, the trial court granted the attorney general's motion to dismiss all claims against him and allowed him to participate as amicus curiae.
[4] From the House and Senate Journals we have determined that House Bill 681, which became Act No. 93-704, was introduced in the Alabama House by Representatives by John Knight of Montgomery on the 11th legislative day; that it was assigned to the Committee on Local Government, House Journal, p. 878; that it was given a favorable report on the 25th legislative day, id. p. 2550; that it was placed on a special order calendar, id. p. 2737; that a Budget Isolation Resolution was adopted, id. p. 3093; and that the bill was read a third time and adopted. Id. p. 3093. A companion bill, Senate Bill 247, was introduced by Senator Charles Langford of Montgomery in the Senate on the second legislative day and was assigned to the Standing Committee on Governmental Affairs/Local Government. Senate Journal, p. 135. S. 247 received a favorable report on the sixth legislative day, and was read a second time and placed on the calendar. Id. p. 322. S. 247 was placed on a special order calendar on the 26th legislative day. Id. p. 1725. The Senate, on the 28th day, received H. 681, id. 2024, and also placed S. 247 on the special order calendar. Id. p. 2190, 2191. S. 247 received its third reading, and, on motion of its sponsor, Senator Langford, was postponed temporarily. Id. p. 2223. On the 29th legislative day, the Senate Standing Committee on Governmental Affairs/Local Government reported H. 681 favorably and it received its second reading in the Senate. Id. 2284. On the 30th legislative day, the Senate adopted a Budget Isolation Resolution relating to H. 681, and it received its third reading in the Senate. Senator Langford requested suspension of the rules, to bring up H. 681; it was read a third time and adopted, 20 Yeas, 0 Nays. Id. p. 2554. H. 681 was signed by the Governor at 5:51 p.m. on May 19, 1993.
[5] The fact that the legislation applied only to Class 3 municipalities may have affected its assignment to committees in the House and Senate, and it was adopted late in the Session, a fact argued by the Water and Sewer Board to support its argument that the bill "caught Legislators sleeping." Otherwise, the legislative history in the Journals does not support the argument that legislators were unaware of its passage or of its provisions.
[6] The trial court held that, if construed to cover public corporations, the Act would violate § 45 of the Constitution of 1901 by "amending" the legislation authorizing each public corporation, without setting out the legislation that was thereby amended.
[7] Justice Ingram was not present at the oral arguments but has listened to the tapes of the oral arguments.
[8] Justice Butts did not participate in this Court's original decision in this case; however, he has studied the briefs submitted and has listened to the tapes of the oral arguments. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919445/ | 660 So. 2d 897 (1995)
Harold ELLOIE
v.
Earl ANTHONY and ABC Insurance Company and John Doe and Def Insurance Company.
No. 95-CA-0238.
Court of Appeal of Louisiana, Fourth Circuit.
August 23, 1995.
Writ Denied November 27, 1995.
*898 Charles L. Elloie, New Orleans, for plaintiff-appellant.
Abbott, Simses, Album, Knister & Baynham, Jerald L. Album, Charles V. Giordano, New Orleans, for defendants-appellees.
Before BARRY, LOBRANO and PLOTKIN, JJ.
BARRY, Judge.
Harold Elloie appeals the dismissal of his tort action based on prescription. We affirm.
Elloie filed this personal injury suit on March 2, 1993 and alleged that he was injured on March 1, 1992 when he fell on an uneven sidewalk in front of the defendant Earl Anthony's home. He alleged Anthony negligently maintained the sidewalk. The trial court sustained Anthony's peremptory exception of prescription. Elloie appeals and asserts that the trial court improperly computed the prescriptive period. Anthony answers the appeal and claims damages, attorney fees and costs for a frivolous appeal.
Prescription
La.C.C. art. 3492 establishes a one year prescriptive period for a delictual action:
Delictual actions are subject to a liberative prescription of one year. This prescription commences to run from the day injury or damage is sustained....
Additionally, La.C.C. art. 3456 sets forth the method to compute time by the year:
If a prescriptive period consists of one or more years, prescription accrues upon the expiration of the day of the last year that corresponds with the date of the commencement of prescription.
Article 3456 applies to both liberative and acquisitive prescription. La.C.C. art. 3456, comment (b).
The day that corresponds with the date of the commencement of prescription and the date Elloie's claim prescribed is March 1, 1993. Warren v. Hart, 545 So. 2d 687 (La. App. 5th Cir.1989); Delahoussaye v. Thibodeaux, 498 So. 2d 1137, 1138 (La.App. 3d Cir.1986), writ den. 501 So. 2d 236 (La.1987). Delahoussaye held that plaintiff's suit for injuries sustained in a February 21, 1984 vehicular collision prescribed February 21, 1985. Warren affirmed the dismissal of a suit filed on May 11, 1988 for injuries sustained on May 10, 1987.
Elloie argues that La.C.C.P. art. 5059 is controlling and extends the accrual of prescription to March 2, 1993. Article 5059 provides that in computing a period of time allowed or prescribed by law or by order of court, the date of the act, event or default after which the period begins to run is not to be included.
That argument was rejected in Delahoussaye, supra, which held that La.C.C. arts. 3492 and 3456 specifically address the prescriptive period applicable to delictual actions and take precedence over the more general La.C.C. art. 5059. We agree with that conclusion.
Guillory v. Department of Transportation and Development, 450 So. 2d 1305 (La.1984), cited by Elloie, is distinguishable because *899 Guillory involved computation of a thirty day appeal delay from a decision of the Civil Service Commission, not a one year prescriptive period for a delictual action.
Frivolous Appeal
We deny Anthony's request for damages, attorney fees and costs for a frivolous appeal. La.C.C.P. art. 2164, which allows damages for a frivolous appeal, is penal and must be strictly construed. Dear v. Mabile, 93-1188 (La.App. 1 Cir. 5/20/94), 637 So. 2d 745, 748. Damages for frivolous appeal are not awarded unless it is clear the appeal was solely for delay or that the appellant is not serious in his position. Id. Although Elloie's argument has no merit, it appears he sincerely advocates his position and did not file this appeal for delay.
We affirm the dismissal of plaintiff's suit.
AFFIRMED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919457/ | 660 So. 2d 1065 (1995)
HORIZON HEALTHCARE and U.S.F. & G., Appellants,
v.
Ann MURPHY, Appellee.
No. 93-3336.
District Court of Appeal of Florida, First District.
July 17, 1995.
Rehearing Denied October 17, 1995.
John P. Brooks of Moore & Peterson, P.A., Orlando, for appellants.
Richard S. Thompson, Orlando, and Bill McCabe, Longwood, Mary Ann Stiles and Robert J. Grace, Jr. of Stiles, Taylor & Metzler, P.A., Tampa, amicus curiae, for appellee.
PER CURIAM.
Horizon Healthcare and USF & G (together "employer") appeal a workers' compensation order imposing sanctions on the employer for violation of a local rule. We reverse because the imposition of sanctions amounted to an abuse of discretion.
Ann Murphy (Murphy) is a fifty-year-old nurse's assistant. She injured her back in an industrial accident on February 27, 1992, at the Fountain Nursing Home, when she attempted to lift an obese patient who had fallen from a wheelchair. The judge of compensation claims (JCC) required the parties, by written order, to file a prehearing memorandum two full working days prior to their hearing. The employer admits that it failed *1066 to timely file its memorandum. The JCC struck the employer's defenses and the deposition of chiropractic physician Dougherty as sanctions. He awarded Murphy temporary total disability (ttd), and chiropractic medical care.
The JCC clearly has authority to issue the instant order. § 440.33(1), Fla. Stat. (1991). Section 440.33(1) provides:
Powers of judges of compensation claims.
(1) The judge of compensation claims may preserve and enforce order during any such proceeding; issue subpoenas for, administer oaths or affirmations to, and compel the attendance and testimony of witnesses, or the production of books, papers, documents, and other evidence, or the taking of depositions before any designated individual competent to administer oaths; examine witnesses; and do all things conformable to law which may be necessary to enable him effectively to discharge the duties of his office. Whenever a law requires an order of a court of competent jurisdiction for the obtention of medical or hospital records, an order of a judge of compensation claims entered for such purposes shall be deemed to be an order of a court of competent jurisdiction.
(Emphasis added.)[1]See also Fla.R.Work. Comp.P. 4.100. The JCC also clearly has authority to impose sanctions. § 440.33(1), Fla. Stat.; Fla.R.Work.Comp.P. 4.150. Florida Rule of Workers' Compensation Procedure 4.150, provides:
SANCTIONS
Failure to comply with the provisions of these rules or any order of the judge of compensation claims may subject a party to reprimand, striking of briefs or pleadings, denial of oral argument, dismissal of proceedings, imposition of costs, attorney fees, or such other sanctions as the judge of compensation claims shall deem appropriate.
(Emphasis added.)
We nevertheless agree with the employer that the instant sanctions are an abuse of the JCC's discretion. Bee Gee Shrimp, Inc. v. Carreras, 516 So. 2d 1121 (Fla. 1st DCA 1987). There is competent, substantial evidence to support the conclusion that the employer's attorney deliberately ignored the JCC's order.[2] Brooks, the employer's lawyer, admits that opposing counsel's memorandum was served on him the day he filed his own memorandum, and that he read Murphy's memorandum; he avoids stating in his reply brief that he did not read Murphy's *1067 memorandum before filing his own.[3] The JCC nevertheless found that Brooks had the opportunity to fully explore Murphy's case before crafting his final defenses. The record however shows that the employer's theory of defense did not change after Murphy's memorandum was served. We conclude that it was an abuse of the JCC's discretion to impose the instant sanctions, which were unduly harsh under the circumstances of this case.
The employer also argues that temporary total disability (ttd) benefits and alternative chiropractic care cannot be awarded to Murphy. We decline to address these issues, instead remanding to the JCC for a full hearing, in which the attorneys timely shall comply with the JCC's order.
We thus affirm in part, reverse in part, and remand.
LAWRENCE, J., concurs.
ALLEN, J., specially concurs with opinion.
BENTON, J., concurs with opinion.
ALLEN, Judge, specially concurring.
The per curiam opinion fails to address the state constitutional challenge to the authority of the supreme court to promulgate rules of practice and procedure before judges of compensation claims. I would reject the challenge because it was implicitly considered and rejected by the supreme court in In Re Workmen's Compensation Rules of Procedure, 343 So. 2d 1273 (Fla. 1977).
I concur in the result of the per curiam opinion because I agree that the judge had authority to require the filing of memoranda prior to the hearing, but that the sanctions amounted to an abuse of discretion under the facts of this case.
BENTON, Judge, concurring.
I concur in the judgment of the court. Counsel failed to comply with a lawful order of the judge of compensation claims. The order requiring that memoranda be filed was authorized by section 440.33(1), Florida Statutes (1993), whether or not any other authority would have given or did in fact supply other (superfluous) authorization. The case can therefore be decided without reaching any constitutional question. Although I would not make findings of fact for the first time on appeal, I agree that, even indulging very generous assumptions in support of the sanction imposed below, it was unjustified and should be overturned.
NOTES
[1] Section 440.33(2) provides: "If any person in proceedings before the judge of compensation claims disobeys or resists any lawful order ... the judge of compensation claims shall certify the facts to the court having jurisdiction in the place in which it is sitting, which shall thereupon ... punish ... in the same manner and to the same extent as for contempt... ." The Florida Supreme Court, in Kirk v. Publix Super Markets, 185 So. 2d 161 (Fla. 1966), held that a deputy commissioner lacks authority to dismiss a claim and should certify enforcement problems to the circuit court for sanctions pursuant to section 440.33(2). The Florida Supreme Court however subsequently adopted rule 4.150, observing that its then-new power to adopt rules is expressly granted by amendment to section 440.29(3), Florida Statute. In re Florida Workers' Compensation Rules of Procedure, 374 So. 2d 981 (Fla. 1979) (adopting rules); see also John Gaul Constr. Co. v. Harbin, 247 So. 2d 33, 35 (Fla. 1971) (holding that the judge of industrial claims has authority to dismiss a claim, and noting that resort to circuit court for contempt proceedings is "inappropriate in certain instances as unnecessarily cumbersome, delaying, expensive, circuitous and out of harmony with the expeditious objectives sought to be achieved in the early processing of workmen's compensation claims"). This court regards certification to circuit court as a discretionary matter. B.G. Willis Painting v. B.G. Willis, 413 So. 2d 1276 (Fla. 1st DCA 1982) (holding that the deputy abused her discretion in failing to certify the employer's nonappearing subpoenaed witness to circuit court for contempt proceedings).
[2] The employer's lawyer, Brooks, admitted at the hearing below that he had repeated notice of the memorandum requirement; and that he was aware that the sanction for failure to timely file the memorandum included dismissing the claim, and striking defenses. Brooks testified that he failed timely to file the memorandum because his secretary failed to put it on his calendar, he was technically on vacation, and he therefore forgot about it. Brooks denied that his failure was intentional. While the JCC did not make an express finding that Brooks's failure to file a prehearing memoranda was deliberate, in view of repeated notice in the instant case, the JCC obviously found Brooks's testimony lacking in credibility.
[3] The implication seems to be that Brooks reviewed Murphy's memo before filing his own, but made no changes in his own as a result. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1919466/ | 106 B.R. 546 (1989)
In re George BROWN, Jr., Debtor.
George BROWN, Jr., Debtor,
v.
The EVANSTON BANK and the Internal Revenue Service, Defendants.
Bankruptcy Nos. 88 B 10817, 88 A 845.
United States Bankruptcy Court, N.D. Illinois, E.D.
November 1, 1989.
Gregory K. Stern, Chicago, Ill., for debtor.
Barrack, Ferrazano, Kirschbaum & Perlman, Chicago, Ill., Benjamin R. Norris, Trial Atty., Tax Div., Washington, D.C., for defendants.
MEMORANDUM OPINION
ERWIN I. KATZ, Bankruptcy Judge.
The debtor in this case, George Brown, Jr. ("Debtor"), commenced this adversary proceeding seeking a turnover of $18,429.78 held by the Evanston Bank ("Bank") and claimed by the Internal Revenue Service *547 ("IRS") pursuant to a Notice of Levy. A trial was held on August 14, 1989 and both parties have submitted post-trial briefs. This Memorandum Opinion will constitute Findings of Fact and Conclusions of Law pursuant to Bankruptcy Rule 7052 and Federal Rule of Civil Procedure 52.
Three bank accounts are involved in this proceeding: a savings account in Debtor's name, number 236169; a certificate of deposit in the name of Daryl Brown, Minor, by George Brown, Jr., Trustee, number 236 169 600; and a savings account in the name of Jennifer Brown, Minor, by George Brown, Jr., Trustee, number XXX-XXXXXX. Daryl and Jennifer Brown are Debtor's children. Despite Debtor's children's names appearing on two of the accounts, the IRS does not concede the children's ownership of the funds in those accounts but asserts that Debtor is in fact the beneficial owner of those funds. In support of its position, the IRS has established that the Debtor freely deposited and withdrew funds from the children's accounts.
The IRS asserts a claim for delinquent taxes in the amount of $20,871.67. The IRS assessed this amount on November 9, 1987. On May 8, 1988, the IRS filed a notice of tax lien. A Notice of Levy, dated June 22, 1988, was served on the Bank on July 14, 1988. The IRS instructed the Bank not to remit the funds but to hold them pending further developments. The following day, July 15, 1988, Debtor filed his Chapter 13 petition in this case. The Debtor claims never to have received a notice of seizure in connection with the levy on the funds held by the Bank; in any event, it is undisputed that no such notice of seizure could have been served on the Debtor prior to the filing of his petition.
The IRS' position is that the pre-petition Notice of Levy effectively terminated any interest of the Debtor in the funds held by the Bank and transferred title of the funds to the IRS. The IRS relies upon Phelps v. United States, 421 U.S. 330, 95 S. Ct. 1728, 44 L. Ed. 2d 201 (1975) for the proposition that a prepetition Notice of Levy served on a third party holding property belonging to a debtor establishes a custodial relationship between the third party and the IRS, preventing the property from being included as property of the estate in any subsequent bankruptcy of the debtor. Phelps involved a pre-bankruptcy assignment for the benefit of creditors where the assignee converted the original assets to cash. The IRS levied on the proceeds, held by the assignee, accomplishing this before the bankruptcy. The Court held that, under the Summary/Plenary distinctions of the Bankruptcy Act, the Bankruptcy Referee had no jurisdiction to adjudicate any claim for the funds levied upon by the IRS. Those funds would have to be recovered, if at all, in a plenary suit in district court.
The IRS asserts that Phelps has continuing validity after United States v. Whiting Pools, Inc., 462 U.S. 198, 103 S. Ct. 2309, 76 L. Ed. 2d 515 (1983). Whiting Pools held that the IRS could be subject to a turnover order in a bankruptcy case following its seizure of tangible personal property belonging to the debtor. The IRS distinguishes Phelps and Whiting Pools because Phelps dealt with cash and cash equivalents with a value less than the amount of the tax liability subject to the lien while Whiting Pools dealt with tangible personal property worth more than the amount of such tax liability.
In Whiting Pools, the IRS levied upon and took possession, pre-petition, of tangible business assets of the debtor having a liquidation value of approximately $35,000 and a going-concern value of approximately $160,000 by reason of a tax delinquency of approximately $92,000. The issue before the Court was whether the property could be recovered by the debtor-in-possession by turnover under Section 542, with the Court holding that it could.
In support of the distinction between tangible property and cash equivalents, the IRS cites the line of cases exemplified by In re Professional Technical Services, Inc., 71 B.R. 946 (Bankr.E.D.Mo.1987) and, in support of the post-Whiting Pools vitality of Phelps, the IRS cites United States v. National Bank of Commerce, 472 U.S. 713, 105 S. Ct. 2919, 86 L. Ed. 2d 565 (1985). *548 National Bank of Commerce is not a bankruptcy case. It involved the issue of whether the IRS could levy upon a joint bank account without showing the extent of the taxpayer's interest in the account. The Court held that the IRS could levy upon the entire account. The delinquent taxpayer's right to withdraw all the funds in the account gave rise to the type of interest which could be levied upon by the IRS, regardless of the co-depositors' interests. The right of the IRS to levy was a federal right which controlled even though the applicable state law prevented a private creditor from exercising this right to withdraw.
Alternatively, if the IRS is subjected to a turnover order with respect to the funds held by the Bank, the IRS seeks adequate protection of its interest securing Debtor's tax liability.
In response, the Debtor asserts that Whiting Pools should control with respect to the turnover order. The Debtor cites in support a line of cases exemplified by In re Dunne Trucking Co., 32 B.R. 182 (Bankr. N.D.Iowa 1983). As to the adequate protection issue, the Debtor takes the position that the IRS is bound by the Debtor's confirmed plan as a result of its failure to object thereto. The plan provides for a full payoff of all creditors, including the IRS, upon Debtor's sale or refinance of his residence at the end of the plan period.
Debtor also interposes his children's rights to some of the funds held by the Bank as a basis for invalidating the IRS levy. National Bank of Commerce does, however, support the IRS' position that the children's interest in the funds does not prevent those funds from being subject to an IRS levy against the Debtor. As previously pointed out, the evidence shows that, regardless of the children's interest, the Debtor had a right to, and did, freely deposit and withdraw funds from the children's accounts. Thus, the Debtor had the same right to withdraw funds which the Court in National Bank of Commerce held sufficient to enable the IRS to levy upon the joint bank account in that case in enforcing the tax lien against the taxpayer co-depositor. Here, as well, Debtor's right to withdraw from the children's accounts was sufficient to enable the IRS to levy upon those accounts in enforcing the tax lien against the Debtor. The issue before this Court, therefore, is not whether the IRS had the power to levy against the funds in the children's accounts it did. The issue is whether the levied-upon funds are subject to a turnover order in Debtor's bankruptcy.
PROPERTY OF THE ESTATE
Section 542 of the Bankruptcy Code, 11 U.S.C. Sec. 542, subjects an entity in possession, custody or control of certain types of property of the estate to an order requiring that entity to turn over such property to the trustee or debtor-in-possession. The statutory scheme, of which Section 542 is an integral part, clearly includes, within the ambit of property of the estate, property in the possession of third parties other than the debtor at the date of the filing of the debtor's petition. It is, thus, a radical departure from the scheme under the Bankruptcy Act, under which the summary jurisdiction of the Bankruptcy Referee was limited to property in the actual or constructive possession, custody or control of the bankruptcy court and did not extend to property held by third persons under claim of right. Phelps was decided under the Bankruptcy Act's scheme and, as interpreted by Whiting Pools (462 U.S. at 206 n. 13, 103 S. Ct. at 2314 n. 13), is no longer controlling once the summary-plenary jurisdiction distinction has been abolished. Furthermore, the citation in National Bank of Commerce to Phelps (472 U.S. at 720-21, 105 S. Ct. at 2924-25) is only to support the limited proposition that an IRS levy transfers constructive possession of the property levied upon to the IRS, setting up a custodial relationship between the third-party served with a Notice of Levy and the IRS. To the same limited effect is G.M. Leasing Corp. v. United States, 429 U.S. 338, 350, 97 S. Ct. 619, 627, 50 L. Ed. 2d 530 (1977) (stating that intangible property need not be physically seized for a levy to be effected).
*549 These limited propositions regarding a levy's effect of transferring possession to the IRS are very much beside the point in deciding the controlling issue in this and other cases of the Whiting Pools genre.
The Whiting Pools Court looked upon the Bankruptcy Code as supplanting the nonbankruptcy remedies of secured creditors against property of their debtors. (462 U.S. at 206-07, 103 S. Ct. at 2314-15.) This modification of secured creditors' rights is intended to foster the policy of encouraging reorganization of a troubled business (462 U.S. at 203-04, 103 S. Ct. at 2312-13), and is particularly applicable in Chapter 11 cases. (462 U.S. at 208, 103 S. Ct. at 2315.) Although the court left open the issue of the applicability of the same policy in Chapter 13 cases (462 U.S. at 208-09 n. 17, 103 S. Ct. at 2315 n. 17), it did not rule out that possibility and, in this Court's opinion, the policy behind individual debt adjustment reorganizations under Chapter 13 is sufficiently similar to the policy behind Chapter 11 to support application of the Whiting Pools rationale. In essence, then, a secured creditor's power to repossess collateral is looked upon as nothing more than a remedy to enforce the debt, a remedy which is supplanted in the event of bankruptcy by the right to adequate protection. So long as the secured creditor has only exercised the remedy of repossession and has not effected a transfer of title to the repossessed property, the Bankruptcy Code steps in to change the remedial scheme to encourage reorganization, all the while protecting the secured creditor's interest by affording it adequate protection. Under Whiting Pools the levying IRS is merely a secured creditor with a possessory lien, no more. Thus, the IRS must look to Section 363 for protection, rather than to the non-bankruptcy remedy of possession.
Against such a background the question regarding a levy becomes simply whether it is but another form of secured creditor remedy or whether it is a substantive transfer of title from the debtor to the IRS. According to the Whiting Pools analysis of the relevant Internal Revenue Code provisions, substantially unchanged since that decision was rendered, the levy power may be superior to state-law enforcement powers available to private secured creditors but that power is still no more than remedial. (462 U.S. at 209-11, 103 S. Ct. at 2315-17). The controlling issue is, therefore, whether the levied-upon property is subject to a Section 542 turnover order. That, in turn, depends upon whether such property may be used, sold or leased by the trustee under Section 363. Section 363, in turn, enables the trustee to use, sell or lease any property of the estate, including cash collateral, subject to the provisions of Section 363(c)(2), so long as the interests of all other parties in the property are adequately protected. Thus, any property of the estate may be subject to a turnover order on the condition that any other parties' interests in such property are adequately protected.
The Whiting Pools decision did not turn on the nature of the property as cash or tangible personal property or on whether a surplus or deficiency exists. The Whiting Pools court stated the contrary definitively:
Of course, if a tax levy or seizure transfers to the IRS ownership of the property seized, 542(a) may not apply. The enforcement provisions of the Internal Revenue Code of 1954, 26 U.S.C. 6321-6326 (1976 ed. and Supp. V), do grant to the Service powers to enforce its tax liens that are greater than those possessed by private secured creditors under state law. See United States v. Rodgers, 461 U.S. 677, 682-683 [103 S. Ct. 2132, 2136-2137, 76 L. Ed. 2d 236] (1983); id., at 713, 717-718, and n. 7 [103 S.Ct. at 2152, 2155-2156, and n. 7] (concurring in part and dissenting in part); United States v. Bess, 357 U.S. 51, 56-57 [78 S. Ct. 1054, 1057-1058, 2 L. Ed. 2d 1135] (1958). But those provisions do not transfer ownership of the property to the IRS.
462 U.S. at 209-10, 103 S. Ct. at 2316 (citations omitted).
The method whereby the IRS may gain title to property in enforcing its tax lien is the lien foreclosure suit. The difference *550 between the lien foreclosure suit and the administrative levy remedy involved in this case was aptly described by the court in National Bank of Commerce:
A federal tax lien, however, is not self-executing. Affirmative action by the IRS is required to enforce collection of the unpaid taxes. The Internal Revenue Code provides two principal tools for that purpose. The first is the lien-foreclosure suit. Section 7403(a) authorizes the institution of a civil action in federal district court to enforce a lien "to subject any property, of whatever nature, of the delinquent, or in which he has any right, title, or interest, to the payment of such tax." Section 7403(b) provides: "All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto." The suit is a plenary action in which the court "shall . . . adjudicate all matters involved therein and finally determine the merits of all claims to and liens upon the property." 7403(c). See generally United States v. Rodgers, 461 U.S. 677, 680-682 [103 S. Ct. 2132, 2135-2137, 76 L. Ed. 2d 236] (1983). The second tool is the collection of the unpaid tax by administrative levy. The levy is a provisional remedy and typically "does not require any judicial intervention." Id., at 682 [103 S.Ct. at 2137]. The governing statute is 6331(a). See n. 1, supra. It authorizes collection of the tax by levy which, by 6331(b), "includes the power of distraint and seizure by any means.". . . .
The administrative levy has been aptly described as a "provisional remedy." 4 Bittker, Par. 111.5.5, at 111-108. In contrast to the lien-foreclosure suit, the levy does not determine whether the Government's rights to the seized property are superior to those of other claimants; it, however, does protect the Government against diversion or loss while such claims are being resolved.
472 U.S. at 720-21, 105 S. Ct. at 2925.
In fact, with the issue properly understood in this way, the National Bank of Commerce case cited by the IRS supports the Debtor, because it so heavily relies upon the nature of the levy power as a provisional remedy rather than as transferring title to the IRS. That case involved the IRS' right to levy against a joint bank account. The Court found that the taxpayers had a sufficient attachable interest based upon the delinquent taxpayer's right to withdraw all the funds in the account. The Court held the levy valid without regard to whether that taxpayer had title to any of the funds and without regard to the interests of the taxpayer's co-depositors. In response to the objection that third-party rights were being trampled upon, the Court emphasized repeatedly that the levy proceeding is only provisional and does not determine the substantive rights to the levied-upon property, these latter rights being subject to determination by a subsequent administrative or judicial proceeding. It is that very provisional nature of the levy remedy, not affecting any substantive rights or effecting any substantive ownership transfer, which was dispositive in Whiting Pools and is dispositive in this case as well, particularly in view of the extension by National Bank of Commerce of this provisional characterization of the levy remedy to situations involving funds in a bank account.
The subsequent lower court cases relied upon by the IRS misread Whiting Pools as limiting that holding to those situations where a debtor has a right to redeem the levied-upon property or the right to a surplus upon sale. It is only in these situations, hold those cases, that the levy can be said to be incomplete as a transfer of ownership to the IRS, and it is therefore only in these situations that the debtor can successfully pursue a turnover action. See, e.g., In re Professional Technical Services, 71 B.R. 946, 949 (Bankr.E.D.Mo.1987). Such cases misconstrue the Whiting Pools holding (at 462 U.S. 211, at 103 S. Ct. 2316). That Court, it is true, mentions the right to any surplus (and does not specifically mention the right to redeem) but does so only by way of example, illustrating a lack of transfer of ownership at the levy stage. The central proposition on which the Court relies in that discussion is stated as follows: "They (the levy and seizure provisions of the Internal Revenue Code) are *551 provisional remedies that do not determine the Service's rights to the seized property, but merely bring the property into the Service's legal custody." Id. (Citations omitted). The fact that the title to the levied-upon property does not pass to the IRS immediately upon levy is sufficient to support the Whiting Pools Court's holding, and that fact obtains regardless of whether the property is cash or tangible personal property and regardless of whether a surplus exists. Requiring an ability to redeem or a surplus proves too much; neither would exist in the case of an insolvent debtor all of whose nonexempt property is subject to judgment liens nor would they exist in the case of a debt undersecured by property the debtor subjectively does not intend to redeem. Yet there is no suggestion of extending the Professional Technical Services distinction beyond cash or cash equivalents. Thus, in this Court's view, the existence of "identifiable interests" (71 B.R. at 949), is not the crucial question. Under the Internal Revenue Code's levy provisions, title does not pass to the IRS upon levy, regardless of whether the property is cash or a cash equivalent and regardless of whether a surplus exists. Accordingly, this property may be property of the estate under Section 541, subject, as in Whiting Pools, to the lien of the IRS.
This Court need not determine when, under the administrative remedy provisions of levy and seizure, title to property does pass sufficiently so that it is no longer property of the estate. Suffice it to say that in this case, where the filing of the petition came before both notice of seizure and transfer of the funds to the IRS, the funds may be property of the estate. See In re Dunne Trucking Co., 32 B.R. 182, 187-88 (Bankr. N.D.Iowa) (levy process itself not complete until notice of seizure sent to taxpayer).
ADEQUATE PROTECTION
The foregoing analysis, however, keying, as it does, the IRS' relinquishment of its levy power in bankruptcy to its right to adequate protection, reinforces the IRS' right to adequate protection in this case. The property is subject to turnover under Section 542 only if it, (a) is ultimately determined to belong to the Debtor, and not the children, and (b) may be used under Section 363, which requires adequate protection. There is no basis in this case for finding a waiver of this right, as the Debtor contends. The failure to object under Section 1325 cannot be construed as a waiver of rights under Section 363, particularly in this case where, until this point, the IRS was in constructive possession of property it may have considered as affording it adequate protection. Furthermore, Section 1322(b)(10) provides that a plan may not contain any provision inconsistent with the Bankruptcy Code. A failure to provide the IRS with adequate protection for its interest in the levied-upon funds would be inconsistent with Section 363. At the same time, this Court lacks a fully developed factual record upon which to base a determination of whether the IRS is adequately protected.
CHILDREN'S RIGHTS
Finally, this Court in this proceeding expressly reserves the issue of the Debtor's entitlement to the funds held by the Bank vis-a-vis the Debtor's minor children. At any subsequent proceeding to determine that entitlement, the interests of the Debtor's children must be properly represented. A status hearing is hereby set for December 6, 1989 at 10:30 a.m. to schedule such further hearings as may be required in accordance with this Memorandum Opinion. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/3339054/ | [EDITOR'S NOTE: This case is unpublished as indicated by the issuing court.] MEMORANDUM RE: MOTION FOR SUMMARY JUDGMENT
The plaintiff in this case claims to have fallen in a K-Mart store when she slipped on a scarf and was injured. The defendant brings this Motion for Summary Judgment claiming there is no genuine issue of material fact. The defendant claims that the plaintiff does not know what caused her to fall and therefore she will be unable to prove that the defendant had notice of the claimed defect.
In deciding this motion, the court must accept the allegations of the complaint as true, Yanow v. Teal Industries178 Conn. 262, and must view the evidence in the light "most favorable to the non moving party" Strada v. Connecticut Newspapers, Inc., 193 Conn. 313, 317, 477 A.2d 1005. The defendant claims that the plaintiff did not see the scarf as alleged and testified that she did not see it on pages 14, 17, 19, 57 of her deposition. However on page 13 of her deposition she testified "I did not see a scarf hanging on the floor: but there was a scarf hanging on the ground" and further on the same page at line 18 she testified "I didn't see it, and I slipped on the scarf, and my foot hit it".
As to this motion I must accept the plaintiffs allegations contained in paragraph 5, b and as to notice, the jury will decide whether the defendants inspection procedure was adequate and/or whether the defendant failed to maintain "a proper number of clerks in the store to insure that fallen clothing does not remain on the floor" as alleged in paragraph 5 f of the complaint. These are fact questions that must be resolved by jury. In addition the plaintiff has alleged that the condition surrounding the clothing and accessory rack was "hazardous" and faults, the defendant in paragraph 5, d for its failure to warn. Whether the condition surrounding the rack was "hazardous" which necessitated a duty to warn is also fact question for the jury to decide.
There are factual questions to be determined and therefore this court must deny the defendants Motion for Summary Judgment.
PELLEGRINO (J) CT Page 3403 | 01-03-2023 | 07-05-2016 |
https://www.courtlistener.com/api/rest/v3/opinions/1536997/ | 979 A.2d 982 (2009)
ALASKA STRUCTURES, INC., Petitioner
v.
DEPARTMENT OF GENERAL SERVICES, Respondent.
No. 2185 C.D. 2008
Commonwealth Court of Pennsylvania.
Submitted on Briefs April 24, 2009.
Decided August 24, 2009.
*984 Robert A. Graci, Harrisburg, for petitioner.
Michael C. Barrett, Sr. Counsel and Harry R. Walter, III, Asst. Counsel, Harrisburg, for respondent.
BEFORE: LEADBETTER, President Judge, SIMPSON, Judge, and FRIEDMAN, Senior Judge.
OPINION BY President Judge LEADBETTER.
Alaska Structures, Inc. (Alaska Structures) petitions for review of the November 3, 2008 order of the Deputy Secretary of the Department of General Services for Administration and Procurement, denying Alaska Structures' protest challenging the award of a contract by the Department of General Services (DGS) to EMS Innovations, Inc. (EMS) for the purchase of eight fifty-bed mobile/portable hospital system units, which are capable of being dispatched to disaster sites for emergency medical care.[1]
Alaska Structures challenges the Deputy Secretary's determination that DGS procured the units through "cooperative purchasing" pursuant to Section 1902 of the Commonwealth Procurement Code (Procurement Code), as amended, 62 Pa.C.S. § 1902, not as an "emergency procurement" under Section 516 of the Procurement Code, 62 Pa.C.S. § 516. Alaska Structures also questions DGS' authority to procure the units pursuant to Section 1902 of the Procurement Code and to issue an "emergency" purchase order to encumber and preserve the federal grant before expiration of the grant period. After careful review of the record and the relevant provisions of the Procurement Code and the federal acquisition regulations, the Court concludes that Alaska Structures' arguments are without merit and must be rejected.
I.
The record reveals the following relevant *985 facts.[2] In September 2006, the United States Department of Health and Human Services (HHS) awarded the Pennsylvania Department of Health, Office of Public Health Preparedness, a federal grant in the amount of $18,776,677 for a "Bioterrorism-Hospital Preparedness Program." Reproduced Record (R.R.) at 224a. In November 2007, HHS extended the 12-month grant period to August 31, 2008, and increased the grant amount to $21,556,281 to provide supplemental funding for "Pandemic Influenza, Medical Surge Capacity and Capability." R.R. at 240a. In March and May 2008, the Department of Health sought HHS' permission to redirect the grant funds "to purchase eight 50-bed mobile hospitals" and also requested further extension of the grant period to August 31, 2009. R.R. at 244a and 257a.
In June 2008, DGS' Bureau of Procurement (Bureau) denied the Department of Health's request that the portable hospital system units be purchased through a no-bid, sole source procurement. The Bureau then issued an Invitation for Bids to procure eight portable hospital system units on behalf of the Department of Health. After Alaska Structures filed a protest raising ambiguities in the Invitation for Bids, the Bureau cancelled the Invitation and denied Alaska Structures' protest as moot on August 8, 2008. In the meantime, HHS issued a notice of award on July 15, 2008, permitting the Department of Health to redirect the funds "towards the purchase of mobile medical facilities" and extending the grant period to August 31, 2009 for "PANDEMIC INFLUENZA SUPPLEMENTAL FUNDS ONLY." R.R. at 261a (emphasis in original).
After cancelling the Invitation for Bids, the Bureau investigated the possibility of purchasing the portable hospital system units through the Federal Disaster Recovery Purchasing Program administered by the General Services Administration (GSA). Under that program, state and local governments are authorized to procure products, services and construction necessary to facilitate recovery from a major disaster, terrorism or nuclear, biological, chemical, or radiological attack from contractors listed in the GSA Schedules, including the Federal Supply Schedule 84 (Schedule 84) ("Total Solutions for Law Enforcement, Security, Facilities Management, Fire, Rescue, Clothing, Marine Craft, and Emergency/Disaster Response").
On August 12, 2008, the Bureau requested a quote for eight fifty-bed portable hospital system units from three contractors listed in Schedule 84: First Line Technology, Global Protection and EMS.[3] First Line Technology declined to submit a quote. On August 15, 2008, Global Protection and EMS each submitted a quote in the amount of $6,642,555.79 and $3,712,525.28, respectively. Determining, in conjunction with the Department of Health, that EMS' quote was the best value, the Bureau prepared a purchase order. At that time, the Bureau believed that it was unlikely to obtain approval of the purchase order from the Office of General *986 Counsel and the Office of Attorney General before the grant period expired on August 31, 2008. The Bureau accordingly issued an "emergency" purchase order on August 28, 2008, to encumber and preserve the federal funds before the grant period expiration.
Alaska Structures timely filed a protest, alleging, inter alia, that DGS limited bid competition by failing to request a quote from Alaska Structures and that the issuance of the "emergency" purchase order was not justified under Section 516 of the Procurement Code. Section 516 authorizes "an emergency procurement when there exists a threat to public health, welfare or safety or circumstances outside the control of the agency create an urgency of need which does not permit the delay involved in using more formal competitive methods." [Emphasis added.] The Bureau stayed the procurement proceeding pending Alaska Structures' protest.
The Deputy Secretary denied Alaska Structures' protest. She distinguished "the method of award of the purchase order" and "the method of issuance of the purchase order." Deputy Secretary's November 3, 2008 Decision at 3. She stated that the method of award utilized by the Bureau to purchase the portable hospital system units "was procurement from a [GSA] Federal Supply Schedule" pursuant to Section 1902 of the Procurement Code. Id. She determined that DGS properly issued the emergency purchase order to prevent the Department of Health from losing the federal funds due to expiration of the grant period on August 31, 2008. Alaska Structures appealed the Deputy Secretary's decision to this Court. DGS subsequently issued a non-emergency purchase order and notified Alaska Structures' counsel that the second order had been fully executed, approved and sent to EMS and that the order "supersede[d] and terminate[d]" the previous emergency purchase order. R.R. at 456a.
II.
Alaska Structures first argues that DGS procured the units as an "emergency procurement" without circumstances justifying such procurement under Section 516 of the Procurement Code. Alaska Structures asserts that DGS should not be permitted to invoke Section 516 when any urgent need for emergency procurement was solely due to its poor procurement planning. DGS counters that the procurement was made through cooperative purchasing under Section 1902 of the Procurement Code, not as an "emergency procurement" under Section 516. While conceding that "the federal government extended the deadline for expenditure of the federal grant monies until August 2009," DGS' Brief at 14, DGS characterizes the "emergency purchase order" as merely a funding document specifying materials to be purchased, which was later rescinded and replaced with a non-emergency purchase order.
Article 3, Section 22 of the Pennsylvania Constitution provides that, "[t]he General Assembly shall maintain by law a system of competitive bidding under which all purchases of materials, printing, supplies or other personal property used by the government of this Commonwealth shall so far as practicable be made." Pursuant to this constitutional mandate, all Commonwealth agency contracts must be awarded by competitive sealed bidding "[u]nless otherwise authorized by law." Section 511 of the Procurement Code, as amended, 62 Pa. C.S. § 511. Section 1902 of the Procurement Code provides in relevant part:
A public procurement unit may either participate in, sponsor, conduct or administer a cooperative purchasing agreement for the procurement of any *987 supplies, services or construction with one or more public procurement units or external procurement activities in accordance with an agreement entered into between the participants. [DGS] is authorized to enter into cooperative purchasing contracts solely for the use of local public procurement units or State-affiliated entities. [Emphasis added.]
The term "cooperative purchasing" is defined as "[p]rocurement conducted by or on behalf of more than one public procurement unit or by a public procurement unit with an external procurement activity." Section 1901 of the Procurement Code, as amended, 62 Pa.C.S. § 1901, 62 Pa.C.S. § 1901. An "external procurement activity" is "[a] buying organization not located in this Commonwealth which if located in this Commonwealth would qualify as a public procurement unit" Id. Under the definition, "[a]n agency of the United States is an external procurement activity." Id.
The federal acquisition procedures are set forth in 48 C.F.R. § 8.405-1(a) and (c)(1), which provides in relevant part:
(a) Ordering activities shall use the procedures of this subsection when ordering supplies and services that are listed in the schedules contracts at a fixed price. . . .
. . . .
(c) . . . (1) Ordering activities shall place orders with the schedule contractors that can provide the supply or service that represents the best value. Before placing an order, an ordering activity shall consider reasonably available information about the supply or service offered under MAS [multiple award schedule] contracts by surveying at least three schedule contractors through the GSA Advantage! on-line shopping service, or by reviewing the catalogs or pricelists of at least three schedule contractors . . . . [Emphasis added.]
A determination of best value should be made by considering many factors, such as prices, contractor's past performance, warranty considerations, maintenance availability and delivery terms. 48 C.F.R. § 8.405-1(c)(3). Any "orders placed against the Federal Supply Schedules contracts. . . using the procedures in this subpart, are considered to be issued using full and open competition . . . ." 48 C.F.R. § 8.404(a) (emphasis added).
DGS requested a quote from the three Schedule 84 contractors "under the GSA Disaster Recovery Program." R.R. at 1a. After evaluating the quotes, DGS determined that EMS' quote was the best value for the Commonwealth. The Deputy Secretary found, and Alaska Structures does not dispute, that DGS complied with the federal acquisition procedures in purchasing the units. The overwhelming evidence in the record thus establishes that DGS purchased the units through cooperative purchasing from Schedule 84 pursuant to Section 1902 of the Procurement Code.
Further, Alaska Structures' assertion that the chief procurement officer conceded that DGS made the procurement as an "emergency procurement" under Section 516 of the Procurement Code is not supported by the record. In his September 17, 2008 response to Alaska Structures' protest, he clearly distinguished the procurement itself and the subsequently issued purchase order. He stated:
[T]he initial procurement was actually not done as an emergency procurement; rather it was a purchase off a GSA Federal Supply Schedule. Such procurements are authorized by Section 1902 of the Procurement Code . . . . Since the procurement was from a GSA Schedule, the Bureau followed all requirements *988 set forth in FAR [federal acquisition regulations] 8.405-1. . . .
The resulting purchasing document from the solicitation of quotes and best value evaluation was an Emergency Purchase Order. This was done because a portion of the grant funds to be used for the units was going to expire.. . . If the money had lapsed, the Department of Health would not have been able to obtain sufficient units to provide emergency response and recovery services throughout the Commonwealth. [Emphasis added.]
R.R. at 127a-128a. In his subsequent October 3, 2008 response to the Deputy Secretary's request for additional information, the chief procurement officer reiterated that the procurement itself was not an emergency procurement and that "[o]nly the final document was done as an emergency to meet the August 31, 2008 expiration date to obligate (encumber) the funds." R.R. at 222a.
As the Deputy Secretary explained in her final decision:
The DGS Bureau of Procurement prepared a purchase order for the portable hospital bed units based upon the EMS Innovations' quote but there was insufficient time for the order to be reviewed and approved by all necessary Commonwealth approvals before the August 31, 2008 expiration date of the grant. The DGS Bureau of Procurement issued emergency Purchase Order XXXXXXXXXX to encumber the funds and authorize EMS Innovations to proceed with performance pending final review and approval of the contract by the Office of General Counsel and Office of Attorney General.
DGS did not award the purchase order pursuant to Section 516 of the Commonwealth Procurement Code, 62 Pa. C.S. Section 516. Rather, the DGS Bureau of Procurement determined that, since funding would be lost if funds were not obligated by August 31, 2008, there was insufficient time for the purchase order to be processed using the normal review and approval process. Accordingly, DGS authorized the issuance of an emergency purchase order.
Decision of Deputy Secretary Anne E. Rung, November 3, 2008, p. 4. In making the primary argument upon which this appeal is predicated, Alaska Structures conflates the procurement process and the payment of chosen contractors. What it fails to acknowledge is the fundamental difference between an emergency procurement, which deals with a method of selecting a vendor (and operates as an exception to the general procurement rules) and the emergency purchase order used here, which served to encumber funds for payment of the selected vendor while Commonwealth counsel reviewed the final contracts. Clearly, the purchase order did not fall within the ambit of Section 516.[4] Moreover, once this fundamental distinction is recognized, it becomes unclear how Alaska Structures was in any way harmed by the emergency encumbrance of funds, as opposed to the detriment it suffered *989 from the procurement process, through which another vendor was selected.[5]
Alaska Structures also questions DGS' authority to "bifurcate" the procurement proceeding by initially issuing the emergency purchase order and later rescinding and replacing it with a non-emergency purchase order. In support, Alaska Structures relies on Susquehanna Area Regional Airport Authority v. Pennsylvania Public Utility Commission, 911 A.2d 612 (Pa.Cmwlth.2006), which held that as creatures of statutes, agencies may exercise only those powers conferred by statute and "'cannot, by mere usage, invest itself with authority or powers not fairly or properly within the legislative grant. . . .'" Id. at 617 n. 8 [quoting Commonwealth v. Am. Ice Co., 406 Pa. 322, 332, 178 A.2d 768, 773 (1962)].[6] Once again, Alaska Structures ignores the fact that the initial purchase order was issued after the procurement/selection process was complete. The only irregularity with respect to that purchase order was that the final contracts had not yet been reviewed and approved by the Office of General Counsel and Attorney General, and its only effect was to encumber the funds from the soon to expire federal grant while that review was effectuated.
It is well-settled that "an administrative agency is invested with the implied authority necessary to the effectuation of its express mandates" imposed by statute. Dep't of Transp. v. Beam, 567 Pa. 492, 496, 788 A.2d 357, 360 (2002). Section 321(1) of the Procurement Code, 62 Pa.C.S. § 321(1), grants DGS broad powers and duties to, inter alia, "[p]rocure or supervise the procurement of all supplies, services and construction needed by executive agencies and those independent agencies for which [DGS] acts as purchasing agency." DGS' authority to take necessary *990 steps to preserve the federal funds used to purchase the units was necessarily implied from its broad authority granted by the Procurement Code.
III.
Alaska Structures next argues that DGS lacked authority to procure the units under Schedule 84 through cooperative purchasing. According to Alaska Structures, Section 1902 of the Procurement Code requires a preexisting written agreement for cooperative purchasing between DGS and GSA because Section 1902 authorizes a procurement unit to participate in a cooperative purchasing agreement "in accordance with an agreement entered into between the participants." DGS posits, on the other hand, that the term "agreement" in Section 1902 refers to an agreement between GSA and GSA Schedule contractors and that DGS was not required to enter into a written agreement with GSA to procure the units from the Schedule 84 contractors.
It is axiomatic that the court must consider, inter alia, "[t]he consequences of a particular interpretation" in ascertaining legislative intent. Section 1921(c)(6) of the Statutory Construction Act of 1972, 1 Pa. C.S. § 1921(c)(6). Further, interpretation of a statute by an administrative agency charged with statutory duties "is given controlling weight unless it is clearly erroneous." Riverwalk Casino, L.P. v. Pa. Gaming Control Bd., 592 Pa. 505, 530, 926 A.2d 926, 940 (2007).
GSA "authorizes" and "encourage[s]" state and local government entities "to use GSA's Schedule Ordering Procedures to ensure the benefit of receiving the best value from GSA Schedule contractors" and "to purchase products and services from contracts awarded under . . . Schedule 84." R.R. at 40a, 42a. The Bureau attached to the request for bids a list of supplies necessary for the units and stated that "[t]he prices offered . . . must be in accordance with your offered prices that are listed under the GSA Disaster Recovery Program." R.R. 1a. The way in which cooperative purchase agreements are structured is for one government agency to negotiate contracts with a number of vendors, and then make that vendor list available to other agencies, which can take advantage of the negotiated price terms. This lends support to the argument that, the critical and necessary "agreement" referenced in Section 1902 is that between the sponsoring agency and the vendors, not an agreement between the sponsoring and participating agencies. Even if such an inter-agency agreement were required, we believe that the essentials of an agreement exist where GSA has established the Disaster Recovery Purchasing Program and made it available to state and local agencies like DGS, and that DGS has accepted GSA's offer by its participation and by complying with the required federal acquisition procedures. Finally, nothing in Section 1902 requires that the referenced agreement be in writing,[7] and Alaska *991 Structures fails to cite any provision in the federal acquisition regulations requiring GSA to enter into a written agreement with state and local governments before authorizing them to procure products and services from GSA Schedules contractors through cooperative purchasing. We conclude, therefore, that DGS' interpretation of the phrase "in accordance with an agreement entered into between the participants" in Section 1902 is reasonable, and thus entitled to controlling weight. Accordingly, the requirements of Section 1902 have been satisfied.
IV.
Finally, Alaska Structures argues that DGS used cooperative purchasing to circumvent competitive bidding. Section 1908 of the Procurement Code provides:
Where the public procurement unit or external procurement activity administering a cooperative purchase complies with the requirements governing its procurement of supplies, services and construction, any public procurement unit participating in the purchase shall be deemed to have complied with the requirements governing its procurement of supplies, services and construction. Public procurement units may not enter into a cooperative purchasing agreement for the purpose of circumventing this part. [Emphasis added.]
Alaska Structures is not suggesting that GSA failed to comply with the federal regulations in entering into cooperative purchasing contracts with the Schedule 84 contractors. When products and services are procured under the Federal Supply Schedules contracts in compliance with the required procedures, such procurement is considered to have met the "full and open competition" requirement. 48 C.F.R. § 8.404(a). As the Deputy Secretary found, DGS complied with all of the procedures required by 48 C.F.R. § 8.405-1 in procuring the units under Schedule 84. GSA encouraged the state and local governments to procure products or services from GSA Schedule contractors to receive the best value. DGS determined that the quote received from EMS was the best value for the Commonwealth. The record does not support Alaska Structures' argument that DGS purchased the units under Schedules 84 to circumvent the competitive bidding process.
Accordingly, the order of the Deputy Secretary denying Alaska Structures' protest is affirmed.
ORDER
AND NOW, this 24th day of August, 2009, the order of the Deputy Secretary of the Department of General Services for Administration and Procurement in the above-captioned matter is hereby AFFIRMED.
NOTES
[1] By a memorandum opinion and order dated February 17, 2009, the Court denied Alaska Structures' application for an immediate stay of DGS' order pending the petition for review.
[2] Section 1711.1(e) of the Procurement Code, 62 Pa.C.S. § 1711.1(e), provides that "[t]he head of the purchasing agency or his designee. . . may, at his sole discretion, conduct a hearing" on a protest. The Deputy Secretary decided Alaska Structures' protest based on the record without a hearing.
[3] Neither Alaska Structures nor its subsidiary, Blu-Med Response Systems, was listed as one of Schedule 84 contractors. However, Alaska Structures was listed in the GSA Schedule 78, under which state governments are permitted to purchase emergency and disaster response systems from a contractor listed in Schedule 84.
[4] Alaska Structures acknowledges that specific procedures set forth in Part II, Chapter 6 of the DGS Procurement Handbook must be followed for a procurement of products or services under Section 516 of the Procurement Code, including the chief procurement officer's prior approval on a completed "Emergency Procurement ('EP') Approval Request" form. See Appendixes D1-5 and E1-2 to Alaska Structures' Reply Brief. The record shows that none of those procedures was taken in this matter, which further buttresses DGS' position that it did not procure the units as an emergency procurement under Section 516.
[5] We further note that the record fails to establish Alaska Structures' claim that the lack of advance procurement planning by DGS and the Department of Health created the need for the emergency purchase order. HHS approved supplemental funding for pandemic influenza, medical surge capacity and capability in November 2007. In March 2008, the Department of Health requested permission to redirect the funds "to purchase eight 50-bed mobile hospitals" R.R. at 244a. HHS did not approve the request until July 15, 2008. After cancelling the Invitation for Bids after Alaska Structures filed the protest, the Bureau requested quotes from the Schedule 84 contractors on August 12. The record fails to show that DGS' failure to make reasonable efforts to procure the units necessitated the need for the emergency purchase order. Alaska Structures' reliance on GTECH Corporation v. Department of Revenue, 965 A.2d 1276 (Pa.Cmwlth.2009), is inapposite. In that case, the Department of Revenue failed to take immediate action on the bid protest and failed to stay contract negotiations pursuant to Section 1711(k) of the Procurement Code, 62 Pa.C.S. § 1711.1(k), which requires a stay of the procurement proceeding upon filing of a protest "unless and until the head of the purchasing agency. . . makes a written determination that the protest is clearly without merit or that award of the contract without delay is necessary to protect substantial interests of the Commonwealth." The GTECH Court held that, "[a]n agency cannot invoke the exception when its own violation of the Procurement Code, i.e., its failure to act promptly on the bid protest, has caused the need for the exception." GTECH, 965 A.2d at 1287. Unlike in GTECH, DGS acted promptly on the protest and stayed the proceeding pending the protest. GTECH is factually distinguishable and, therefore, its holding is inapplicable to this case.
[6] DGS argues that the propriety of the emergency purchase order has been rendered moot because that order was rescinded and replaced with the non-emergency purchase order. We disagree that the issue is moot, because Alaska Structures challenges DGS' authority to do just thatissue an emergency purchase order before contract review is complete and then cure any defect by substituting a subsequent non-emergency order.
[7] The Procurement Code defines a "contract" as "[a] type of written agreement . . . for the procurement or disposal of supplies, services or construction and executed by all parties.. . ." Section 103 of the Procurement Code, as amended, 62 Pa.C.S. § 103. The Procurement Code, however, neither defines "cooperative purchasing agreement" or "agreement" nor requires an agreement to be in writing. Compare the definitions of "medical assistance provider agreement" and "participating provider agreement," requiring the agreements to be "written agreement[s]." Id. Black's Law Dictionary 74 (8th ed. 2004) defines the term "agreement" to include "[a] mutual understanding between two or more persons about their relative rights and duties regarding past or future performances." The term "`agreement,' although frequently used as synonymous with the word `contract,' is really an expression of greater breadth of meaning and less technicality"; thus, "[e]very contract is an agreement; but not every agreement is a contract." Id. [quoting 2 Stephen's Commentaries on the Laws of England 5 (L. Crispin Warmington ed., 21st ed.1950)]. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536996/ | 27 B.R. 146 (1983)
In re Thomas Edwin POWELL and Amy Ann Powell, Debtors.
Bankruptcy No. 82-02653-S-11.
United States Bankruptcy Court, W.D. Missouri, S.D.
February 17, 1983.
James I. Singer, St. Louis, Mo., for Local 36, Sheet Metal Workers Int'l Ass'n.
John Newberry, Springfield, Mo., for debtors.
*147 MEMORANDUM OPINION AND ORDER
JOEL PELOFSKY, Bankruptcy Judge.
On November 1, 1982 Local Union No. 36, Sheet Metal Workers International Association, AFL-CIO, filed an unfair labor practice charge under § 8(a)(1), (3)(5) and (d) of the National Labor Relations Act, § 158(a)(1)(3)(5) and (d), Title 29, U.S.C. The Union alleged that Tom Powell & Son, Inc., Tom Powell Heating Co. and Tom Powell, alter egos, violated the Act by discharging an employee for union membership and activities.
At the time the complaint was filed, Tom Powell & Son, Inc., and Tom Powell as an individual had filed for relief under Chapter 11 of the Bankruptcy Code. The Union was fully aware of these filings. In re Tom Powell & Son, Inc., 22 B.R. 657, 7 C.B.C.2d 145 (Bkrtcy.W.D.Mo.1982).
Tom Powell individually now moves the Court to cite the Union for contempt for filing the charge in violation of the automatic stay. The Union moves the Court to dismiss the motion as alleging no grounds for relief.
The alleged violation occurred on October 28, 1982, and thus took place, if at all, after the petition was filed. With some exceptions the automatic stay provisions of Section 362 of the Code, Title 11, U.S.C., do not reach post-petition claims. See, for example, this Court's opinion in Prime, Inc. v. Action Shippers Cooperative, Inc., 81-03200-S-11 and 82-1231-S-11 (unpublished January 10, 1983) and In re York, 13 B.R. 757 (Bkrtcy.Me.1981).
Section 362 does stay, without regard to when the claim arose, "any act to obtain possession of property of the estate or of property from the estate" and "any act to create, perfect, or enforce any lien against property of the estate." Section 362(a)(3) and (4). Since a proceeding before the National Labor Relations Board could result in an award of back pay, the proceeding could be considered an act to obtain possession of estate property or to create a lien, especially at the time an attempt was made to collect the judgment. The proceeding before the Labor Board, or at least part of it, could arguably fall within the reach of the automatic stay.
The Union argues that such a proceeding is not stayed as falling within the exception of the Section 362(b)(4) allowing "the commencement or continuation of an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power." But as State of Missouri v. U.S. Bankruptcy Court, 647 F.2d 768 (8th Cir.1981) teaches, the "term police or regulatory power refers to the enforcement of state laws affecting health, welfare, morals, and safety, but not regulatory laws that directly conflict with the control of the res or property by the bankruptcy court." 647 F.2d at 776.
An unfair labor practice proceeding has two purposes. One is to enforce the national labor policy established by law. The other is to grant relief to particular parties who may have suffered damage by reason of a violation of the law. Remedies are both prospective, such as the posting of notices or agreements as to future conduct, and retroactive, such as the awarding of back pay. Vindication of the policies of the Act may require remedies of both kinds.
Prospective remedies, usually not pecuniary, can be dealt with in a reorganization. Retroactive remedies, usually pecuniary, create a different problem. Such a remedy represents a claim which must be dealt with by the bankruptcy court which may or may not allow it. Compare Brown v. Felsen, 442 U.S. 127, 99 S. Ct. 2205, 60 L. Ed. 2d 767 (1979) where the Supreme Court pointed out that judgments of other courts may not bind the bankruptcy court if the grounds for such judgment are not clearly set out.
The Courts are divided as to whether proceedings before the Labor Board are stayed by a bankruptcy. Compare NLRB v. Evans Plumbing Co., 639 F.2d 291 (5th Cir. 1981) and In re Brada Miller Freight Systems, Inc., 16 B.R. 1002, 6 C.B.C.2d 375 (Dist.Ct.N.D.Ala.1981) with Matter of Theobald Industries, Inc., 16 B.R. 537 (Bkrtcy.N. J.1981) and In re Tucson Yellow Cab Company, Inc., 21 B.R. 166 (Bkrtcy.Ariz.1982). For an enlightening discussion of the policy *148 considerations, see 2 Broken Bench Review No. 1 (January 1983).
The Court concludes that the automatic stay should not be enforced in the context of this particular proceeding before the Labor Board except as to the allowance of any claim for pecuniary relief. There are two reasons. First this is a post-petition cause of action which may or may not be a claim against a debtor. There is a non-debtor entity among the parties charged. Second, the Labor Board is that agency charged with enforcement of national labor policy as expressed in the Act. Amalgamated Workers v. Edison Co., 309 U.S. 261, 60 S. Ct. 561, 84 L. Ed. 738 (1940). It has developed an expertise on the subject. This Court should, therefore, abstain from interrupting proceedings before such an agency except insofar as those proceedings threaten the assets of the estate. Nathanson v. NLRB, 344 U.S. 25, 73 S. Ct. 80, 97 L. Ed. 23 (1952); NLRB v. Evans Plumbing Co., supra.
The Motion for Citation for Contempt is DENIED. The Motion to Dismiss is SUSTAINED. The proceeding before the Labor Board may proceed to judgment but the parties are enjoined from the collecting of any pecuniary judgment against debtors pending further proceedings in this Court. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1536995/ | 27 B.R. 445 (1983)
In re Laverne James MURRAY, Eva Jean Murray, Debtors.
Robert H. WALDSCHMIDT, Trustee, Plaintiff,
v.
FORD MOTOR CREDIT COMPANY, Laverne James Murray, and Eva Jean Murray, Defendants.
Bankruptcy No. 382-00586, Adv. No. 382-0298.
United States Bankruptcy Court, M.D. Tennessee, Nashville Division.
February 8, 1983.
*446 Robert H. Waldschmidt, Cosner, Waldschmidt & Crocker, Nashville, Tenn., Trustee.
Kevin J. Jones, Loewenstein, Ziegler & Buffaloe, Nashville, Tenn., for Ford Motor Credit Co.
MEMORANDUM
KEITH M. LUNDIN, Bankruptcy Judge.
This matter is before the court on the trustee's complaint to avoid a preferential transfer. The trustee alleges that the debtors' transfer of a security interest in an automobile is an avoidable preference. Ford Motor Credit Company denies that the transfer was preferential maintaining that it was not made on account of an antecedent debt, and that the transfer was a "contemporaneous exchange" excepted from the trustee's avoiding powers. After review of the entire record and the applicable authority, the court concludes that the debtors' transaction with Ford Motor Credit Company created an avoidable preference. Furthermore, the "contemporaneous exchange" exception is not available to expand the 10-day perfection period specifically provided for enabling loans and does not protect the transfer from avoidance. Accordingly, the proceeds from the sale of the automobile must be turned over to the trustee for administration.[1]
The following constitute findings of fact and conclusions of law required by Rule 752 of the Federal Rules of Bankruptcy Procedure.
The facts are not disputed. The debtors, Laverne James Murray and Eva Jean Murray, purchased a 1981 Lincoln Mark VI automobile from Preston Lincoln-Mercury on March 7, 1981. A certificate of title was issued by the Tennessee Department of Motor Vehicles noting Ford Motor Credit Company ("FMCC") as first lienholder and Laverne Murray as owner.
The Murrays experienced numerous problems with the automobile. After unsuccessfully attempting to remedy the defects, the dealership offered to substitute a 1981 Cadillac Fleetwood Brougham. The Murrays consented and FMCC approved the substitution under the terms of the original loan arrangement. On January 22, 1982, the Murrays executed a new security agreement pledging the Cadillac as collateral. The car was delivered to the Murrays at the latest on January 26, 1982.[2] On January 25, 1982, the dealership employee responsible for obtaining lien notations on certificates of title resigned. A replacement was hired on February 1, 1982 and began working February 8, 1982. The new clerk applied for a certificate of title noting FMCC as lienholder on February 9, 1982, 18 days after the grant of the security interest and at least 14 days after delivery of the car.
On February 26, 1982, the debtors filed a petition under Chapter 7 of the Bankruptcy *447 Code. The debtors listed FMCC as a secured creditor holding a security interest in the automobile. FMCC filed a proof of claim evidencing secured indebtedness of $21,894.34. Mr. Murray surrendered the automobile to FMCC.
The trustee subsequently initiated an adversary proceeding to set aside FMCC's security interest as a preferential transfer.
The Bankruptcy Code prescribes six elements which must be proven before a transfer is preferential: (1) a transfer of property of the debtor; (2) to or for the benefit of a creditor; (3) for or on account of an antecedent debt; (4) made while the debtor was insolvent; (5) made within 90 days before the date of the filing of a petition; (6) that enables the creditor to receive more than it would have received if the transfer had not been made and the case were a liquidation case under Chapter 7. 11 U.S.C.A. § 547(b) (West 1979). The burden of proof is on the trustee to demonstrate each and every requirement, and if the proof is lacking on any element, the transfer may not be avoided. Eggleston v. Third National Bank, 19 B.R. 280, 282 (Bkrtcy.M.D.Tenn.1982). See also Steel Structures, Inc. v. Star Manufacturing Co., 466 F.2d 207, 216 (6th Cir.1972); 2 Norton Bankr.L. & Prac. § 32.12 at 37 (1981).
The existence of five of the six preference elements is not at issue. FMCC concedes that a transfer of the debtors' property occurred, that the transfer benefited FMCC and allowed FMCC to receive more than it would have under the provisions of Chapter 7 if the transfer had not been made and that the transfer occurred within 90 days before bankruptcy during which time the debtor is presumed to be insolvent.[3]
FMCC disputes the trustee's contention that the transfer was made on account of an antecedent debt. FMCC acknowledges that the debt in question was incurred when the Murrays executed the security agreement on January 22, 1982. The issue is when did the "transfer" occur for purposes of the preference calculation.
Under the Bankruptcy Code, the date of transfer is determined with reference to the date a security interest is "perfected." 11 U.S.C.A. § 547(e)(2).[4] The transfer of a security interest in personal property (here, an automobile) is perfected when a creditor cannot acquire a judicial lien that is superior to the lien of the transferee. 11 U.S.C.A. § 547(e)(1)(B) (West 1979). Under Tennessee law, a creditor cannot obtain a superior judicial lien on a motor vehicle once the transferee has satisfied the requirements for recording the lien on the certificate of title as set out in Tenn.Code Ann. § 55-3-101, et seq. (1980 repl. vol.). FMCC fulfilled these requisites when the Department of Motor Vehicles recorded the lien on debtors' automobile on February 9, 1982. Thus, for purposes of the preference statute, the "transfer" of the debtors' property to FMCC took place on February 9, 1982.
FMCC argues that the "transfer" took place before February 9 because no judicial lien creditor could have acquired a superior lien between January 22 (or January 26) and February 9 since FMCC's security interest was continuously effective and relates back to the date the security agreement *448 was signed. FMCC relies on Tenn. Code Ann. § 47-9-301(2) which provides:
If the secured party files with respect to a purchase money security interest before or within twenty (20) days after the collateral comes into possession of the debtor, he takes priority over the rights of a transferee in bulk or of a lien creditor which arise between the time the security interest attaches and the time of filing.
FMCC is correct that it may have priority over any other party asserting a lien under state law. However, timely perfection under state law does not necessarily provide protection from the creation of a possible preference under the Bankruptcy Code.
Although Tennessee law is appropriate for determining the date of perfection, the date of transfer is governed by the provisions of § 547. "The preference statute has its own rules . . . Under the preference statute perfection relates back only as allowed by it. The exception in § 546(b) for state laws allowing relation back does not apply to the preference statute." Ford Motor Credit Co. v. Ken Gardner Ford Sales, Inc., 10 B.R. 632, 643 (Bkrtcy.E.D.Tenn. 1981).[5] Section 547 provides that if the security interest is perfected within 10 days after the transaction took effect between the parties, then the date of the transaction is considered to be the date of transfer for determining whether a preference has occurred. 11 U.S.C.A. § 547(e)(2)(A) (West 1979) (See note 4 supra.) If a security interest is perfected after 10 days, however, the transfer is considered to be made on the date of perfection. For purposes of § 547, February 9, 1982, the date FMCC's security interest was perfected, is the date of transfer. The transfer, coming 18 days after the creation of the debt and at least 14 days after delivery of the car, is outside the relation back period provided under the Bankruptcy Code and is, therefore, on account of an antecedent debt.
Finding all the operative elements of a preference present in the instant case, FMCC's security interest is avoidable unless the transaction comes within one of the savings provisions delineated in § 547(c). The trustee argues that the only exception available to FMCC is 11 U.S.C.A. § 547(c)(3) (West 1979). Section 547(c)(3) provides:
(c) The trustee may not avoid under this section a transfer
(3) of a security interest in property acquired by the debtor
(A) to the extent such security interest secures new value that was
(i) given at or after the signing of a security agreement that contains a description of such property as collateral;
(ii) given by or on behalf of the secured party under such agreement;
(iii) given to enable the debtor to acquire such property; and
(iv) in fact used by the debtor to acquire such property; and
(B) that is perfected before 10 days after such security interest attaches.
This provision has come to be referred to as the "enabling loan" exception. There is little question that the transfer involved in the present case is an enabling loan. The security interest was taken to secure new value at the time the agreement was signed, was taken to enable the debtor to obtain the automobile, and actually resulted in acquisition of the automobile.[6] However, because FMCC did not perfect its security interest within the prescribed 10 days, § 547(c)(3) does not protect the transfer from avoidance.
FMCC contends, however, that its security interest is protected by 11 U.S.C.A. § 547(c)(1) which provides:
(c) The trustee may not avoid under this section a transfer
(1) to the extent that such transfer was
*449 (A) intended by the debtor and the creditor to or for whose benefit such transfer was made to be a contemporaneous exchange for new value given to the debtor; and
(B) in fact a substantially contemporaneous exchange.
This section has come to be referred to as the "contemporaneous exchange" exception. The courts have been struggling with the relationship between the contemporaneous exchange exception to the preference power and the enabling loan exception discussed above. Specifically, to come within the enabling loan exception, the creditor must perfect its security interest within 10 days after attachment. No such time limit is specified for the contemporaneous exchange exception. To support the application of § 547(c)(1) to enabling loan cases, FMCC cites several decisions originating with Judge Kelley of the Bankruptcy Court for the Eastern District of Tennessee. See Jahn v. First Tennessee Bank (In re Burnette), 14 B.R. 795 (Bkrtcy.E.D.Tenn.1981); Ray v. Security Mutual Finance Corp. (In re Arnett), 13 B.R. 267 (Bkrtcy.E.D.Tenn.1981) aff'd, 17 B.R. 912 (E.D.Tenn.1982); See also General Motors Acceptance Corp. v. Martella, 22 B.R. 649 (Bkrtcy.D.Colo.1982) (adopting Arnett in applying § 547(c)(1) to except from avoidance an enabling loan perfected after 10 days). Judge Wilson explained the alleged interrelationship between § 547(c)(1) and § 547(c)(3) in affirming the bankruptcy court's holding in In re Arnett:
. . . [A]ny security interest perfected in the ten day grace period will be treated as being "in fact substantially contemporaneous," while it will be a question of fact as to whether any transaction extending beyond these limits is "in fact substantially contemporaneous" . . . When delay beyond the ten day grace period is satisfactorily explained . . . and no risk of fraud or misrepresentation is occasioned by the delay, the statute should not prevent the courts from being allowed to determine that the transaction was substantially contemporaneous.
17 B.R. at 914. This application of the contemporaneous exchange section to enabling loan situations in effect creates a "good faith exception" to the 10-day perfection period provided by § 547(c)(3). The adherents to this view seek a factual explanation as to why perfection did not occur within 10 days. If a satisfactory excuse is offered, the specific limitation contained in § 547(c)(3) is overcome.
This court respectfully disagrees with the expansive application of the contemporaneous exchange exception outlined above. The better view and the majority view is that § 547(c)(3) is the exclusive exception available to protect enabling loans from avoidance.[7]See Gower v. Ford Motor Credit Co. (In re Davis), 22 B.R. 644 (Bkrtcy.M. D.Ga.1982); Valley Bank v. Vance, 22 B.R. 26 (Bkrtcy.D.Idaho 1982); Knauer v. Enlow, 20 B.R. 480 (Bkrtcy.S.D.Ind.1982); Exchange *450 Bank v. Christian, 8 B.R. 816 (Bkrtcy.M.D.Fla.1981); Brown v. Callaway Bank (In re Merritt), 7 B.R. 876 (Bkrtcy.W. D.Mo.1980). A number of leading commentators have concurred that the contemporaneous exchange exception is not available to excuse the untimely perfection of an enabling loan.
If the perfection was delayed more than 10 days, the question is whether Code § 547(c)(1) provides protection for delay beyond the 10-day grace period. The better view is that the general terms of Code § 547(c)(1) yield to the specific protections embodied in the 10-day grace period.
2 Norton Bankr.L. & Prac. § 32-13 at 41-42 (1981). See also White & Summers, Uniform Commercial Code § 24-4 at 1006 (2d ed. 1980); 4 L. King, Collier on Bankruptcy ¶ 547.46 at 136.4 n. 13(c) (15th ed. 1982).
The expansive interpretation of the contemporaneous exchange exception argued by FMCC departs significantly from the legislative intent underlying the creation of § 547(c)(1).[8] Although, the legislative history is sparse, the discussion of problems involving bank checking account transactions is illustrative of the underlying purpose of the provision.
The first exception is for a transfer that was intended by all parties to be a contemporaneous exchange for new value and was in fact substantially contemporaneous. Normally a check is a credit transaction. However, for the purposes of the paragraph, a transfer involving a check is considered to be "intended to be contemporaneous," and if the check is presented for payment in the normal course of affairs, which the Uniform Commercial Code specifies as 30 days, U.C.C. § 3-503(2)(a), that will amount to a transfer that is "in fact substantially contemporaneous."
H.R.Rep. No. 595, 95th Cong., 1st Sess. 373, reprinted in 1978 U.S.Code Cong. & Ad. News 6329. Richard Levin, a member of the House Judiciary Committee staff during the drafting of the Bankruptcy Reform Act of 1978, further explains that:
. . . The first exception [the contemporaneous exchange exception] is a simple one, excepting a transfer that is really not on account of an antecedent. No doubt a purchase by the debtor of goods or services with a check, if deemed to be on credit by state law, would be insulated by this exception. Though strictly speaking the transaction may be a credit transaction because the seller does not receive payment until the check is cleared through the debtor's bank, it is generally considered and intended to be a contemporaneous transaction, and assuming the check is promptly deposited and cleared, is in fact substantially contemporaneous.
"An Introduction to the Trustee's Avoiding Powers," 53 Am.Bankr.L.J. 173, 186 (Spring 1979). Congress was apparently concerned *451 that cash payments would be converted to credit transactions by a mere delay in receipt or deposit. Essentially cash transactions were not intended to be avoidable preferences. Congress, therefore, created two separate exceptions, distinguishing between credit transactions which were governed by § 547(c)(3) and noncredit transactions governed by § 547(c)(1).[9] As the court stated in Enlow:
The explicit reference by Congress in § 547(c)(3) to enabling loans lends further support to the conclusion that § 547(c)(1) is not applicable to the instant transaction. Through its enactment of § 547(c)(3) Congress intended to make that sectionnot § 547(c)(1)applicable to an enabling loan situation.
20 B.R. at 483. The transfer of the security interest in the instant case is clearly an extension of credit and not a cash transaction, and is, therefore, not within the intended ambit of § 547(c)(1).
The policies underlying the enactment of § 547(c)(3) further support the rejection of FMCC's theory of this case. The fixing of the 10-day grace periods in §§ 547(c)(3) and (e)(2) was an effort to establish a national uniform perfection period for enabling loans in bankruptcy cases. Congress shortened the perfection period from 21 days under the Bankruptcy Act to 10 days under the new Bankruptcy Code. See In re Burnette, 14 B.R. at 797-801. Judge Kelley noted in Burnette that "the ten day grace periods in § 547(e)(2) and (c)(3) were meant to operate in the same way. The idea was that the preference statute should establish a uniform grace period." 14 B.R. at 798-799 (emphasis added). Furthermore,
[i]t is evident that Congress did not intend for state grace periods to be relevant under the preference statute. There was to be a uniform rule throughout the nation. In any jurisdiction, a transferee was to have only ten days to perfect a transfer and thereby avoid the antecedent debt problem.
Id. at 801. This court should not unnecessarily interpret the interaction of state law and the Bankruptcy Code in a manner which defeats the uniformity Congress intended. Although the state legislature has discretion to establish grace periods relevant for determining priorities in ordinary commercial transactions, such grace periods are not controlling in the bankruptcy context for determining whether a preference is avoidable.
Finally, the application of the contemporaneous exchange exception argued by FMCC essentially renders the provisions of § 547(c)(3) meaningless. Under FMCC's reasoning, every enabling loan disqualified for protection under § 547(c)(3) would necessarily be examined under the provisions of § 547(c)(1). Such an application offends *452 the well-settled principle of statutory interpretation that all parts of a statute, if at all possible, should be given effect. Jarecki v. Searle & Co., 367 U.S. 303, 307-308, 81 S. Ct. 1579, 1582, 6 L. Ed. 2d 859 (1961); United States v. Menasche, 348 U.S. 528, 538-539, 75 S. Ct. 513, 519, 99 L. Ed. 615 (1955). A statute should not be interpreted so as to render one part inoperative, superfluous or insignificant. McLanahan v. Vernan (In re Gasteiger), 471 F. Supp. 13, 15 (E.D.Tenn. 1977). If the contemporaneous exchange exception were applicable to all enabling loan cases, the 10-day grace period would serve as little more than an evidentiary presumption. In all cases where perfection occurred after 10 days, the court would be required to engage in extensive fact-finding to determine whether a palatable explanation was available for noncompliance.[10] Under FMCC's theory, enabling loans perfected beyond the 10-day period would be accorded protection equal to that realized by diligent creditors who complied with the express provisions of § 547(c)(3). The court is persuaded that it should not adopt such a doctrine.
Accordingly, the court finds that the transfer of the security interest to FMCC is an avoidable preference and that 11 U.S.C.A. § 547(c)(1) (West 1979) is not available to except from avoidance enabling loans perfected beyond the 10-day grace period. The proceeds from the sale of the automobile should be turned over to the trustee for administration.
NOTES
[1] Pursuant to an agreed order entered June 17, 1982, the automobile has been sold and the proceeds held in escrow pending resolution of this matter.
[2] The affidavits submitted to the court indicate that some warranty work was performed on the Cadillac after execution of the new security agreement and that the car was finally delivered to the Murrays after the repairs on January 25 or January 26.
[3] FMCC does not contest the presumption of insolvency.
[4] Section 547(e)(2) provides as follows:
(2) For the purposes of this section, except as provided in paragraph (3) of this subsection, a transfer is made
(A) at the time such transfer takes effect between the transferor and the transferee, if such transfer is perfected at, or within 10 days after, such time;
(B) at the time such transfer is perfected, if such transfer is perfected after such 10 days; or
(C) immediately before the date of the filing of the petition, if such transfer is not perfected at the later of
(i) the commencement of the case; and
(ii) 10 days after such transfer takes effect between the transferor and the transferee.
The reference to § 547(e)(3) in the text of § 547(e)(2) adds the requirement that the debtor must acquire rights in the property before a transfer can take place for preference purposes. In the case at hand, this occurred on or before January 26 and is, thus, not outcome determinative.
[5] Section 546(b) provides limitations on the trustee's avoiding powers under certain sections, not including the preference provisions herein applicable.
[6] No party contends that the substitution of the Cadillac for the Lincoln in any way upsets the enabling character of the loan.
[7] The court is aware that the legislative history indicates that a transferee may qualify under more than one exception. The House Report noted that:
Subsection (c) contains exceptions to the trustee's avoiding power. If a creditor can qualify under any one of the exceptions, then he is protected to that extent. If he can qualify under several, he is protected by each to the extent he can qualify under each.
H.R.Rep. No. 595, 95th Cong., 1st Sess. 373 (1977), reprinted in 1978 U.S.Code Cong. & Ad.News 5787, 6329. The legislative history does not reveal which sections might provide multiple protection or why a transferee would desire to qualify under more than one section because satisfaction of any section excepts the entire transfer from avoidance. Assuming some purpose for multiple protection, however, the legislative history cannot be interpreted, as FMCC argues, to suggest that all exceptions in § 547(c) are interchangeable and overlap. Each section has distinct prerequisites and to the extent one of those elements is absent, the section is inapplicable. Similarly, those sections that are inconsistent with each other will not be applied to one another. It is a well-established principle of statutory construction that where a statute provides for a certain remedy, all inconsistent remedies should be discounted. National Railroad Passenger Corp. v. National Assoc. of Railroad Passengers, 414 U.S. 453, 94 S. Ct. 690, 38 L. Ed. 2d 646 (1974). Botany Worsted Wools v. United States, 278 U.S. 282, 289, 49 S. Ct. 129, 132, 73 L. Ed. 379 (1929). This is an application of the maxim of statutory construction expressio unius est exclusio alterius.
[8] A principle objective of a court interpreting statutory provisions is to ascertain and effectuate Congressional intent. Philbrook v. Glodgett, 421 U.S. 707, 713, 95 S. Ct. 1893, 1898, 44 L. Ed. 2d 525 (1975); Sinclair Refining Co. v. Atkinson, 370 U.S. 195, 215, 82 S. Ct. 1328, 1339, 8 L. Ed. 2d 440 (1962); City of Tullahoma v. Coffee County, 204 F. Supp. 794, 798 (E.D. Tenn.1962). While the literal meaning of a particular clause is persuasive, a court should look beyond the literal meaning of the particular clause and analyze it in context, keeping in mind the objectives of the whole section and construing its application to effectuate the intent of Congress. Kokoszka v. Belford, 417 U.S. 642, 650, 94 S. Ct. 2431, 2436, 41 L. Ed. 2d 374 (1974); Perry v. Commerce Loan Co., 383 U.S. 392, 400, 86 S. Ct. 852, 857, 15 L. Ed. 2d 827 (1966); Richards v. United States, 369 U.S. 1, 11, 82 S. Ct. 585, 591, 7 L. Ed. 2d 492 (1961). The literal application of particular language sometimes clashes with the legislative intent and it has long been a familiar rule that although an interpretation of a provision may technically be within the letter of the statute, it is not a proper interpretation because not within the spirit of the statute, nor intended by its drafters. Church of the Holy Trinity v. United States, 143 U.S. 457, 459, 12 S. Ct. 511, 512, 36 L. Ed. 226 (1892).
Judge Kelley conceded in applying the contemporaneous exchange exception to an enabling loan perfected after 10 days of transfer that "this exception was not meant to apply to situations like this. What Congress had in mind were transactions that parties do not consider to be on credit though legally they are." In re Burnette, 14 B.R. at 802. (emphasis added).
[9] At least one court has suggested that the contemporaneous exchange exception is applicable to enabling loan cases because § 547(c)(1) codifies the Supreme Court holding in Dean v. Davis, 242 U.S. 438, 37 S. Ct. 130, 61 L. Ed. 419 (1917). General Motors Acceptance Corp. v. Martella, 22 B.R. 649, 653 (Bkrtcy.D. Col.1982). In Davis, it was held that the transfer was not preferential when both parties to the transfer intended to make a secured loan, but the mortgage was not recorded until one week after the loan was made. There was no preference, the Court held, because there was no payment on an antecedent debt. This court has discovered no other authority to support the theory that Dean v. Davis was codified in the contemporaneous exchange exception and in fact has found only authority to the contrary. See Brody, Practicing Under the Bankruptcy Reform Act § 10.07 at 140-141 (1979). Yet, even if Davis retained vitality under the Code, the case is not precedent for applying § 547(c)(1) to enabling loan cases. First, Davis is a case addressing the antecedent debt issue, not analyzing possible exceptions to a trustee's avoiding power. The antecedent debt problem is resolved by determining the date of transfer by reference to § 547(e). The contemporaneous exchange exception contained in § 547(c)(1) is not relevant if no antecedent debt is present. Second, the loan at issue in Davis was not an enabling loan within the meaning of § 547(c)(3). The loan was made to secure the repayment of several forged instruments. Therefore, the Davis case does not create a conflict between the contemporaneous exchange exception and the 10-day perfection period. Third, the delay in perfection in Davis was only one week and, therefore, the case cannot stand as authority for applying the contemporaneous exchange exception to security interests perfected beyond the 10-day period.
[10] Because the court finds that the contemporary exchange exception is not applicable to enabling loan cases, we do not address the factual issue of whether the conduct of FMCC in failing to perfect within 10 days is "satisfactorily explained" within the meaning of Arnett. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537042/ | 27 B.R. 733 (1983)
In re Alan David LICHSTRAHL, Debtor.
BANKERS TRUST COMPANY, Plaintiff,
v.
Alan David LICHSTRAHL, Defendant.
Bankruptcy No. 82-01748-BKC-TCB, Adv. Nos. 82-1152-BKC-TCB, 82-1153-BKC-TCB.
United States Bankruptcy Court, S.D. Florida.
February 9, 1983.
Myrna Bricker, Miami, Fla., for debtor-defendant.
Nancy Worth, Coral Gables, Fla., for plaintiff.
ORDER TAXING COSTS
THOMAS C. BRITTON, Bankruptcy Judge.
The debtor-defendant in each of these proceedings, brought by the same plaintiff, has moved for costs. The motions were heard on February 7. Costs incurred in both matters in the total sum of $329 are assessed against the plaintiff. The debtor also seeks its attorney's fee of $4,125. That application is denied.
The fee application is based upon the power of a federal court of equity to assess fees:
". . . when the losing party has `acted in bad faith, vexatiously, wantonly, or for oppressive reasons . . .'" Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975).
In Matter of Love, 5 Cir.1978, 577 F.2d 344, 352, the exercise of this power by a bankruptcy court under the former Act was upheld.
The present Act, 11 U.S.C. § 523(d), unlike the previous Act, expressly requires the assessment of the debtor's fees against an unsuccessful plaintiff under limited circumstances:
"If a creditor requests a determination of dischargeability of a consumer debt under subsection (a)(2) of this section, and such debt is discharged, the court shall grant judgment against such creditor and in favor of the debtor for the costs of, and a reasonable attorney's fee for, the proceeding to determine dischargeability, unless such granting of judgment would be clearly inequitable."
All parties agree that the debt owed in this case is not a "consumer debt". In re Scanlon, Bkrtcy.E.D.Pa.1980, 4 B.R. 197, 198. *734 Had this provision merely permitted assessment of a fee, I would infer a statutory intent to prohibit the assessment of a fee against the losing party under any other circumstances in bankruptcy. Congress has that legislative power and such a provision would clearly reflect that legislative intent. However, this provision requiring assessment of a fee in one instance is entirely consistent with discretionary assessment of fees under the principle recognized in Aleyska and Love and, therefore, did not overrule Love. I conclude that this court retains the discretion under the present Act to assess fees against the losing litigant who sued in bad faith.
In this instance, plaintiff's conduct approached but did not reach the point of bad faith.
Case No. 82-1152 opposed discharge under 11 U.S.C. § 727(a)(4)(A), that:
"the debtor knowingly and fraudulently, in or in connection with the case, (A) made a false oath or account."
The paper thin factual basis for this charge was stated by plaintiff's attorney as follows:
"Well, in one place he valued the car at $3,000 and in another he takes an exemption for $1,000 and includes the car under that. It appeared to me, from the face of the schedules, that he was making a false oath in one place or the other, and knowing that the car was free and clear, there were no liens listed to the car, I felt that in one place or the other he was contradicting himself and making a false oath." Tr. 7.
The complaint was voluntarily dismissed when trial was called.
Case No. 82-1153 sought exception from discharge for plaintiff's claim of $319,000 on the lease of medical equipment to the debtor. The circumstances are stated in a Memorandum Decision (C.P. No. 28) and need not be repeated here. Judgment was for the debtor. This case, which was weak to begin with, fell apart for the plaintiff when the agent for the leasing company that arranged the transaction surprised plaintiff by his testimony for the debtor.
A claim is colorable and therefore not made in bad faith:
". . . when it has some legal and factual support, considered in light of the reasonable beliefs of the individual making the claim. The question is whether a reasonable attorney could have concluded that facts supporting the claim `might be established', not whether such facts actually `had been established'." Nemeroff v. Abelson, 2 Cir.1980, 620 F.2d 339, 348.
Although I consider the issue to be marginal, I find the claim in each case to be colorable and, therefore, no basis for an inference of bad faith. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537213/ | 979 A.2d 190 (2009)
187 Md. App. 481
Larry JOHNSON
v.
STATE of Maryland.
No. 2987, September Term, 2007.
Court of Special Appeals of Maryland.
August 28, 2009.
Brian M. Saccenti (Nancy S. Forster, Public Defender, on brief), Baltimore, for Appellant.
Jeremy M. McCoy (Douglas F. Gansler, Atty. Gen., on brief), Baltimore, for Appellee.
Panel: EYLER, DEBORAH S., MATRICCIANI and MOYLAN, CHARLES E., JR. (Retired, Specially Assigned), JJ.
MATRICCIANI, J.
On August 6, 1992, in the Circuit Court for Wicomico County, appellant, Larry Johnson, pleaded guilty to daytime housebreaking. The court sentenced him to the mandatory minimum, 25 years in prison with no possibility of parole, pursuant to Maryland Code (1957, Repl.Vol.1992) Article 27, § 643B.[1] In 2007, the General Assembly enacted a statute permitting individuals serving a mandatory minimum sentence under Article 27, § 643B, based on a predicate crime of daytime housebreaking, to apply for and receive a sentence review. Mr. Johnson filed for a sentence review. The three-judge panel assigned to review his sentence left the sentence unchanged. Mr. Johnson then filed this timely appeal.
Appellant presents a single issue for our review:
The circuit court denied Mr. Johnson the right to counsel and failed to comply *191 with Maryland Rule 4-215 in the sentence review hearing.
For the reasons which follow, we shall vacate the decision of the sentence review panel and remand for a new hearing.
BACKGROUND
Mr. Johnson pleaded guilty to daytime housebreaking on August 6, 1992. Pursuant to Article 27, § 643B the circuit court sentenced him to the mandatory minimum sentence of 25 years without the possibility of parole. In 2007, the General Assembly enacted a statute that permitted individuals serving a mandatory minimum sentence under Article 27, § 643B, based on a predicate crime of daytime housebreaking, to apply for and receive a review of the sentence by a three-judge panel. The three-judge panel was authorized either to strike the no parole provision or to leave the sentence unchanged. Pursuant to the new law, Mr. Johnson filed a pro se application for sentence review on December 10, 2007. Three days later, Judge Daniel Long sent a letter to James P. Murray at the Office of the Public Defender, to Sampson G. Vincent at the Office of the State's Attorney, and to Mr. Johnson wherein he stated that the parties had 15 days to present information to be considered by the three-judge panel. Mr. Johnson submitted a letter. He wrote in part:
I would like to ask this panel to defer any ruling in this matter until I have had ample time to confer with court appointed counsel, so that Mr. James P. Murray, can provide the best representation possible in this matter after having conducted a thorough investigation and assessment, I believe that this case can be presented more effectively by able counsel, and that the courts [sic] decision to appoint counsel should amount to more than a procedure.
No other information was submitted to the three-judge panel. The panel issued its decision on January 16, 2008, declining to modify Mr. Johnson's sentence. Mr. Johnson filed this timely appeal on February 7, 2008.
DISCUSSION
Mr. Johnson asserts that his right to counsel during the sentence review hearing was violated and, as a result, the panel's decision should be vacated and the matter remanded for further proceedings. The State responds by first arguing that the appeal should be dismissed because the panel decision in this case was not an appealable judgment. If it is properly before the Court, however, the State argues that Mr. Johnson's right to counsel was not violated because he filed a pro se application for sentence review.
To begin, we will address the State's claim that Mr. Johnson is prohibited from appealing the decision of a sentence review panel. We have held:
The appellate jurisdiction of the Court of Special Appeals of Maryland is bestowed by legislative enactment. The statutes provide no right of appeal to that Court by a person from an order of a sentence review panel nor is an appeal from such an order designated to be within its appellate jurisdiction. Under Courts Art. § 12-301 ". . . a party may appeal from a final judgment entered in a civil or criminal case by a circuit court. The right of appeal exists from a final judgment entered by a court in the exercise of original, special, limited, statutory jurisdiction, unless in a particular case the right of appeal is expressly denied by law." A sentence review panel is not a court. "Circuit Court' means the circuit court for a county . . ." and the courts of the Supreme Bench of Baltimore City. Courts Art. § 12-101(d).
*192 The right of appeal from the order of a sentence review panel is clearly not within the contemplation of Courts Art. § 12-301. Courts Art. § 12-308 specifically designates those actions, cases, causes, suits or proceedings with respect to which the Court of Special Appeals of Maryland has exclusive initial appellate jurisdiction. Proceedings before a sentence review panel is not among them.
Glass v. State, 24 Md.App. 76, 79, 329 A.2d 109 (1974) (footnote omitted).
The Court of Appeals later held:
Appellate review of sentences is extremely limited in Maryland; only three grounds of review are recognized: (1) the sentence may not constitute cruel and unusual punishment or otherwise violate constitutional requirements; (2) the sentencing judge may not be motivated by ill will, prejudice or other impermissible considerations; and (3) the sentence must be within statutory limitations.
Teasley v. State, 298 Md. 364, 370, 470 A.2d 337 (1984) (citations omitted).
Based on this limited appellate jurisdiction for sentence review appeals, we went on to clarify our holding in Glass and stated that a significant difference exists "between a confirmance or reduction in sentence by a review panel . . . and an increase ordered by it . . ." Rendelman v. State, 73 Md.App. 329, 334, 533 A.2d 1339 (1987). When a review panel increases a sentence, the new sentence is the one that "must be within Constitutional and statutory limits; it is that proceeding that must comport with required procedure; it is the panel then that must be free of ill will, prejudice or other impermissible considerations." Id. at 335, 533 A.2d 1339 (internal citations and quotations omitted). Thus, we held in Rendelman that an individual could appeal a sentence review panel decision in which his sentence was increased. Id. at 335-36, 533 A.2d 1339. Based on this analysis, it appears that Mr. Johnson would not be entitled to appellate review of the panel's decision, as the panel declined to alter his sentence.
In Rendelman, however, we noted in a footnote that
the action of a review panel is not entirely immune from appellate review when the sentence is not increased. Denial of a fundamental right by the panel, such as the right to counsel . . ., must be subject to appellate review, even if the sentence is not increased, for, absent that denial, the panel might have been persuaded to decrease the sentence.
Id. at 335 n. 1, 533 A.2d 1339. In accordance with this reasoning, we conclude that in this case Mr. Johnson is entitled to an appeal based on his claim of denial of his statutory right to counsel.
We now turn to the merits of Mr. Johnson's contention that he was denied his statutory right to counsel when filing his application for sentence review. The law under which Mr. Johnson filed the application states, in pertinent part:
[N]otwithstanding any other law to the contrary, a person who is serving a mandatory minimum sentence of confinement imposed under former Article 27, § 643B of the Code before October 1, 1994, where burglary or daytime housebreaking was a predicate offense for the imposition of the mandatory minimum sentence, may apply for and receive one review of the mandatory minimum sentence as provided in § 8-102 of the Criminal Procedure Article. The review panel may strike the restriction against parole, but may not reduce the length of the sentence. An application for review under this section shall be filed on or before September 30, 2008.
*193 2007 Md. Laws 4060. Along with Mr. Johnson's right to file an application for sentence review, he had the right to representation during that process. Md.Code (2001, Repl.Vol.2008), § 8-103 of the Criminal Procedure Article ("CP") states:
(a) In general. A person entitled to file an application for a sentence review under this subtitle has the right to be represented by counsel:
(1) to determine whether to seek a sentence review; and
(2) to file an application for a sentence review.
(b) Obtaining counsel. The counsel representing a person for a sentence review may be:
(1) retained by a person who is entitled to file an application for review under this subtitle;
(2) appointed by the sentencing judge; or
(3) provided under Title 16 of this article.
This statute clearly indicates that individuals have a right to counsel at a sentence review hearing, Rendelman, 73 Md. App. at 336, 533 A.2d 1339, and we have held[2] that Maryland Rule 4-215 applies to sentence review hearings. Id. at 337, 533 A.2d 1339. Md. Rule 4-215, states in pertinent part:
(b) Express Waiver of Counsel. If a defendant who is not represented by counsel indicates a desire to waive counsel, the court may not accept the waiver until after an examination of the defendant on the record conducted by the court, the State's Attorney, or both, the court determines and announces on the record that the defendant is knowingly and voluntarily waiving the right to counsel.
Thus, absent an express waiver of counsel, Mr. Johnson could not waive his right to counsel during the sentence review process. We find nothing in the record indicating that Mr. Johnson expressly waived his right to counsel and we are not persuaded by the State's claim that appellant waived his right to counsel by filing a pro se application for sentence review. In fact, we note that the record clearly indicates that Mr. Johnson asked the court for additional time so that he could consult with counsel. Judge Long appeared to be suggesting representation by the Office of the Public Defender when he forwarded the letter requesting additional information to Mr. Murray and addressed it to Mr. Johnson and Counsel. The record is unclear as to why such representation did not occur. Based on the lack of express waiver and lack of representation, we hold that Mr. Johnson is entitled to reconsideration of his sentence review upon remand, with the assistance of counsel, if he still desires to exercise that right.
ORDER OF SENTENCE REVIEW PANEL VACATED; CASE REMANDED FOR NEW HEARING. COSTS TO BE PAID BY WICOMICO COUNTY.
NOTES
[1] Maryland Code, Article 27, § 643B was replaced by Md.Code (2002), § 14-101 of the Criminal Law Article.
[2] Our holding was based on former Article 27, § 645JE(a), the predecessor statute to CP § 8-103. Section 8-103 is new language derived without substantive change from the former Article. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/384463/ | 634 F.2d 1267
7 Fed. R. Evid. Serv. 434
UNITED STATES of America, Plaintiff-Appellee,v.Ray FREEMAN, Sr. and Harry Van Ausdall, Defendants-Appellants.
Nos. 79-1587, 79-1588.
United States Court of Appeals,Tenth Circuit.
Submitted Sept. 16, 1980.Decided Nov. 10, 1980.Rehearing Denied Jan. 5, 1981.
Richard J. Smith, Albuquerque, N.M. (R. E. Thompson, U. S. Atty., Margo J. McCormick, Asst. U. S. Atty., Albuquerque, N.M., with him on brief), for plaintiff-appellee.
William S. Dixon, Albuquerque, N.M. (Rodey, Dickason, Sloan, Akin & Robb, P.A., Albuquerque, N.M., on briefs), for defendant-appellant, Ray Freeman, Sr.
Michael A. Williams (Craig R. Maginness, Denver, Colo., with him on briefs), for defendant-appellant, Harry Van Ausdall.
Before McWILLIAMS, BREITENSTEIN and McKAY, Circuit Judges.
BREITENSTEIN, Circuit Judge.
1
An indictment charged defendants-appellants Freeman and Van Ausdall, and three others, with conspiracy to import marijuana in violation of 21 U.S.C. §§ 846 and 963. The jury found Freeman and Van Ausdall guilty, and they appeal. We reverse because of the presence of persons, other than jurors, in the jury room during its deliberations.
2
New Mexico police officer Chappel learned, through an informant, of Freeman's activities in the importation of marijuana from Mexico. Gillespie, an agent of the Federal Bureau of Investigation, FBI, assisted the ensuing investigation. The informant, equipped with a recording device, had numerous conversations with Freeman and Van Ausdall. Several tapes of these conversations were played for the jury in open court during the trial. Near the end of its instructions, the court told the jury:
3
"We do have the tapes in this case, and we have the equipment set up in the courtroom. If you should care to listen to the tapes, which are exhibits in the case, please inform the Deputy Marshall, and he will inform us."
4
Defendants did not object to this instruction.
5
The next reference to the tapes was later the same day. Defense counsel were present. The record does not disclose whether the defendants were present. The court said:
6
"After the jury had requested to have played back Government Exhibit No. 21, I instructed the Marshal and operator, Mr. Gillespie, to be in the room with the jury while the tape was played to the jury. (Emphasis supplied.)
7
A fair inference from the above is that without notice to any party the court told Gillespie, the chief government investigator in the case, to operate the tape equipment.
8
The court disclosed that its law clerk had been in the jury room and had reported to the court that the Marshal had told the jury that the taking of notes was permissible and that during the playing of the tape no comments had been made while he, the law clerk, was in the room. The court directed the law clerk to return to the jury room and tell the Marshal that notes should not be taken. The court asked the lawyers for comments, and none were made. The court further said that the tape was not played in the regular jury room because that room and the courtroom were being used in the trial of another case.
9
Gillespie actively assisted state officers in the investigation of the activities of Freeman and Van Ausdall. He signed the criminal complaints against the defendants and the affidavit for a warrant to search Freeman's residence. At the trial Gillespie testified as a government witness that a bag containing marijuana was taken from Freeman when his residence was searched.
10
The question is whether the defendants were denied their Fourteenth Amendment right to a fair trial. Odell v. Hudspeth, 10 Cir., 189 F.2d 300, 303, cert. denied, 342 U.S. 873, 72 S.Ct. 116, 96 L.Ed. 656, denied habeas relief to a state prisoner who asserted that he had not received a fair trial because a prosecution witness acted as bailiff and custodian during jury deliberations. The Odell decision was repudiated in Turner v. Louisiana, 379 U.S. 466, 471 n. 8, 85 S.Ct. 546, 549, 13 L.Ed. 424 and 474. In Turner the Supreme Court reversed a state conviction because the association with the jury of two prosecution witnesses as jury custodians deprived the defendant of the right to trial by an impartial jury as required by the due process clause of the Fourteenth Amendment. Id. at 471-474, 85 S.Ct. at 548-550.
11
In United States v. Pittman, 9 Cir., 449 F.2d 1284, on court order a government agent, who had a prominent role in the trial, played a tape in the jury room. Citing Turner v. Louisiana, the court held that "access to the jury during its deliberative process by any adversary simply cannot be tolerated." Id. at 1285-1286.
12
In United States v. Florea, 6 Cir., 541 F.2d 568, 570, 572, an FBI agent was present when tapes were replayed for the jury after it had commenced its deliberations. After verdict, the defense objected and the court held a hearing. On the testimony presented, the trial court found no prejudice. The court of appeals reviewed the evidence and concluded that the defendants were not deprived of a fair trial. Id. at 572. After saying that it would not condone such conduct in the future, the court announced a per se rule that "without prior stipulation a trial court should not permit any unauthorized person * * * to communicate with or otherwise have any contact with a jury in any proceeding." Id.
13
The government argues that the defendants are foreclosed from attacking the intrusion into the jury room by their failure to object. When the court first disclosed the presence of Gillespie, the Marshal, and the law clerk in the jury room, the harm had been done. No opportunity had been afforded for a contemporaneous objection. Without knowledge of the situation, the defense cannot be charged with lying in wait when it had an opportunity to speak, Cf. Wall v. United States, 10 Cir., 384 F.2d 758, 763, or with intentionally waiving a known right, Cf. Lawn v. United States, 355 U.S. 339, 353, 78 S.Ct. 311, 319, 2 L.Ed.2d 321.
14
The government further contends that the defendants have shown no prejudice and that, at the most, we should remand for a hearing on what happened in the jury room. See Remmer v. United States, 347 U.S. 227, 229, 74 S.Ct. 450, 451, 98 L.Ed. 654 and United States v. Greer, 10 Cir., 620 F.2d 1383. The government has a responsibility to assure that every defendant in a criminal case receives a fair trial. In the circumstances of this case the FBI agent should not have been in the jury room to operate the sound equipment. When the government learned of the activities of the agent, it should have requested an immediate hearing, but it did not. Without such a request, the court of its own motion should have ordered an immediate hearing. It did not. The agent was an adversary. Absent a stipulation by the parties and the approval of that stipulation by the court, the agent should not have been in the jury room. See United States v. Florea, supra, 541 F.2d at 572.
15
On any hearing that might be held, Rule 606(b), F.R.Evid. applies. The Rule permits objective testimony by jurors but forbids subjective testimony. The correct application of the Rule in this circuit is uncertain. See the differences expressed by the panel members in U. S. v. Greer, supra, 620 F.2d at 1385, 1387, and 1391. The trial was more than 18 months ago. Any effort now to draw the thin line between objective and subjective would be futile. We reject the government's request that the case be remanded for a hearing.
16
The sanctity of jury proceedings must be preserved. The danger of improper influence adheres in every contact between an interested party and a jury. As said in United States v. Pittman, supra, 449 F.2d at 1286:
17
" * * * the potential for prejudice inherent in any adversary's intrusion into the jury room and the uncertainties in ascertaining the extent of such prejudice require the extreme measure of a new trial in cases where the invasion was at the direction of the court and not inadvertent."
18
The court instructed FBI agent Gillespie to be in the jury room and gave no notice to counsel. In the circumstances presented, the defendants were deprived of their constitutional right to a fair trial.
19
Because a new trial is necessary, two other points presented by the defendants must be mentioned. The first trial of the case resulted in a mistrial when it was disclosed that Freeman's counsel was the father of an unindicted co-conspirator. The mistrial was declared at the request of Freeman with the concurrence of Van Ausdall. No claim is made of prosecutorial misconduct. The grand jury then returned a superseding indictment. The claim is that the grand jury lacked power to return the second indictment. We have held to the contrary. United States v. Davis, 10 Cir., 578 F.2d 277, 279. See also United States v. Cerilli, 3 Cir., 558 F.2d 697, 700-701.
20
The indictment charged that Freeman and Van Ausdall conspired with three other named defendants and with others, including by name the informant, who were not indicted. Defendants say that the trial court erred in refusing to instruct the jury that the defendants could not conspire with the government informant. Sears v. United States, 5 Cir., 343 F.2d 139, 142, does not support the defense argument. As pointed out in United States v. Seelig, 5 Cir., 498 F.2d 109, 112, Sears applies when "the only other supposed co-conspirator is a governmental informant." (Emphasis in original) In the case at bar the evidence links Freeman and Van Ausdall in a conspiracy and both of them with other indicted conspirators. Considering the evidence adduced and the entire instructions of the court, it properly rejected the tendered instruction.
21
Reversed and remanded for a new trial. | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/384471/ | 634 F.2d 1326
UTAH FARM BUREAU INSURANCE COMPANY, Plaintiff in Interpleader-Appellee,v.DAIRYLAND INSURANCE COMPANY, Defendant in Interpleader-Appellant.
No. 79-1044.
United States Court of Appeals,Tenth Circuit.
Argued Sept. 19, 1980.Decided Dec. 8, 1980.
Stephen G. Morgan of Morgan, Scalley & Davis, Salt Lake City, Utah, for plaintiff in interpleader-appellee.
Wendell E. Bennett of Wendell E. Bennett & Associates, Salt Lake City, Utah, for defendant in interpleader-appellant.
Before SETH, Chief Judge, and McWILLIAMS and BARRETT, Circuit Judges.
McWILLIAMS, Circuit Judge.
1
This is essentially a dispute between two insurance companies concerning policy coverage. An automobile driven by Dennis Nohava collided in Utah with a motorcycle driven by James Tuntland. James Tuntland was killed. James Tuntland's personal representative brought an action against Nohava in the United States District Court for the District of Utah. Jurisdiction was based on diversity.
2
Utah Farm Bureau Insurance Company thereafter filed a so-called "Complaint for Interpleader and Declaratory Relief" in the action then pending between Tuntland's personal representative and Nohava. Utah Farm sought a declaratory judgment as to whether, under its policy of insurance issued to one Ross Cassidy, it had a duty to defend Nohava and to indemnify for any judgment recovered against him. By stipulation, Dairyland Insurance Company, which provided uninsured motorist coverage on the Tuntland motorcycle, was permitted to appear as a defendant in interpleader.
3
The question of policy coverage was tried to the court before the liability issue was litigated. The evidentiary matter before the trial court consisted of various stipulations and testimony by Ross Cassidy and Dennis Nohava. From the record we learn that the title to the automobile which Nohava was driving at the time of the accident was in the name of Ross Cassidy and his wife. Ross Cassidy had been issued a policy of insurance on the vehicle by Utah Farm Bureau. Several months before the accident, Cassidy had entered into an oral conditional sales contract with his brother-in-law, Boyd Bowler, for the sale of the vehicle. Bowler thereafter retained possession of the vehicle, and made periodic payments to Cassidy, who used the money to pay the holder of a mortgage on the vehicle.
4
As indicated, at the trial on the coverage issue, the only witnesses were Cassidy and Nohava. Bowler, the conditional vendee, could not be located. The controverted fact issue before the trial judge was whether Nohava had permission from Bowler to drive the automobile on the day of the accident. Nohava testified that he had received the car keys from Bowler and that he had permission to drive the vehicle. This was the only direct evidence bearing on the question of permission. The trial judge, however, rejected Nohava's testimony. He did so on the basis that Nohava's testimony was self-serving, and that Nohava had a record of car theft.
5
The trial judge indicated that the state of the record on the question of permission was "in even balance." In other words, after rejecting Nohava's self-serving testimony, there was in reality no evidence on the matter, one way or the other. In such circumstance, the trial judge stated that the question of who had the burden of the proof became all-important and would be decisive of the case.
6
The trial judge ruled that one who seeks to come within an omnibus clause of an insurance policy has the burden of proof. This meant that Tuntland's personal representative, Nohava, and Dairyland Insurance had the burden of proof on the issue of whether Nohava had Bowler's permission to drive the automobile. The trial judge then found that Dairyland had failed to establish that Nohava was driving the vehicle with Bowler's permission and that under such circumstance Utah Farm's policy did not cover the accident. Alternatively, the trial judge held that, even if Bowler granted Nohava permission to drive the vehicle, Bowler, as a "first permittee," did not have the power or legal authority to grant permission to Nohava, who would be a "second permittee." Dairyland appeals.
7
It is agreed that the question of whether Dairyland had the burden of proving permission, or whether, on the other hand, Utah Farm had the burden of proving non-permission, is a substantive matter and, as such, is to be determined under Utah law. Palmer v. Hoffman, 318 U.S. 109, 117, 63 S.Ct. 477, 482, 87 L.Ed. 645 (1943); Fireman's Fund Ins. Co. v. Videfreeze, 540 F.2d 1171, 1174-75 (3rd Cir. 1976), cert. denied, 429 U.S. 1053, 97 S.Ct. 767, 50 L.Ed.2d 770 (1977). It is further agreed that there is no Utah law directly bearing on the precise issue before us.
8
Faced with a situation in which there was no Utah law on the subject, the trial judge, a former Utah district judge, recognized that there was a split of authority on the matter, and found the better rule to be that the burden of establishing coverage under the omnibus clause of an automobile insurance policy is on the insured, and those claiming through the insured, and not on the insurance company. He further held that this general rule is not changed merely because the insurance company is the plaintiff in a declaratory judgment action. We are not inclined to disturb the trial judge's ruling on the matter.
9
It would appear that the general rule is that the burden of establishing coverage under an omnibus clause of an insurance policy is on those seeking to come within the coverage of the policy. Hartford Accident and Indemnity Co. v. Shaw, 273 F.2d 133, 137 (8th Cir. 1959). The split of authority arises when the issue is presented in a declaratory judgment context, i. e., the insurance company, as a plaintiff, institutes an action seeking a declaration as to its rights and responsibilities. Some courts have held that in such setting the insurer has the overall burden of proof and, more particularly, the burden of proving non-permission where the party driving the car is not the named insured. See, e. g., First National Bank v. Malady, 242 Or. 353, 408 P.2d 724, 726 (Or.1965).
10
Other courts have held, however, that the mere fact that the insurer has instituted a declaratory judgment is not in and of itself determinative of the question of burden of proof. The question still turns on the nature of the issue to be resolved. Many courts have held on facts similar to those of the instant case that the burden of proving permission to drive the insured vehicle rests on the insured, and those claiming through him, and not the insurer, even when the latter has instituted a declaratory judgment action designed to resolve the question.1 See, e. g., Fireman's Fund Ins. Co. v. Videfreeze, 540 F.2d 1171, 1174-76 (3rd Cir. 1976), cert. denied, 429 U.S. 1053, 97 S.Ct. 767, 50 L.Ed.2d 770 (1977); Hartford Accident & Indemnity Co. v. Shaw, 273 F.2d 133, 137 (8th Cir. 1959); and Travelers Insurance Co. v. Greenough, 190 A. 129 (N.H.1937).2 Cf. Preferred Acc. Ins. Co. of N. Y. v. Grasso, 186 F.2d 987 (2nd Cir. 1951) (discussing burden of proof regarding ownership).
11
As above indicated, on a close question involving unresolved Utah law, we are disinclined to disturb the ruling of the resident federal judge. Certainly there is respectable authority to support the ruling of the trial court. Julander v. Ford Motor Co., 488 F.2d 839, 844 (10th Cir. 1973).3
12
Judgment affirmed.
1
The matter has been described as one in which, although the plaintiff-insurance company has initiated the action, the defendant actually is the party who seeks to prove an issue, i. e., that the insurance policy provides coverage. As stated in Reliance Life Insurance Co. v. Burgess, 112 F.2d 234 (8th Cir.), cert. denied, 311 U.S. 699, 61 S.Ct. 137, 85 L.Ed. 453 (1940), the risk of non-persuasion "rests upon the party who, as determined by the pleadings, asserts the affirmative of an issue and it remains there until the termination of the action. It is generally upon the party who will be defeated if no evidence relating to the issue is given on either side." 112 F.2d at 238 (citations omitted)
2
Travelers, decided under the New Hampshire declaratory judgment statute, is apparently the first reported case in which the burden of proof was placed on the defendant in this type of situation. The New Hampshire court, in finding that the purpose of the declaratory judgment statute was not to shift the ordinary burden of proof, stated, "Burden of proof is not imposed according to priorities in taking legal steps to determine issues." 190 A. at 131
3
The general rule governing a federal district court judge in determining a question of unresolved law of the state in which he sits is summarized in Julander as follows:
(I)n such circumstance a federal trial court must determine for itself what result would probably be reached were the question to be litigated in a state court, and in making its determination the federal court may look to all resources, including decisions of other states, as well as the resident state, federal decisions, and the general weight and trend of authority.... And once a federal trial court has made its determination, we, as the reviewing court, are entitled to lean on the judgment of the federal trial judge as being knowledgeable and persuasive in the determination of the law of his resident state and his resolution of the matter should not be disturbed by us unless clearly erroneous. 488 F.2d at 844 (citations omitted). | 01-03-2023 | 08-23-2011 |
https://www.courtlistener.com/api/rest/v3/opinions/1537155/ | 979 A.2d 901 (2009)
In re D.S. and M.S., Minor Children, Appeal of D.B., Grandmother.
No. 2685 EDA 2008
Superior Court of Pennsylvania.
Argued June 10, 2009.
Filed July 23, 2009.
*902 Neil M. Krum, Philadelphia, for appellant.
Michael E. Angelotti, Philadelphia, for Dept. of Human Services, Participating Party.
BEFORE: STEVENS, KLEIN, and KELLY, JJ.
OPINION BY STEVENS, J.:
¶ 1 D.B. ("Grandmother") appeals from the August 27, 2008 order entered in the Court of Common Pleas of Philadelphia County concluding that Grandmother did not have standing to participate in the dependency proceedings and vacating the appointment of Grandmother's counsel. We affirm.
¶ 2 D.S. (d.o.b. 6/23/99) and M.S. (d.o.b. 7/15/04) ("Children") were residing with their mother ("Mother") in Washoe County, Nevada, when the Nevada trial court adjudicated them dependent on October 31, 2005. The Washoe County Department of Social Services ("WCDSS") worked with the Children's parents to meet their Family Service Plan ("FSP") objectives, but both parents failed to substantially comply with them. WCDSS concurrently filed an Interstate Compact for the Placement of Children ("ICPC") in order for the Children to be placed with their Grandmother who resided in Philadelphia, Pennsylvania. The ICPC was approved on August 16, 2006, and the Children were placed with Grandmother. The Philadelphia Department of Human Services ("DHS") agreed to accept the Children and filed a dependency petition on August 13, 2007. Trial Court Opinion, 1/7/09, at 2.
¶ 3 Based on their parents' inability to care for them, the trial court adjudicated the Children dependent on August 14, 2007, and committed them to the supervision of DHS. The trial court ruled that the Children should remain with their Grandmother and Step-Grandfather. However, in the fall of 2007, during the course of their investigation to qualify Grandmother as a foster parent, DHS discovered that Step-Grandfather had a twelve-year-old conviction for aggravated assault. DHS then disqualified Grandmother as a foster parent pursuant to the Children's Protective Services Law ("CPSL"), which indicates that a home cannot be approved as a foster home, if a household member of the foster home has a criminal conviction for certain specific offenses, including aggravated assault. See 23 Pa.C.S.A. § 6344; Trial Court Opinion, 1/7/09, at 2.
¶ 4 Following DHS's disqualification of Grandmother as a foster parent for the *903 Children, DHS removed the Children from Grandmother's home and placed them in another foster home. On December 10, 2007, the trial court appointed counsel for Grandmother and ordered that the Children remain in the foster home to which they had been transferred. In addition, the trial court granted Grandmother weekly unsupervised visits with the Children on the condition that Step-Grandfather would not have any contact with them. The Children were subsequently moved to the home of a maternal cousin. Trial Court Opinion, 1/7/09, at 3.
¶ 5 At a hearing on May 5, 2008, Grandmother raised the issue of whether she had standing to participate in the dependency hearings. N.T., 5/5/08, at 33-35. At that time, the trial court requested that the parties file briefs concerning the issue of standing. On August 27, 2008, the trial court issued an order finding that Grandmother did not have standing to participate in the dependency proceedings and vacated the appointment of Grandmother's counsel. Trial Court Opinion, 1/7/09, at 3.
¶ 6 On September 15, 2008, Grandmother filed a motion to reconsider the trial court's denial of standing, and, on the same date, the trial court denied Grandmother's motion for reconsideration. At that time, Grandmother also requested a stay of the denial of court-appointed counsel for the purpose of filing an appeal, and the trial court denied the request. The trial court docketed Grandmother's timely notice of appeal on August 28, 2008, but did not enter it until September 22, 2008. On September 17, 2008, the trial court directed Grandmother to file a Concise Statement of Errors Complained of on Appeal pursuant to Pa.R.A.P.1925(b), and Grandmother timely complied on October 8, 2008. The trial court filed a responsive Pa.R.A.P.1925(a) opinion.[1]
¶ 7 Initially, we note that the standard of review which this Court employs in cases of dependency is as follows:
We must accept the facts as found by the trial court unless they are not supported by the record. Although bound by the facts, we are not bound by the trial court's inferences, deductions, and conclusions therefrom; we must exercise our independent judgment in viewing the court's determination, as opposed to its findings of fact, and must order whatever right and justice dictate. We review for abuse of discretion.
In re F.B., 927 A.2d 268, 272 (Pa.Super. 2007) (quotation omitted).
¶ 8 In her brief on appeal, Grandmother raises the following five issues:
1. Did the court below err in ruling that grandmother, D.B., has no standing?
2. Did the court err below in failing to consider grandmother, D.B., as a placement resource, due to unconstitutionally overbroad application of 23 Pa.C.S. § 6344?
3. Did the court below err in failing to consider Appellant's Motion for Reconsideration?
4. Did the court below err in depriving Appellant of her rights to counsel, which are guaranteed by the Constitutions of Pennsylvania and the United States, and by the Juvenile Act?
5. If allowed to stand, would the errors committed by the lower court deprive Appellant of her rights to Due *904 Process and Equal Protection under the law?
Appellant's brief at 4.
¶ 9 Grandmother first argues that the trial court erred in holding that she did not have standing to participate in the dependency proceedings concerning the Children. Citing to R.M. v. Baxter, 565 Pa. 619, 777 A.2d 446 (2001), Grandmother contends that the Pennsylvania Supreme Court has determined that 23 Pa.C.S.A. § 5313 confers standing upon a grandparent to file a complaint for custody and/or visitation of a grandchild after the child has been declared dependent and that the standing applies to the dependency proceedings also.
¶ 10 The trial court found that Grandmother's arguments with regard to her standing in the dependency case of the Children based on 23 Pa.C.S.A. § 5313 and R.M., supra, are misplaced in this case. The trial court noted that, although the Supreme Court and the legislature granted grandparents in both instances standing to file a petition for custody, they did not grant grandparents standing to participate in dependency proceedings before the trial court grants the petition for custody.
¶ 11 According to the record in this case, Grandmother did not file a petition for custody until September 19, 2008. The trial court held that, since Grandmother's appeal filed on September 22, 2008 divested the court of jurisdiction to consider the merits of the petition for custody, it had no recourse but to dismiss the custody petition on October 1, 2008. Pa.R.A.P. 1701(a).
¶ 12 The trial court found the facts and the holding in In re L.C., II, 900 A.2d 378, 381 (Pa.Super.2006), to be directly on point with the instant case. In In re L.C. II, as in this case, a grandmother appealed from a court order denying her standing to participate in the proceeding at which her grandson was adjudicated dependent. The child had lived with his grandmother for fourteen years, and the trial court then awarded legal and physical custody to his mother. Seventeen months later, the child was adjudicated dependent and placed under the supervision of Indiana County Children and Youth agency. The grandmother sought standing to participate in the child's dependency hearing, and the trial court denied the grandmother's petition. The grandmother appealed, citing R.M., supra, (granting standing to grandmother seeking custody of her grandchild who had been declared dependent), and In re Adoption of Hess, 530 Pa. 218, 608 A.2d 10 (1992) (granting grandparents' petition to intervene in the proceedings for their grandchildren after the parental rights of the natural parents had been terminated).
¶ 13 This Court found the cases cited by the grandmother in In re L.C., II, to be inapposite since they concerned custody actions, not adjudications of dependency. Id. at 380. The Court noted that, under the Juvenile Act, attendance at and participation in dependency proceedings are restricted, and that dependency proceedings are closed to the general public. Id. at 381; In re L.J., 456 Pa.Super. 685, 691 A.2d 520, 526 (1997); 42 Pa.C.S.A. § 6336(d). This Court also found that only a "party" has "the right to participate, to be heard on his or her behalf, to introduce evidence, and/or to cross-examine witnesses." In re L.C., II, 900 A.2d at 381.
¶ 14 In In re L.C., II, this Court clearly determined that only three classes of individuals may qualify for legal party standing in dependency proceedings: (1) the parents of the juvenile whose dependency status is at issue, (2) the legal custodian of the juvenile whose dependency status is at issue, and (3) the person whose care and control of the juvenile is at question at the *905 time of the adjudicatory hearing. Id. at 381. See In re F.B., 927 A.2d 268 (Pa.Super. 2007); In re J.P., 832 A.2d 492, 496 (Pa.Super.2003). The Court opined that the categories "logically stem from the fact that, upon adjudication of dependency, the court has the authority to remove a child from the custody of his or her parents or legal custodian." In re L. C., II, 900 A.2d at 381. See 42 Pa.C.S.A. § 6351. Moreover, Section 6336.1 of the Juvenile Act, added via amendment effective on January 1, 1999, further indicates that standing in dependency matters is restrictive. In order to achieve statutory standing under Section 6336.1, a foster parent, pre-adoptive parent or relative providing care must have legal custody of the child. In re L.C., II, 900 A.2d at 382. In In re L.C., II, this Court found the statutory provision to be "silent regarding either the right to be heard or statutory standing for grandparents or relatives who at some time in the past served as a primary caregiver for the child." Id. at 382 (emphasis in original).
¶ 15 Finally, the Court in In re L.C., II, stated that its conclusion in the case did not mean that the grandmother would lack standing to seek custody of her grandson. Rather, the Court found that, although the trial court allowed grandmother to be present at the hearing, it properly denied the grandmother standing to participate as a party in the grandson's dependency hearing, and the trial court appropriately deferred further custody and family placement decision to another day. Id. at 382-83.
¶ 16 Thus, after a review of the record in the instant case and the applicable case law, we find that the trial court did not err in ruling that Grandmother did not have standing in the dependency proceeding. The trial court noted that, when the trial court in Washoe County, Nevada, adjudicated the Children dependent, it did so because Mother, and not Grandmother, was unable to care for the Children. The court also noted that Grandmother's role was not as the caretaker of the Children, but as a placement resource after the adjudication of dependency. Thus, the trial court found that Grandmother did not fall into any of the categories which would grant her status as a party in a dependency hearing. Her care and control of the Children were not at issue in this case. Grandmother did not have legal custody of the Children. Finally, Grandmother did not have any standing in the dependency proceedings by virtue of her status as a grandparent. Therefore, we find that the trial court did not err in finding that Grandmother did not have standing to participate in the dependency proceedings. See Trial Court Opinion, 1/7/09. The trial court never held that Grandmother lacked standing to seek custody of the Children. Rather, as in In re L.C., II, the trial court properly deferred further custody and family placement decisions to another day.
¶ 17 Grandmother next contends that the trial court erred in holding that, pursuant to 23 Pa.C.S.A. § 6344, Grandmother was disqualified as a foster parent and a placement resource for the Children. Grandmother argues that "the trial court gave no consideration to how remote in time was [Step-grandfather's] conviction, nor to how remote it was from impacting on the question of or capacity to care for children." Grandmother's brief at 19. We disagree.
¶ 18 We agree with the trial court that Grandmother did not appeal the removal of the Children from her home in a timely manner, and, thus waived her right to do so at this time. First, the trial court found, after DHS disqualified Grandmother as a kinship provider, she could have pursued administrative remedies and appealed the disqualification pursuant to 55 *906 Pa.Code § 3700.72. The record shows that Grandmother did not do so. Trial Court Opinion, 1/7/09, at 5.
¶ 19 In addition, Grandmother did not appeal the trial court's decision of December 7, 2007, which affirmed the removal of the Children from Grandmother's home. Rather, Grandmother waited until September 22, 2008 to appeal the decision. Pa. R.A.P. 903(a) (appeal must filed within 30 days after entry of the order from which the appeal is taken).
¶ 20 However, in the alternative we find that the trial court properly considered Grandmother as a placement source but found that since Step-Grandfather had been convicted of aggravated assault twelve years before, Grandmother's home could not qualify as a foster home. The trial court held that 23 Pa.C.S.A. § 6344 prohibits the authorization, without exception, of a person as a foster parent, if a person living in a prospective foster parent's home has a criminal conviction for aggravated assault. We find, as does the trial court, that the statute does not provide any time limitation in its application, as Grandmother suggests.
¶ 21 In her appeal, Grandmother cites the Commonwealth Court's decision in Warren County Human Services v. State Civil Service Commission, 844 A.2d 70 (Pa.Cmwlth.2004)[2] for the proposition the trial court's application of 23 Pa.C.S.A. § 6344 was overbroad. In Warren County Human Services, the appellant worked for the children and youth agency serving Forrest and Warren counties, having passed criminal background checks. However, the appellant was forced to reapply for his job due to reorganization and did not qualify for his job based on his criminal history based on a new version of section 6344. The Commonwealth Court held that section 6344 violated Article 1 of the Pennsylvania Constitution. Warren County Human Services, 844 A.2d at 71-72. The Pennsylvania Supreme Court has consistently interpreted Article 1, Section 1 to guarantee an individual's right to a livelihood and income from that livelihood. Id. at 74.
¶ 22 The trial court found Warren County Human Services distinguishable from the current case. After careful analysis, the trial court found a significant difference between a job of a caseworker and role of a foster parent. For example, a caseworker depends on the job for his livelihood and income, and, as a requirement of the job, visits the child on occasion, but is not responsible on a daily basis for the care and security of the child. On the other hand, the trial court determined that a foster parent has that responsibility, and, thus, a lifetime ban is rationally related to the legitimate state interest in protecting children. Trial Court Opinion, 1/7/09, at 5. Grandmother's role as a foster parent would not be to earn a living or to make a profit, but rather to provide for the care, maintenance, and emotional well-being of the Children. Thus, we find no error on the part of the trial court.
¶ 23 Grandmother also argues that the trial court erred in failing to consider her motion for reconsideration. In our review of the record, we find no evidence that the trial court did not adequately review and consider Grandmother's motion for reconsideration.
¶ 24 In her next issue, Grandmother, contends that she was deprived of her right to counsel guaranteed by the Constitutions of the United States and Pennsylvania, and by the Juvenile Act. We find *907 that, although the trial court appointed counsel for Grandmother to litigate the issue of whether she had standing, the trial court properly vacated the appointment when it held that Grandmother lacked standing. Grandmother was never found to be a "party" to the dependency proceedings and, therefore, was never entitled to court-appointed counsel. The Juvenile Act provides that "a party is entitled to representation by legal counsel at all stages of any proceedings . . . . and if he is without financial resources unable to employ counsel or to have counsel provided for him." 42 Pa.C.S.A. § 6337. We agree with the trial court that Grandmother never met the requirement of a "party" and is not entitled to counsel. Trial Court Opinion, 1/7/09, at 8.
¶ 25 Finally, Grandmother argues that the trial court deprived her of her rights to Due Process and Equal Protection under the Law. The trial court found Grandmother's arguments vague and unanswerable and, therefore, waived. We agree with the trial court and find that any argument presented in this section is repetitious of argument previously made and issues previous discussed in this case. However, we do note that, despite not being a party to the dependency proceeding, the trial court did provide Grandmother with both notice concerning the hearings in the case and an opportunity to be heard, including the assistance of a court-appointed attorney. See In re F.B., supra. Thus, we find no error on the part of the trial court.
¶ 26 Because the trial court's findings and conclusions concerning Grandmother's lack of standing are amply supported by our review of the record and established law, we affirm the order denying Grandmother standing to participate in the dependency proceedings and vacating the appointment of Grandmother's counsel.
¶ 27 Order affirmed.
¶ 28 KLEIN, J. FILES A CONCURRING STATEMENT IN WHICH JUDGE KELLY ALSO JOINS.
CONCURRING STATEMENT BY KLEIN, J.:
¶ 1 I fully join in the cogent analysis of my esteemed colleague. I write separately only to note that I believe it was error for the trial court to dismiss Grandmother's custody petition because the dependency matter was pending. As the majority fully and thoroughly points out in its opinion, there are significant differences between a grandparent who is merely a placement as a foster parent and a grandparent seeking custody. As noted by Judge Stevens:
The trial court found that Grandmother's arguments with regard to her standing in the dependency case of the Children based on 23 Pa.C.S.A. § 5313 and R.M., supra, are misplaced in this case. The trial court noted that, although the Supreme Court and the legislature granted grandparents in both instances standing to file a petition for custody, they did not grant grandparents standing to participate in dependency proceedings before the trial court grants the petition for custody.
Majority Opinion, at 904.
¶ 2 The prime reason why Grandmother was denied standing to participate in the dependency proceeding is because it is a very different procedure from a custody hearing. Therefore, the appeal of the dependency petition should have no effect on the custody petition and that should have been heard.
¶ 3 There are practical reasons for this as well. First, it is vitally important for children to have certainty in their placements, and if ultimately the Grandmother obtains custody, as she well might, there *908 will have been a long delay while the child is in a placement with different foster parents. Secondly, it is understandable that with the crush of the volume of dependency matters, it is necessary for the Department of Human Services to have firm rules to provide placement and further to avoid being hampered by extensive litigation. At the same time, the Court has more flexibility when determining permanent custody. I do not question a rule that prohibits dependency placement when a member of the household has certain criminal convictions. However, in a custody matter when there is time to fully consider all factors, such as this case, the court may well find that despite the foster step-grandfather's twelve-year-old conviction for aggravated assault, that placement may be optimum for the grandchildren.
¶ 4 While I fully agree with Judge Stevens, I urge the immediate reactivation of the custody matter.
NOTES
[1] We note that, on September 19, 2008, Grandmother filed a petition to modify the custody order with regard to the Children. Since an appeal to this Court was pending, the trial court dismissed Grandmother's custody petition on October 1, 2008.
[2] We note that Commonwealth Court cases are not binding on this Court. Stackhouse v. Stackhouse, 862 A.2d 102, 105 (Pa.Super.2004). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/2857760/ | IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,
AT AUSTIN
NO. 3-91-578-CR
JOE ALVIAR, JR.,
APPELLANT
vs.
THE STATE OF TEXAS,
APPELLEE
FROM THE DISTRICT COURT OF BELL COUNTY, 264TH JUDICIAL DISTRICT
NO. 40,555, HONORABLE RICK MORRIS, JUDGE PRESIDING
Over a plea of not guilty, the jury found appellant Joe Alviar, Jr. guilty of
aggravated sexual assault. See Tex. Penal Code Ann. § 22.021(a)(1)(B) (1989). The trial court
sentenced Alviar to fifty-years imprisonment. He appeals. We will reverse the judgment of the
trial court and remand the cause for a new trial.
THE CONTROVERSY
Alviar was indicted and tried for sexually assaulting his niece's daughter, C.A.,
who was six years of age at the time of trial. During the trial C.A. testified that Alviar assaulted
her through both oral and vaginal penetration. She stated a number of times, in response to both
prosecution and defense questions, that she was telling the truth.
On cross-examination, defense counsel asked C.A. whether she had seen adults
engage in sex, either on television or elsewhere. She replied that she had not. She did, however,
give conflicting testimony about whether a Luis Corona had sexually assaulted her as well.
The State elicited testimony from C.A.'s mother, Wendy P., about opportunities
Alviar had to assault C.A. The State also elicited testimony from Dr. Susan Nickel, who had
treated C.A. Dr. Nickel testified C.A. had made an outcry statement accusing Alviar of the
assault. The State then rested.
Testifying in his own defense, Alviar denied assaulting C.A. He testified C.A. had
once asked him questions about sex because she had seen her mother and stepfather engaging in
sex. Alviar admitted being alone with C.A. several times, but stated repeatedly that she was lying
about the assault.
Alviar's wife, Rosalinda, also testified for the defense. She stated that she believed
C.A. was lying about the assault. Rosalinda also implied that Wendy had taught C.A. to lie in
order to prevent Wendy's husband from learning about Wendy's relationships with other men.
The State then called a rebuttal witness, Dr. Christine Svoboda, a psychologist with
experience in treating abused children. Dr. Svoboda had met with C.A. on a weekly basis from
September to November 1991, approximately ten weeks in all. After recounting the effects of
child abuse in general, Dr. Svoboda testified that C.A.'s behavior was consistent with the
behavior of abused children. Dr. Svoboda stated that C.A. complained of sexual abuse by "Uncle
Joe Joe," apparently a reference to Alviar. Dr. Svoboda also testified C.A. added details of the
sexual assault with succeeding therapy sessions, and there were no contradictions from one session
to the next. Dr. Svoboda attributed C.A.'s elaborations on her account of the assault to the
growing trust between doctor and patient. The prosecutor then elicited from Dr. Svoboda the
following testimony, which we have set out at some length because of the importance of the
context of Dr. Svoboda's statements:
Q: The idea that [C.A.] has made all of this up, that this is fantasy on her part,
that she saw it somewheres [sic] else and has divulged it from having seen
it, okay, that type of--that type of defense, from your training and experience,
what do you know about this?
A: Well, there are some cases where victims have fabricated the story, and that
is certainly a possibility in some cases. They are specific kind [sic] of cases
though in terms of the literature when that has happened, and also the child
gives a specific kind of presentation. Okay. That is likely. It's not likely,
but you would be concerned about something like that if it were a custody
hearing, okay, where one parent perhaps is misusing the child in the custody
arrangement.
Another possibility is if a parent has a very severe psychiatric disorder, a
delusional kind of disorder and they have false beliefs about a number of
things and they tell the child this. The child's presentation, though, is much
different when the information is falsified. They come in and tell the story
completely in kind of an uneffected [sic] flat way without any anxiety
attached to it. And oftentimes because they are children and they are not
particularly--this isn't their story, it's somebody else's story, the facts will
change over time. So I know that there's been a good deal of information
in the literature about falsification of the story. That was certainly not my
assessment in this case.
Q: Okay. What you have seen and observed of [C.A.] the type of situations
where this, a fabrication would exist, you have not seen that at all with
regard to [C.A.]?
A: No, that was never a consideration.
Q: And in the time that you have been able to spend with her there has been a
direct--well, for instance, the Defendant has said that [C.A.] is lying. The
Defendant's wife sat where you are at and said I think [C.A.] is lying.
What is your opinion from having been with her over this period of time?
[Defense Counsel]: We are going to object to that, your
Honor, that's nothing but bolstering.
The Court: Overruled.
Q: (By the prosecutor) What is your opinion?
A: I think that her account is factual.
[Prosecutor]: I pass the witness.
(Emphasis added). Based on the foregoing evidence, the jury found Alviar guilty of aggravated
sexual assault. The trial court assessed punishment of fifty-years imprisonment. Alviar appeals.
DISCUSSION
In his sole point of error, Alviar complains the trial court erred in overruling his
objection that the State improperly bolstered C.A.'s testimony with Dr. Svoboda's opinion
testimony that she was truthful. "Bolstering" occurs when a party improperly uses an item of
evidence to add credence or weight to some earlier unimpeached piece of evidence offered by the
same party. Guerra v. State, 771 S.W.2d 453, 474 (Tex. Crim. App. 1988), cert. denied, 492
U.S. 925 (1989). Alviar argues C.A. was not impeached and therefore bolstering was improper.
The State responds with three arguments: (1) Alviar did not preserve error because
his objection was not specific enough; (2) C.A. had been impeached on cross-examination and by
the testimony of other witnesses and bolstering was therefore permitted; and (3) even if the
bolstering was improper, the evidence was cumulative because Dr. Svoboda had already testified
without objection that she did not believe C.A. falsified the story. We will examine each of these
contentions.
Preservation of Error
According to the State, Alviar did not preserve a complaint for appellate review
because he did not state the specific grounds for the ruling he desired from the court. See Tex.
R. App. P. Ann. 52(a) (Pamph. 1992). The State reasons as follows: A party may bolster the
testimony of a witness who has been impeached; C.A. had been impeached by the cross-examination and by the Alviars' testimony; because bolstering in and of itself was not improper
in this case, Alviar had to make a more specific objection that Texas Rules of Criminal Evidence
702 and 704 prohibited the particular type of bolstering employed by the State; Alviar did not
make such an objection, and therefore did not preserve error. See Tex. R. Crim. Evid. Ann. 702,
704 (Pamph. 1992).
We believe Alviar did preserve error. Texas Rule of Appellate Procedure 52(a)
requires a party to make a "timely request, objection or motion stating the specific grounds for
the ruling he desired the court to make if the specific grounds were not apparent from the
context." Tex. R. App. P. Ann. 52(a) (Pamph. 1992) (emphasis added); see also Lankston v.
State, 827 S.W.2d 907, 909 (Tex. Crim. App. 1992) ("As regards specificity, all a party has to
do to avoid the forfeiture of a complaint on appeal is to let the trial judge know what he wants,
why he thinks himself entitled to it, and to do so clearly enough for the judge to understand him
at a time when the trial court is in a proper position to do something about it."). We conclude the
specific grounds were apparent from the context of the objection. The prosecutor asked Dr.
Svoboda a direct question as to her opinion of whether C.A. was telling the truth. Alviar's
attorney objected that the question was "bolstering," that is, attempting to enhance C.A.'s
credibility by having another witness express an opinion as to whether C.A. was telling the truth.
The court of criminal appeals approved an objection similar to the one in the
present cause in Moreno v. State, 755 S.W.2d 866 (Tex. Crim. App. 1988). In Moreno, the State
attempted to impeach the defendant with unadjudicated offenses by cross-examining him about
firing guns within his apartment complex. The defendant's attorney objected, "Judge, I object to
this line of questioning. This is going to other acts that are irrelevant to this matter." The court
of criminal appeals held this objection was sufficiently specific to apprise the trial court of the
defendant's objection. Id. at 870.
Defense counsel objected to a question directly asking Dr. Svoboda whether she
believed C.A. was telling the truth. Neither the trial court nor opposing counsel could have failed
to grasp that Alviar was objecting to the State's attempt to enhance C.A.'s credibility by the
question directed to Dr. Svoboda. See Lankston, 827 S.W.2d at 911; Black v. State, 634 S.W.2d
356, 358-59 (Tex. App. 1982, no pet.); see also Miller v. State, 741 S.W.2d 382, 387 (Tex.
Crim. App. 1987), cert. denied, 486 U.S. 1061 (1988); Zillender v. State, 557 S.W.2d 515, 517
(Tex. Crim. App. 1977). We conclude Alviar preserved the point of error.
Propriety of Bolstering
The State may not bolster or support its own witnesses unless they have been
impeached on cross-examination. Duckett v. State, 797 S.W.2d 906, 918 (Tex. Crim. App.
1990). "An unimpeached witness may not be bolstered simply because his or her testimony may
be disbelieved; it is only when a witness is placed in a position of having testified differently from
earlier testimony that a party will be permitted to bolster its own case." Id. Alviar contends
neither the cross-examination of C.A. nor the testimony of other witnesses impeached her. The
State argues C.A. was impeached on cross-examination and by the Alviars' accusations that C.A.
was lying, so bolstering was proper. We must therefore determine whether C.A. was impeached
in order to determine whether the bolstering was improper.
On cross-examination the following exchange occurred between defense counsel
and C.A.:
Q: Do you remember telling -- Has something like this ever happened to you
before?
A: No.
Q: Do you remember telling one of the doctors about Luis Corona?
A: Yes.
Q: What did you tell them about that?
A: I forgot.
Q: But you did tell them -- But you did tell them something like this
happened with Luis Corona?
A: I can't remember.
. . . .
Q: And the truth is you did tell the doctor that Luis had done
something like this, didn't you?
A: Yes.
Q: And it happened a long time ago or when?
A: I can't remember.
On redirect examination, the prosecutor asked C.A.:
Q: Did Luis put his private into your mouth like Uncle Joe did in
yours?
A: No.
Q: Now, anybody else, any other man ever do that to you?
A: No.
Q: Okay. Who is the only person that has put his private in your
mouth and has put his private in your private?
A: Joe.
Finally, on recross examination defense counsel asked C.A.:
Q: But it is true, isn't it, that you did tell the doctor that Luis did
something like that?
A: Yes.
Q: Okay. And you told the doctor the truth, didn't you?
A: Yes.
. . . .
Q: As a matter of fact, I think isn't it true that you did tell the doctor
that [Luis] put his private part in your mouth also?
A: (Shrugs shoulder.) I don't know.
Q: Have you forgotten?
A: Yes.
Q: A lot of times we forget things when it's been a long time ago,
doesn't it [sic]?
A: Yes.
Q: Sometimes we don't remember things just like they happened, do
we?
A: Yes.
Alviar and his wife both testified they believed C.A. was lying about the alleged
sexual assault. Alviar testified C.A. had asked him about sexual acts, whereas C.A. testified she
had never seen adults engage in sex, either at her home or on television. Rosalinda Alviar
testified she believed C.A. made up the accusation about Alviar after witnessing her mother,
Wendy, engage in sex. In argument before the jury, defense counsel conceded C.A. had probably
suffered abuse, but suggested Corona was responsible for that abuse.
We believe Alviar's defense counsel impeached C.A. Defense counsel's cross-examination elicited contradictory responses from C.A. about previous abuse by Corona. The
cross-examination also exposed an inconsistency between C.A.'s trial testimony and her out-of-court statement to the doctor about previous abuse. Finally, Alviar testified that C.A. questioned
him about sex, indicating she had some knowledge of sex; this at least implicitly contradicted
C.A.'s testimony that she had never seen anyone engage in sexual activity. See Duckett, 797
S.W.2d at 918 (concluding a child was impeached during cross-examination when she gave
inconsistent testimony and became confused and reticent when answering questions); see also
Livingston v. State, 739 S.W.2d 311, 332 (Tex. Crim. App. 1987) (allowing bolstering because
defense counsel "attempted to impeach the testimony" of a witness, or at least "clouded" the
testimony of the witness by cross-examination), cert. denied, 487 U.S. 1210 (1988); Smith v.
State, 595 S.W.2d 120, 126 (Tex. Crim. App. 1980) (allowing bolstering when the testimony of
a witness was "clearly undermined and clouded" by cross-examination).
Because defense counsel impeached C.A., bolstering was proper. Moreover, Dr.
Svoboda's testimony directly related to the matter on which C.A. had been impeached--her
credibility. See Duckett, 797 S.W.2d at 918 (bolstering testimony must be related to the
impeachment to be admissible). The question remains, however, whether the particular type of
bolstering engaged in by the State was proper. We conclude it was not.
The court of criminal appeals distinguished between direct and indirect bolstering
in Duckett, 797 S.W.2d at 920. In that case the court approved an expert's recitation of the six
"elements" of the so-called "Child Sexual Abuse Syndrome" and the expert's application of the
elements to the facts of the case. Id. The court, however, drew a definite line between testimony
which assists the factfinder and that which usurps the role of the factfinder:
Under our interpretation of the rules, such testimony which merely embraces an
ultimate issue is clearly admissible under [Texas Rule of Criminal Evidence 704].
The situation would be different if the trial court had permitted [the expert witness]
to give an opinion whether he believed S__ S__ was telling the truth or could be
believed. The latter form of opinion would not only embrace the ultimate issue of
whether the child was abused as charged, it would cross the line of assisting the
trier of fact to replace that body as decisionmaker.
Id. (emphasis in original). The court held the expert's testimony "did not cross the line in an
attempt to decide the issue for the jury" because it was mere background information supplied to
rehabilitate the witness. Id.
We believe the question the prosecutor asked Dr. Svoboda in the present cause did
"cross the line" of permissible testimony because it falls directly within the type of testimony
disapproved in Duckett. The prosecutor asked Dr. Svoboda her opinion as to whether C.A. was
telling the truth. Over defense counsel's objection, Dr. Svoboda replied, "I think that her account
is factual." This exchange crossed the line from indirect to direct bolstering and was therefore
improper. See Kirkpatrick v. State, 747 S.W.2d 833, 839 (Tex. App. 1987, pet. ref'd) (reversing
and remanding for a new trial because an expert witness testified she believed the child
complainant was telling the truth); Black, 634 S.W.2d at 358 (same); see also Martin v. State, 819
S.W.2d 552, 555 (Tex. App. 1991, no pet.).
The State argues that, because C.A. was impeached by inconsistent statements and
direct opinion evidence attacking her credibility, opinion testimony bolstering C.A.'s credibility
was proper. According to the State, Dr. Svoboda's opinion that C.A.'s account was factual was
simply a reply to Rosalinda Alviar's opinion that the child was lying. We agree that the State
could bolster C.A.'s credibility by use of an expert witness. The expert witness was obliged to
testify within certain constraints, however. "[T]he use of expert testimony must be limited to
providing knowledge that will assist the jury's rational decision of the issues before it; it cannot
be used to advise the jurors who is telling the truth." Kirkpatrick, 747 S.W.2d at 837. Because
no expert witness is qualified to ascertain credibility, the trial court erred in allowing Dr. Svoboda
to comment directly on the credibility of C.A. See id. at 838.
Cumulative Evidence
The State argues that any error resulting from improper bolstering was harmless
because Dr. Svoboda had previously testified without objection that she thought C.A. was telling
the truth about the assault. See Tex. R. App. P. Ann. 81(b)(2) (Pamph. 1992). The State
correctly points out that a party must object to the introduction of evidence at the earliest
opportunity. Montelongo v. State, 681 S.W.2d 47, 57 (Tex. Crim. App. 1984); O'Neill v. State,
681 S.W.2d 663, 670 (Tex. App. 1984, pet. ref'd). Improper admission of evidence does not
constitute reversible error if the same facts were proved by evidence to which the appellant did
not object. Brasfield v. State, 600 S.W.2d 288, 296 (Tex. Crim. App. 1980).
We cannot conclude either of Dr. Svoboda's statements preceding the objected-to
question was a direct comment on C.A.'s credibility, as the objected-to statement was. After
discussing the circumstances in which a child might falsify an abuse accusation and the child's
manner of relating a false story, Dr. Svoboda said, "That was certainly not my assessment in this
case." Although the statement was arguably an opinion of C.A.'s credibility, it could also be
construed as an opinion that the circumstances which prompt false accusations were absent in the
present cause. We do not believe this statement was such a direct comment on C.A.'s credibility
that it relegated Dr. Svoboda's explicit opinion of C.A.'s credibility to the status of cumulative
evidence.
Nor was Dr. Svoboda's next answer clearly an opinion of C.A.'s credibility. The
prosecutor asked, "What you have seen and observed of C.A. the type of situations where this,
a fabrication would exist, you have not seen that at all with regard to C.A.?" (Emphasis added).
From the context of the question, the prosecutor was apparently asking Dr. Svoboda whether
C.A.'s circumstances included a custody battle or a parent imposing false beliefs on the child.
Dr. Svoboda answered, "No, that was never a consideration." An expert witness is allowed to
describe general behavioral characteristics of a child-abuse victim and match those characteristics
with the complainant's behavior patterns as long as the expert does not comment directly on the
credibility of the victim. Duckett, 797 S.W.2d at 915 n.13. We believe the question and answer
served to establish only that the present cause did not present the usual motives for a child to lie.
If the answer commented on C.A.'s credibility, it did so only indirectly. See id. at 919 (stating
that the court of appeals erred by focusing upon the indirect result of the expert's bolstering
testimony without considering the context in which the testimony was allowed).
The State urged an identical argument in Kirkpatrick, 747 S.W.2d at 839 n.6. In
that case the prosecutor asked the expert witness, "Are those things that you have mentioned or
that you have observed on counseling with . . . [child complainant] and hearing her story,
watching her reaction, are those things all consistent, based on your training and experience, with
children who have in fact been sexually abused?" The expert answered, "Yes, they are." The
defendant lodged no objection to this exchange, but did object later when the prosecutor asked the
expert "whether or not [the child] is truthful about her claim of sexual abuse." On appeal, the
State argued that no reversible error was present because the prosecutor had elicited the earlier
testimony without objection.
The court of appeals rejected the State's argument because it did not believe the
evidence was cumulative: "Our examination of the record reflects that the unobjected inquiry was
merely the opening salvo of an extended line of inquiry. The inquiries as to which appellant made
proper objection cannot be dismissed as `merely cumulative.' The errors asserted by appellant
were preserved and we find them reversible." Id.; see also Morgan v. State, 816 S.W.2d 98, 102
(Tex. App.) (holding that the appellant preserved error even though he did not object immediately
because the comments "did not become blatantly objectionable until the second or third time the
prosecutor made a comment"), pet. ref'd per curiam, 817 S.W.2d 706 (Tex. Crim. App. 1991).
Harmless-Error Analysis
Having concluded the trial court erred in allowing Dr. Svoboda to express an
opinion of C.A.'s credibility, we must determine whether the error merits reversal. See Tex. R.
App. P. Ann. 81(b)(2) (Pamph. 1992). In a harmless-error analysis, we must calculate the
probable impact of the error on the jury in light of the existence of the other evidence. (1) Orona
v. State, 791 S.W.2d 125, 130 (Tex. Crim. App. 1990).
C.A.'s testimony was the only direct evidence adduced tending to show Alviar
assaulted her. Dr. Nickel testified C.A. had suffered vaginal scarring, but that scarring could
be attributed to the alleged abuse by Corona. Both Dr. Nickel and Dr. Svoboda testified C.A.
implicated Alviar in outcry statements, but the reliability of those statements was also dependent
on C.A.'s credibility.
Considering C.A.'s inconsistent statements during her testimony and the lack of
corroborating evidence of Alviar's guilt, we believe a juror might place undue weight on Dr.
Svoboda's opinion that C.A.'s account was factual. See Yount v. State, 808 S.W.2d 633, 636
(Tex. App. 1991, pet. ref'd) (motion for rehearing pending); see also Farris v. State, 643 S.W.2d
694, 697 (Tex. Crim. App. 1982). We therefore cannot conclude beyond a reasonable doubt that
the error made no contribution to the conviction. See Tex. R. App. P. Ann. 81(b)(2) (Pamph.
1992).
We reverse the judgment of the trial court and remand the cause for a new trial.
John Powers, Justice
[Before Justices Powers, Jones and Kidd]
Reversed and Remanded
Filed: August 12, 1992
[Do Not Publish]
1. To calculate the probable impact of the error on the jury, we look to the factors set forth
in Harris v. State, 790 S.W.2d 568 (Tex. Crim. App. 1989): (1) the source of the error; (2)
the nature of the error; (3) whether or to what extent the State emphasized the error; (4) the
error's probable collateral implications; (5) how much weight a juror would probably place on
the error; and (6) whether declaring the error harmless would encourage the State to repeat it
with impunity. Id. at 587. We focus not on the weight of the other evidence of guilt, but
rather on whether the error at issue might have prejudiced the jurors' decisionmaking. Id. at
587-88. In the final analysis, our inquiry is whether the trial was an essentially fair one. Id.
at 588. | 01-03-2023 | 09-05-2015 |
https://www.courtlistener.com/api/rest/v3/opinions/1644713/ | 994 So. 2d 1120 (2007)
WILLIAM LEONARD ASSOCIATES, INC., a Florida corporation, d/b/a Leonard Associates, Appellant,
v.
Deborah KESHEN and Cynthia Lawrence, Appellee.
No. 3D07-631.
District Court of Appeal of Florida, Third District.
June 6, 2007.
Langbein & Langbein and Evan J. Langbein and Richard A. Friend and Richard F. O'Brien, III and Sands Moskowitz, Miami, for appellant.
Bilzin Sumberg Baena Price & Axelrod and Alvin D. Lodish and Raquel M. Fernandez and Melissa Pallett-Vasquez, Miami, for appellee.
Before FLETCHER, WELLS, and SUAREZ JJ.
PER CURIAM.
Affirmed.
WELLS, J., specially concurring.
I agree that the summary judgment dismissing the instant action against Deborah Keshen and Cynthia Lawrence in their individual capacities should be affirmed. I write only to make clear that nothing in this determination should preclude William Leonard Associates from seeking to amend its complaint to properly reflect what the parties admit, which is that the properties at issue here were owned by a general partnership in which these two individuals, and their brother (who like these two parties was named individually and served with process), were general partners. See I. Epstein & Bro. v. First Nat. Bank of Tampa, 92 Fla. 796, 110 So. 354 (1926) (wherein the Florida Supreme Court opined that an amendment to the pleadings which changed the capacity of a defendant-partner from representative status to individual status is permitted even after the statute of limitations has run where the partners had, prior to expiration of the limitation period, been served with process and had appeared in court and filed pleadings). | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537167/ | 27 B.R. 123 (1983)
In re PDQ COPY CENTER INC., Debtor.
Bankruptcy No. 82 B 20343, 82 Adv. 6329.
United States Bankruptcy Court, S.D. New York.
February 8, 1983.
*124 Sidney Turner, White Plains, N.Y., for trustee.
George Damashek, White Plains, N.Y., for defendant.
DECISION ON ACTION BY TRUSTEE TO RECOVER FEES COLLECTED BY DISCARDED ATTORNEY AFTER COMMENCEMENT OF THIS CASE.
HOWARD SCHWARTZBERG, Bankruptcy Judge.
This case involves the reach of an attorney's charging lien on proceeds received by the attorney after the filing of a bankruptcy petition, at a time when the trustee in bankruptcy petition, at a time when the trustee in bankruptcy had already dismissed the attorney and had initiated efforts to collect the debt on his own.
FACTS
1. In January, 1981, George Damashek, Esq., the defendant in this action, was retained as an attorney by PDQ Copy Center, Inc. ("PDQ"), the above named debtor, to collect a claim it had against a certain corporation in the sum of $2003.59 for work, labor and services.
2. The defendant and PDQ agreed that his fee for his legal services would be on a contingency basis; one-third of any recovery, plus disbursements advanced by the defendant in the prosecution of the claim.
3. In March, 1980 the defendant commenced an action in the City Court of White Plains on behalf of PDQ against a principal of the account debtor for the recovery of $2003.59, together with interest. This action resulted in the entry of a judgment on July 13, 1981 in favor of PDQ and against the principal of the account debtor in the sum of $2,303.20, inclusive of interest and costs.
4. On June 4, 1982, PDQ filed in this court its voluntary petition for relief under Chapter 7 of the Bankruptcy Code. The plaintiff is the duly qualified trustee in bankruptcy of PDQ.
5. Sometime after his appointment, the trustee and the defendant had a conversation whereby the defendant was advised that he was no longer authorized to act on behalf of the debtor, PDQ, and that the defendant should not entertain any settlement offers from the judgment debtor. The trustee then proceeded to attempt to effect collection of the indebtedness.
6. Thereafter, the judgment debtor desired to clear all impairments against the title to his home which were listed as of record, so that he could complete a proposed sale. Accordingly, on November 15, 1982, the judgment debtor forwarded to the defendant, as attorney of record for the judgment creditor, PDQ, payment of the judgment debt in the amount of $2,651.58; inclusive of interest to the date of payment.
7. On November 22, 1982, the defendant issued and transmitted to the plaintiff trustee, a check payable to the trustee in the sum of $1,737.72. This sum represents two-thirds of the $2651.58 received by the defendant after deducting $883.86 in accordance with the one-third contingent fee arrangement, plus disbursements of $30.00, for an aggregate fee of $913.86.
DISCUSSION
While a trustee in bankruptcy may look to his arsenal of so-called strong arm avoidance weapons, so may an attorney seek protection from the trustee's assault by taking refuge behind the shield of the statutory charging lien that many states have enacted for the protection of earned attorneys' fees
Section 475 of the New York Judiciary Law provides, in relevant part:
"From the commencement of an action or special proceeding ..., or the service *125 of an answer containing a counterclaim, the attorney who appears for a party has a lien upon his client's cause of action, claim or counterclaim, which attaches to a verdict, report, decision, judgment or final order in his client's favor, and the proceeds thereof in whatever hands they may come; and the lien can not be affected by any settlement between the parties before or after judgment or final order. The court upon petition of the client or attorney must determine and enforce the lien. 29 McKinney's Consolidated Laws of New York Annotated, Judiciary § 475 (1968)."
Judge Cardozo (later Mr. Justice) in Matter of Heinsheimer, 214 N.Y. 361 at 367, 108 N.E. 636 (1915) pointed out that the lien arose not when the funds were produced but rather when the attorney commenced the action out of which the proceeds arose:
"The same statute that gives an attorney a lien on the judgment, gives him a lien on the cause of action, and the lien attaches the moment that the action is begun."
See also Matter of Montgomery, 272 N.Y. 323, 6 N.E.2d 40 (1936); Tillman v. Komar, 259 N.Y. 133, 181 N.E. 75 (1932); Beecher v. Vogt Manufacturing Co., 227 N.Y. 468, 125 N.E. 831 (1920).
The fact that bankruptcy intervened between the time when the attorney commenced the action on behalf of the debtor and when the funds were received by him in satisfaction of the cause of action does not detract from the attorney's right to rely upon the attorney's statutory charging lien; it relates back to the initiation of the action. Judge Ryan in this District, in In re E.C. Ernst, Inc., 4 B.R. 317 at 320 (Bkrtcy.S. D.N.Y.1980) said:
"Since the lien relates back to the commencement of F & G's services (i.e., prepetition), the fact that the debtors each filed a Chapter XI petition does not affect the lien as to those relevant pre-petition activities."
The relation back concept is consistent with the provision in Code § 546(b) that the rights and powers of the trustee under sections 544, 545 or 549 of the Code are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in the property before the date of such perfection. See In re Fiorillo & Company, 19 B.R. 21 (Bkrtcy.S.D.N.Y.1982) where a mechanic's lien related back to the commencement of work so as to defeat a debtor in possession that was asserting its avoiding powers in its capacity as trustee. The attorney need not file or record a charging lien in order to perfect it; the lien takes effect from the time the services were commenced, and a trustee in a subsequent bankruptcy case involving the client takes the property of the estate subject to such lien. In re Pacific Far East Line, Inc., 654 F.2d 664 (9th Cir.1981); Hanna Paint Mfg. Co. v. Rodey, Dickason, Sloan, Akin & Robb, 298 F.2d 371 (10th Cir.1962); In re Knudsen Bros. Dairy, Inc., 24 B.R. 418 (Bkrtcy.Conn. 1982); In re TLC of Lake Wales, Inc., 13 B.R. 593 (Bkrtcy.M.D.Fla.1981); In re E.C. Ernst, Inc., 4 B.R. 317 (Bkrtcy.S.D.N.Y. 1980).
The Discarded Attorney
There next remains to be determined the extent of such lien. The defendant reasons that he is entitled to enforce the one-third contingent fee agreed to by PDQ. The contingent fee arrangement was rooted in a contract entered into between the attorney and PDQ before the bankruptcy petition was filed. Therefore, it follows that the trustee's failure to assume the contract within sixty days after the order for relief resulted in the contract being deemed rejected pursuant to Code § 365(d)(1). In any event, the trustee expressly informed the defendant that he was no longer authorized to represent the debtor before the judgment was paid. Although the cancellation of the contingent fee agreement does not deprive the attorney of his fee, it can no longer serve as the measure of compensation.
In Tillman v. Komar, supra, the New York Court of Appeals stated 259 N.Y. at page 135, 181 N.E. 75:
"The client is entitled to cancel his contract of retainer but such agreement cannot *126 be partially abrogated. Either it wholly stands or it totally falls. After cancellation, its terms no longer serve to establish the sole standard for the attorney's compensation. Together with other elements they may, however, be taken into consideration as a guide for ascertaining quantum meruit."
Indeed, in Matter of Montgomery, supra, the attorney established that the reasonable value of the legal services performed was greater than the agreed upon fee.
Accordingly, the discarded attorney is entitled to apply to this court for a determination of the reasonableness of his fees, based upon the time invested, the nature, the extent and the value of the legal services and the cost of comparable services. The application should be made on notice to the trustee and filed within twenty-one days from this date. The defendant shall hold the $913.86 that he retained subject to further order of this court.
IT IS SO ORDERED. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537169/ | 27 B.R. 915 (1983)
In the Matter of DAYTON SUZUKI, INC., Debtor.
Bankruptcy No. 3-82-03224.
United States Bankruptcy Court, S.D. Ohio, W.D.
March 3, 1983.
DeWayne Smith, Troy, Ohio, for debtor.
Thomas F. Folino, Dayton, Ohio, for Earl G. Stepp.
Jack Pickrel, Dayton, Ohio, trustee.
DECISION AND ORDER
CHARLES A. ANDERSON, Bankruptcy Judge.
FINDINGS OF FACT
The Trustee in Bankruptcy on 6 January 1983 served notice of sale of the inventory and equipment of the estate, appraised at $7,500.00. On 31 January 1983 Earl G. Stepp filed "Objection to Sale," claiming a valid security interest in the property, and referring to a proof of claim filed on December 10, 1982, in the amount of $33,483.40. At the hearing on 7 February 1983 decision was reserved for two weeks pending receipt of legal memoranda.
The claim of Stepp stems from an "Agreement (and Pledge of Stock)" (attached to the objection) executed on or about December 1, 1978, wherein the Debtor corporation purchased one share of the common stock held by Stepp for $21,500.00. $500.00 was paid on the date of the agreement *916 and the balance, with 6 per cent interest, by a promissory note of even date, payable in consecutive monthly installments of not less than $700.00.
A secured proof of claim had been filed by Earl G. Stepp on 10 December 1982 for the amount of $33,483.40, to which was attached a similar agreement with Harold Fultz, as buyer, dated December 1, 1978, for the sale by Debtor of one share of common stock for $65,000.00 payable by $30,000.00 cash and deferred installment payments of $700.00 per month for the balance of $35,000.00, also evidenced by a promissory note. This agreement, however, was signed by Stepp as President of the debtor corporation, the seller, to Fultz.
The agreement attached to the objection to sale has covenants, as follows:
As security for the amount due Earl G. Stepp, the Corporation shall execute its promissory note and, in addition, the Corporation shall execute a security agreement on all the fixtures, chattels and equipment of the corporation, with the consent of the sole stockholder, Harold Fultz, who is the owner of one share of stock issued and outstanding of the Corporation.
In order to further secure the payment of said obligation to Earl G. Stepp by the Corporation, Harold Fultz as the sole stockholder does hereby pledge all of his one share of stock of Dayton Suzuki Sales, Inc. to Earl G. Stepp as security for the payment of said obligation. Therefore, Harold Fultz does hereby assign and transfer over to Earl G. Stepp his one share of stock and all his right, title, and interest in and thereto, as security for the payment of said obligation. Upon the complete payment of said obligation of $21,000.00 with interest thereon, then Earl G. Stepp shall return the one share of stock to Harold Fultz.
No such security agreement was ever executed, as mentioned in the Agreement of Sale.
The Agreement attached to the secured proof of claim does not contain such a covenant, as to a security agreement to be executed later.
On 5 December 1978 Stepp caused a financing statement to be filed with the Recorder of Montgomery County, Ohio, and on 6 December 1978 with the Ohio Secretary of State, describing an extensive list of shop and office equipment, tools, stock in trade, and testing devices located at the place of business in Dayton, Ohio, Montgomery County.
There was no evidence adduced to explain the two different agreements to sell, or why the agreement of sale to Fultz for the larger indebtedness was attached to the secured proof of claim of Stepp, since it does not even refer to any proposed security agreement.
DECISION
The objector urges "that as security for the payment by the Debtor corporation to the secured creditor, the Debtor corporation executed and delivered a Financing Statement to the secured creditor." The Trustee and Debtor both insist that the filing of the financing statements would merely perfect a duly executed security agreement, if one were in effect, pursuant to Ohio Revised Code Sections 1309.21 (U.C.C. 9-302) and 1309.39 (U.C.C. 9-402).
This Court has previously held on numerous occasions that if a financing statement has been duly executed and complies with the statutory requirements for both a security agreement and financing statement, a separate security agreement is not necessary if the parties intended a security interest by the signing of the financing statement to be filed. See opinion In Re Shaffner, (1966) Case No. 23088 (at Dayton). Contra are such cases as American Card Co. v. H.M.H. Co. 97 R.I. 59, 196 A.2d 150, holding that a filed financing statement which does not contain the debtor's grant of a security interest does not meet the requirements of Article 9 of the Uniform Commercial Code. Likewise, see L & V Co. v. Asch, 267 Md. 251, 297 A.2d 285; and Crete State Bank v. Lankoff Grain Co., 195 Neb. 605, 239 N.W.2d 789; and 30 A.L.R. 3d 9, 42, § 11.
*917 The opinion in Shaffner rationalizes that the Uniform Commercial Code requires no special terminology, and the formal requisites of a financing statement conformably to Ohio Revised Code § 1309.39 (U.C.C. 9-402(1)) include the minimal requirements for a security agreement prescribed by Ohio Revised Code § 1309.13 (U.C.C. 9-203). Also, a promissory note might likewise constitute a security agreement. Realistically, the fact that a debtor executes a financing statement should not be deemed insignificant; and third parties searching the public files surely are on notice of the substance of the claimed collateral. A "grant" clause can certainly even be oral if such is the intention of the parties. The function of a security agreement as a matter of elementary and fundamental contract law is merely to evidence the intention of the contracting parties.
Looking to the intent of the parties on the facts, instanter, however, the very wording of the written sales agreement supplies the determinative intent factor. There can be no doubt that the financing statement as executed was not intended as a security agreement. It specifically stipulates "the Corporation will execute a security agreement. . . ." Obviously, for whatever reason, no security agreement was ever granted and the parties apparently intended, at least temporarily, to rely upon the pledge of the corporate stock for security.
Accordingly, the conclusion must follow as a matter of law that neither the requirements of the Uniform Commercial Code nor elementary contract law have been met, and the objection to the Trustee's sale must be overruled. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537180/ | 979 A.2d 558 (2009)
117 Conn.App. 403
Colleen J. HANNON
v.
Michael R. REDLER.
No. 29257.
Appellate Court of Connecticut.
Argued April 28, 2009.
Decided September 29, 2009.
*560 George Markley, with whom was Richard G. Kent, Fairfield, for the appellant (defendant).
David J. Elliott, with whom was Laura J. Martella, Hartford, for the appellee (plaintiff).
BISHOP, HARPER and SCHALLER, Js.
HARPER, J.
The defendant, Michael R. Redler, appeals from the judgment of the trial court dissolving his marriage to the plaintiff, Colleen J. Hannon. On appeal, the defendant claims that the court improperly (1) determined the value of his interest in *561 his medical practice, (2) determined the net equity in his home, (3) determined his income and (4) ordered alimony and a distribution of assets to the plaintiff. We affirm the judgment of the trial court.
The parties were married on September 12, 1981. At the time of dissolution, the parties had four adult children born of the marriage, two of whom were ages twenty and twenty-two.[1] The plaintiff was the director of human resources for a company named Alenia North America. The defendant was an orthopedic surgeon in a medical practice named Orthopedic and Sports Medicine Center (medical practice). The medical practice was a limited liability company, which the defendant started in late 1994 "in partnership with" other persons. After four days of trial, the court dissolved the parties' marriage by a memorandum of decision filed on September 28, 2007. The court found that the parties had been separated and living apart since January, 2004. It found that the marriage had broken down irretrievably and entered various financial orders. In relevant part, it ordered the defendant to pay $4000 per month[2] in alimony until the children finished college or until October 31, 2011, whichever occurred first. Thereafter, an increase in the alimony was ordered for a total of $6000 per month until the year 2022.[3] The court also made factual findings as to the value of the parties' assets and their respective incomes and distributed the assets according to its findings. This appeal followed. Additional facts will be set forth as necessary.
At the outset, "[t]he standard of review in family matters is well settled. An appellate court will not disturb a trial court's orders in domestic relations cases unless the court has abused its discretion or it is found that it could not reasonably conclude as it did, based on the facts presented.. . . It is within the province of the trial court to find facts and draw proper inferences from the evidence presented. . . . In determining whether a trial court has abused its broad discretion in domestic relations matters, we allow every reasonable presumption in favor of the correctness of its action. . . . [T]o conclude that the trial court abused its discretion, we must find that the court either incorrectly applied the law or could not reasonably conclude as it did. . . . Appellate review of a trial court's findings of fact is governed by the clearly erroneous standard of review. . . . A finding of fact is clearly erroneous when there is no evidence in the record to support it . . . or when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." (Internal quotation marks omitted.) Elia v. Elia, 99 Conn.App. 829, 831, 916 A.2d 845 (2007). "With respect to the financial awards in a dissolution action, great weight is given to the judgment of the trial court because of its opportunity to observe the parties and the evidence." (Internal quotation marks omitted.) Bornemann v. Bornemann, 245 Conn. 508, 530, 752 A.2d 978 (1998).
I
First, the defendant claims that the court improperly determined the value of *562 his interest in the medical practice by inferring a value significantly higher than its actual value at the time of the dissolution. Specifically, the defendant argues that the court lacked sufficient evidence to determine the value of his interest. We disagree.
The following additional facts are relevant to the defendant's claim. During the first day of trial, the plaintiff testified that she assisted the defendant and his medical business "partners" with the startup of the medical practice from 1993 to 1994 and had purchased computers, desks and supplies for the office. She testified that she worked for eight to nine months with the defendant, planning the startup of the medical practice. The plaintiff also testified that the defendant admitted to her during the marriage that the value of his interest in the medical practice was $500,000 and that when he started the medical practice, the initial buyout during that time was valued at $500,000. Later during that first day of trial, the court noted that the defendant claimed on his financial affidavit that the total cash value of all of his assets was zero. During the second day of trial, one of the defendant's business partners, Stuart Belkin, a physician, testified that the medical practice had a buyout agreement that entitled a business partner who retired at the age of sixty-five to receive a buyout of his interest valued at $500,000.
By the end of trial, no buyout agreement had been produced to the court, and the defendant offered no evidence to assist the court as to the current value of his interest in the medical practice. The court found, in its memorandum of decision, that the defendant's interest in the medical practice was valued at $500,000. The defendant argues that there was insufficient evidence for the court to determine the value of his interest in the medical practice. The defendant also asserts that because neither party produced sufficient evidence of the present value of his interest in the medical practice, the court could not infer or estimate a value.
"In distributing the assets of the marital estate, the court is required by [General Statutes] § 46b-81 to consider the estate of each of the parties. Implicit in this requirement is the need to consider the economic value of the parties' estates. The court need not, however, assign specific values to the parties' assets. . . . In assessing the value of the assets that comprise the marital estate, the trial court functions as the trier of fact. The trial court has the right to accept so much of the testimony . . . as [it] finds applicable.. . . [It] arrives at [its] own conclusions by weighing the opinions of the appraisers, the claims of the parties, and [its] own general knowledge of the elements going to establish value, and then employs the most appropriate method of determining valuation. . . . In selecting and applying an appropriate valuation method, the trial court has considerable discretion. . . . The trial court's findings will be overturned only if it misapplies, overlooks, or gives a wrong or improper effect to any test or consideration which it was [its] duty to regard." (Citations omitted; internal quotation marks omitted.) Bornemann v. Bornemann, supra, 245 Conn. at 531-32, 752 A.2d 978.
"[When] the factual basis of the court's decision is challenged, our review includes determining whether the facts set out in the memorandum of decision are supported by the record or whether, in light of the evidence and the pleadings in the whole record, those facts are clearly erroneous. . . . Further, a court's inference of fact is not reversible unless the inference was arrived at unreasonably.. . . We note as well that [t]riers of *563 fact must often rely on circumstantial evidence and draw inferences from it. . . . Proof of a material fact by inference need not be so conclusive as to exclude every other hypothesis. It is sufficient if the evidence produces in the mind of the trier a reasonable belief in the probability of the existence of the material fact. . . . Moreover, it is the exclusive province of the trier of fact to weigh the conflicting evidence, determine the credibility of witnesses and determine whether to accept some, all or none of a witness' testimony. . . . Thus, if the court's dispositive finding here was not clearly erroneous, then the judgment must be affirmed." (Citations omitted; emphasis added; internal quotation marks omitted.) Levy, Miller, Maretz, LLC v. Vuoso, 70 Conn.App. 124, 130-31, 797 A.2d 574 (2002).
The issue before us is whether the court's finding that the value of the medical practice was $500,000 was clearly erroneous in light of the evidence in the record. We conclude that it was not. As shown in the record, the court had sufficient evidence before it, by way of testimony during the four day trial, to determine a value for the medical practice. To dispute this, the defendant argues that there was a lack of evidence before the court to enable the court to find a value of his interest in the medical practice. The record reflects that the defendant failed to provide the court with sufficient evidence to assist the court in determining the value of his interest in the medical practice. Nonetheless, the lack of evidence from the defendant did not preclude the court from determining the value of his interest in the medical practice and providing an equitable distribution of this asset. It was not improper for the court to value the asset, by way of the testimony before it, on the basis of the buyout agreement's value of the defendant's interest in the medical practice. As noted previously, the court, as trier of fact, was free to accept any, all or none of the testimony before it on the issue relating to the value of the defendant's interest in the medical practice. See, e.g., Gyerko v. Gyerko, 113 Conn.App. 298, 305, 966 A.2d 306 (2009).
Further, the defendant had notice that his interest in the medical practice might be distributed, and his decision not to provide the court with evidence as to the current value of his interest is not a decision about which he can later complain. Our Supreme Court, in Bornemann v. Bornemann, supra, 245 Conn. at 508, 752 A.2d 978, noted that "when neither party in a dissolution proceeding chooses to introduce detailed information as to the value of a given asset, neither party may later complain that it is not satisfied with the court's valuation of that asset. Both parties in a dissolution proceeding are required to itemize all of their assets in a financial affidavit and to provide the court with the approximate value of each asset. . . . If the parties fail to do so, the equitable nature of the proceedings precludes them from later seeking to have the financial orders overturned on the basis that the court had before it too little information as to the value of the assets distributed." (Citation omitted.) Id., at 535-36, 752 A.2d 978.
In light of the testimony and evidence presented at trial, we conclude that there was sufficient evidence before the court to support its factual finding that the defendant's medical practice was valued at $500,000 at the time of dissolution.
II
Next, the defendant claims that the court improperly determined the net equity in his home in failing to deduct from the net equity a loan that a girlfriend, Michelle Clark, made to him when he purchased *564 the property. We are unpersuaded.
The following additional facts are relevant to the defendant's claim. The court found that the parties were separated in January, 2004, but living in separate bedrooms within their marital home in Fairfield on Lookout Drive. In June, 2004, the parties purchased a beachfront home in Milford on Seaview Avenue. The plaintiff immediately moved out of the marital home on Lookout Drive and began living in the Seaview Avenue property. The defendant remained in the marital home. In December, 2004, the marital home was sold, and the defendant rented a house for the next six months in Fairfield. In June, 2005, the defendant moved in with the plaintiff. Thereafter, the parties formally agreed to divorce in October, 2005. In January, 2006, the plaintiff filed for marital dissolution. In November, 2006, less than one year after the plaintiff filed the marital dissolution action, the defendant moved out of the plaintiff's home on Seaview Avenue and purchased a new home for himself in Fairfield on South Pine Creek Road, the property at issue. The cost of the new home was approximately $1.36 million. To purchase the new home, the defendant used $54,000 from the home equity line of credit on the Seaview Avenue property, $220,000 in cash loaned to him by Clark and $1.08 million in a mortgage loan. The defendant testified that he sporadically repaid the loan to Clark, but he could not recall the exact amount that had been repaid.
The defendant submitted two financial affidavits to the court, one on February 20, 2007, and the other on July 3, 2007. In both financial affidavits, the defendant listed his debt liability as either zero or left the space blank. During the four day trial, the court heard testimony from the defendant that he borrowed money from Clark and was obligated to pay it back. The court also heard testimony from Clark that the loan did not require a monthly payment and that the defendant was obligated to pay the loan when he was capable of doing so or upon the sale of other real estate that he owned. Clark testified that there was a promissory note executed that detailed the loan agreement terms and that the note was created by her attorney. In addition, when Clark was asked whether the defendant requested a loan to purchase the property, Clark testified that she offered the loan to the defendant. The defendant did not produce the note to the court. In its memorandum of decision, the court valued the net equity on the South Pine Creek Road property as $280,000. The defendant asserts that the court's determination of the net equity does not reflect the debt to Clark.
The court made no finding as to whether the loan by Clark was a gift or a debt. It further did not state the basis for its calculation of the net equity on the defendant's home. The defendant failed to seek an articulation with respect to the basis of the net equity value. Without an articulation to clarify this issue, we would be forced to speculate as to whether the court improperly failed to reduce the net equity of the defendant's home by the amount of the loan to Clark. "An articulation may be necessary where the trial court fails completely to state any basis for its decision. . . or where the basis, although stated, is unclear. . . . It is the responsibility of the appellant to provide an adequate record for review as provided in [Practice Book §] 61-10. . . . Conclusions of the trial court cannot be reviewed where the appellant fails to establish through an adequate record that the trial court incorrectly applied the law or could not reasonably have concluded as it did. . . . When the trial court does not provide the necessary factual and legal conclusions, either on its own *565 or in response to a proper motion for articulation, any decision made by us respecting this claim would be entirely speculative." (Internal quotation marks omitted.) Gyerko v. Gyerko, supra, 113 Conn. App. at 317-18, 966 A.2d 306. The failure to seek an articulation leaves us without the ability to engage in a meaningful review. Accordingly, we cannot conclude that the court's calculation was improper.
III
Next, the defendant claims that the court improperly determined his gross and weekly income when it failed to consider an updated financial affidavit submitted to the court, which reflected a significantly lower figure than what was first presented to the court. We are unpersuaded.
The following additional facts are necessary to the defendant's claim. The defendant submitted two financial affidavits to the court in 2007. The first financial affidavit was submitted on February 20, 2007.[4] On the first day of trial, the defendant's counsel stated to the court that the defendant had provided his accountant with information to complete his February 20, 2007 financial affidavit. The defendant's counsel also provided the court with a document titled, "Statement of Financial Condition," dated for 2006, that was completed by the defendant's accountant. The defendant's counsel confirmed that the defendant had reviewed the documents for accuracy. On the second day of trial, Belkin testified that there was no increase or decrease in patient visits during the past year. He testified that the flow of patients had been consistent since the start of the medical practice and that the defendant had remained consistently busy. He further testified that five out of the six business partners, including the defendant, had received a consistent base rate in their biweekly paychecks for several years. He testified that the five partners, including the defendant, received $320,000 annually, in addition to their quarterly bonuses that ranged from zero to $50,000.
In addition, Belkin testified that generally, out of the four quarterly bonuses, two would have a zero value. He testified that the last quarterly bonus was in December, 2006, in the amount of $50,000. He also testified that their first quarterly bonus for 2007 was expected to be $20,000. Belkin went on to testify that the quarterly bonuses and fixed base rate were the only two forms of income received by each partner from the medical practice. He testified that the income of the partners has dropped by 4 to 5 percent during the past four to five years, starting in about 2004. On the third day of trial, the defendant testified that his annualized income, which included his bonuses, was $460,000. The defendant also testified that his current financial affidavit, which was submitted to the court on the first day of trial, consisted of financial data and expenses from 2005 because he did not have the expense information for 2006. He testified that he did not have the 2006 expenses because the paperwork for his taxes for 2006 was not yet completed. He acknowledged that some of the expenses for 2005 that were listed in his February 20, 2007 financial affidavit did not carry over into 2006. He testified, however, that he was unable to differentiate on his February 20, 2007 financial affidavit which expenses were relevant solely to 2005 as opposed to 2006.
*566 On the final day of trial, July 3, 2007, some three months later, the defendant submitted an updated financial affidavit for 2007,[5] along with a revised statement of financial condition for 2007. Upon commencement of the final day of trial, the defendant testified that, in 2006, his annualized income was $460,000 but that his income for 2007, however, was significantly less. The defendant testified that his present financial earnings were $7700 biweekly with expenses consisting of a $7800 mortgage, $3000 a month for his children's living expenses and weekly expenses for the home. The defendant testified that he was living from paycheck to paycheck. He further testified that his income in the past two years averaged $466,000 per year.
Also on the final day of trial, Kelly Poulin, the administrator for the medical practice, testified. She stated that revenue was declining because insurance companies were paying less for services. She also testified that if insurance payments were reduced, the medical practice would not have "the money to pay out in bonuses . . . just salary." The court, in its memorandum of decision, found that the defendant's annualized income was $484,000 and that his net weekly income was $6400.
The court noted that the defendant's weekly income was 80 percent more than the plaintiff's net weekly income, which was $1303. The defendant argues that it was improper for the court to make such findings regarding his income because the numbers did not reflect the updated financial affidavit that was submitted on the last day of trial. He asserts that the court completely ignored the updated financial affidavit and did not offer a reason as to why it did so.
As previously noted, because we are reviewing the court's factual findings as to the defendant's income, we look to see whether the court's findings are clearly erroneous, and we must affirm the court's decision unless there is either no evidence to support the court's findings or we are left with a definite and firm conviction that a mistake has been committed. After a careful review of the record, we cannot say that the court's findings were clearly erroneous.
For comparison purposes, we refer to this court's decision in Gervais v. Gervais, 91 Conn.App. 840, 882 A.2d 731, cert. denied, 276 Conn. 919, 888 A.2d 88 (2005). In Gervais, this court found an abuse of discretion when the trial court did not consider an updated financial affidavit submitted to it prior to a hearing on a motion to terminate alimony. Id., at 845, 882 A.2d 731. The transcript in Gervais reflected that the defendant was extensively questioned on the updated financial affidavit during the hearing. Id. In response to a request for an articulation, the trial court twice commented that the defendant had failed to file an updated financial affidavit. Id. This court noted that a trial court should consider the present financial circumstances of the parties before entering financial orders relevant to a marital dissolution. Id., at 845-48, 882 A.2d 731. Because the trial court's articulation reflected that it did not consider the financial affidavit that clearly had been submitted to the trial court, this court found that the trial court abused its discretion and that its findings were erroneous. Id. Nonetheless, this court noted that had the trial court actually reviewed the amended financial affidavit, as the trier of fact, "it could have accepted or rejected the information contained therein." Id., at 848, 882 A.2d 731.
*567 In the present case, the record does not reflect that the court improperly failed to consider a financial affidavit that was clearly before it. Here, the defendant failed to seek an articulation of whether the court considered his updated financial affidavit to determine his income. Any further review of the court's failure to consider the updated financial affidavit for its findings would be speculative. As previously noted, great weight is given to the judgment of the trial court, and, absent any indication to the contrary, we presume that the court acted properly. Because the defendant did not move for an articulation of the court's determination of his income pursuant to Practice Book § 66-5 and because there was sufficient evidence to support the court's finding, we cannot conclude that the court's finding was clearly erroneous.
IV
Last, the defendant claims that the court abused its discretion when it ordered alimony to the plaintiff and distributed the parties' assets to his detriment. The defendant argues that the court's order of alimony and the distribution of assets are improper because they are based on improper factual findings made by the court. Specifically, the defendant references his arguments that we considered in parts I, II and III of this opinion, which were that the court improperly made factual findings as to the value of certain property and as to his income. We are unpersuaded.
"In fashioning its financial orders, the court has broad discretion, and [j]udicial review of a trial court's exercise of [this] broad discretion . . . is limited to the questions of whether the . . . court correctly applied the law and could reasonably have concluded as it did. . . . In making those determinations, we allow every reasonable presumption . . . in favor of the correctness of [the trial court's] action. . . . That standard of review reflects the sound policy that the trial court has the unique opportunity to view the parties and their testimony, and is therefore in the best position to assess all of the circumstances surrounding a dissolution action, including such factors as the demeanor and the attitude of the parties." (Citation omitted; internal quotation marks omitted.) Mann v. Miller, 93 Conn.App. 809, 812, 890 A.2d 581 (2006).
As previously noted, "[i]n distributing the assets of the marital estate, the court is required by . . . § 46b-81 to consider the estate of each of the parties. . . . [Section] 46b-81 (a) provides in relevant part: `At the time of entering a decree . . . dissolving a marriage . . . the Superior Court may assign to either the husband or wife all or any part of the estate of the other. . . .' Courts are not required to ritualistically recite the criteria they considered, nor are they bound to any specific formula respecting the weight to be accorded each factor in determining the distribution of marital assets." (Citation omitted; emphasis added.) Mann v. Miller, supra, 93 Conn.App. at 812, 890 A.2d 581.
The defendant's claim rests on the assertion that the court's findings on the value of his interest in the medical practice, his property and his income were erroneous. As a result, the defendant argues that the court's financial orders for alimony and a distribution of assets are also improper because the financial orders rest on erroneous findings. The defendant has crafted his argument premised on his belief as to the correct values of his assets and income. He asserts that when this court considers the proper values, as claimed in his brief, of his assets and income, the court's financial orders result in negative net worth for the defendant of *568 approximately $51,000.[6] The defendant appears to assert that the court improperly formulated the distribution of assets and alimony. Specifically, the defendant argues that the record does not support the court's orders. In light of our review of the entire record, we conclude that the record supports the court's financial orders and that the court did not abuse its discretion.
The judgment is affirmed.
In this opinion the other judges concurred.
NOTES
[1] The other two children were older than twenty-three.
[2] Payments began retroactively dating back to May 29, 2007, in response to the plaintiff's motion for alimony pendente lite, filed on May 11, 2007.
[3] Payments would terminate earlier than 2022 if the plaintiff remarried, upon the death of either party or pursuant to § 46b-86 (b).
[4] On the defendant's February 20, 2007 financial affidavit, his net weekly income was $6400.
[5] On the defendant's July 3, 2007 financial affidavit, his net weekly income was $4513.
[6] The defendant originally briefed that his negative net worth was $96,750. In oral argument to this court, however, the defendant corrected that figure and argued, instead, that the financial orders resulted in a negative net worth of $51,000. | 01-03-2023 | 10-30-2013 |
https://www.courtlistener.com/api/rest/v3/opinions/1537154/ | 27 B.R. 603 (1982)
In re James A. BURLEY and Elsie M. Burley, Debtors.
B.H. BRINEY and Lucile Briney, Appellants,
v.
James A. BURLEY and Elsie M. Burley, Appellees.
BAP No. CC-81-1150-KHG, Bankruptcy No. LA 80-08761-RO.
United States Bankruptcy Appellate Panels of the Ninth Circuit.
Argued January 21, 1982.
Decided December 28, 1982.
*604 Yale M. Harlow, Law Offices of Richard M. Moneymaker, Los Angeles, Cal., for appellants.
No appearance for appellees.
Before KATZ, HUGHES and GEORGE, Bankruptcy Judges.
OPINION
KATZ, Bankruptcy Judge:
Appellants appeal from an order of the bankruptcy court denying their motion to vacate the order of discharge entered in the bankruptcy proceedings filed by the Burleys.
The salient facts are that the Burleys filed a Petition for Relief Under Chapter 7 of the Bankruptcy Code in the Central District of California.
The Brineys are creditors of the debtors as a result of a judgment having been entered in their favor in the state courts of Colorado and are the debtors' only creditors.
Upon receiving notice of the filing of the bankruptcy, which advised them of the time within which to file complaints objecting to the discharge or to determine dischargeability of debt, the Brineys timely filed such a complaint in the bankruptcy court for the District of Colorado. The clerk of the bankruptcy court in the Central District of California was notified of the timely filing of the complaint.
Thereafter, the Burleys moved in the Colorado court to dismiss the complaint for improper venue or in the alternative to transfer the proceeding to the California court. The motions were denied and the matters were set for trial.
Subsequently the California bankruptcy court entered the discharge of the Burleys. A motion under F.R.C.P. 60(b) and Bankruptcy Rule 924 to vacate the order of discharge was made by appellants and denied. The court below denied the motion on the grounds that the Colorado court had no authority to retain the proceedings under applicable law.
In its decision, In re Burley, 11 B.R. 369, the court concluded that it was free to grant the debtors a discharge despite the timely filed complaints pending in Colorado. The court below recognized that the Colorado court had jurisdiction to accept, process and file the creditors' complaint, but that venue was improper and therefore the Colorado court could not have retained the proceedings for ultimate disposition.
We agree with the trial court on the determination that the Colorado court had jurisdiction over the Brineys' complaint. We disagree on the venue issue and therefore REVERSE and REMAND with instructions to grant the motion of appellants to vacate the Order of Discharge.
In determining the venue issue, one must look to 28 U.S.C. §§ 1473, 1475 and 1477, as well as legislative history.
28 U.S.C. § 1473 provides, in subdivision (a) thereof:
*605 "Except as provided in subsections (b) and (d) of this section, a proceeding arising in or related to a case under title 11 may be commenced in the bankruptcy court in which such case is pending." [Emphasis added.]
The word "may" is permissive, indicating that while a proceeding may be filed in the court wherein the case is pending it may also be filed in another court.
The term "proceeding" in the Code is used in its broadest terms to include anything that occurs in a case. H.R.Rep. No. 95-595, 95th Cong., 1st Sess. 445 (1977), U.S.Code Cong. & Admin.News 1978, p. 5787.
28 U.S.C. § 1477(a) states:
"The bankruptcy court of a district in which is filed a case or proceeding laying venue in the wrong division or district may, in the interest of justice and for the convenience of the parties, retain such case or proceeding, or may transfer, under section 1475 of this title, such case or proceeding to any other district or division."
These matters, taken together, indicate that any proceeding which includes disputes relating to administrative matters may be heard in a bankruptcy court other than the court in which the case is pending if it is in the interest of justice and for the convenience of the parties to do so.
We do not have before us the record of the Colorado court of the hearing on the motion to dismiss filed by the Burleys. Hence, whether the Colorado court abused its discretion in not granting that motion, thereby retaining venue, is not before us.
What is before us is the question of whether the California court abused its discretion in refusing to set aside the discharge. In basing its ruling on its belief that venue was improper, we think the court below was in error.
REVERSED and REMANDED with instructions.
HUGHES, Bankruptcy Judge, dissenting:
I respectfully dissent because I believe the trial court properly denied the creditors' motion to vacate the debtors' order of discharge.
I.
The essential facts, which are few, bear reiteration. The Burleys filed a petition under Chapter 7 of the Bankruptcy Code in the Central District of California. Their only creditors, the Brineys, filed a two-count complaint (1) objecting to discharge and (2) seeking an order holding their judgment nondischargeable in bankruptcy. The Brineys' complaint was filed in the District of Colorado.
The Burleys appeared before the Colorado bankruptcy court on a motion to dismiss or to change venue to California. The motion was denied by the Colorado court and the Burleys answered the complaint.
Meanwhile, the California court fixed the last date for filing objections to discharge. Bankruptcy Rule 404(a). A copy of the complaint filed in Colorado was lodged with the California court before the bar date, and the Brineys' attorney wrote to the California court requesting that entry of discharge be delayed, but no objection to discharge was ever filed in California.
Orders of discharge were entered by the California court pursuant to 11 U.S.C. § 727 on March 19, 1981 and the Brineys' moved that court to vacate those orders pursuant to Rule 60(b), Fed.R.Civ.P., on March 27, 1981. The trial court denied the motion and the Brineys appealed.
That part of the Colorado complaint seeking an order holding the Brineys' judgment to be nondischargeable pursuant to 11 U.S.C. § 523 was not affected by the motion below and is not before us.
II.
The trial court summarized its reasons for denying the motion to vacate the Burleys' discharge orders. I summarize the summary:
*606 The Colorado Court (1) had jurisdiction over the complaint objecting to discharge, but (2) lacked proper venue. Therefore, the trial court concluded, the motion should be denied. It also held that the facts did not justify exercise of discretion "to permit continuation of the `proceeding' in Colorado."
I would affirm the order appealed on the ground that appellants have failed to establish that the trial judge abused his discretion, the standard of review for orders made on Rule 60(b) motions. Plotkin v. Pacific Tel. and Tel. Co., 688 F.2d 1291 (9th Cir.1982). I would affirm notwithstanding my conclusion that the premises for the order were erroneous. Unlike the trial court, I would hold that the Colorado court lacked jurisdiction over the Burleys' discharge in bankruptcy. Furthermore, I believe that the trial court was not competent to question the Colorado court's venue rulings. Unlike the majority of this panel, I believe that the appeal ultimately turns on jurisdiction rather than venue.
I attempt to show in Part III that the Brineys failed to justify the relief they sought, in Part IV that the conflicting venue analyses of the trial court and the panel are beside the point; and in Part V that, contrary to the assumptions of the trial court and the panel, the Colorado court did not acquire jurisdiction to deny discharge to the Burleys.
III.
The Brineys did not articulate a legal theory that would justify any interference with the Burleys' order of discharge in California, whether before or after it was entered. The Brineys first sought delay of entry of the discharge order and then vacation of the order on the following grounds: 1. The objection to discharge was timely filed in Colorado and notice of the Colorado filing was timely given to the California court. 2. The Colorado court had jurisdiction over the objection to discharge. 3. The Colorado court had denied a motion to dismiss or change venue. I am unable to determine why the foregoing factors, accepted as true, affect the Burleys' discharge in California.
It is arguable that a Colorado judgment denying discharge to the Burleys would preclude the California court from entering discharge on res judicata grounds. Bluthenthal v. Jones, 208 U.S. 64, 28 S. Ct. 192, 52 L. Ed. 390 (1908). There was no judgment, however, so res judicata does not apply.
It is also arguable that the doctrine of federal comity is applicable. See, generally Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93 (9th Cir.1982) but rulings under that doctrine are reversed only for an abuse of discretion. 678 F.2d at 95.
I conclude that there is no showing that the trial court should have withheld entry of discharge or that it abused its discretion in denying the motion to vacate the order after entry.
Nevertheless, I address the issues of venue and jurisdiction because the panel majority rests its decision of reversal on them.
IV.
The panel and the trial court both consider venue determinative and both assume that the judgment of a court of improper venue may be ignored. (They differ in their conclusions, the panel holding that the Colorado venue ruling was correct). Both analyses are flawed because they treat rulings on venue as subject to collateral attack. To the contrary, venue is of concern only to the court whose venue is challenged, and to an appellate court on direct appeal.
Judgments may be collaterally attacked only for want of jurisdiction. Windsor v. McVeigh, 93 U.S. 274, 282-83, 23 L. Ed. 914 (1876). As was stated in Yale v. National Indemnity Co., 602 F.2d 642 (4th Cir.1979), at 644,
". . . the traditional rule, Restatement of Judgments § 11 comment b . . . [is] that only void judgments are subject to collateral attack, and that a void judgment is only one that is rendered by a court lacking jurisdiction over the defendant or over the subject matter, or in violation of a procedural requirement so substantial *607 that it is deemed . . . to be void, i.e., to be `jurisdictional'."
Venue and jurisdiction are distinct concepts. Wright, Miller and Cooper Fed. Practice & Procedure § 3826, p. 166-167. Unlike jurisdiction, venue does not involve the power or authority to adjudicate a controversy. It is a "forum limitation for the convenience of the parties." United States ex rel. Rudick v. Laird, 412 F.2d 16, 20 (2nd Cir.1969). Proper venue is not a prerequisite to the rendition of a valid judgment. Ruddies v. Auburn Spark Plug Co., 261 F. Supp. 648, 649 (S.D.N.Y.1966).
Accordingly, whether the Colorado court committed error with respect to venue is the exclusive concern of that court and of courts in which appeal from its judgments lie. Neither the Central District of California trial court nor this panel are in that line of appeal. Thus, I agree with the panel majority that the trial court erroneously disregarded the Colorado rulings on venue, but for different reasons.
V.
The trial court's jurisdiction analysis is also flawed, in my opinion, because it considered the power of the Colorado court to render a valid judgment only as an abstract question of subject matter jurisdiction. It failed to consider whether the Colorado court had in fact acquired jurisdiction to deny the Burleys' discharge. As I now seek to demonstrate, even though the Colorado bankruptcy court had subject matter jurisdiction to grant or deny discharge in bankruptcy, its jurisdiction to deny the Burleys' discharge was never invoked. Accordingly, any judgment of the Colorado court denying discharge would be void and would not have res judicata effect.
A.
A court can render a valid judgment only if it has (1) jurisdiction of the subject matter and (2) jurisdiction of the parties and then only if (3) subject matter and personal jurisdiction have been invoked. See Windsor v. McVeigh, supra; Elwess v. Elwess, 73 N.M. 400, 389 P.2d 7, 9 (1964). We are concerned here only with the third requisite, i.e., whether a court has acquired subject matter jurisdiction over the matter in which judgment issues. (I assume but find it unnecessary to decide that the Colorado court had personal jurisdiction over the parties).
Subject matter jurisdiction may be invoked in a particular case only by following prescribed statutory procedure. As stated by Justice Field, "[t]hough a court may possess jurisdiction of a cause, of the subject matter and of the parties, it is still limited in its modes of procedure . . . [A] departure from established modes of procedure will often render the judgment void." Windsor v. McVeigh, supra.
The filing of proper pleadings is one requisite to invoking the court's jurisdiction over a particular matter. "The exercise of jurisdiction [is] conferred by the filing of a petition containing all the requisites and in the manner prescribed by law." The United States v. Arredondo, 31 U.S. (6 Pet.) 691, 709, 8 L. Ed. 547 (1832). "[A] court can acquire jurisdiction in the concrete in a particular instance only when it is presented to the court as prescribed by law." Zarges v. Zarges, 79 N.M. 494, 445 P.2d 97, 99 (1968) quoting Riggs v. Moise, 344 Mo. 177, 128 S.W.2d 632, 635 (1939). See Tinn v. U.S. District Attorney, 148 Cal. 773, 775-76, 84 P. 152 (1906); Bassick Min. Co. v. Schoolfield, 10 Colo. 46, 14 P. 65, 67 (1887); State ex rel. Campbell v. Chapman, 145 Fla. 647, 1 So. 2d 278, 281-82 (1941); Lovett v. Lovett, 93 Fla. 611, 112 So. 768, 775-77 (1927); Crawford v. Pierse, 56 Mont. 371, 185 P. 315, 318 (1919); State ex rel. Clark v. Allaman, 154 Ohio St. 296, 95 N.E.2d 753, 756-57 (1950); State ex rel. Conners v. Zimmerman, 202 Wis. 69, 231 N.W. 590, 592 (1930).
A pleading that fails to present a claim on which relief can be granted does not invoke the jurisdiction of the court and any judgment rendered thereon is void. State ex rel. Campbell v. Chapman, supra; Crawford v. Pierse, supra. An answer to a petition will not invoke the jurisdiction of the court unless it is in the nature of a cross or counterclaim setting up some independent ground for relief. Lovett v. Lovett, supra.
*608 B.
The right to a discharge in bankruptcy is a creature of the Bankruptcy Code (Title 11 United States Codes) and does not exist independent of a bankruptcy case. There is no cause of action for a bankruptcy discharge under state law, or under nonbankruptcy federal law. It is unknown at common law.
The Bankruptcy Code, then, prescribes how a court having subject matter jurisdiction to adjudicate rights created by the Code acquires those rights in a particular instance. Under section 727(a) of the Code, an individual Chapter 7 debtor is entitled to an order of discharge unless a party in interest files a timely objection. 11 U.S.C. § 727(c)(1). In the absence of such timely objection, "the court shall forthwith grant the discharge . . ." Bankruptcy Rule 404(d).
An individual becomes a debtor under Chapter 7 of the Code through compliance with sections 301 et seq., which govern voluntary and involuntary petitions in bankruptcy. These sections prescribe the only manner in which a case may be commenced under the various chapters of the Code and thus the only manner in which a court's subject matter jurisdiction over a bankruptcy case may be invoked.
Once invoked, jurisdiction over a case may be transferred to a bankruptcy court in another district. 28 U.S.C. § 1475. Only a court in which jurisdiction over a case has been invoked has the power to order such transfer. Presumably, that court is authorized to transfer part of the case, such as the disposition of an objection to discharge.
In summary, a court's jurisdiction to grant or deny discharge in bankruptcy is invoked either by the commencement of a case under Chapter 7 in the manner prescribed by 11 U.S.C. §§ 301 et seq. or by order of transfer pursuant to 28 U.S.C. § 1475.
C.
Applying the foregoing principles to the facts of this appeal, it is apparent that the Brineys did not take those statutory steps necessary to invoke the Colorado bankruptcy court's subject matter jurisdiction to grant or deny a discharge in bankruptcy to the Burleys. Their complaint objecting to discharge filed in Colorado can hardly be construed as an involuntary petition in bankruptcy. 11 U.S.C. § 303. None of their contacts with the California court can be construed as a motion to transfer. 28 U.S.C. § 1475.
As to the part of the complaint filed in Colorado that raised an objection to discharge, then, the Colorado complaint was a legal nullity because it did not invoke that court's jurisdiction and any judgment affecting discharge would have been void. The California court properly ignored the objection to discharge because it was not filed with it and because the filing in Colorado had no legal effect.
VI.
I believe the foregoing analysis disposes of the jurisdictional issue: the Colorado bankruptcy court did not acquire subject matter jurisdiction over the Burleys' right to a discharge in bankruptcy because none of the statutory steps for conferring such jurisdiction were taken. In this part, I attempt to dispose of what appear to me to be false issues that intrude upon the analysis.
The major stumbling block is the notion that a complaint objecting to discharge is a proceeding or a civil proceeding and thus somehow governed by different principles than those I have addressed. Thus in its venue discussion, the majority notes that "`proceeding' in the Code is used in its broadest terms to include anything that occurs in a case." Likewise, the trial court noted that "Congress did not bifurcate the term `proceedings' to distinguish between . . . matter[s] . . . inherent and integral to the administration of a `case' . . . and . . . plenary suits."
However valid these statements may be for other purposes, they miss the mark for purposes of determining whether subject matter jurisdiction is invoked in a particular *609 instance. The basic grants of subject matter jurisdiction to bankruptcy courts distinguishes between cases, 28 U.S.C. § 1471(a), (c) and civil proceedings, 28 U.S.C. § 1471(b), (c). The bankruptcy court's jurisdiction over cases is exclusive, by the express terms of that grant (as an adjunct of the district court), and is shared with no other court. On the other hand, the statute expressly makes the bankruptcy court's jurisdiction over civil proceedings non-exclusive, i.e., it shares jurisdiction over civil proceedings with state and other federal courts.
Nowhere in 28 U.S.C. § 1471which is the source of the bankruptcy court's subject matter jurisdictionis the word proceeding found. Thus for purposes of jurisdiction, the word proceeding alone has no meaning. A particular matter, such as an objection to discharge, must then be characterized as either a case (or part thereof) or a civil proceeding. There is nothing of a convincing nature to suggest that an objection to discharge is a civil proceeding.
As demonstrated earlier, the right to discharge does not exist independent of a bankruptcy case. The right to discharge flows from the original Chapter 7 petition and, although parties in interest may oppose discharge, there is no right to deny discharge in the abstract.
Discharge is one of the "primary purposes" of United States bankruptcy law, Local Loan Co. v. Hunt, 292 U.S. 234, 244, 54 S. Ct. 695, 699, 78 L. Ed. 1230 (1934), and is integral to the bankruptcy process. It follows that the bankruptcy court's exclusive jurisdiction "has extended to . . . the granting or denial of discharge . . ." Kennedy, The Bankruptcy Court Under the New Bankruptcy Law, 11 St. Mary's Law Journal, 251 (1979). Discharge jurisdiction that is exclusive to bankruptcy courts, not shared with state and other federal courts, cannot by definition be a civil proceeding, jurisdiction over which is non-exclusive. 28 U.S.C. § 1471(b).
Nor is an adversary proceeding as defined in Part VII of the Bankruptcy Rules to be equated with a civil proceeding as used in 28 U.S.C. § 1471(b). The rules draftsmen decided in 1973 that objections to discharge should be governed by Part VII of the Rules. Bankruptcy Rule 701(4).
Until 1938, an order of discharge was not granted unless the bankrupt filed an application. Bankruptcy Act § 14. One opposing discharge filed a "specification . . . of the grounds of . . . opposition to discharge." General Order XXXII. The specification thus functioned as an answer to the application for discharge. In 1938, the Act was amended to provide that adjudication of an individual bankrupt operated as an application for discharge, thus eliminating the need for a separate application. Act § 14a.
Throughout the history of the 1898 act, therefore, the bankrupt initiated the request for an order of discharge, either expressly by separate application or implicitly by petition for adjudication as a bankrupt.
The 1973 Bankruptcy Rules addressed the form the opposition to the application for discharge should take. Those rules required that what was functionally an answer (opposition to the request for discharge) be called a complaint and that the bankrupt reply to the opposition by way of an answer.
The anomaly that an objection to discharge under the Bankruptcy Rules is called a complaint does not affect the jurisdictional analysis. That analysis is based on the substantive provisions of titles 11 and 28 United States Codes and the rules "cannot abridge, enlarge or modify any substantive rights." 28 U.S.C. § 2075.
VII.
In summary, I would affirm the order denying the Brineys' motion to set aside the Burleys' discharge because they have not shown that the court abused its discretion. I am unable to accept the trial court's venue or jurisdiction analyses, however. | 01-03-2023 | 10-30-2013 |
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